S&W Seed pany(US:SANW)2025-05-15 20:54PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements present the company's financial position, operations, and cash flows, noting a $20.1 million net loss and substantial doubt about its going concern Condensed Consolidated Balance Sheets Total assets decreased to $69.6 million from $120.7 million as of March 31, 2025, primarily due to the deconsolidation of S&W Australia Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $31,476 | $63,374 | | Total Assets | $69,613 | $120,726 | | Total Current Liabilities | $31,407 | $69,242 | | Total Liabilities | $36,636 | $75,694 | | Total Stockholders' Equity | $26,820 | $39,262 | - The significant reduction in assets and liabilities is primarily due to the deconsolidation of S&W Australia, which is now treated as a discontinued operation. Current assets and liabilities of discontinued operations were $22.4 million and $44.9 million respectively at June 30, 2024, and are zero as of March 31, 2025 on the main balance sheet181930 Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, revenue was $9.6 million with a net loss from continuing operations of $2.2 million, while the nine-month total net loss was $20.1 million Statement of Operations Summary - Three Months Ended March 31 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $9,552 | $9,368 | | Gross Profit | $3,605 | $2,306 | | Loss from Operations | ($663) | ($3,238) | | Net Loss from Continuing Operations | ($2,225) | ($4,810) | | Net Loss Attributable to S&W | ($2,236) | ($5,501) | Statement of Operations Summary - Nine Months Ended March 31 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $22,939 | $28,387 | | Gross Profit | $6,824 | $8,565 | | Loss from Operations | ($9,240) | ($8,433) | | Net Loss from Continuing Operations | ($14,714) | ($13,442) | | Net Loss from Discontinued Operations | ($5,413) | ($4,487) | | Net Loss Attributable to S&W | ($20,127) | ($17,919) | - The net loss per share for the nine months ended March 31, 2025, was ($8.98), compared to ($7.89) for the same period in 202421 Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2025, net cash used in operating activities was $0.3 million, with a net increase in cash of $0.068 million Cash Flow Summary - Nine Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | ($348) | ($5,582) | | Net Cash from Investing Activities | ($144) | $5,797 | | Net Cash from Financing Activities | $553 | ($3,443) | | Net (Decrease) in Cash | $68 | ($3,228) | - Cash from continuing operations showed a net inflow of $1.1 million, but this was offset by a $1.4 million cash outflow from discontinued operating activities27 Notes to Condensed Consolidated Financial Statements The notes detail significant events including S&W Australia's deconsolidation, a 1-for-19 reverse stock split, new debt financing, and substantial doubt about the company's going concern - Going Concern: The company has a history of unprofitability and negative cash flows, reporting a net loss from continuing operations of $14.7 million for the nine months ended March 31, 2025. These factors raise substantial doubt about the company's ability to continue as a going concern4849 - S&W Australia Deconsolidation: Effective July 24, 2024, the company deconsolidated its Australian subsidiary, S&W Australia, which entered voluntary administration. The disposal resulted in a net loss of $5.2 million for the nine-month period, which is included in discontinued operations307882 - New Debt Facility: On December 19, 2024, the company entered into a new credit agreement with Mountain Ridge for up to $25.0 million, which was used to repay its previous CIBC facility. The company was in compliance as of March 31, 2025, but subsequently had events of default in April 2025 for which it received a waiver in May 202510449153 - Reverse Stock Split: A 1-for-19 reverse stock split was implemented on October 17, 2024. All share and per-share data have been retroactively adjusted40133 - Vision Bioenergy Dilution (Subsequent Event): The company failed to meet a $2.0 million capital call for its Vision Bioenergy joint venture by the April 15, 2025 deadline. As a result, its partner Shell funded the portion, and the company's ownership interest was reduced from 34.0% to 30.6%152 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its strategic focus, new licensing model, and the financial impact of S&W Australia's deconsolidation, highlighting a 19.2% revenue decrease and ongoing liquidity concerns - The company's board has commenced a process to explore strategic alternatives, including a potential sale, merger, or recapitalization to enhance shareholder value16039 - The company is launching a new business model for private label customers focused on licensing germplasm and traits, which will shift revenue recognition to a royalty basis upon the customer's final sale159 - The company's liquidity is a major concern, with a history of negative cash flow and unprofitability, relying on its new Mountain Ridge credit facility and ability to secure additional financing224225244 Results of Operations For the nine months ended March 31, 2025, revenue fell by $5.4 million (19.2%) year-over-year, primarily due to decreased alfalfa and sorghum sales, widening the net loss from continuing operations to $14.7 million Results of Operations - Nine Months Ended March 31 (in thousands) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $22,939 | $28,387 | (19.2)% | | Gross Profit | $6,824 | $8,565 | (20.3)% | | Loss from Operations | ($9,240) | ($8,433) | 9.6% | | Net Loss from Continuing Operations | ($14,714) | ($13,442) | 9.5% | - The $5.4 million revenue decline was driven by an import ban on alfalfa in Saudi Arabia, timing of private label shipments for Double Team sorghum, and tighter credit policies in Mexico200 - Selling, General and Administrative (SG&A) expenses decreased by $0.7 million, mainly due to lower compensation and bad debt expenses, but this was partially offset by a $0.8 million increase in one-time transaction costs related to the S&W Australia administration process202 Results of Business Segments The Americas segment revenue decreased by $2.4 million to $18.0 million, while the International segment saw a more significant revenue drop of $3.2 million to $4.8 million, with its gross margin falling Revenue by Segment - Nine Months Ended March 31 (in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Americas | $18,028 | $20,406 | | International | $4,820 | $7,980 | | Total | $22,939 | $28,387 | Gross Profit by Segment - Nine Months Ended March 31 (in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Americas | $6,116 | $6,774 | | International | $906 | $1,791 | | Total | $6,824 | $8,565 | Liquidity and Capital Resources The company's liquidity is precarious due to recurring losses, relying on a new $25.0 million credit facility from Mountain Ridge and ongoing support from its largest stockholder, MFP - The company is not profitable and has had negative cash flow from operations for several years, actively evaluating financing and strategic alternatives, including debt/equity financing and asset sales224 - On December 19, 2024, the company secured a new credit facility of up to $25.0 million from Mountain Ridge, using the initial advance to fully repay its obligations to CIBC226227 - The company experienced events of default under the new Mountain Ridge agreement in April 2025 but received a waiver and amendment on May 9, 2025231233 - The company's largest stockholder, MFP, amended its loan agreement, extending the maturity to July 2028 and providing a new $13.0 million letter of credit to support the Mountain Ridge facility240 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, S&W Seed Company is not required to provide the information typically disclosed under this item - The company is a smaller reporting company and is not required to provide disclosures about market risk259 Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to two identified material weaknesses in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of March 31, 2025260 - A material weakness was identified in FY2024 related to inadequate controls for complete and accurate GAAP presentation and disclosure262264 - A second material weakness was identified in Q1 FY2025 related to the lack of an effectively designed system to ensure appropriate recognition and measurement of non-routine transactions265 - Remediation efforts are underway for both material weaknesses, including updated monitoring and review processes, but are not yet complete266267268 PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal matters, with the primary event being the resolved voluntary administration of its former subsidiary, S&W Australia - The voluntary administration of the S&W Australia subsidiary was completed via a sale on November 22, 2024273 - There are no other pending legal matters expected to have a material adverse impact on the company's business, financial condition, or cash flows274 Risk Factors No material changes to risk factors except for an expanded discussion on international trade policies, detailing how tariffs, sanctions, and trade barriers could adversely affect the business - The primary updated risk factor relates to international trade policies, including tariffs and sanctions, which could raise costs, reduce margins, and harm customer relationships276277 - Trade disputes may exacerbate unfavorable macroeconomic conditions like inflation and financial instability, potentially impacting customer demand and access to capital278 - Retaliatory trade policies or anti-U.S. sentiment could lead to a preference for local competitors, heightened regulatory scrutiny, and difficulties in retaining non-U.S. customers and partners279 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None283 Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None284 Mine Safety Disclosures This item is not applicable to the company - Not applicable285 Other Information On May 9, 2025, the company entered into an amendment and waiver to its credit agreement with Mountain Ridge, waiving existing events of default and revising the EBITDA definition - On May 9, 2025, the company received a waiver for existing events of default under its Mountain Ridge Credit Agreement286 - The amendment also revised the definition of "EBITDA" for covenant calculation purposes, with the change being retroactive to December 31, 2024286 Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including articles of incorporation, bylaws, and officer certifications