S&W Seed pany(US:SANW)2022-02-10 13:43PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Presents unaudited consolidated financial statements for the periods, detailing financial position, performance, and cash flows, showing a net loss Notes to Consolidated Financial Statements Provides crucial context to financial statements, detailing accounting policies, customer concentration, international sales, and significant going concern doubts due to liquidity issues - The company has significant customer concentration, with four customers accounting for 23% of revenue in Q2 2022 and one customer accounting for 29% in Q2 202150 - International sales represent a major component of revenue, increasing to 81% for the three months and 78% for the six months ended December 31, 2021, from 55% and 58% in prior-year periods respectively52 - The company has expressed substantial doubt regarding its ability to continue as a going concern due to uncertain cash flow, upcoming debt maturities in late 2022, and the need for additional capital60215 - Distribution and production agreements with Pioneer (Corteva) were terminated in May 2019, with final seed deliveries completed in March 2021, and no significant future revenue expected from Corteva9798102 - In October 2021, the company sold 1,847,343 shares of common stock to its largest stockholder and certain directors/officers for approximately $5.0 million in gross proceeds148 Consolidated Balance Sheet Highlights (as of December 31, 2021) | Metric | Amount (USD) | | :--- | :--- | | Total Current Assets | $88,205,602 | | Total Assets | $150,250,983 | | Total Current Liabilities | $54,967,847 | | Total Liabilities | $86,090,454 | | Total Stockholders' Equity | $64,160,529 | Consolidated Statement of Operations Highlights | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $12,631,409 | $15,051,331 | $28,163,090 | $28,906,717 | | Gross Profit | $1,660,364 | $2,038,160 | $4,787,033 | $3,819,092 | | Loss from Operations | $(8,897,022) | $(7,362,251) | $(14,666,093) | $(13,659,837) | | Net Loss | $(9,781,565) | $(8,395,242) | $(16,195,806) | $(15,581,117) | | Net Loss per Share (Basic & Diluted) | $(0.25) | $(0.25) | $(0.43) | $(0.47) | Consolidated Statement of Cash Flows Highlights (Six Months Ended Dec 31) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,065,824) | $(7,887,079) | | Net cash (used in) provided by investing activities | $(1,206,255) | $282,469 | | Net cash provided by financing activities | $8,699,613 | $5,828,555 | | Net Decrease in Cash | $(805,871) | $(1,197,015) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, condition, and liquidity, highlighting revenue decline due to Pioneer sales cessation, widening net loss, and significant going concern doubts Results of Operations Analyzes Q2 FY2022 performance, noting a revenue decline due to Pioneer sales cessation, offset by core revenue growth, and an increased net loss from higher SG&A expenses Revenue Comparison (Three Months Ended Dec 31) | Revenue Type | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $12.6M | $15.1M | $(2.5)M | | Pioneer Revenue | $0 | $4.1M | $(4.1)M | | Core Revenue | $12.6M | $11.0M | $1.6M (15% increase) | - SG&A expense increased by $1.2 million in Q2 2022, primarily due to $0.7 million in non-recurring severance costs for a CFO change and a $0.5 million increase in stock-based compensation185 Financial Performance (Six Months Ended Dec 31) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $28.2M | $28.9M | $(0.7)M | | Core Revenue | $28.2M | $23.2M | $5.0M (21.4% increase) | | Gross Profit Margin | 17.0% | 13.2% | +3.8 ppt | | Net Loss | $(16.2)M | $(15.6)M | $(0.6)M | Liquidity and Capital Resources Details the company's significant liquidity challenges, negative operating cash flow, and substantial going concern doubt, emphasizing the need for debt refinancing and additional capital - The company is not profitable and has experienced negative cash flow from operations for several years, relying on debt and equity financing214 - The company is actively engaging with potential lenders to refinance its CIBC Credit Facility and secured note with Conterra, both maturing in late 2022226232 - As of December 31, 2021, $6.2 million remained available for sale under the At Market Issuance (ATM) Sales Agreement235 - The company obtained a covenant waiver from CIBC for the quarter ended December 31, 2021, due to CFO transition costs, ensuring loan agreement compliance119215224 Critical Accounting Policies Identifies critical accounting policies requiring significant judgment and estimation, including goodwill, intangible assets, stock-based compensation, income taxes, inventories, and doubtful accounts - Key critical accounting policies requiring significant estimates and judgments include Goodwill, Intangible Assets, Stock-Based Compensation, Income Taxes, Inventories, and Allowance for Doubtful Accounts249250252 - Inventory write-downs of $0.7 million and $0.9 million were recognized for the six months ended December 31, 2021 and 2020 respectively, due to quality and germination rate deterioration259260 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide disclosures on market risk - The company is a smaller reporting company and is not required to provide information for this item262 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021264 - No significant changes in internal control over financial reporting were identified during the quarter265 PART II. OTHER INFORMATION Legal Proceedings The company reported no material legal proceedings for the period - No material legal proceedings were reported268 Risk Factors As a smaller reporting company, the company is not required to provide information on risk factors - The company is a smaller reporting company and is not required to provide information for this item269 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds - No unregistered sales of equity securities or use of proceeds were reported270 Other Information The company reported no other material information for the period - No other material information was reported for the period273 Exhibits Lists exhibits filed with the Form 10-Q, including financing, employment, and securities agreements, along with CEO and CFO certifications - Key exhibits filed include a Finance Agreement with National Australia Bank, employment and separation agreements for CFOs, and CEO/CFO certifications275