SOURCE: S & W Seed Company

S & W Seed Company

May 16, 2011 16:10 ET

S&W Seed Company Reports Fiscal 2011 Third Quarter Results and Comments on Prevailing Growth Initiatives

FIVE POINTS, CA--(Marketwire - May 16, 2011) - S&W Seed Company (NASDAQ: SANW) today announced its fiscal third quarter results for the three and nine months ended March 31, 2011.

"Approximately one year ago this month, we began implementing an aggressive growth strategy focused on fully leveraging S&W's reputation, longstanding industry relationships and agricultural expertise to build a diversified Ag company of enduring value and substance. Volatile market dynamics at play during the past year have proven to be quite challenging for S&W's overall sales performance, resulting in declining revenues for the last several quarters. However, we remain confident that the investments we have made, and will continue to make, to implement and support planned growth initiatives should ultimately prove to be very rewarding for all S&W stakeholders," stated Mark Grewal, President and Chief Executive Officer of S&W.

"Steps we've taken to monetize underutilized capacity at our Five Points milling facility is but one example of how our early efforts are beginning to pay off," continued Grewal. "Sales growth in this area of our business has been pronounced in the past two quarters and is expected to gain greater strength and momentum as we continue to increase the number of independent growers and grain companies for which we clean and process seed and small grains. Moreover, our stevia program, which has been in development since fiscal 2010 and represented a notable portion of the increase in our overhead expenses, is poised to take flight with our first commercial scale planting due to commence within only a matter of days."

"Other strategic initiatives that are expected to contribute to S&W's future growth include our recently announced plan to farm our own crops, rather than strictly contracting alfalfa seed production to local growers. Through our lease of 800 acres of farmland in Kern County, we hope to participate in and financially benefit from the production, milling and sale of other profitable crops complementary to our core alfalfa business that may include wheat, safflower, sorghum and stevia," noted Grewal.

"Following its 2008/2009 market collapse, the U.S. dairy market is now showing signs of stabilizing, which bodes well for the strong recovery of the alfalfa hay market, and in turn, the demand for our alfalfa varieties from domestic growers in the upcoming fall planting season," Grewal added. "Further, early indications from our international distribution channels are suggesting that alfalfa seed sales to the Middle East and North Africa should continue to ramp-up measurably over the next six to nine months, particularly in view of the fact that seed pricing in Saudi Arabia is now on the rise. Our decision to protect our margins and storehouse our seed until market prices in Saudi rebounded should fuel strong and profitable seed sales growth for our Company in the coming year."

Concluding, Grewal stated, "S&W's plans to grow through strategic acquisition and joint ventures remain firmly intact. Our executive management team has been cautiously proceeding with due diligence and negotiations related to several possible transactions, and will continue to consider all new opportunities that may be presented to us."


Financial Highlights When Comparing Three Months Ended March 31, 2011 to Three Months Ended March 31, 2010:

-- Total revenues declined 48% to $439,890 from $839,306.
   -- Revenues from seed milling services significantly increased, rising
      to $236,138 from $1,356.
   -- Revenues from alfalfa seed sales totaled $203,752, down from 
      $837,950.  Similarly to what was reported in the first and second
      quarter periods, seed sales have continued to be challenged by the
      glut of low price, non-proprietary seed being sold in Saudi Arabia
      and the downturn in the U.S. dairy industry on which the alfalfa hay
      market is highly dependent.
-- Due primarily to the increase in sales of higher margin milling
   services, gross profit margin on sales improved to 43% from 17%.
-- Total operating expenses increased 100% to $753,179 from $375,899, due
   to higher expenses relating to the expansion of the Company's sales,
   marketing and support teams; increased investment in domestic
   advertising and marketing initiatives; ongoing investment in the
   development of S&W's new U.S. stevia initiative; ongoing costs of
   developing new alfalfa seed varieties; and the costs associated with
   becoming a fully reporting, publicly traded company.
-- The net loss was $293,634, or $0.05 loss per basic and diluted common
   share, compared to a net loss of $204,589, or 0.07 loss per basic and
   diluted common share.


Financial Highlights When Comparing Nine Months Ended March 31, 2011 to Nine Months Ended March 31, 2010:

-- Total revenues were $2,282,689, a 59% decrease from $5,500,504.
   -- Revenues from seed cleaning and processing climbed 51% to $883,198
      from $586,442.
   -- Sales of the Company's alfalfa varieties decreased 72% to $1,399,491
      from $4,914,062.  The sales decline can be primarily attributed to a
      $2,764,340 decrease in sales to Genetics International, the Company's
      distributor who sells into Saudi Arabia.
-- Gross profit margin on sales rose to 45% from 29%, due to the increase
   in higher margin sales of seed cleaning and processing services.
-- For the reasons previously mentioned, total operating expenses increased
   164% to $2,160,417 from $819,021.
-- The net loss totaled $629,910, or $0.11 loss per basic and diluted
   share, compared to net income of $645,141, or $0.22 earnings per basic
   and diluted shares.

As of March 31, 2011, assets totaled $15.17 million; working capital was $11.45 million; there was zero long-term debt and stockholders' equity totaled $14.71 million.

For more detailed information regarding S&W's third quarter results for Fiscal 2011, please refer to the related 10-Q which will be filed with the U.S. Securities and Exchange Commission later today.





                             S&W SEED COMPANY
                         (A DELAWARE CORPORATION)
                        CONSOLIDATED BALANCE SHEETS
                                (Unaudited)



                                                  March 31,     June 30,
                                                    2011          2010
                                                ------------- -------------
                     ASSETS

CURRENT ASSETS
  Cash and cash equivalents                     $   4,133,439 $   7,830,517
  Accounts receivable, net                          1,009,779     2,114,868
  Inventories, net                                  6,601,833     2,714,183
  Prepaid expenses and other current assets            31,825        75,901
  Deferred tax asset                                  133,978       184,488
                                                ------------- -------------
    TOTAL CURRENT ASSETS                           11,910,854    12,919,957

Property, plant and equipment, net of
 accumulated depreciation                           2,194,956     2,110,503
Other intangibles, net                                513,988       548,674
Deferred tax asset - long term                        552,595             -
                                                ------------- -------------
    TOTAL ASSETS                                $  15,172,393 $  15,579,134
                                                ============= =============

     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                              $      98,636 $     294,477
  Accounts payable - related party                    259,164         1,782
  Accrued expenses and other current
   liabilities                                        101,439        31,348
                                                ------------- -------------
    TOTAL CURRENT LIABILITIES                         459,239       327,607
                                                ------------- -------------

    TOTAL LIABILITIES                                 459,239       327,607
                                                ------------- -------------

STOCKHOLDERS' EQUITY
  Preferred stock, $0.001 par value; 5,000,000
   shares authorized; no shares issued and
   outstanding                                              -             -
  Common stock, $0.001 par value; 50,000,000
   shares authorized; 5,800,000 issued and
   outstanding at March 31, 2011 and
   June 30, 2010                                        5,800         5,800
  Additional paid-in capital                       14,574,068    14,482,531
  Retained earnings                                   133,286       763,196
                                                ------------- -------------
    TOTAL STOCKHOLDERS' EQUITY                     14,713,154    15,251,527
                                                ------------- -------------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $  15,172,393 $  15,579,134
                                                ============= =============





                             S&W SEED COMPANY
                         (A DELAWARE CORPORATION)
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)


                           Three Months Ended         Nine Months Ended
                                March 31,                 March 31,
                        ------------------------  ------------------------
                            2011         2010         2011         2010
                        -----------  -----------  -----------  -----------
Revenue                 $   439,890  $   839,306  $ 2,282,689  $ 5,500,504

Cost of revenue             249,707      699,172    1,258,468    3,931,166
                        -----------  -----------  -----------  -----------

Gross profit                190,183      140,134    1,024,221    1,569,338

Operating expenses
  Selling, general and
   administrative
   expenses                 614,820      253,347    1,640,233      551,235
  Research and
   development expenses      77,645       68,088      339,773      106,217
  Depreciation and
   amortization              60,714       54,464      180,411      161,569
                        -----------  -----------  -----------  -----------

    Total operating
     expenses               753,179      375,899    2,160,417      819,021
                        -----------  -----------  -----------  -----------

Income (loss) from
 operations                (562,996)    (235,765)  (1,136,196)     750,317

Other (income) expense
  Loss on sale of fixed
   assets                         -            -        5,706            -
  Interest (income)
   expense, net              (2,764)      35,426       (9,907)      77,363
                        -----------  -----------  -----------  -----------

Net income (loss)
 before income tax
 benefit                   (560,232)    (271,191)  (1,131,995)     672,954

  Income tax (benefit)
   expense                 (266,598)     (66,602)    (502,085)     (66,602)
                        -----------  -----------  -----------  -----------

Net income (loss)
 including
 noncontrolling
 interests                 (293,634)    (204,589)    (629,910)     739,556
Net income attributable
 to noncontrolling
 interests                        -            -            -       94,415
                        -----------  -----------  -----------  -----------
Net income (loss)
 attributable to S&W
 Seed Company           $  (293,634) $  (204,589) $  (629,910) $   645,141
                        ===========  ===========  ===========  ===========

Net income (loss)
 attributable to S&W
 Seed Company
 per common share:
  Basic                 $     (0.05) $     (0.07) $     (0.11) $      0.22
                        ===========  ===========  ===========  ===========
  Diluted               $     (0.05) $     (0.07) $     (0.11) $      0.22
                        ===========  ===========  ===========  ===========

Weighted average number
 of common shares
 outstanding:
  Basic                   5,800,000    3,000,000    5,800,000    3,000,000
                        ===========  ===========  ===========  ===========
  Diluted                 5,800,000    3,000,000    5,800,000    3,000,000
                        ===========  ===========  ===========  ===========








                             S&W SEED COMPANY
                         (A DELAWARE CORPORATION)
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)


                                                    Nine Months Ended
                                                        March 31,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) including noncontrolling
   interests                                    $   (629,910) $    739,556
  Adjustments to reconcile net income (loss)
   from operating activities to net cash used
   in operating activities
    Accretion of acquisition purchase
     obligation                                            -        27,214
    Stock based compensation                          91,537             -
    Depreciation and amortization                    180,411       161,569
    Loss on disposal of fixed assets                   5,706             -
   Changes in:
      Accounts receivable                          1,105,089    (1,069,491)
      Inventories                                 (3,887,650)   (2,518,678)
      Prepaid expenses and other current
       assets                                         44,076       (72,790)
      Deferred tax asset and income tax
       receivable                                   (502,085)            -
      Due from related parties                             -        63,693
      Accounts payable                              (195,841)    2,317,323
      Accounts payable - related party               257,382             -
      Accrued expenses and other current
       liabilities                                    70,091        26,219
                                                ------------  ------------
        Net cash used in operating activities     (3,461,194)     (325,385)

CASH FLOWS FROM INVESTING ACTIVITIES
  Additions to property, plant and equipment        (240,384)      (29,635)
  Proceeds from disposal of property, plant
   and equipment                                       4,500             -
                                                ------------  ------------
        Net cash used in investing activities       (235,884)      (29,635)

CASH FLOWS FROM FINANCING ACTIVITIES
  Withdrawals by owners                                    -       (79,614)
  Equity offering costs                                    -      (727,727)
  Borrowing (repayments) on revolving credit
   loan                                                    -     1,519,927
                                                ------------  ------------
        Net cash provided by financing
         activities                                        -       712,586
                                                ------------  ------------

NET INCREASE OR (DECREASE) IN CASH                (3,697,078)      357,566

CASH AND CASH EQUIVALENTS, beginning of the
 period                                            7,830,517           367
                                                ------------  ------------

CASH AND CASH EQUIVALENTS, end of period        $  4,133,439  $    357,933
                                                ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION
  Cash paid during the period for:
    Interest                                    $          -  $     34,950
    Income taxes                                           -             -

  Non-cash transactions:
    Debt issued for acquisition of
     minority interests                         $          -  $    819,542




About S&W Seed Company

Founded in 1980 and headquartered in the Central Valley of California, S&W Seed Company is a leading provider of warm climate, high yield alfalfa seed varieties, including varieties that can thrive in poor, saline soils, as verified over decades of university-sponsored trials. S&W also offers seed cleaning and processing at its 40-acre facility in Five Points, California. In fiscal 2010, the Company launched a business expansion initiative centered on mass producing stevia leaf in the U.S. in response to growing global demand for the all-natural, zero calorie sweetener from the food and beverage industry. For more information, please visit www.swseedco.com.

Safe Harbor Statement

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may," "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected." You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the Company's 10-K for the fiscal year ended June 30, 2010, and other filings made by the Company with the Securities and Exchange Commission.

Contact Information

  • FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

    Elite Financial Communications Group, LLC
    Dodi B. Handy
    President and CEO
    Twitter: dodihandy

    FOR MEDIA:
    Kathy Addison
    COO
    Twitter: kathyaddison
    (407) 585-1080
    Email Contact