S&W Seed pany(SANW) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for the three months ended September 30, 2022, detailing revenue growth, reduced net loss, and shifts in financial position and cash flows Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue | $19,865,865 | $15,531,682 | | Gross Profit | $4,504,511 | $3,126,670 | | Loss from Operations | ($3,399,900) | ($5,769,071) | | Net Loss | ($4,515,203) | ($6,414,241) | | Net Loss per Share (Basic & Diluted) | ($0.11) | ($0.17) | Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $80,703,665 | $77,229,625 | | Total Assets | $135,292,780 | $133,787,851 | | Total Current Liabilities | $76,485,074 | $48,291,496 | | Total Liabilities | $83,714,414 | $77,574,363 | | Total Stockholders' Equity | $46,659,486 | $51,408,669 | Consolidated Cash Flow Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,319,995) | ($5,484,482) | | Net cash used in investing activities | ($147,716) | ($452,647) | | Net cash provided by financing activities | $6,421,764 | $4,831,688 | | Net decrease in cash & cash equivalents | ($832,108) | ($1,633,210) | Notes to Consolidated Financial Statements The notes detail accounting policies, highlighting going concern doubts due to net loss and debt covenant non-compliance, along with international sales and goodwill impairment - The company's operating and liquidity factors, including a net loss of $4.5 million, net cash used in operations of $7.3 million, and non-compliance with debt covenants, raise substantial doubt about its ability to continue as a going concern[61][62] Revenue by Destination Country (Three Months Ended Sep 30) | Country | 2022 Revenue | % of Total | 2021 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | Saudi Arabia | $5,172,286 | 26% | $3,467,210 | 22% | | United States | $4,260,754 | 21% | $3,665,328 | 24% | | Libya | $2,998,047 | 15% | $1,044,000 | 7% | | Australia | $2,557,732 | 13% | $3,434,005 | 22% | - Due to a sustained decline in market valuation, the company recognized a full goodwill impairment charge of $1.5 million for the fiscal year ended June 30, 2022, representing the entire goodwill balance[111][113] - The company has faced non-compliance with covenants in its CIBC Loan Agreement and Rooster Note and is currently not in compliance with a net related entity position undertaking in its NAB Finance Agreement due to foreign currency fluctuations[62][126] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 27.9% year-over-year revenue increase to $19.9 million, improved gross profit margin, strategic focus areas, planned operating expense reductions, and significant liquidity challenges including debt refinancing efforts Q1 FY2023 vs Q1 FY2022 Performance | Metric | Q1 FY2023 | Q1 FY2022 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $19.9M | $15.5M | +27.9% | | Gross Profit Margin | 22.7% | 20.1% | +2.6 p.p. | | SG&A Expense | $5.1M | $5.6M | -8.9% | | R&D Expense | $1.5M | $2.0M | -25.0% | - The company has initiated a strategic review to focus on key value centers, including sorghum technology (Double Team™), forage operations, and specialty crops like stevia and camelina, with a plan to reduce annual operating expenses by approximately $5.0 million[170][171][173] - The company faces significant liquidity challenges and is actively pursuing refinancing for the CIBC Loan Agreement and the Rooster Note, both maturing on December 23, 2022, with no assurance of successful refinancing[215][216] - The company experienced numerous logistical challenges, including limited truck availability, port congestion, and rising shipping costs, which are expected to persist through fiscal 2023 and may delay revenue recognition[179] Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[262] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no significant changes to internal controls over financial reporting during the quarter - Based on an evaluation as of September 30, 2022, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[263] - There were no significant changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[264] PART II. OTHER INFORMATION Legal Proceedings The company reports no pending legal matters expected to have a material adverse impact on its business, financial condition, or cash flows - There are no pending legal matters expected to have a material adverse impact on the company's business, results of operations, financial condition, or cash flows[267] Risk Factors The company is exempt from providing risk factor information in its Form 10-Q as it qualifies as a smaller reporting company - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[268] Other Items (Unregistered Sales of Equity Securities, Defaults, Mine Safety, Other Information) This section confirms no unregistered sales of equity securities, no defaults upon senior securities, and no other material information for the reporting period, with mine safety disclosures being not applicable - The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no other material information for the quarter, with mine safety disclosures being not applicable[269][270][271][272] Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to loan agreements with CIBC and Rooster Capital, a new subordinate loan agreement, and required officer certifications - The report lists several key agreements filed as exhibits, including the Sixth Amendment to the Loan and Security Agreement with CIBC, the Second Amendment to the Note with Rooster Capital, and a new Subordinate Loan and Security Agreement with MFP Partners, L.P[274]