Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Sep. 20, 2018 | Dec. 31, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | S&W Seed Co | ||
Entity Central Index Key | 1,477,246 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 47,685,994 | ||
Entity Common Stock, Shares Outstanding | 25,956,252 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,018 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 4,320,894 | $ 745,001 |
Accounts receivable, net | 13,861,932 | 23,239,325 |
Inventories, net | 60,419,276 | 31,489,945 |
Prepaid expenses and other current assets | 1,279,794 | 1,249,921 |
TOTAL CURRENT ASSETS | 79,881,896 | 56,724,192 |
Property, plant and equipment, net | 13,180,132 | 13,581,576 |
Intangibles, net | 33,109,780 | 34,939,079 |
Goodwill | 10,292,265 | 10,292,265 |
Other assets | 1,303,135 | 1,563,176 |
TOTAL ASSETS | 137,767,208 | 117,100,288 |
CURRENT LIABILITIES | ||
Accounts payable | 5,935,454 | 7,157,745 |
Accounts payable - related parties | 0 | 331,694 |
Deferred revenue | 212,393 | 880,326 |
Accrued expenses and other current liabilities | 3,114,799 | 2,733,718 |
Lines of credit, net | 32,630,559 | 27,399,784 |
Current portion of contingent consideration obligation | 0 | 2,500,000 |
Current portion of long-term debt | 503,012 | 10,309,664 |
TOTAL CURRENT LIABILITIES | 42,396,217 | 51,312,931 |
Long-term debt, less current portion | 12,977,087 | 1,096,155 |
Derivative warrant liabilities | 0 | 2,836,600 |
Other non-current liabilities | 651,780 | 632,947 |
TOTAL LIABILITIES | 56,025,084 | 55,878,633 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value; 50,000,000 shares authorized; 24,367,906 issued and 24,342,906 outstanding at June 30, 2018; 18,004,681 issued and 17,979,681 outstanding at June 30, 2017 | 24,367 | 18,004 |
Treasury stock, at cost, 25,000 shares at June 30, 2018 and June 30, 2017 | (134,196) | (134,196) |
Additional paid-in capital | 108,803,991 | 83,312,518 |
Accumulated deficit | (21,161,376) | (16,436,286) |
Accumulated other comprehensive loss | (5,790,662) | (5,538,385) |
TOTAL STOCKHOLDERS' EQUITY | 81,742,124 | 61,221,655 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 137,767,208 | $ 117,100,288 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Jun. 30, 2017 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 24,367,906 | 18,004,681 |
Common stock, shares outstanding | 24,342,906 | 17,979,681 |
Treasury stock, shares | 25,000 | 25,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||
Revenue | $ 64,085,510 | $ 75,373,810 |
Cost of revenue | 49,332,052 | 59,232,846 |
Gross profit | 14,753,458 | 16,140,964 |
Operating expenses | ||
Selling, general and administrative expenses | 10,503,020 | 11,794,026 |
Research and development expenses | 3,887,723 | 3,032,112 |
Depreciation and amortization | 3,439,287 | 3,325,743 |
Disposal of property, plant and equipment loss (gain) | (82,980) | 78,538 |
Impairment charges | 0 | 319,001 |
Total operating expenses | 17,747,050 | 18,549,420 |
Loss from operations | (2,993,592) | (2,408,456) |
Other expense | ||
Foreign currency loss (gain) | (12,584) | 1,388 |
Change in derivative warrant liabilities | (431,300) | (1,517,500) |
Change in contingent consideration obligations | 0 | 231,584 |
Loss on equity method investment | 0 | 144,841 |
Anticipated loss on sub-lease land | 0 | 424,600 |
Interest expense - amortization of debt discount | 169,045 | 1,176,023 |
Interest expense | 1,863,288 | 1,324,945 |
Loss before income taxes | (4,582,041) | (4,194,337) |
Provision for income taxes | 143,049 | 7,627,705 |
Net loss | $ (4,725,090) | $ (11,822,042) |
Net income (loss) per common share: | ||
Basic | $ (0.21) | $ (0.67) |
Diluted | $ (0.21) | $ (0.67) |
Weighted average number of common shares outstanding: | ||
Basic | 22,481,491 | 17,718,057 |
Diluted | 22,481,491 | 17,718,057 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Consolidated Statements Of Comprehensive Loss | ||
Net loss | $ (4,725,090) | $ (11,822,042) |
Foreign currency transaction adjustment, net of income taxes | (252,277) | 251,278 |
Comprehensive loss | $ (4,977,367) | $ (11,570,764) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
Beginning balance, shares at Jun. 30, 2016 | 17,086,111 | (25,000) | ||||
Beginning balance, amount at Jun. 30, 2016 | $ 17,086 | $ (134,196) | $ 78,282,461 | $ (4,614,244) | $ (5,789,663) | $ 67,761,444 |
Stock-based compensation - options, restricted stock and RSU's | $ 0 | $ 0 | 1,409,368 | 0 | 0 | $ 1,409,368 |
Exercise of stock options, net of withholding taxes, shares | 161,781 | 0 | 232,000 | |||
Exercise of stock options, net of withholding taxes, amount | $ 162 | $ 0 | 603,700 | 0 | 0 | $ 603,862 |
Net issuance to settle RSU's, shares | 72,468 | 0 | ||||
Net issuance to settle RSU's, amount | $ 72 | $ 0 | (143,599) | 0 | 0 | (143,527) |
Issuance of common stock upon conversion of principal and interest of convertible debentures, shares | 684,321 | |||||
Issuance of common stock upon conversion of principal and interest of convertible debentures | $ 684 | 0 | 3,160,588 | 0 | 0 | 3,161,272 |
Reclassification of warrants upon expiration of repricing provisions | 0 | |||||
Other comprehensive income (loss) | 0 | 0 | 0 | 0 | 251,278 | 251,278 |
Net loss | $ 0 | $ 0 | 0 | (11,822,042) | 0 | (11,822,042) |
Ending balance, shares at Jun. 30, 2017 | 18,004,681 | (25,000) | ||||
Ending balance, amount at Jun. 30, 2017 | $ 18,004 | $ (134,196) | 83,312,518 | (16,436,286) | (5,538,385) | 61,221,655 |
Stock-based compensation - options, restricted stock and RSU's | $ 0 | $ 0 | 748,516 | 0 | 0 | $ 748,516 |
Exercise of stock options, net of withholding taxes, shares | 49,000 | |||||
Net issuance to settle RSU's, shares | 103,225 | 0 | ||||
Net issuance to settle RSU's, amount | $ 103 | $ 0 | (115,422) | 0 | 0 | $ (115,319) |
Proceeds from sale of common stock, net of fees and expenses, shares | 6,260,000 | |||||
Proceeds from sale of common stock, net of fees and expenses, amount | $ 6,260 | 0 | 22,453,079 | 0 | 0 | 22,459,339 |
Reclassification of warrants upon expiration of repricing provisions | 0 | 0 | 2,405,300 | 0 | 0 | 2,405,300 |
Other comprehensive income (loss) | 0 | 0 | 0 | 0 | (252,277) | (252,277) |
Net loss | $ 0 | $ 0 | 0 | (4,725,090) | 0 | (4,725,090) |
Ending balance, shares at Jun. 30, 2018 | 24,367,906 | (25,000) | ||||
Ending balance, amount at Jun. 30, 2018 | $ 24,367 | $ (134,196) | $ 108,803,991 | $ (21,161,376) | $ (5,790,662) | $ 81,742,124 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (4,725,090) | $ (11,822,042) |
Adjustments to reconcile net (loss) income from operating activities to net cash provided by (used in) operating activities | ||
Stock-based compensation | 748,516 | 1,409,368 |
Change in allowance for doubtful accounts | 78,980 | 449,590 |
Change in inventory provision | 482,250 | 0 |
Depreciation and amortization | 3,439,287 | 3,325,743 |
Loss (gain) on disposal of property, plant and equipment | (82,980) | 78,538 |
Impairment charges | 0 | 319,001 |
Change in deferred tax asset | 0 | 7,269,420 |
Change in foreign exchange contracts | 272,801 | 112,970 |
Change in derivative warrant liabilities | (431,300) | (1,517,500) |
Change in contingent consideration obligations | 0 | 231,584 |
Amortization of debt discount | 169,045 | 1,176,023 |
Loss on equity method investment | 0 | 144,841 |
Anticipated loss on sub-lease land | 0 | 424,600 |
Changes in operating assets and liabilities, net: | ||
Accounts receivable | 9,207,302 | 4,110,609 |
Inventories | (29,860,271) | (9,343,989) |
Prepaid expenses and other current assets | (241,394) | (41,928) |
Other non-current assets | 259,683 | (9,487) |
Accounts payable | (1,052,624) | (7,400,553) |
Accounts payable - related parties | (336,494) | (64,424) |
Deferred revenue | (456,643) | 369,688 |
Accrued expenses and other current liabilities | 307,500 | 314,402 |
Other non-current liabilities | 21,191 | 163,386 |
Net cash used in operating activities | (22,200,241) | (10,300,160) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Additions to property, plant and equipment | (1,187,307) | (2,960,620) |
Proceeds from disposal of property, plant and equipment | 45,830 | 877,617 |
Acquisition of germplasm assets | (295,034) | 0 |
Additions to internal use software | 0 | (156,185) |
Net cash used in investing activities | (1,436,511) | (2,239,188) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from sale of common stock | 22,459,339 | 0 |
Net proceeds from exercise of common stock options | 0 | 603,862 |
Taxes paid related to net share settlements of stock-based compensation awards | (115,319) | (143,527) |
Borrowings and repayments on line of credit, net | 5,439,382 | 10,488,213 |
Payment of contingent consideration obligation | (2,500,000) | 0 |
Borrowings of long-term debt | 12,590,318 | 280,654 |
Debt issuance costs | (257,964) | 0 |
Repayments of long-term debt | (10,273,560) | (304,770) |
Repayments of convertible debt | 0 | (4,721,551) |
Net cash provided by financing activities | 27,342,196 | 6,202,881 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (129,551) | 176,968 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 3,575,893 | (6,159,499) |
CASH AND CASH EQUIVALENTS, beginning of the period | 745,001 | 6,904,500 |
CASH AND CASH EQUIVALENTS, end of period | 4,320,894 | 745,001 |
Cash paid during the period for: | ||
Interest | 1,830,277 | 1,366,854 |
Income taxes | $ (150,139) | $ 210,682 |
NOTE 1 - BACKGROUND AND ORGANIZ
NOTE 1 - BACKGROUND AND ORGANIZATION | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 1 - BACKGROUND AND ORGANIZATION | NOTE 1 - BACKGROUND AND ORGANIZATION Organization S&W Seed Company, a Nevada corporation (the "Company"), began as S&W Seed Company, a general partnership, in 1980 and was originally in the business of breeding, growing, processing and selling alfalfa seed. We then incorporated a corporation with the same name in Delaware in October 2009, which is the successor entity to Seed Holding, LLC, having purchased a majority interest in the general partnership between June 2008 and December 2009. Following the Company's initial public offering in May 2010, the Company purchased the remaining general partnership interests and became the sole owner of the general partnership's original business. Seed Holding, LLC remains a consolidated subsidiary of the Company. In December 2011, the Company reincorporated in Nevada as a result of a statutory short-form merger of the Delaware corporation into its wholly-owned subsidiary, S&W Seed Company, a Nevada corporation. On April 1, 2013, the Company, together with its wholly-owned subsidiary, S&W Holdings Australia Pty Ltd, an Australia corporation (f/k/a S&W Seed Australia Pty Ltd "S&W Holdings"), consummated an acquisition of all of the issued and outstanding shares of Seed Genetics International Pty Ltd, an Australia corporation ("SGI"), from SGI's shareholders. In April 2018, SGI changed its name to S&W Seed Company Australia Pty Ltd ("S&W Australia"). Business Overview Since its establishment, the Company, including its predecessor entities, has been principally engaged in breeding, growing, processing and selling agricultural seeds, primarily alfalfa seed. The Company owns seed cleaning and processing facilities, which are located in Five Points, California, Nampa, Idaho and Keith, South Australia. The Company's seed products are primarily grown under contract by farmers. The Company began its stevia initiative in fiscal year 2010 and is currently focused on breeding improved varieties of stevia and developing marketing and distribution programs for its stevia products. The Company has also been actively engaged in expansion initiatives through a combination of organic growth and strategic acquisitions, including in December 31, 2014, when the Company purchased certain alfalfa research and production facilities and conventional (non-GMO) alfalfa germplasm assets and assumed certain related liabilities ("the Pioneer Acquisition") of Pioneer Hi-Bred International, Inc. ("DuPont Pioneer"). The Company has a long-term distribution agreement with DuPont Pioneer regarding conventional (non-GMO) varieties, the term of which extends into 2024. The Company's production agreement with DuPont Pioneer (relating to GMO-traited varieties) terminates on May 31, 2019. Although the production agreement will terminate on May 31, 2019, the Company expects that the DuPont Pioneer distribution agreement will continue to be a significant source of the Company's annual revenue through December 2024. In May 2016, the Company acquired the assets and business of SV Genetics, a private Australian company specializing in the breeding and licensing of proprietary hybrid sorghum and sunflower seed germplasm, which represented the Company's initial effort to diversify its product portfolio beyond alfalfa seed and stevia. The Company's operations span the world's alfalfa seed production regions with operations in the San Joaquin and Imperial Valleys of California, five other U.S. states, Australia, and three provinces in Canada, and the Company sells its seed products in more than 30 countries around the globe. |
NOTE 2 - SUMMARY OF SIGNIFICANT
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Company maintains its accounting records on an accrual basis in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the accounts of Seed Holding, LLC and its other wholly-owned subsidiaries, S&W Holdings, which owns 100% of S&W Australia, and Stevia California, LLC. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are adjusted to reflect actual experience when necessary. Significant estimates and assumptions affect many items in the financial statements. These include allowance for doubtful trade receivables, inventory valuation, asset impairments, provisions for income taxes, grower accruals (an estimate of amounts payable to farmers who grow seed for the Company), contingent consideration obligations, derivative liabilities, contingencies and litigation. Significant estimates and assumptions are also used to establish the fair value and useful lives of depreciable tangible and certain intangible assets, goodwill as well as valuing stock-based compensation. Actual results may differ from those estimates and assumptions, and such results may affect income, financial position or cash flows. Certain Risks and Concentrations The Company's revenue is principally derived from the sale of alfalfa seed, the market for which is highly competitive. The Company depends on a core group of significant customers. One customer accounted for 62% of its revenue for the year ended June 30, 2018. Two customers accounted for 58% of its revenue for the year ended June 30, 2017. One customer accounted for 35% of the Company's accounts receivable at June 30, 2018. Two customers accounted for 52% of the Company's accounts receivable at June 30, 2017. In addition, the Company sells a substantial portion of its products to international customers. Sales to international markets represented 35% and 45% of revenue during the years ended June 30, 2018 and 2017, respectively. The net book value of fixed assets located outside the United States was 20% and 19% of total assets at June 30, 2018 and June 30, 2017, respectively. Cash balances located outside of the United States may not be insured and totaled $369,803 and $192,879 at June 30, 2018 and June 30, 2017, respectively. The following table shows revenue from external sources by destination country: Years Ended June 30, 2018 2017 United States $ 41,662,556 65% $ 41,505,305 55% Mexico 4,932,105 8% 4,749,315 6% Sudan 3,178,039 5% 2,747,923 4% Argentina 2,748,492 4% 2,881,050 4% Peru 1,844,898 3% 1,230,999 2% Saudi Arabia 1,461,368 2% 12,055,276 16% Australia 1,242,957 2% 1,882,899 2% Italy 938,252 1% 151,415 0% Libya 936,423 1% 158,500 0% South Africa 802,629 1% 1,190,789 2% Other 4,337,791 8% 6,820,338 9% Total $ 64,085,510 100% $ 75,373,810 100% International Operations The Company translates its foreign operations' assets and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative translation account, a component of accumulated other comprehensive income. Gains or losses from foreign currency transactions are included in the consolidated statement of operations. Revenue Recognition The Company derives its revenue primarily from sale of seed and other crops and milling services. Revenue from seed and other crop sales is recognized when risk and title to the product is transferred to the customer. The Company recognizes revenue from milling services according to the terms of the sales agreements and when delivery has occurred, performance is complete and pricing is fixed or determinable at the time of sale. Additional conditions for recognition of revenue for all sales include the requirements that the collection of sales proceeds must be reasonably assured based on historical experience and current market conditions, the sales price is fixed and determinable and that there must be no further performance obligations under the sale. Cost of Revenue The Company records purchasing and receiving costs, inspection costs and warehousing costs in cost of revenue. When the Company is required to pay for outward freight and/or the costs incurred to deliver products to its customers, the costs are included in cost of revenue. Cash and Cash Equivalents For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation. Accounts Receivable The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer's trade accounts receivable. The allowance for doubtful trade receivables was $584,202 and $526,495 at June 30, 2018 and June 30, 2017, respectively. Inventories Inventories consist of seed and packaging materials. Inventories are stated at the lower of cost or net realizable value, and an inventory reserve permanently reduces the cost basis of inventory. Inventories are valued as follows: Actual cost is used to value raw materials such as packaging materials, as well as goods in process. Costs for substantially all finished goods, which include the cost of carryover crops from the previous year, are valued at actual cost. Actual cost for finished goods includes plant conditioning and packaging costs, direct labor and raw materials and manufacturing overhead costs based on normal capacity. The Company records abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) as current period charges and allocates fixed production overhead to the costs of finished goods based on the normal capacity of the production facilities. The Company's subsidiary, S&W Australia, does not fix the final price for seed payable to its growers until the completion of a given year's sales cycle pursuant to its standard contract production agreement. S&W Australia records an estimated unit price; accordingly, inventory, cost of revenue and gross profits are based upon management's best estimate of the final purchase price to growers. Inventory is periodically reviewed to determine if it is marketable, obsolete or impaired. Inventory that is determined to be obsolete or impaired is written off to expense at the time the impairment is identified. Because the germination rate, and therefore the quality, of alfalfa seed improves over the first year of proper storage, inventory obsolescence for alfalfa seed is not a material concern. The Company sells its inventory to distributors, dealers and directly to growers. Components of inventory are: June 30, June 30, 2018 2017 Raw materials and supplies $ 344,620 $ 266,551 Work in progress and growing crops 2,775,398 5,603,825 Finished goods 57,299,258 25,619,569 $ 60,419,276 $ 31,489,945 Property, Plant and Equipment Property, plant and equipment is depreciated using the straight-line method over the estimated useful life of the asset - periods of 5-28 years for buildings, 3-20 years for machinery and equipment, and 3-5 years for vehicles. Intangible Assets Intangible assets acquired in business acquisitions are reported at their initial fair value less accumulated amortization. Intangible assets are amortized using the straight-line method over the estimated useful life of the asset. Periods of 10-30 years for technology/IP/germplasm, 10-20 years for customer relationships and trade names and 3-20 for other intangible assets. The weighted average estimated useful lives are 26 years for technology/IP/germplasm, 18 years for customer relationships and 20 years for trade names and other intangible assets. Goodwill Goodwill originated from acquisitions of Imperial Valley Seeds, Inc. ("IVS") and S&W Australia in fiscal year 2013, the acquisition of the alfalfa business from DuPont Pioneer in fiscal year 2015 and the acquisition of assets of SV Genetics in fiscal year 2016. Goodwill is assessed at least annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a two-step quantitative goodwill impairment test. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses market capitalization and an estimate of a control premium to estimate the fair value of its one reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. The Company performed a quantitative assessment of goodwill at June 30, 2018 and 2017 and determined that goodwill was not impaired. Equity Method Investments Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company's board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company's accounts are not reflected within the Company's consolidated balance sheets and statements of operations; however, the Company's share of the earnings or losses of the investee company is reflected in the caption ``Loss on equity method investment'' in the consolidated statements of operations. The Company's carrying value in an equity method investee company is included in the Company's consolidated balance sheets. When the Company's carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company's consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. Cost Method Investments Investee companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, the Company's share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or statement of operations. However, impairment charges are recognized in the consolidated statement of operations. If circumstances suggest that the value of the investee company has subsequently recovered, such recovery is not recorded. Research and Development Costs The Company is engaged in ongoing research and development ("R&D") of proprietary seed and stevia varieties. All R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results have been achieved. The costs associated with equipment or facilities acquired or constructed for R&D activities that have alternative future uses are capitalized and depreciated on a straight-line basis over the estimated useful life of the asset. Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company's effective tax rate for the years ended June 30, 2018 and 2017 has been effected by the valuation allowance on the Company's deferred tax assets. Net Income (Loss) Per Common Share Data Basic net income (loss) per common share ("EPS"), is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated by adjusting both the numerator (net income (loss)) and the denominator (weighted-average number of shares outstanding) for the dilutive effects of potentially dilutive securities, including options, restricted stock awards, convertible debt and common stock warrants. The if-converted method is used for convertible debt. Under the if-converted method, interest expense recognized in the period on the convertible debt is added to net income, and the number of shares that would be obtained upon conversion is added to the denominator. The treasury stock method is used for common stock warrants, stock options, and restricted stock awards. Under this method, consideration that would be received upon exercise (as well as remaining compensation cost to be recognized for awards not yet vested) is assumed to be used repurchase shares of stock in the market, with net number of shares assumed to be issued added to the denominator. The calculation of Basic and Diluted EPS is shown in the table below. Classes of securities identified in the table with no adjustments in the calculation of Diluted EPS were determined to be antidilutive for the applicable periods. Years Ended June 30, 2018 2017 Numerator: Net loss $ (4,725,090) $ (11,822,042) Numerator for basic EPS (4,725,090) (11,822,042) Effect of dilutive securities: Warrants - - - - Numerator for diluted EPS $ (4,725,090) $ (11,822,042) Denominator: Denominator for basic EPS - weighted-average shares 22,481,491 17,718,057 Effect of dilutive securities: Employee stock options - - Employee restricted stock units - - Warrants - - Dilutive potential common shares - - Denominator for diluted EPS - adjusted weighted average shares and assumed conversions 22,481,491 17,718,057 Basic EPS $ (0.21) $ (0.67) Diluted EPS $ (0.21) $ (0.67) Impairment of Long-Lived Assets The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of long-lived assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. Derivative Financial Instruments Foreign Exchange Contracts The Company's subsidiary, S&W Australia, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company at times manages through the use of foreign currency forward contracts. The Company has entered into certain derivative financial instruments (specifically foreign currency forward contracts), and accounts for these instruments in accordance with ASC Topic 815, "Derivatives and Hedging", which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. The Company's foreign currency contracts are not designated as hedging instruments under ASC 815; accordingly, changes in the fair value are recorded in current period earnings. Derivative Liabilities The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options and redemption options, which are required to be bifurcated and accounted for separately as derivative financial instruments. Fair Value of Financial Instruments The Company discloses assets and liabilities that are recognized and measured at fair value, presented in a three-tier fair value hierarchy, as follows: Level 1. Observable inputs such as quoted prices in active markets; Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. No assets or liabilities were valued at fair value on a non-recurring basis as of June 30, 2018 or June 30, 2017. The carrying value of cash and cash equivalents, accounts payable, short-term and all long-term borrowings, as reflected in the consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments or interest rates commensurate with market rates. There have been no changes in operations and/or credit characteristics since the date of issuance that could impact the relationship between interest rate and market rates. The Company used a discounted cash flows approach to measure the fair value using Level 3 inputs. Assets and liabilities that are recognized and measured at fair value on a recurring basis are categorized as follows: Fair Value Measurements as of June 30, 2018 Using: Level 1 Level 2 Level 3 Foreign exchange contract liability $ - $ 100,138 $ - Contingent consideration obligations - - - Total $ - $ 100,138 $ - Fair Value Measurements as of June 30, 2017 Using: Level 1 Level 2 Level 3 Foreign exchange contract asset $ - $ 166,629 $ - Contingent consideration obligations - - 2,500,000 Derivative warrant liabilities - - 2,836,600 Total $ - $ 166,629 $ 5,336,600 During the year ended June 30, 2018, a change in derivative warrant liability of $431,300 was recorded in earnings. Upon expiration of the round-down pricing protection on December 31, 2017, the warrants were reclassified from derivative warrant liabilities to equity. During the year ended June 30, 2018, there was no change in the contingent consideration obligations. The DuPont contingent consideration was settled on December 1, 2017. Refer to Note 5 for further discussion. Recently Adopted and Issued Accounting Pronouncements In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04") In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15") In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting In February 2016, the FASB issued Accounting Standards Update No. 2016-02: Leases ASC Topic 606, Revenue from Contracts with Customers , The Company is near finalization of its evaluation of the impact of the adoption of Topic 606 on its consolidated financial statements and related disclosures. From that evaluation, the Company has identified a need to potentially change the accounting for revenue from the DuPont Pioneer distribution agreement, which made up 62% of the Company's revenues in the year ended June 30, 2018. The result of this change would be that revenue would be recognized earlier than it currently is, because the provisions of Topic 606 would require recognition during processing of the seed, rather than upon delivery, which is the current accounting. The Company believes that the total amount of revenue for each fiscal year will remain the same, but that a significant portion of the Pioneer revenue would be recognized in earlier quarters under ASC 606. The Company has preliminarily concluded that the new standards will not result in changes to its revenue recognition policies for the rest of its customer contracts. The Company continues to work on preparing the enhanced revenue disclosures that will be presented in the first quarter of fiscal year 2019. |
NOTE 3 - GOODWILL AND INTANGIBL
NOTE 3 - GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 3 - GOODWILL AND NTANGIBLE ASSETS | NOTE 3 - GOODWILL AND INTANGIBLE ASSETS The following table summarizes the activity of goodwill for the years ended June 30, 2018 and 2017, respectively. Balance at Balance at July 1, 2017 Additions June 30, 2018 Goodwill $ 10,292,265 $ - $ 10,292,265 Balance at Balance at July 1, 2016 Additions June 30, 2017 Goodwill $ 10,292,265 $ - $ 10,292,265 Intangible assets consist of the following: Balance at Balance at July 1, 2017 Additions Amortization June 30, 2018 Trade name $ 1,244,306 $ - $ (84,480) $ 1,159,826 Customer relationships 1,258,163 - (101,208) 1,156,955 Non-compete 102,035 - (39,315) 62,720 GI customer list 78,803 - (7,164) 71,639 Supply agreement 1,153,415 - (75,632) 1,077,783 Distribution agreement 6,728,753 - (384,500) 6,344,253 Production agreement 111,670 - (111,670) - Grower relationships 1,858,616 - (105,408) 1,753,208 Intellectual property 21,725,539 295,034 (1,147,180) 20,873,393 Internal use software 677,779 - (67,776) 610,003 $ 34,939,079 $ 295,034 $ (2,124,333) $ 33,109,780 Balance at Balance at July 1, 2016 Additions Amortization June 30, 2017 Trade name $ 1,328,786 $ - $ (84,480) $ 1,244,306 Customer relationships 1,359,371 - (101,208) 1,258,163 Non-compete 198,999 - (96,964) 102,035 GI customer list 85,967 - (7,164) 78,803 Supply agreement 1,229,047 - (75,632) 1,153,415 Distribution agreement 7,113,253 - (384,500) 6,728,753 Production agreement 335,002 - (223,332) 111,670 Grower relationships 1,964,024 - (105,408) 1,858,616 Intellectual property 22,870,760 - (1,145,221) 21,725,539 Internal use software 521,593 156,186 - 677,779 $ 37,006,802 $ 156,186 $ (2,223,909) $ 34,939,079 Amortization expense totaled $2,124,333 and $2,223,909 for the years ended June 30, 2018 and 2017, respectively. Estimated aggregate remaining amortization is as follows: 2019 2020 2021 2022 2023 Thereafter Amortization expense $ 1,989,188 $ 1,989,188 $ 1,989,188 $ 1,989,188 $ 1,983,896 $ 23,169,132 |
NOTE 4 - PROPERTY, PLANT AND EQ
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT | NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Components of property, plant and equipment were as follows: June 30, June 30, 2018 2017 Land and improvements $ 2,068,742 $ 2,223,674 Buildings and improvements 8,888,196 6,401,277 Machinery and equipment 5,731,293 5,435,542 Vehicles 1,130,276 1,005,455 Construction in progress 220,089 2,196,513 Total property, plant and equipment 18,038,596 17,262,461 Less: accumulated depreciation (4,858,464) (3,680,885) Property, plant and equipment, net $ 13,180,132 $ 13,581,576 Depreciation expense totaled $1,314,954 and $1,101,834 for the years ended June 30, 2018 and 2017, respectively. |
NOTE 5 - DEBT
NOTE 5 - DEBT | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 5 - DEBT | NOTE 5 - DEBT Total debt outstanding is presented on the consolidated balance sheet as follows: June 30, June 30, 2018 2017 Working capital lines of credit KeyBank $ 25,050,464 $ 18,695,896 National Australia Bank Limited 7,697,040 8,703,888 Debt issuance costs (116,945) - Total working capital lines of credit, net $ 32,630,559 $ 27,399,784 Current portion of long-term debt Capital lease $ 27,241 $ 26,648 Keith facility (building loan) - National Australia Bank Limited 3,701 - Keith facility (machinery & equipment loans) - National Australia Bank Limited 198,251 183,016 Unsecured subordinate promissory note 100,000 100,000 Promissory note - DuPont Pioneer - 10,000,000 Secured real estate note - Conterra 229,789 - Debt issuance costs (76,981) - Secured equipment note - Conterra 37,824 - Debt issuance costs (16,813) - Total current portion, net 503,012 10,309,664 Long-term debt, less current portion Capital lease - 26,648 Keith facility (building loan) - National Australia Bank Limited 421,857 499,524 Keith facility (machinery & equipment loans) - National Australia Bank Limited 431,754 569,983 Secured real estate note - Conterra 10,170,211 - Debt issuance costs (100,576) - Secured equipment note - Conterra 2,062,176 - Debt issuance costs (8,335) - Total long-term portion, net 12,977,087 1,096,155 Total debt, net $ 13,480,099 $ 11,405,819 On September 22, 2015, the Company entered into a credit and security agreement (the "KeyBank Credit Facility") with KeyBank. Key provisions of the KeyBank Credit Facility, as amended, include: An aggregate principal amount that the Company may borrow, repay and reborrow, of up to $35.0 million in the aggregate, subject to a requirement that the Company maintain a reduced loan balance of (i) not more than $20.0 million for at least 30 consecutive days over the prior twelve months (measured each quarter on a trailing 12 month basis) and (ii) not more than $25.0 million for at least 60 consecutive days over the prior twelve months (measured each quarter on a trailing 12 month basis). All amounts due and owing, including, but not limited to, accrued and unpaid principal and interest, will be payable in full on September 12, 2019. A borrowing base of up to 85% of eligible domestic accounts receivable and 90% of eligible foreign accounts receivable, plus up to the lesser of (i) 75% of the cost eligible inventory or (ii) 90% of the net orderly liquidation value of the inventory, subject to lender reserves. Loans may be based on a Base Rate or Eurodollar Rate (which is increased by an applicable margin of 2.2% per annum) (both as defined in the KeyBank Credit Facility), generally at the Company's option. In the event of a default, at the option of KeyBank, the interest rate on all obligations owing will increase by 3% per annum over the rate otherwise applicable. Subject to certain exceptions, the KeyBank Credit Facility is secured by a first priority perfected security interest in all of the Company's now owned and after acquired tangible and intangible assets and its domestic subsidiaries, which have guaranteed the Company's obligations under the KeyBank Credit Facility. The KeyBank Credit Facility is further secured by a lien on, and a pledge of, 65% of the stock of its wholly-owned subsidiary, S&W Holdings Australia Pty Ltd. At June 30, 2018, the Company was in compliance with all KeyBank debt covenants. On December 31, 2014, the Company issued a three-year secured promissory note to DuPont Pioneer in the initial principal amount of $10,000,000 (the "Pioneer Note"), with a maturity date of December 31, 2017. The Pioneer Note accrued interest at 3% per annum. Interest was payable in three annual installments, in arrears, commencing on December 31, 2015. On December 31, 2014, the Company also issued contingent consideration to DuPont Pioneer which required the Company to increase the principal amount of the Pioneer Note by up to an additional $5,000,000 if the Company met certain performance metrics during the three-year period following December 31, 2014. The earn out payment to DuPont Pioneer was finalized in October 2017 and this amount of $2,500,000 was added to the Pioneer Note in October 2017. On December 1, 2017, the Company repaid the Pioneer Note. The repayment amount included the $2.5 million earn-out payment related to the Pioneer Acquisition that was added to the principal amount of the Pioneer Note in October 2017. On November 30, 2017, the Company entered into a secured note financing transaction (the "Loan Transaction") with Conterra Agricultural Capital, LLC ("Conterra") for $12.5 million in gross proceeds. Pursuant to the Loan Transaction, the Company issued two secured promissory notes (the "Notes") to Conterra as follows: Secured Real Estate Note Secured Equipment Note The Notes and related documents include customary representations and warranties in addition to customary affirmative and negative covenants (including financial covenants), and customary events of default that permit Conterra to accelerate the Company's obligations under the Notes, including, among other things, that a default under one of the Notes would constitute a default under the other Note. On December 1, 2017, the Company used the proceeds from the Loan Transaction to repay the Pioneer Note. S&W Australia finances the purchase of most of its seed inventory from growers pursuant to a seasonal credit facility with National Australia Bank Ltd ("NAB"). The current facility, referred to as the 2016 NAB Facilities, was amended as of April 13, 2018 and expires on March 30, 2020. As of June 30, 2018, AUD $10,400,000 (USD $7,697,040) was outstanding under the 2016 NAB Facilities. The 2016 NAB Facilities, as currently in effect, comprises two distinct facility lines: (i) an overdraft facility (the "Overdraft Facility"), having a credit limit of AUD $1,000,000 (USD $740,100 at June 30, 2018) and a borrowing base facility (the "Borrowing Base Facility"), having a credit limit of AUD $12,000,000 (USD $8,881,200 at June 30, 2018). The Borrowing Base Facility permits S&W Australia to borrow funds for periods of up to 180 days, at S&W Australia's discretion, provided that the term is consistent with its trading terms. Interest for each drawdown is set at the time of the drawdown as follows: (i) for Australian dollar drawings, based on the Australian Trade Refinance Rate plus 1.5% per annum and (ii) for foreign currency drawings, based on the British Bankers' Association Interest Settlement Rate for the relevant foreign currency for the relevant period, or if such rate is not available, the rate reasonably determined by NAB to be the appropriate equivalent rate, plus 1.5% per annum. As of June 30, 2018, the Borrowing Base Facility accrued interest on Australian dollar drawings at approximately 5.3% calculated daily. The Borrowing Base Facility is secured by a lien on all the present and future rights, property and undertakings of S&W Australia, the mortgage on S&W Australia's Keith, South Australia property and the Company's corporate guarantee (up to a maximum of AUD $15,000,000). The Overdraft Facility permits S&W Australia to borrow funds on a revolving line of credit up to the credit limit. Interest accrues daily and is calculated by applying the daily interest rate to the balance owing at the end of the day and is payable monthly in arrears. As of June 30, 2018, the Overdraft Facility accrued interest at approximately 6.77% calculated daily. For both the Overdraft Facility and the Borrowing Base Facility, interest is payable each month in arrears. In the event of a default, as defined in the NAB Facility Agreement, the principal balance due under the facilities will thereafter bear interest at an increased rate per annum above the interest rate that would otherwise have been in effect from time to time under the terms of each facility ( i.e. Both facilities constituting the 2016 NAB Facilities are secured by a fixed and floating lien over all the present and future rights, property and undertakings of S&W Australia and are guaranteed by the Company as noted above. The 2016 NAB Facilities contain customary representations and warranties, affirmative and negative covenants and customary events of default that permit NAB to accelerate S&W Australia's outstanding obligations, all as set forth in the NAB facility agreements. S&W Australia was in compliance with all NAB debt covenants at June 30, 2018. In January 2015, NAB and S&W Australia entered into a new business markets - flexible rate loan (the "Keith Building Loan") and a separate machinery and equipment facility (the "Keith Machinery and Equipment Facility"). In February 2016, NAB and S&W Australia also entered into a master asset finance facility (the "Master Assets Facility"). The Master Asset Facility has various maturity dates through 2021 and have interest rates ranging from 4.86% to 5.31%. The Keith Building Loan and Keith Machinery and Equipment Facility are used for the construction of a building on S&W Australia's Keith, South Australia property, purchase of adjoining land and for the machinery and equipment for use in the operations of the building. The Keith Building Loan matures on November 30, 2024. The interest rate on the Keith Building Loan varies from pricing period to pricing period (each such period approximately 30 days), based on the weighted average of a specified basket of interest rates (6.31% as of June 30, 2018). Interest is payable each month in arrears. The Keith Machinery and Equipment Facility bears interest, payable in arrears, based on the Australian Trade Refinance Rate quoted by NAB at the time of the drawdown, plus 2.9%. The Keith Credit Facilities contain customary representations and warranties, affirmative and negative covenants and customary events of default that permit NAB to accelerate S&W Australia's outstanding obligations, all as set forth in the facility agreement. They are secured by a lien on all the present and future rights, property and undertakings of S&W Australia, the Company's corporate guarantee and a mortgage on S&W Australia's Keith, South Australia property. The annual maturities of short-term and long-term debt, excluding convertible debt addressed in Note 6, are as follows: Fiscal Year Amount 2019 $ 596,806 2020 2,647,415 2021 10,162,183 2022 87,676 2023 77,711 Thereafter 111,013 Total $ 13,682,804 |
NOTE 6 - SENIOR CONVERTIBLE NOT
NOTE 6 - SENIOR CONVERTIBLE NOTES AND WARRANTS | 12 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
NOTE 6 - SENIOR CONVERTIBLE NOTES AND WARRANTS | NOTE 6 - SENIOR CONVERTIBLE NOTES AND WARRANTS On December 31, 2014, the Company consummated the sale of senior secured convertible debentures (the "Debentures") and common stock purchase warrants (the "Warrants") to various institutional investors ("Investors") pursuant to the terms of a securities purchase agreement among the Company and the Investors. At closing, the Company received $27,000,000 in gross proceeds. Offering expenses of $1,931,105 attributed to the Debentures were recorded as deferred financing fees and recorded as a debt discount and offering expenses of $424,113 attributed to the Warrants were expensed during the year ended June 30, 2015. The net proceeds were paid directly to DuPont Pioneer in partial consideration for the purchase of certain DuPont Pioneer assets, the closing for which also took place on December 31, 2014. Debentures At the date of issuance, the Debentures were due and payable on November 30, 2017, unless earlier converted or redeemed. The Debentures bore interest on the aggregate unconverted and then outstanding principal amount at 8% per annum, payable in arrears monthly beginning February 2, 2015. The monthly interest was payable in cash, or in any combination of cash or shares of the Company's common stock at the Company's option, provided certain "equity conditions" defined in the Debentures were satisfied. Beginning on July 1, 2015, the Company was required to make monthly payments of principal as well, payable in cash or any combination of cash or shares of its common stock at the Company's option, provided all of the applicable equity conditions are satisfied. As of June 30, 2017, the Debentures were fully retired and had no outstanding balance. The Debentures were initially convertible, at the holder's option, into the Company's common stock at a conversion price of $5.00. Pursuant to the terms of the Debentures, the conversion price was reset to $4.63 on September 30, 2015. During the year ended June 30, 2017, certain holders of the Debentures converted an aggregate of $3,168,342 of principal and interest into 684,321 shares of the Company's common stock in accordance with the terms of the Debentures. Upon conversion, the Company recognized interest expense of $194,939 related to unamortized debt discount on the Debentures and incurred $7,070 of stock issuance costs. Warrants The Warrants entitle the holders to purchase, in the aggregate, 2,699,999 shares of the Company's common stock. The Warrants are exercisable through their expiration on June 30, 2020, unless earlier redeemed. The Warrants were initially exercisable at an exercise price equal to $5.00. On September 30, 2015, pursuant to the terms of the Warrants, the exercise price was reset to $4.63. In addition, if the Company issues or is deemed to have issued securities at a price lower than the then applicable exercise price during the three-year period ending December 31, 2017, the exercise price of the Warrants will adjust based on a weighted average anti-dilution formula ("down-round protection"). On November 24, 2015, the Company closed on a private placement transaction in which 1,180,722 common shares were sold at $4.15 per share. Pursuant to the down-round protection terms of the Warrants, the exercise price was adjusted to $4.59 on November 24, 2015. On February 29, 2016, the Company completed a rights offering and accompanying noteholders' participation rights offering in which an aggregate of 2,125,682 shares of common stock were sold at $4.15 per share, triggering an adjustment of the exercise price of the Warrants to $4.53. On July 19, 2017, the Company completed a private placement transaction in which an aggregate of 2,685,000 shares of common stock were sold at $4.00 per share, triggering an adjustment of the exercise price of the Warrants to $4.46. On December 22, 2017, the Company completed a rights offering and backstop commitment in which an aggregate of 3,500,000 shares of common stock were sold at $3.50 per share, triggering an adjustment of the exercise price of the Warrants to $4.32. The down-round protection provision of the warrants expired on December 31, 2017. The Warrants may be exercised for cash, provided that, if there is no effective registration statement available registering the exercise of the Warrants, the Warrants may be exercised on a cashless basis. At any time that (i) all equity conditions set forth in the Warrants have been satisfied, and (ii) the closing sales price of the common stock equals or exceeds $12.00 for 15 consecutive trading days (subject to adjustment for stock splits, reverse stock splits and other similar recapitalization events), the Company may redeem all or any part of the Warrants then outstanding for cash in an amount equal to $0.25 per Warrant. Accounting for the Conversion Option and Warrants Due to the down-round price protection included in the terms of the Warrants, the Warrants were treated as a derivative liability in the consolidated balance sheet, measured at fair value and marked to market each reporting period until December 31, 2017, when the down-round protection expires. The down-round price protection expired on December 31, 2017, accordingly, the fair value of the Warrants as of December 31, 2017 was reclassified to additional paid in capital within the equity section of the balance sheet. At December 31, 2017 and June 30, 2017, the fair value of the Warrants was estimated at $2,405,300 and $2,836,600, respectively. The Warrants were valued at December 31, 2017 using the Monte Carlo simulation model, under the following assumptions: (i) remaining expected life of 2.5 years, (ii) volatility of 39.0%, (iii) risk-free interest rate of 1.92% and (iv) dividend rate of zero. The aggregate fair value of the Warrants derived via the Monte Carlo analysis were also weighted by a prior third-party market transaction and third-party indications of fair value. The prior third-party market transaction was provided a weighting of 10.0% while the third-party indications of fair value were provided a 50% weighting in the fair value analysis. The Warrants were valued at June 30, 2017 using the Monte Carlo simulation model, under the following assumptions: (i) remaining expected life of 3 years, (ii) volatility of 45.6%, (iii) risk-free interest rate of 1.54% and (iv) dividend rate of zero. The aggregate fair value of the Warrants derived via the Monte Carlo analysis were also weighted by a prior third-party market transaction and third-party indications of fair value. The prior third-party market transaction was provided a weighting of 10.0% while the third-party indications of fair value were provided a 50% weighting in the fair value analysis. |
NOTE 7 - INCOME TAXES
NOTE 7 - INCOME TAXES | 12 Months Ended |
Jun. 30, 2018 | |
Note 7 - Income Taxes | |
NOTE 7 - INCOME TAXES | NOTE 7 – INCOME TAXES Loss before income taxes consists of the following: Years Ended June 30, 2018 2017 United States $ (5,112,254) $ (3,545,631) Foreign 530,213 (648,706) Loss before income taxes $ (4,582,041) $ (4,194,337) Significant components of the provision for income taxes from continuing operations are as follows: Years Ended June 30, 2018 2017 Current: Federal $ - $ - State - 1,680 Foreign 100,122 - Total current provision 100,122 1,680 Deferred: Federal 20,785 6,945,260 State 22,142 691,135 Foreign - (10,370) Total deferred provision (benefit) 42,927 7,626,025 Provision for income taxes $ 143,049 $ 7,627,705 The differences between the total calculated income tax provision and the expected income tax computed using the U.S. federal income tax rate are as follows: Years Ended June 30, 2018 2017 Tax expense (benefit) at statutory tax rate $ (1,262,509) $ (1,426,075) State taxes (benefit), net of federal tax (benefit) (133,666) (112,798) Mark to market on financial instruments (118,838) (515,950) Section 965 toll tax 584,086 - Other permanent differences (144,049) 33,251 Federal and state research credits - current year (89,572) (103,006) Foreign rate differential (971) 25,407 Shortfall on restricted stock vest 155,783 129,627 Tax Cuts and Jobs Act 3,264,391 - Valuation allowance (2,145,250) 9,615,586 Other 33,644 (18,337) $ 143,049 $ 7,627,705 The Company recognizes federal and state current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the current fiscal year. The Company also recognizes federal and state deferred tax liabilities or assets based on the Company's estimate of future tax effects attributable to temporary differences and carry forwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The Company considers projected future taxable income and planning strategies in making this assessment. Based on projections of taxable income, the Company had previously determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, a valuation allowance had been recorded as of June 30, 2017. The Company's valuation allowance position has not changed for the year ended June 30, 2018, as the Company does not believe that it is more likely than not that it will realize its deferred tax assets. The valuation allowance decreased $2,110,572 for the year ended June 30, 2018 related primarily to the change in the value of the Company's deferred tax assets as a result of the Tax Cuts and Jobs Act. The U.S. Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on a corporation's ability to utilize net operating loss carryovers ("NOLs") if it experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. In the event that an ownership change has occurred, or were to occur, utilization of the Company's NOLs would be subject to an annual limitation under Section 382 as determined by multiplying the value of the Company's stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in the Internal Revenue Code. Any unused annual limitation may be carried over to later years. The Company could experience an ownership change under Section 382 as a result of events in the past in combination with events in the future. If so, the use of the Company's NOLs, or a portion thereof, against future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of the NOLs before utilization. To the extent our use of net operating loss carryforwards is significantly limited under the rules of Section 382, our income could be subject to U.S. corporate income tax earlier than it would if we were able to use net operating loss carryforwards, which could result in lower profits. Any carryforwards that expire prior to utilization as a result of such limitations will be removed, if applicable, from deferred tax assets with a corresponding reduction of the valuation allowance. As of June 30, 2018, the Company is not aware of any applicable Section 382 limitations that may exist on its net operating losses. Significant components of the Company's deferred tax assets are shown below. June 30, 2018 2017 Deferred tax assets: Net operating loss carry forwards $ 6,771,974 $ 8,511,398 Compensation accruals 144,550 327,462 Allowance for bad debts 151,972 182,723 Stock compensation 241,837 451,303 Tax credit carry forwards 434,245 341,411 Deferred rent 90,466 153,656 Other, net 277,065 220,208 Total deferred tax assets 8,112,109 10,188,161 Valuation allowance for deferred tax assets (7,506,759) (9,617,331) Deferred tax assets, net of valuation allowance 605,350 570,830 Deferred tax liabilities Intangible assets (519,942) (235,218) Fixed assets (355,491) (562,763) Total deferred tax liabilities (875,433) (797,981) Net deferred tax asset / (liability) $ (270,083) $ (227,151) As of June 30, 2018, the Company had federal and state net operating loss carry forwards of approximately $27,860,303 and $12,512,969, respectively, which will begin to expire June 30, 2030, unless previously utilized. The Company has federal research credits of $414,425 which will expire June 30, 2031, unless previously utilized. The Company also has foreign tax credits of $157,859 which will begin to expire June 30, 2023, unless previously utilized. The Company has state research credits of $25,089 that do not expire. As of June 30, 2018, the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on approximately $4,109,000 of undistributed earnings of its foreign subsidiary as these earnings are considered indefinitely reinvested outside of the United States. The Company does not plan to repatriate any earnings that are currently located in its foreign subsidiaries as of June 30, 2018. However, to the extent that the foreign subsidiaries accrue earnings and profits in the future years, the Company does plan to repatriate those funds to the U. S. and will record withholding taxes as those earnings and profits are incurred. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. The Company is open for audit for all years since the entity became a corporation. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. The Company has not accrued interest and penalties associated with uncertain tax positions as of June 30, 2018 and 2017. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act reduced the corporate tax rate from the maximum federal statutory rate of 35% to a flat rate of 21%. The Tax Act states that the 21% corporate tax rate is effective for tax years beginning on or after January 1, 2018. However, existing tax law, which was not amended under the Tax Act, governs when a change in tax rate is effective. Existing tax law provides that if the taxable year includes the effective date of any rate change (unless the change is the first date of the taxable year), taxes should be calculated by applying a blended rate to the taxable income for the year. Our blended federal rate is 27.55%. As a result of the new law, we have concluded that our deferred tax assets will need to be revalued. Our deferred tax assets represent a reduction in corporate taxes that are expected to be paid in the future. As a result of the Tax Act, we estimated a reduction to the value of our deferred tax assets which is almost entirely offset by a reduction to our valuation allowance in the second quarter of the year ended June 30, 2018. The net impact of the decrease to both the deferred tax assets and the valuation allowance will be a remeasuring of our net deferred tax liability associated with indefinite lived intangibles for which we cannot predict a reversal into taxable income. In conjunction with tax law changes, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. We have recognized the provisional tax impacts related to deemed repatriated earnings, the potential impact of new section 162(m) rules on our deferred tax balances, and the revaluation of deferred tax assets and liabilities and included these amounts in our consolidated financial statements for the year end June 30, 2018. In all cases, we will continue to refine our calculations as additional analysis is completed. In addition, our estimates may also be affected as we gain a more thorough understanding of the tax law. The Tax Act allows for one hundred percent expensing of the cost of qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. We do not plan to take advantage of this provision for the near term and have the option of opting out of this provision. In addition, net operating losses incurred in tax years beginning after December 31, 2017 are only allowed to offset a taxpayer's taxable income by eighty percent, but those net operating losses are allowed to be carried forward indefinitely with no expiration. Also, as part of the Tax Act, our net interest expense deductions are limited to 30% of earnings before interest, taxes, depreciation, and amortization through 2021 and of earnings before interest and taxes thereafter. This provision also takes effect for tax years beginning after 2017 and isn't expected to have a material impact to our deferred tax asset position. The Tax Act also incorporates changes to certain international tax provisions. There is a one-time transition tax on foreign income earned by subsidiaries at a rate of 15.5% for cash and cash equivalents and at a rate of 8% for the remainder of the foreign earnings. There is a provision for the current inclusion in US taxable income of global intangible low-tax income and also the imposition of a tax equal to its base erosion minimum tax amount. The new laws incorporate a potential benefit for foreign derived intangible income, but the benefit only applies if the foreign derived sales and services income exceeds a calculated 'routine return' and if we have taxable income. We do not currently anticipate that any of the foreign provisions will have a net impact to our tax accounts. |
NOTE 8 - WARRANTS
NOTE 8 - WARRANTS | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 8 - WARRANTS | NOTE 8 - WARRANTS The following table summarizes the total warrants outstanding at June 30, 2018: Exercise Price Expiration Outstanding as Outstanding as Issue Date Per Share Date of June 30, 2017 New Issuances Expired of June 30, 2018 Warrants Dec 2014 $ 4.32 Jun 2020 2,699,999 - - 2,699,999 2,699,999 - - 2,699,999 The following table summarizes the total warrants outstanding at June 30, 2017: Exercise Price Expiration Outstanding as Outstanding as Issue Date Per Share Date of June 30, 2016 New Issuances Expired of June 30, 2017 Underwriter warrants May 2012 $ 6.88 Feb 2017 50,000 - (50,000) - Warrants Dec 2014 $ 4.53 Jun 2020 2,699,999 - - 2,699,999 2,749,999 - (50,000) 2,699,999 |
NOTE 9 - FOREIGN CURRENCY CONTR
NOTE 9 - FOREIGN CURRENCY CONTRACTS | 12 Months Ended |
Jun. 30, 2018 | |
Note 9 - Foreign Currency Contracts | |
NOTE 9 - FOREIGN CURRENCY CONTRACTS | NOTE 9 - FOREIGN CURRENCY CONTRACTS The Company's subsidiary, S&W Australia, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company manages through the use of foreign currency forward contracts. These foreign currency contracts are not designated as hedging instruments; accordingly, changes in the fair value are recorded in current period earnings. These foreign currency contracts had a notional value of $3,980,100 at June 30, 2018 and their maturities range from July to December 2018. The Company records an asset or liability on the consolidated balance sheet for the fair value of the foreign currency forward contracts. The foreign currency contract liabilities totaled $100,138 at June 30, 2018 and foreign currency contract asset totaled $166,629 at June 30, 2017. The Company recorded a loss on foreign exchange contracts of $272,801 and a gain on foreign exchange contracts of $205,531, which is reflected in cost of revenue for the years ended June 30, 2018 and 2017, respectively. |
NOTE 10 - COMMITMENTS AND CONTI
NOTE 10 - COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 10 - COMMITMENTS AND CONTINGENCIES | NOTE 10 - COMMITMENTS AND CONTINGENCIES Contingencies Based on information currently available, management is not aware of any other matters that would have a material adverse effect on the Company's financial condition, results of operations or cash flows. Legal Matters The Company may be subject to various legal proceedings from time to time. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. Any current litigation is considered immaterial and counter claims have been assessed as remote. Leases The Company has entered into various non-cancelable operating lease agreements. Rent expense under operating leases was $401,375 and $555,583 for the years ended June 30, 2018 and 2017, respectively. The following table sets forth the Company's estimates of future lease payment obligations as of June 30, 2018: 2019 2020 2021 2022 2023 2024 and beyond Total (a) Operating lease obligations $ 411,055 $ 358,099 $ 239,012 $ 143,083 $ 118,772 $ 116,800 $ 1,386,821 (a) The following table sets forth the composition of total rental expense for all operating leases except those with terms of a month or less that were not renewed. Years Ended June 30, 2018 2017 Minimum rentals $ 401,375 $ 555,583 Less: Sublease rentals (43,800) (223,200) $ 357,575 $ 332,383 |
NOTE 11 - RELATED PARTY TRANSAC
NOTE 11 - RELATED PARTY TRANSACTIONS | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 11 - RELATED PARTY TRANSACTIONS | NOTE 11 - RELATED PARTY TRANSACTIONS Glen D. Bornt, a member of the Company's Board of Directors until January 9, 2018, is the founder and President of Imperial Valley Milling Co. ("IVM"). He is IVM's majority shareholder and a member of its Board of Directors. Glen D. Bornt is also a majority shareholder of Kongal Seeds Pty. Ltd. ("Kongal"). IVM had a 15-year supply agreement with IVS, and this agreement was assigned by IVS to the Company when it purchased the assets of IVS in October 2012. IVM contracts with alfalfa seed growers in California's Imperial Valley and sells its growers' seed to the Company pursuant to a supply agreement. Under the terms of the supply agreement, IVM's entire certified and uncertified alfalfa seed production must be offered and sold to the Company, and the Company has the exclusive option to purchase all or any portion of IVM's seed production. The Company paid $2,682,946 and $8,482,663 to IVM during the years ended June 30, 2018 and June 30, 2017, respectively. Amounts due to IVM totaled $97,136 and $326,941 at June 30, 2018 and June 30, 2017, respectively. The Company paid $159,156 and $94,744 to Kongal during the years ended June 30, 2018 and June 30, 2017, respectively. Amounts due to Kongal totaled $357 and $4,753 at June 30, 2018 and June 30, 2017, respectively. On July 19, 2017, the Company entered into a Securities Purchase Agreement with certain purchasers, including MFP Partners, L.P. ("MFP"), a stockholder of the Company, and certain entities related to Wynnefield Capital Management LLC (collectively, "Wynnefield"), pursuant to which MFP purchased approximately $3.7 million of shares of its common stock and Wynnefield purchased approximately $3.0 million of shares of its common stock. Each of MFP and Wynnefield is a beneficial owner of more than 5% of the Company's common stock. Alexander C. Matina, a member of the Company's Board, is Vice President, Investments of MFP. Robert D. Straus, a member of the Company's Board since January 9, 2018, is a Portfolio Manager and Analyst at Wynnefield. On October 11, 2017, the Company entered into a Securities Purchase Agreement with Mark W. Wong, the Company's President and Chief Executive Officer, pursuant to which the Company sold and issued an aggregate of 75,000 shares of its Common Stock at a purchase price of $3.50 per share, for aggregate gross proceeds of $262,500. On December 22, 2017, the Company completed the closing of its previously announced rights offering. At the closing, the Company sold and issued an aggregate of 2,594,923 shares of its Common Stock at a subscription price of $3.50 per share pursuant to the exercise of subscriptions and oversubscriptions in the rights offering from its existing stockholders. Pursuant to an Investment Agreement, dated October 3, 2017, between the Company and MFP, MFP agreed to purchase, at the subscription price, all of the shares not purchased in the Rights Offering (the "Backstop Commitment"). Accordingly, on December 22, 2017, the Company and MFP completed the closing of the Backstop Commitment, in which the Company sold and issued 905,077 shares of its Common Stock to MFP. Combined, the Company sold and issued an aggregate of 3,500,000 shares of its common stock for aggregate gross proceeds of $12.25 million. |
NOTE 12 - EQUITY-BASED COMPENSA
NOTE 12 - EQUITY-BASED COMPENSATION | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
NOTE 12 - EQUITY-BASED COMPENSATION | NOTE 12 - EQUITY-BASED COMPENSATION 2009 Equity Incentive Plan In October 2009 and January 2010, the Company's Board of Directors and stockholders, respectively, approved the 2009 Equity Incentive Plan (as amended and/or restated from time to time, the "2009 Plan"). The plan authorized the grant and issuance of options, restricted shares and other equity compensation to the Company's directors, employees, officers and consultants, and those of the Company's subsidiaries and parent, if any. In October 2012 and December 2012, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 1,250,000 shares. In September 2013 and December 2013, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 1,700,000 shares. In September 2015 and December 2015, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 2,450,000 shares. The term of incentive stock options granted under the 2009 Plan may not exceed ten years, or five years for incentive stock options granted to an optionee owning more than 10% of the Company's voting stock. The exercise price of options granted under the 2009 Plan must be equal to or greater than the fair market value of the shares of the common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than 10% of voting stock must have an exercise price equal to or greater than 110% of the fair market value of the common stock on the date the option is granted. The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Stock options issued to non- employees are accounted for at their estimated fair value. The fair value of options granted to non-employees is re-measured as they vest. The Company amortizes stock-based compensation expense on a straight-line basis over the requisite service period. The Company utilizes a Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of the Company's common stock to estimate the fair value of employee options grants. Weighted average assumptions used in the Black-Scholes-Merton model are set forth below: Years Ended June 30, 2018 2017 Risk free rate 1.7% - 2.3% 1.2% - 2.0% Dividend yield 0% 0% Volatility 45.3% - 45.5% 46.9% - 50.8% Average forfeiture assumptions 1.4% 2.4% During year ended June 30, 2018, the Company granted 103,283 options to its Directors, certain members of the executive management team and other employees at exercise prices ranging from $3.00 - $4.03. These options vest in either quarterly or annual periods over one to three years, and expire ten years from the date of grant. A summary of stock option activity for the years ended June 30, 2018 and 2017 is presented below: Weighted- Weighted - Average Average Remaining Aggregate Number Exercise Price Contractual Intrinsic Outstanding Per Share Life (Years) Value Outstanding at June 30, 2016 1,021,418 $ 5.14 4.2 $ 142,381 Granted 230,610 4.19 - - Exercised (232,000) 4.20 - - Canceled/forfeited/expired (29,500) 5.95 - - Outstanding at June 30, 2017 990,528 5.12 4.3 100,344 Granted 103,283 3.45 - - Exercised (49,000) 3.95 - - Canceled/forfeited/expired (252,737) 6.46 - - Outstanding at June 30, 2018 792,074 4.55 6.3 10,413 Options vested and exercisable at June 30, 2018 579,018 4.81 5.4 1,977 Options vested and expected to vest as of June 30, 2018 791,493 $ 4.55 6.3 $ 10,334 The weighted average grant date fair value of options granted and outstanding at June 30, 2018 was $1.54. At June 30, 2018, the Company had $275,584 of unrecognized stock compensation expense, net of estimated forfeitures, related to the options under the 2009 Plan, which will be recognized over the weighted average remaining service period of 1.68 years. The Company settles employee stock option exercises with newly issued shares of common stock. During the year ended June 30, 2017, the Company issued 77,275 restricted stock units to its directors, certain members of the executive management team, and other employees. The restricted stock units have varying vesting periods ranging from immediate vesting to annual installments over a three-year period. The fair value of the awards totaled $374,530 and was based on the closing stock price on the date of grants. During the year ended June 30, 2018, the Company issued 78,642 restricted stock units to its directors, certain members of the executive management team and other employees. The restricted stock units vest in either quarterly or annual periods over one to three-years. The fair value of the awards totaled $279,611 and was based on the closing stock price on the date of grants. The Company recorded $487,391 and $1,032,170 of stock-based compensation expense associated with grants of restricted stock units during the years ended June 30, 2018 and 2017, respectively. A summary of activity related to non-vested restricted stock units is presented below: Year Ended June 30, 2018 Weighted - Number of Weighted - Average Nonvested Average Remaining Restricted Grant Date Contractual Share Units Fair Value Life (Years) Beginning nonvested restricted units outstanding 120,971 $ 5.59 1.0 Granted 78,642 3.56 1.3 Vested (105,985) 5.49 - Forfeited (4,435) 4.45 - Ending nonvested restricted units outstanding 89,193 $ 3.98 1.1 At June 30, 2018, the Company had $203,138 of unrecognized stock compensation expense related to the restricted stock units, which will be recognized over the weighted average remaining service period of 1.1 years. At June 30, 2018, there were 713,636 shares available under the 2009 Plan for future grants and awards. Stock-based compensation expense recorded for stock options, restricted stock grants and restricted stock units for the years ended June 30, 2018 and 2017, totaled $748,516 and $1,409,368, respectively. |
NOTE 13 - NON-CASH INVESTING AN
NOTE 13 - NON-CASH INVESTING AND FINANCING ACTIVITIES FOR STATEMENTS OF CASH FLOWS | 12 Months Ended |
Jun. 30, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |
NOTE 13 - NON-CASH INVESTING AND FINANCING ACTIVITIES FOR STATEMENTS OF CASH FLOWS | NOTE 13 - NON-CASH INVESTING AND FINANCING ACTIVITIES FOR STATEMENTS OF CASH FLOWS The below table represents supplemental information to the Company's consolidated statements of cash flows for non-cash activities during the years ended June 30, 2018 and 2017, respectively. Years Ended June 30, 2018 2017 Issuance of common stock upon conversion of principal and interest of convertible debentures $ - $ 3,168,342 Reclassification of warrants upon expiration of repricing provisions $ 2,405,300 $ - |
NOTE 14 - SUBSEQUENT EVENTS
NOTE 14 - SUBSEQUENT EVENTS | 12 Months Ended |
Jun. 30, 2018 | |
Note 14 - Subsequent Events | |
Note 14 - SUBSEQUENT EVENTS | NOTE 14 - SUBSEQUENT EVENTS On August 15, 2018, the Company closed on a sale-leaseback transaction with American AgCredit involving certain equipment located at the Company's Five Points, California and Nampa, Idaho production facilities. Under the terms of the sale-leaseback transaction: S&W sold the equipment to American AgCredit for $2,106,395 million in proceeds. The proceeds were used to pay off in full a note (in the principal amount of $2,081,527, plus accrued interest of $24,868) held by Conterra Agricultural Capital, LLC, which had an interest rate of 9.5% per annum and was secured by, among other things, the equipment. S&W entered into a lease agreement with American AgCredit relating to the equipment. The lease agreement has a five-year term and provides for monthly lease payments of $40,023 (representing an annual interest rate of 5.6%). At the end of the lease term, S&W will repurchase the equipment for $1. On September 5, 2018, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Novo Advisors (f/k/a Turnaround Advisory Group Inc.), solely in its capacity as the receiver (the "Receiver") for, and on behalf of, Chromatin, Inc., a Delaware corporation (together with certain of its subsidiaries and affiliates in receivership, "Chromatin"), in a receivership action pending in the United States District Court for the Northern District of Illinois (the "Court"). Pursuant to the Asset Purchase Agreement, the Company agreed to purchase substantially all of Chromatin's assets (the "Purchased Assets"), as well as assume certain contracts ("Assigned Contracts") and other liabilities of Chromatin (collectively, the "Chromatin Acquisition"), for a purchase price of $23.0 million. Pursuant to sale procedures approved by the Court, other parties had an opportunity to submit a competing bid by September 7, 2018 and, if a qualified competing bid was submitted, an auction would be held on September 13, 2018. At an auction held on September 13, 2018, the Company was designated the highest bidder, with a winning bid of $26.5 million. A hearing to consider approval of the Chromatin Acquisition was held before the Court on September 17, 2018, and the sale remains subject to the Court's approval. In connection with the Company's winning bid, on September 14, 2018, the Company entered into an updated Asset Purchase Agreement (the "Second Asset Purchase Agreement") with the Receiver to reflect the updated terms and conditions under which the Company agreed to complete the Chromatin Acquisition, including the purchase price of $26.5 million. The closing of the Chromatin Acquisition is contingent upon, among other things, (a) the entry of a sale order by the Court ("Order"), (b) the written consent of CIBC Bank USA (f/k/a The PrivateBank and Trust Company) and all other holders of any lien or other security interest in any of the Purchased Assets to the sale and transfer of the Purchased Assets to the Company, and (c) the Receiver obtaining executed written consents to the assignment to the Company of certain Assigned Contracts from the counterparties thereto, including a waiver and release of any termination or other contract rights based upon or related to Chromatin having been placed in receivership or the financial condition or insolvency of Chromatin. On September 5, 2018, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with MFP, pursuant to which the Company agreed to sell and issue to MFP 1,607,717 shares of its common stock (the "Common Shares") at a purchase price of $3.11 per share at an initial closing (the "Initial Closing") and, subject to the satisfaction of certain conditions, 7,235 shares of newly designated Series A Convertible Preferred Stock of the Company ("Preferred Shares") at a purchase price of $3,100 per share at a second closing (the "Second Closing"). The Initial Closing was completed on September 5, 2018. The consummation of the Second Closing is contingent upon, among other things, the Court's entry of the Order and the other conditions to the closing of the Chromatin Acquisition having been satisfied or reasonably expected to be satisfied. The Company will use the proceeds from the Second Closing for the Chromatin Acquisition and working capital purposes. The Securities Purchase Agreement may be terminated prior to the completion of the Second Closing if the Chromatin Acquisition has not been completed by October 31, 2018. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Principles of Consolidation | Basis of Presentation and Principles of Consolidation The Company maintains its accounting records on an accrual basis in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the accounts of Seed Holding, LLC and its other wholly-owned subsidiaries, S&W Holdings, which owns 100% of S&W Australia, and Stevia California, LLC. All significant intercompany balances and transactions have been eliminated. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are adjusted to reflect actual experience when necessary. Significant estimates and assumptions affect many items in the financial statements. These include allowance for doubtful trade receivables, inventory valuation, asset impairments, provisions for income taxes, grower accruals (an estimate of amounts payable to farmers who grow seed for the Company), contingent consideration obligations, derivative liabilities, contingencies and litigation. Significant estimates and assumptions are also used to establish the fair value and useful lives of depreciable tangible and certain intangible assets, goodwill as well as valuing stock-based compensation. Actual results may differ from those estimates and assumptions, and such results may affect income, financial position or cash flows. |
Certain Risks and Concentrations | Certain Risks and Concentrations The Company's revenue is principally derived from the sale of alfalfa seed, the market for which is highly competitive. The Company depends on a core group of significant customers. One customer accounted for 62% of its revenue for the year ended June 30, 2018. Two customers accounted for 58% of its revenue for the year ended June 30, 2017. One customer accounted for 35% of the Company's accounts receivable at June 30, 2018. Two customers accounted for 52% of the Company's accounts receivable at June 30, 2017. In addition, the Company sells a substantial portion of its products to international customers. Sales to international markets represented 35% and 45% of revenue during the years ended June 30, 2018 and 2017, respectively. The net book value of fixed assets located outside the United States was 20% and 19% of total assets at June 30, 2018 and June 30, 2017, respectively. Cash balances located outside of the United States may not be insured and totaled $369,803 and $192,879 at June 30, 2018 and June 30, 2017, respectively. The following table shows revenue from external sources by destination country: Years Ended June 30, 2018 2017 United States $ 41,662,556 65% $ 41,505,305 55% Mexico 4,932,105 8% 4,749,315 6% Sudan 3,178,039 5% 2,747,923 4% Argentina 2,748,492 4% 2,881,050 4% Peru 1,844,898 3% 1,230,999 2% Saudi Arabia 1,461,368 2% 12,055,276 16% Australia 1,242,957 2% 1,882,899 2% Italy 938,252 1% 151,415 0% Libya 936,423 1% 158,500 0% South Africa 802,629 1% 1,190,789 2% Other 4,337,791 8% 6,820,338 9% Total $ 64,085,510 100% $ 75,373,810 100% |
International Operations | International Operations The Company translates its foreign operations' assets and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative translation account, a component of accumulated other comprehensive income. Gains or losses from foreign currency transactions are included in the consolidated statement of operations. |
Revenue Recognition | Revenue Recognition The Company derives its revenue primarily from sale of seed and other crops and milling services. Revenue from seed and other crop sales is recognized when risk and title to the product is transferred to the customer. The Company recognizes revenue from milling services according to the terms of the sales agreements and when delivery has occurred, performance is complete and pricing is fixed or determinable at the time of sale. Additional conditions for recognition of revenue for all sales include the requirements that the collection of sales proceeds must be reasonably assured based on historical experience and current market conditions, the sales price is fixed and determinable and that there must be no further performance obligations under the sale. |
Cost of Revenue | Cost of Revenue The Company records purchasing and receiving costs, inspection costs and warehousing costs in cost of revenue. When the Company is required to pay for outward freight and/or the costs incurred to deliver products to its customers, the costs are included in cost of revenue. |
Cash and Equivalents | Cash and Cash Equivalents For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation. |
Accounts Receivable | Accounts Receivable The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer's trade accounts receivable. The allowance for doubtful trade receivables was $584,202 and $526,495 at June 30, 2018 and June 30, 2017, respectively. |
Inventories | Inventories Inventories consist of seed and packaging materials. Inventories are stated at the lower of cost or net realizable value, and an inventory reserve permanently reduces the cost basis of inventory. Inventories are valued as follows: Actual cost is used to value raw materials such as packaging materials, as well as goods in process. Costs for substantially all finished goods, which include the cost of carryover crops from the previous year, are valued at actual cost. Actual cost for finished goods includes plant conditioning and packaging costs, direct labor and raw materials and manufacturing overhead costs based on normal capacity. The Company records abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) as current period charges and allocates fixed production overhead to the costs of finished goods based on the normal capacity of the production facilities. The Company's subsidiary, S&W Australia, does not fix the final price for seed payable to its growers until the completion of a given year's sales cycle pursuant to its standard contract production agreement. S&W Australia records an estimated unit price; accordingly, inventory, cost of revenue and gross profits are based upon management's best estimate of the final purchase price to growers. Inventory is periodically reviewed to determine if it is marketable, obsolete or impaired. Inventory that is determined to be obsolete or impaired is written off to expense at the time the impairment is identified. Because the germination rate, and therefore the quality, of alfalfa seed improves over the first year of proper storage, inventory obsolescence for alfalfa seed is not a material concern. The Company sells its inventory to distributors, dealers and directly to growers. Components of inventory are: June 30, June 30, 2018 2017 Raw materials and supplies $ 344,620 $ 266,551 Work in progress and growing crops 2,775,398 5,603,825 Finished goods 57,299,258 25,619,569 $ 60,419,276 $ 31,489,945 |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment is depreciated using the straight-line method over the estimated useful life of the asset - periods of 5-28 years for buildings, 3-20 years for machinery and equipment, and 3-5 years for vehicles. |
Intangible Assets | Intangible Assets Intangible assets acquired in business acquisitions are reported at their initial fair value less accumulated amortization. Intangible assets are amortized using the straight-line method over the estimated useful life of the asset. Periods of 10-30 years for technology/IP/germplasm, 10-20 years for customer relationships and trade names and 3-20 for other intangible assets. The weighted average estimated useful lives are 26 years for technology/IP/germplasm, 18 years for customer relationships and 20 years for trade names and other intangible assets. |
Goodwill | Goodwill Goodwill originated from acquisitions of Imperial Valley Seeds, Inc. ("IVS") and S&W Australia in fiscal year 2013, the acquisition of the alfalfa business from DuPont Pioneer in fiscal year 2015 and the acquisition of assets of SV Genetics in fiscal year 2016. Goodwill is assessed at least annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a two-step quantitative goodwill impairment test. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses market capitalization and an estimate of a control premium to estimate the fair value of its one reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. The Company performed a quantitative assessment of goodwill at June 30, 2018 and 2017 and determined that goodwill was not impaired. |
Equity Method Investments | Equity Method Investments Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company's board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company's accounts are not reflected within the Company's consolidated balance sheets and statements of operations; however, the Company's share of the earnings or losses of the investee company is reflected in the caption ``Loss on equity method investment'' in the consolidated statements of operations. The Company's carrying value in an equity method investee company is included in the Company's consolidated balance sheets. When the Company's carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company's consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. |
Cost Method Investments | Cost Method Investments Investee companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, the Company's share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or statement of operations. However, impairment charges are recognized in the consolidated statement of operations. If circumstances suggest that the value of the investee company has subsequently recovered, such recovery is not recorded. |
Research and Development Costs | Research and Development Costs The Company is engaged in ongoing research and development ("R&D") of proprietary seed and stevia varieties. All R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results have been achieved. The costs associated with equipment or facilities acquired or constructed for R&D activities that have alternative future uses are capitalized and depreciated on a straight-line basis over the estimated useful life of the asset. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company's effective tax rate for the years ended June 30, 2018 and 2017 has been effected by the valuation allowance on the Company's deferred tax assets. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share Data Basic net income (loss) per common share ("EPS"), is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated by adjusting both the numerator (net income (loss)) and the denominator (weighted-average number of shares outstanding) for the dilutive effects of potentially dilutive securities, including options, restricted stock awards, convertible debt and common stock warrants. The if-converted method is used for convertible debt. Under the if-converted method, interest expense recognized in the period on the convertible debt is added to net income, and the number of shares that would be obtained upon conversion is added to the denominator. The treasury stock method is used for common stock warrants, stock options, and restricted stock awards. Under this method, consideration that would be received upon exercise (as well as remaining compensation cost to be recognized for awards not yet vested) is assumed to be used repurchase shares of stock in the market, with net number of shares assumed to be issued added to the denominator. The calculation of Basic and Diluted EPS is shown in the table below. Classes of securities identified in the table with no adjustments in the calculation of Diluted EPS were determined to be antidilutive for the applicable periods. Years Ended June 30, 2018 2017 Numerator: Net loss $ (4,725,090) $ (11,822,042) Numerator for basic EPS (4,725,090) (11,822,042) Effect of dilutive securities: Warrants - - - - Numerator for diluted EPS $ (4,725,090) $ (11,822,042) Denominator: Denominator for basic EPS - weighted-average shares 22,481,491 17,718,057 Effect of dilutive securities: Employee stock options - - Employee restricted stock units - - Warrants - - Dilutive potential common shares - - Denominator for diluted EPS - adjusted weighted average shares and assumed conversions 22,481,491 17,718,057 Basic EPS $ (0.21) $ (0.67) Diluted EPS $ (0.21) $ (0.67) |
Impairment of Long-lived Assets | Impairment of Long-Lived Assets The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of long-lived assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. |
Foreign Exchange Contracts | Derivative Financial Instruments Foreign Exchange Contracts The Company's subsidiary, S&W Australia, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company at times manages through the use of foreign currency forward contracts. The Company has entered into certain derivative financial instruments (specifically foreign currency forward contracts), and accounts for these instruments in accordance with ASC Topic 815, "Derivatives and Hedging", which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. The Company's foreign currency contracts are not designated as hedging instruments under ASC 815; accordingly, changes in the fair value are recorded in current period earnings. |
Derivative Liabilities | Derivative Financial Instruments Derivative Liabilities The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options and redemption options, which are required to be bifurcated and accounted for separately as derivative financial instruments. |
Fair Values of Financial Instruments | Fair Value of Financial Instruments The Company discloses assets and liabilities that are recognized and measured at fair value, presented in a three-tier fair value hierarchy, as follows: Level 1. Observable inputs such as quoted prices in active markets; Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. No assets or liabilities were valued at fair value on a non-recurring basis as of June 30, 2018 or June 30, 2017. The carrying value of cash and cash equivalents, accounts payable, short-term and all long-term borrowings, as reflected in the consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments or interest rates commensurate with market rates. There have been no changes in operations and/or credit characteristics since the date of issuance that could impact the relationship between interest rate and market rates. The Company used a discounted cash flows approach to measure the fair value using Level 3 inputs. Assets and liabilities that are recognized and measured at fair value on a recurring basis are categorized as follows: Fair Value Measurements as of June 30, 2018 Using: Level 1 Level 2 Level 3 Foreign exchange contract liability $ - $ 100,138 $ - Contingent consideration obligations - - - Total $ - $ 100,138 $ - Fair Value Measurements as of June 30, 2017 Using: Level 1 Level 2 Level 3 Foreign exchange contract asset $ - $ 166,629 $ - Contingent consideration obligations - - 2,500,000 Derivative warrant liabilities - - 2,836,600 Total $ - $ 166,629 $ 5,336,600 During the year ended June 30, 2018, a change in derivative warrant liability of $431,300 was recorded in earnings. Upon expiration of the round-down pricing protection on December 31, 2017, the warrants were reclassified from derivative warrant liabilities to equity. During the year ended June 30, 2018, there was no change in the contingent consideration obligations. The DuPont contingent consideration was settled on December 1, 2017. Refer to Note 5 for further discussion. |
Recently Adopted and Issued Accounting Pronouncements | Recently Adopted and Issued Accounting Pronouncements In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04") In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15") In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting In February 2016, the FASB issued Accounting Standards Update No. 2016-02: Leases ASC Topic 606, Revenue from Contracts with Customers , The Company is near finalization of its evaluation of the impact of the adoption of Topic 606 on its consolidated financial statements and related disclosures. From that evaluation, the Company has identified a need to potentially change the accounting for revenue from the Dupont Pioneer distribution agreement, which made up 62% of the Company's revenues in the year ended June 30, 2018. The result of this change would be that revenue would be recognized earlier than it currently is, because the provisions of Topic 606 would require recognition during processing of the seed, rather than upon delivery, which is the current accounting. The Company believes that the total amount of revenue for each fiscal year will remain the same, but that a significant portion of the Pioneer revenue would be recognized in earlier quarters under ASC 606. The Company has preliminarily concluded that the new standards will not result in changes to its revenue recognition policies for the rest of its customer contracts. The Company continues to work on preparing the enhanced revenue disclosures that will be presented in the first quarter of fiscal year 2019. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Certain Risks and Concentrations) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Summary Of Significant Accounting Policies Certain Risks And Concentrations | |
Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area | The following table shows revenue from external sources by destination country: Years Ended June 30, 2018 2017 United States $ 41,662,556 65% $ 41,505,305 55% Mexico 4,932,105 8% 4,749,315 6% Sudan 3,178,039 5% 2,747,923 4% Argentina 2,748,492 4% 2,881,050 4% Peru 1,844,898 3% 1,230,999 2% Saudi Arabia 1,461,368 2% 12,055,276 16% Australia 1,242,957 2% 1,882,899 2% Italy 938,252 1% 151,415 0% Libya 936,423 1% 158,500 0% South Africa 802,629 1% 1,190,789 2% Other 4,337,791 8% 6,820,338 9% Total $ 64,085,510 100% $ 75,373,810 100% |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Inventories) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Summary Of Significant Accounting Policies Inventories | |
Inventories (Tables) | Components of inventory are: June 30, June 30, 2018 2017 Raw materials and supplies $ 344,620 $ 266,551 Work in progress and growing crops 2,775,398 5,603,825 Finished goods 57,299,258 25,619,569 $ 60,419,276 $ 31,489,945 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Neit Inconw (Loss) Per Share) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Summary Of Significant Accounting Policies Neit Inconw Loss Per Share | |
Net Income (Loss) Per Share (Tables) | The calculation of Basic and Diluted EPS is shown in the table below. Classes of securities identified in the table with no adjustments in the calculation of Diluted EPS were determined to be antidilutive for the applicable periods. Years Ended June 30, 2018 2017 Numerator: Net loss $ (4,725,090) $ (11,822,042) Numerator for basic EPS (4,725,090) (11,822,042) Effect of dilutive securities: Warrants - - - - Numerator for diluted EPS $ (4,725,090) $ (11,822,042) Denominator: Denominator for basic EPS - weighted-average shares 22,481,491 17,718,057 Effect of dilutive securities: Employee stock options - - Employee restricted stock units - - Warrants - - Dilutive potential common shares - - Denominator for diluted EPS - adjusted weighted average shares and assumed conversions 22,481,491 17,718,057 Basic EPS $ (0.21) $ (0.67) Diluted EPS $ (0.21) $ (0.67) |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Fair Value Measurement) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Summary Of Significant Accounting Policies Fair Value Measurement | |
Fair Value of Financial Instrumements (Tables) | Assets and liabilities that are recognized and measured at fair value on a recurring basis are categorized as follows: Fair Value Measurements as of June 30, 2018 Using: Level 1 Level 2 Level 3 Foreign exchange contract liability $ - $ 100,138 $ - Contingent consideration obligations - - - Total $ - $ 100,138 $ - Fair Value Measurements as of June 30, 2017 Using: Level 1 Level 2 Level 3 Foreign exchange contract asset $ - $ 166,629 $ - Contingent consideration obligations - - 2,500,000 Derivative warrant liabilities - - 2,836,600 Total $ - $ 166,629 $ 5,336,600 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Intangible Assets Tables Abstract | |
Goodwill | The following table summarizes the activity of goodwill for the years ended June 30, 2018 and 2017, respectively. Balance at Balance at July 1, 2017 Additions June 30, 2018 Goodwill $ 10,292,265 $ - $ 10,292,265 Balance at Balance at July 1, 2016 Additions June 30, 2017 Goodwill $ 10,292,265 $ - $ 10,292,265 |
Carrying values of intangible assets | Intangible assets consist of the following: Balance at Balance at July 1, 2017 Additions Amortization June 30, 2018 Trade name $ 1,244,306 $ - $ (84,480) $ 1,159,826 Customer relationships 1,258,163 - (101,208) 1,156,955 Non-compete 102,035 - (39,315) 62,720 GI customer list 78,803 - (7,164) 71,639 Supply agreement 1,153,415 - (75,632) 1,077,783 Distribution agreement 6,728,753 - (384,500) 6,344,253 Production agreement 111,670 - (111,670) - Grower relationships 1,858,616 - (105,408) 1,753,208 Intellectual property 21,725,539 295,034 (1,147,180) 20,873,393 Internal use software 677,779 - (67,776) 610,003 $ 34,939,079 $ 295,034 $ (2,124,333) $ 33,109,780 Balance at Balance at July 1, 2016 Additions Amortization June 30, 2017 Trade name $ 1,328,786 $ - $ (84,480) $ 1,244,306 Customer relationships 1,359,371 - (101,208) 1,258,163 Non-compete 198,999 - (96,964) 102,035 GI customer list 85,967 - (7,164) 78,803 Supply agreement 1,229,047 - (75,632) 1,153,415 Distribution agreement 7,113,253 - (384,500) 6,728,753 Production agreement 335,002 - (223,332) 111,670 Grower relationships 1,964,024 - (105,408) 1,858,616 Intellectual property 22,870,760 - (1,145,221) 21,725,539 Internal use software 521,593 156,186 - 677,779 $ 37,006,802 $ 156,186 $ (2,223,909) $ 34,939,079 |
Finite-lived intangible assets - future amortization expense | Estimated aggregate remaining amortization is as follows: 2019 2020 2021 2022 2023 Thereafter Amortization expense $ 1,989,188 $ 1,989,188 $ 1,989,188 $ 1,989,188 $ 1,983,896 $ 23,169,132 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Property Plant And Equipment | |
Components of Property, Plant and Equipment | Components of property, plant and equipment were as follows: June 30, June 30, 2018 2017 Land and improvements $ 2,068,742 $ 2,223,674 Buildings and improvements 8,888,196 6,401,277 Machinery and equipment 5,731,293 5,435,542 Vehicles 1,130,276 1,005,455 Construction in progress 220,089 2,196,513 Total property, plant and equipment 18,038,596 17,262,461 Less: accumulated depreciation (4,858,464) (3,680,885) Property, plant and equipment, net $ 13,180,132 $ 13,581,576 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Debt | |
Debt Components | Total debt outstanding is presented on the consolidated balance sheet as follows: June 30, June 30, 2018 2017 Working capital lines of credit KeyBank $ 25,050,464 $ 18,695,896 National Australia Bank Limited 7,697,040 8,703,888 Debt issuance costs (116,945) - Total working capital lines of credit, net $ 32,630,559 $ 27,399,784 Current portion of long-term debt Capital lease $ 27,241 $ 26,648 Keith facility (building loan) - National Australia Bank Limited 3,701 - Keith facility (machinery & equipment loans) - National Australia Bank Limited 198,251 183,016 Unsecured subordinate promissory note 100,000 100,000 Promissory note - DuPont Pioneer - 10,000,000 Secured real estate note - Conterra 229,789 - Debt issuance costs (76,981) - Secured equipment note - Conterra 37,824 - Debt issuance costs (16,813) - Total current portion, net 503,012 10,309,664 Long-term debt, less current portion Capital lease - 26,648 Keith facility (building loan) - National Australia Bank Limited 421,857 499,524 Keith facility (machinery & equipment loans) - National Australia Bank Limited 431,754 569,983 Secured real estate note - Conterra 10,170,211 - Debt issuance costs (100,576) - Secured equipment note - Conterra 2,062,176 - Debt issuance costs (8,335) - Total long-term portion, net 12,977,087 1,096,155 Total debt, net $ 13,480,099 $ 11,405,819 |
Schedule of Annual Maturities | The annual maturities of short-term and long-term debt, excluding convertible debt addressed in Note 6, are as follows: Fiscal Year Amount 2019 $ 596,806 2020 2,647,415 2021 10,162,183 2022 87,676 2023 77,711 Thereafter 111,013 Total $ 13,682,804 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Income Taxes Tables Abstract | |
Schedule of income before income tax, domestic and foreign | Loss before income taxes consists of the following: Years Ended June 30, 2018 2017 United States $ (5,112,254) $ (3,545,631) Foreign 530,213 (648,706) Loss before income taxes $ (4,582,041) $ (4,194,337) |
Components of tax provision (benefit) | Significant components of the provision for income taxes from continuing operations are as follows: Years Ended June 30, 2018 2017 Current: Federal $ - $ - State - 1,680 Foreign 100,122 - Total current provision 100,122 1,680 Deferred: Federal 20,785 6,945,260 State 22,142 691,135 Foreign - (10,370) Total deferred provision (benefit) 42,927 7,626,025 Provision for income taxes $ 143,049 $ 7,627,705 |
Reconciliation of U.S. statutory income tax rate to company's effective tax rate | The differences between the total calculated income tax provision and the expected income tax computed using the U.S. federal income tax rate are as follows: Years Ended June 30, 2018 2017 Tax expense (benefit) at statutory tax rate $ (1,262,509) $ (1,426,075) State taxes (benefit), net of federal tax (benefit) (133,666) (112,798) Mark to market on financial instruments (118,838) (515,950) Section 965 toll tax 584,086 - Other permanent differences (144,049) 33,251 Federal and state research credits - current year (89,572) (103,006) Foreign rate differential (971) 25,407 Shortfall on restricted stock vest 155,783 129,627 Tax Cuts and Jobs Act 3,264,391 - Valuation allowance (2,145,250) 9,615,586 Other 33,644 (18,337) $ 143,049 $ 7,627,705 |
Schedule of tax effects of temporary differences that give rise to deferred tax assets and liabilities | Significant components of the Company's deferred tax assets are shown below. June 30, 2018 2017 Deferred tax assets: Net operating loss carry forwards $ 6,771,974 $ 8,511,398 Compensation accruals 144,550 327,462 Allowance for bad debts 151,972 182,723 Stock compensation 241,837 451,303 Tax credit carry forwards 434,245 341,411 Deferred rent 90,466 153,656 Other, net 277,065 220,208 Total deferred tax assets 8,112,109 10,188,161 Valuation allowance for deferred tax assets (7,506,759) (9,617,331) Deferred tax assets, net of valuation allowance 605,350 570,830 Deferred tax liabilities Intangible assets (519,942) (235,218) Fixed assets (355,491) (562,763) Total deferred tax liabilities (875,433) (797,981) Net deferred tax asset / (liability) $ (270,083) $ (227,151) |
Stockholders' Equity (Warrants
Stockholders' Equity (Warrants Outstanding) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Stockholders Equity Warrants Outstanding | |
Warrants Outstanding (Tables) | The following table summarizes the total warrants outstanding at June 30, 2018: Exercise Price Expiration Outstanding as Outstanding as Issue Date Per Share Date of June 30, 2017 New Issuances Expired of June 30, 2018 Warrants Dec 2014 $ 4.32 Jun 2020 2,699,999 - - 2,699,999 2,699,999 - - 2,699,999 The following table summarizes the total warrants outstanding at June 30, 2017: Exercise Price Expiration Outstanding as Outstanding as Issue Date Per Share Date of June 30, 2016 New Issuances Expired of June 30, 2017 Underwriter warrants May 2012 $ 6.88 Feb 2017 50,000 - (50,000) - Warrants Dec 2014 $ 4.53 Jun 2020 2,699,999 - - 2,699,999 2,749,999 - (50,000) 2,699,999 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Commitments And Contingencies | |
Schedule of Future Minimum Rental Payments for Operating Leases | The following table sets forth the Company's estimates of future lease payment obligations as of June 30, 2018: 2019 2020 2021 2022 2023 2024 and beyond Total (a) Operating lease obligations $ 411,055 $ 358,099 $ 239,012 $ 143,083 $ 118,772 $ 116,800 $ 1,386,821 (a) |
Schedule of Rent Expense | The following table sets forth the composition of total rental expense for all operating leases except those with terms of a month or less that were not renewed. Years Ended June 30, 2018 2017 Minimum rentals $ 401,375 $ 555,583 Less: Sublease rentals (43,800) (223,200) $ 357,575 $ 332,383 |
Equity-Based Compensation (Tabl
Equity-Based Compensation (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Stock Options | |
Summary of Share-Based Compensation Arrangements By Share-Based Payment Award (Tables) | A summary of stock option activity for the years ended June 30, 2018 and 2017 is presented below: Weighted- Weighted - Average Average Remaining Aggregate Number Exercise Price Contractual Intrinsic Outstanding Per Share Life (Years) Value Outstanding at June 30, 2016 1,021,418 $ 5.14 4.2 $ 142,381 Granted 230,610 4.19 - - Exercised (232,000) 4.20 - - Canceled/forfeited/expired (29,500) 5.95 - - Outstanding at June 30, 2017 990,528 5.12 4.3 100,344 Granted 103,283 3.45 - - Exercised (49,000) 3.95 - - Canceled/forfeited/expired (252,737) 6.46 - - Outstanding at June 30, 2018 792,074 4.55 6.3 10,413 Options vested and exercisable at June 30, 2018 579,018 4.81 5.4 1,977 Options vested and expected to vest as of June 30, 2018 791,493 $ 4.55 6.3 $ 10,334 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Weighted average assumptions used in the Black-Scholes-Merton model are set forth below: Years Ended June 30, 2018 2017 Risk free rate 1.7% - 2.3% 1.2% - 2.0% Dividend yield 0% 0% Volatility 45.3% - 45.5% 46.9% - 50.8% Average forfeiture assumptions 1.4% 2.4% |
Nonvested RSU's | |
Summary of Share-Based Compensation Arrangements By Share-Based Payment Award (Tables) | A summary of activity related to non-vested restricted stock units is presented below: Year Ended June 30, 2018 Weighted - Number of Weighted - Average Nonvested Average Remaining Restricted Grant Date Contractual Share Units Fair Value Life (Years) Beginning nonvested restricted units outstanding 120,971 $ 5.59 1.0 Granted 78,642 3.56 1.3 Vested (105,985) 5.49 - Forfeited (4,435) 4.45 - Ending nonvested restricted units outstanding 89,193 $ 3.98 1.1 |
Non-Cash Investing and Financin
Non-Cash Investing and Financing Activities for Statements of Cash Flows (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Non-cash Investing And Financing Activities For Statements Of Cash Flows | |
Schedule of Cash Flow, Supplemental Disclosures | The below table represents supplemental information to the Company's consolidated statements of cash flows for non-cash activities during the years ended June 30, 2018 and 2017, respectively. Years Ended June 30, 2018 2017 Issuance of common stock upon conversion of principal and interest of convertible debentures $ - $ 3,168,342 Reclassification of warrants upon expiration of repricing provisions $ 2,405,300 $ - |
Background and Organization (Na
Background and Organization (Narrative) (Details) | Jun. 30, 2018 |
Background And Organization Narrative | |
Number of Countries in which S&W Operates | 30 |
Summary of Significant Accoun36
Summary of Significant Accounting Policies (Concentrations Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Summary Of Significant Accounting Policies Concentrations Narrative | ||
Sales revenue, major customer, percentage | 62.00% | 58.00% |
Accounts receivable from major customers, percentage of total | 35.00% | 52.00% |
International sales revenue, percentage | 35% | 45% |
Cash, Uninsured Amount | $ 369,803 | $ 192,879 |
Disclosure on Geographic Areas, Fixed Assets | The net book value of fixed assets located outside the United States was 20% and 19% of total assets at June 30, 2018 and June 30, 2017, respectively. |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Revenues from External Customers By Country Of Domicile) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues from external customers | $ 64,085,510 | $ 75,373,810 |
Revenue from external customers by country, percentage | 100.00% | 100.00% |
United States | ||
Revenues from external customers | $ 41,662,556 | $ 41,505,305 |
Revenue from external customers by country, percentage | 65.00% | 55.00% |
Mexico | ||
Revenues from external customers | $ 4,932,105 | $ 4,749,315 |
Revenue from external customers by country, percentage | 8.00% | 6.00% |
Sudan | ||
Revenues from external customers | $ 3,178,039 | $ 2,747,923 |
Revenue from external customers by country, percentage | 5.00% | 4.00% |
Argentina | ||
Revenues from external customers | $ 2,748,492 | $ 2,881,050 |
Revenue from external customers by country, percentage | 4.00% | 4.00% |
Peru | ||
Revenues from external customers | $ 1,844,898 | $ 1,230,999 |
Revenue from external customers by country, percentage | 3.00% | 2.00% |
Saudi Arabia | ||
Revenues from external customers | $ 1,461,368 | $ 12,055,276 |
Revenue from external customers by country, percentage | 2.00% | 16.00% |
Australia | ||
Revenues from external customers | $ 1,242,957 | $ 1,882,899 |
Revenue from external customers by country, percentage | 2.00% | 2.00% |
Italy | ||
Revenues from external customers | $ 938,252 | $ 151,415 |
Revenue from external customers by country, percentage | 1.00% | 0.00% |
Libya | ||
Revenues from external customers | $ 936,423 | $ 158,500 |
Revenue from external customers by country, percentage | 1.00% | 0.00% |
South Africa | ||
Revenues from external customers | $ 802,629 | $ 1,190,789 |
Revenue from external customers by country, percentage | 1.00% | 2.00% |
Other | ||
Revenues from external customers | $ 4,337,791 | $ 6,820,338 |
Revenue from external customers by country, percentage | 8.00% | 9.00% |
Summary of Significant Accoun38
Summary of Significant Accounting Policies (Accounts Receivable Narrative) (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Summary Of Significant Accounting Policies Accounts Receivable Narrative | ||
Allowance for doubtful trade receivables | $ 584,202 | $ 526,495 |
Summary of Significant Accoun39
Summary of Significant Accounting Policies (Inventories by Component) (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Summary Of Significant Accounting Policies Inventories By Component | ||
Raw materials and supplies | $ 344,620 | $ 266,551 |
Work in progress and growing crops | 2,775,398 | 5,603,825 |
Finished goods | 57,299,258 | 25,619,569 |
Inventories | $ 60,419,276 | $ 31,489,945 |
Summary of Significant Accoun40
Summary of Significant Accounting Policies (Property, Plant and Equipment Useful Life Narrative) (Details) | 12 Months Ended |
Jun. 30, 2018 | |
Building | Minimum | |
Estimated Useful Lives | 5 years |
Building | Maximum | |
Estimated Useful Lives | 28 years |
Equipment | Minimum | |
Estimated Useful Lives | 3 years |
Equipment | Maximum | |
Estimated Useful Lives | 20 years |
Vehicles | Minimum | |
Estimated Useful Lives | 3 years |
Vehicles | Maximum | |
Estimated Useful Lives | 5 years |
Summary of Significant Accoun41
Summary of Significant Accounting Policies (Intangible Assets Useful Life Narrative) (Details) | 12 Months Ended |
Jun. 30, 2018 | |
Technology/IP/Germplasm | Minimum | |
Useful life | 10 years |
Technology/IP/Germplasm | Maximum | |
Useful life | 30 years |
Technology/IP/Germplasm | Weighted Average | |
Useful life | 26 years |
Customer Relationships | Minimum | |
Useful life | 10 years |
Customer Relationships | Maximum | |
Useful life | 20 years |
Customer Relationships | Weighted Average | |
Useful life | 18 years |
Other Intangibles | Minimum | |
Useful life | 3 years |
Other Intangibles | Maximum | |
Useful life | 20 years |
Other Intangibles | Weighted Average | |
Useful life | 20 years |
Summary of Significant Accoun42
Summary of Significant Accounting Policies (Calculation of EPS) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Numerator: | ||
Net income (loss) | $ (4,725,090) | $ (11,822,042) |
Numerator for basic EPS: | (4,725,090) | (11,822,042) |
Effect of dilutive securities: | ||
Warrants | 0 | 0 |
Total effect of dilutive securities | 0 | 0 |
Numerator for diluted EPS: | $ (4,725,090) | $ (11,822,042) |
Denominator: | ||
Denominator for basic EPS - weighted-average shares | 22,481,491 | 17,718,057 |
Effect of dilutive securities: | ||
Employee stock stock options | 0 | 0 |
Employee restricted stock units | 0 | 0 |
Warrants | 0 | 0 |
Dilutive potential common shares | 0 | 0 |
Denominator for diluted EPS - adjusted weighted average shares and assumed conversions | 22,481,491 | 17,718,057 |
Basic EPS | $ (0.21) | $ (0.67) |
Diluted EPS | $ (0.21) | $ (0.67) |
Summary of Significant Accoun43
Summary of Significant Accounting Policies (Impairment of Long-Lived Assets Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Summary Of Significant Accounting Policies Impairment Of Long-lived Assets Narrative | ||
Impairment of Long-lived Assets | $ 0 | $ 319,001 |
Summary of Significant Accoun44
Summary of Significant Accounting Policies (Fair Value of Financial Instruments) (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Foreign exchange contract asset | $ 166,629 | |
Derivative warrant liabilities | $ 0 | 2,836,600 |
(Level 1) | ||
Foreign exchange contract asset | 0 | |
Total | 0 | |
Foreign exchange contract liability | 0 | |
Contingent consideration obligations | 0 | 0 |
Derivative warrant liabilities | 0 | |
Total | 0 | 0 |
(Level 2) | ||
Foreign exchange contract asset | 166,629 | |
Total | 166,629 | |
Foreign exchange contract liability | 100,138 | |
Contingent consideration obligations | 0 | 0 |
Derivative warrant liabilities | 0 | |
Total | 100,138 | 0 |
(Level 3) | ||
Foreign exchange contract asset | 0 | |
Total | 0 | |
Foreign exchange contract liability | 0 | |
Contingent consideration obligations | 0 | 2,500,000 |
Derivative warrant liabilities | 2,836,600 | |
Total | $ 0 | $ 5,336,600 |
Changes in Carrying Amount of G
Changes in Carrying Amount of Goodwill by Location (Detail) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Goodwill, Beginning Balance | $ 10,292,265 | $ 10,292,265 |
Goodwill additions | 0 | 0 |
Goodwill, Ending Balance | $ 10,292,265 | $ 10,292,265 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Intangible asset | $ 33,109,780 | $ 34,939,079 | $ 37,006,802 |
Intangible addition | 295,034 | 156,186 | |
Intangible amortization expense | (2,124,333) | (2,223,099) | |
Trade name | |||
Intangible asset | 1,159,826 | 1,244,306 | 1,328,786 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (84,480) | (84,480) | |
Customer Relationships | |||
Intangible asset | 1,156,955 | 1,258,163 | 1,359,371 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (101,208) | (101,208) | |
Non-compete | |||
Intangible asset | 62,720 | 102,035 | 198,999 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (39,315) | (96,964) | |
GI Customer list | |||
Intangible asset | 71,639 | 78,803 | 85,967 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (7,164) | (7,164) | |
Supply Agreement | |||
Intangible asset | 1,077,783 | 1,153,415 | 1,229,047 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (75,632) | (75,632) | |
Distribution agreement | |||
Intangible asset | 6,344,253 | 6,728,753 | |
Intangible addition | 0 | ||
Intangible amortization expense | (384,500) | ||
Distribution Agreement | |||
Intangible asset | 7,113,253 | ||
Intangible addition | 0 | ||
Intangible amortization expense | (384,500) | ||
Production agreement | |||
Intangible asset | 0 | 111,670 | 335,002 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (111,670) | (223,332) | |
Grower Relationships | |||
Intangible asset | 1,753,208 | 1,858,616 | 1,964,024 |
Intangible addition | 0 | 0 | |
Intangible amortization expense | (105,408) | (105,408) | |
Intellectual Property | |||
Intangible asset | 20,873,393 | 21,725,539 | 22,870,760 |
Intangible addition | 295,034 | 0 | |
Intangible amortization expense | (1,147,180) | (1,145,221) | |
Internal use software | |||
Intangible asset | 610,003 | 677,779 | $ 521,593 |
Intangible addition | 0 | 156,186 | |
Intangible amortization expense | $ (67,776) | $ 0 |
Intangible Assets (Future Amort
Intangible Assets (Future Amortization) (Details) | Jun. 30, 2018USD ($) |
Finite-Lived Intangible Assets, Future Amortization Expense [Abstract] | |
2,019 | $ 1,989,188 |
2,020 | 1,989,188 |
2,021 | 1,989,188 |
2,022 | 1,989,188 |
2,023 | 1,983,896 |
Thereafter | $ 23,169,132 |
Intangible Assets (Amortization
Intangible Assets (Amortization Expense Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Intangible Assets Amortization Expense Narrative | ||
Amortization expense | $ 2,124,333 | $ 2,223,099 |
Property, Plant and Equipment49
Property, Plant and Equipment (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Balance Sheet Related Disclosures [Abstract] | ||
Land and improvements | $ 2,068,742 | $ 2,223,674 |
Buildings and improvements | 8,888,196 | 6,401,277 |
Machinery and equipment | 5,731,293 | 5,435,542 |
Vehicles | 1,130,276 | 1,005,455 |
Construction in progress | 220,089 | 2,196,513 |
Total property, plant and equipment | 18,038,596 | 17,262,461 |
Less: Accumulated depreciation | (4,858,464) | (3,680,885) |
Property, plant and equipment, net | $ 13,180,132 | $ 13,581,576 |
Property, Plant and Equipment50
Property, Plant and Equipment (Depreciation Expense Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Property Plant And Equipment Depreciation Expense Narrative | ||
Depreciation expense | $ 1,314,954 | $ 1,101,834 |
Debt Lines of Credit (Details)
Debt Lines of Credit (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Working capital lines of credit | ||
Line of Credit Facility, Fair Value of Amount Outstanding | $ 32,630,559 | $ 27,399,784 |
Debt issuance costs | (116,945) | |
KeyBank | ||
Working capital lines of credit | ||
Line of Credit Facility, Fair Value of Amount Outstanding | 25,050,464 | 18,695,896 |
National Australia Bank | ||
Working capital lines of credit | ||
Line of Credit Facility, Fair Value of Amount Outstanding | $ 7,697,040 | $ 8,703,888 |
Debt Current and Long Term (Det
Debt Current and Long Term (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Current portion of long-term debt | ||
Unsecured Debt, Current | $ 0 | $ 2,500,000 |
Total current portion | 503,012 | 10,309,664 |
Long-term debt, less current portion | ||
Total long-term portion | 12,977,087 | 1,096,155 |
Total debt | 13,480,099 | 11,405,819 |
Capital Lease Current | ||
Current portion of long-term debt | ||
Secured Debt, Current | 27,241 | 26,648 |
Keith Building Current | ||
Current portion of long-term debt | ||
Secured Debt, Current | 3,701 | 0 |
Keith Equipment Current | ||
Current portion of long-term debt | ||
Secured Debt, Current | 198,251 | 183,016 |
Promissory Note Current | ||
Current portion of long-term debt | ||
Unsecured Debt, Current | 100,000 | 100,000 |
DuPont | ||
Current portion of long-term debt | ||
Secured Debt, Current | 0 | 10,000,000 |
Contera RE Short | ||
Current portion of long-term debt | ||
Secured Debt, Current | 229,789 | 0 |
Debt issuance costs | (76,981) | 0 |
Contera Equip Short | ||
Current portion of long-term debt | ||
Secured Debt, Current | 37,824 | 0 |
Debt issuance costs | (16,813) | 0 |
Capital Lease Long Term | ||
Long-term debt, less current portion | ||
Secured Long-term Debt, Noncurrent | 0 | 26,648 |
Keith Building Long | ||
Long-term debt, less current portion | ||
Secured Long-term Debt, Noncurrent | 421,857 | 499,524 |
Keith Equipment Long | ||
Long-term debt, less current portion | ||
Secured Long-term Debt, Noncurrent | 431,754 | 569,983 |
Contera RE Long | ||
Current portion of long-term debt | ||
Debt issuance costs | (100,576) | 0 |
Long-term debt, less current portion | ||
Secured Long-term Debt, Noncurrent | 10,170,211 | 0 |
Contera Equip Long | ||
Current portion of long-term debt | ||
Debt issuance costs | (8,335) | 0 |
Long-term debt, less current portion | ||
Secured Long-term Debt, Noncurrent | $ 2,062,176 | $ 0 |
Debt (Details)
Debt (Details) | Jun. 30, 2018USD ($) |
Fiscal Year | |
2,019 | $ 596,806 |
2,020 | 2,647,415 |
2,021 | 10,162,183 |
2,022 | 87,676 |
2,023 | 77,711 |
Thereafter | 111,013 |
Total | $ 13,682,804 |
Debt (Narrative) (Details)
Debt (Narrative) (Details) | 1 Months Ended | 12 Months Ended |
Dec. 31, 2014 | Jun. 30, 2018 | |
Long-term Debt, Description | On December 31, 2014, the Company consummated the sale of senior secured convertible debentures (the "Debentures") and common stock purchase warrants (the "Warrants") to various institutional investors ("Investors") pursuant to the terms of a securities purchase agreement among the Company and the Investors. At closing, the Company received $27,000,000 in gross proceeds. Offering expenses of $1,931,105 attributed to the Debentures were recorded as deferred financing fees and recorded as a debt discount and offering expenses of $424,113 attributed to the Warrants were expensed during the year ended June 30, 2015. The net proceeds were paid directly to DuPont Pioneer in partial consideration for the purchase of certain DuPont Pioneer assets, the closing for which also took place on December 31, 2014. Debentures At the date of issuance, the Debentures were due and payable on November 30, 2017, unless earlier converted or redeemed. The Debentures bore interest on the aggregate unconverted and then outstanding principal amount at 8% per annum, payable in arrears monthly beginning February 2, 2015. The monthly interest was payable in cash, or in any combination of cash or shares of the Company's common stock at the Company's option, provided certain "equity conditions" defined in the Debentures were satisfied. Beginning on July 1, 2015, the Company was required to make monthly payments of principal as well, payable in cash or any combination of cash or shares of its common stock at the Company's option, provided all of the applicable equity conditions are satisfied. As of June 30, 2017, the Debentures were fully retired and had no outstanding balance. The Debentures were initially convertible, at the holder's option, into the Company's common stock at a conversion price of $5.00. Pursuant to the terms of the Debentures, the conversion price was reset to $4.63 on September 30, 2015. During the year ended June 30, 2017, certain holders of the Debentures converted an aggregate of $3,168,342 of principal and interest into 684,321 shares of the Company's common stock in accordance with the terms of the Debentures. Upon conversion, the Company recognized interest expense of $194,939 related to unamortized debt discount on the Debentures and incurred $7,070 of stock issuance costs. Warrants The Warrants entitle the holders to purchase, in the aggregate, 2,699,999 shares of the Company's common stock. The Warrants are exercisable through their expiration on June 30, 2020, unless earlier redeemed. The Warrants were initially exercisable at an exercise price equal to $5.00. On September 30, 2015, pursuant to the terms of the Warrants, the exercise price was reset to $4.63. In addition, if the Company issues or is deemed to have issued securities at a price lower than the then applicable exercise price during the three-year period ending December 31, 2017, the exercise price of the Warrants will adjust based on a weighted average anti-dilution formula ("down-round protection"). On November 24, 2015, the Company closed on a private placement transaction in which 1,180,722 common shares were sold at $4.15 per share. Pursuant to the down-round protection terms of the Warrants, the exercise price was adjusted to $4.59 on November 24, 2015. On February 29, 2016, the Company completed a rights offering and accompanying noteholders' participation rights offering in which an aggregate of 2,125,682 shares of common stock were sold at $4.15 per share, triggering an adjustment of the exercise price of the Warrants to $4.53. On July 19, 2017, the Company completed a private placement transaction in which an aggregate of 2,685,000 shares of common stock were sold at $4.00 per share, triggering an adjustment of the exercise price of the Warrants to $4.46. On December 22, 2017, the Company completed a rights offering and backstop commitment in which an aggregate of 3,500,000 shares of common stock were sold at $3.50 per share, triggering an adjustment of the exercise price of the Warrants to $4.32. The down-round protection provision of the warrants expired on December 31, 2017. The Warrants may be exercised for cash, provided that, if there is no effective registration statement available registering the exercise of the Warrants, the Warrants may be exercised on a cashless basis. At any time that (i) all equity conditions set forth in the Warrants have been satisfied, and (ii) the closing sales price of the common stock equals or exceeds $12.00 for 15 consecutive trading days (subject to adjustment for stock splits, reverse stock splits and other similar recapitalization events), the Company may redeem all or any part of the Warrants then outstanding for cash in an amount equal to $0.25 per Warrant. Accounting for the Conversion Option and Warrants Due to the down-round price protection included in the terms of the Warrants, the Warrants were treated as a derivative liability in the consolidated balance sheet, measured at fair value and marked to market each reporting period until December 31, 2017, when the down-round protection expires. The down-round price protection expired on December 31, 2017, accordingly, the fair value of the Warrants as of December 31, 2017 was reclassified to additional paid in capital within the equity section of the balance sheet. At December 31, 2017 and June 30, 2017, the fair value of the Warrants was estimated at $2,405,300 and $2,836,600, respectively. The Warrants were valued at December 31, 2017 using the Monte Carlo simulation model, under the following assumptions: (i) remaining expected life of 2.5 years, (ii) volatility of 39.0%, (iii) risk-free interest rate of 1.92% and (iv) dividend rate of zero. The aggregate fair value of the Warrants derived via the Monte Carlo analysis were also weighted by a prior third-party market transaction and third-party indications of fair value. The prior third-party market transaction was provided a weighting of 10.0% while the third-party indications of fair value were provided a 50% weighting in the fair value analysis. The Warrants were valued at June 30, 2017 using the Monte Carlo simulation model, under the following assumptions: (i) remaining expected life of 3 years, (ii) volatility of 45.6%, (iii) risk-free interest rate of 1.54% and (iv) dividend rate of zero. The aggregate fair value of the Warrants derived via the Monte Carlo analysis were also weighted by a prior third-party market transaction and third-party indications of fair value. The prior third-party market transaction was provided a weighting of 10.0% while the third-party indications of fair value were provided a 50% weighting in the fair value analysis. | |
KeyBank | ||
Line of Credit Facility, Description | On September 22, 2015, the Company entered into a credit and security agreement (the "KeyBank Credit Facility") with KeyBank. Key provisions of the KeyBank Credit Facility, as amended, include: An aggregate principal amount that the Company may borrow, repay and reborrow, of up to $35.0 million in the aggregate, subject to a requirement that the Company maintain a reduced loan balance of (i) not more than $20.0 million for at least 30 consecutive days over the prior twelve months (measured each quarter on a trailing 12 month basis) and (ii) not more than $25.0 million for at least 60 consecutive days over the prior twelve months (measured each quarter on a trailing 12 month basis). All amounts due and owing, including, but not limited to, accrued and unpaid principal and interest, will be payable in full on September 12, 2019. A borrowing base of up to 85% of eligible domestic accounts receivable and 90% of eligible foreign accounts receivable, plus up to the lesser of (i) 75% of the cost eligible inventory or (ii) 90% of the net orderly liquidation value of the inventory, subject to lender reserves. Loans may be based on a Base Rate or Eurodollar Rate (which is increased by an applicable margin of 2.2% per annum) (both as defined in the KeyBank Credit Facility), generally at the Company's option. In the event of a default, at the option of KeyBank, the interest rate on all obligations owing will increase by 3% per annum over the rate otherwise applicable. Subject to certain exceptions, the KeyBank Credit Facility is secured by a first priority perfected security interest in all of the Company's now owned and after acquired tangible and intangible assets and its domestic subsidiaries, which have guaranteed the Company's obligations under the KeyBank Credit Facility. The KeyBank Credit Facility is further secured by a lien on, and a pledge of, 65% of the stock of its wholly-owned subsidiary, S&W Holdings Australia Pty Ltd. At June 30, 2018, the Company was in compliance with all KeyBank debt covenants. | |
Pioneer Note | ||
Long-term Debt, Description | On December 31, 2014, the Company issued a three-year secured promissory note to DuPont Pioneer in the initial principal amount of $10,000,000 (the "Pioneer Note"), with a maturity date of December 31, 2017. The Pioneer Note accrued interest at 3% per annum. Interest was payable in three annual installments, in arrears, commencing on December 31, 2015. On December 31, 2014, the Company also issued contingent consideration to DuPont Pioneer which required the Company to increase the principal amount of the Pioneer Note by up to an additional $5,000,000 if the Company met certain performance metrics during the three-year period following December 31, 2014. The earn out payment to DuPont Pioneer was finalized in October 2017 and this amount of $2,500,000 was added to the Pioneer Note in October 2017. On December 1, 2017, the Company repaid the Pioneer Note. The repayment amount included the $2.5 million earn-out payment related to the Pioneer Acquisition that was added to the principal amount of the Pioneer Note in October 2017. | |
Conterra | ||
Long-term Debt, Description | On November 30, 2017, the Company entered into a secured note financing transaction (the "Loan Transaction") with Conterra Agricultural Capital, LLC ("Conterra") for $12.5 million in gross proceeds. Pursuant to the Loan Transaction, the Company issued two secured promissory notes (the "Notes") to Conterra as follows: Secured Real Estate Note Secured Equipment Note The Notes and related documents include customary representations and warranties in addition to customary affirmative and negative covenants (including financial covenants), and customary events of default that permit Conterra to accelerate the Company's obligations under the Notes, including, among other things, that a default under one of the Notes would constitute a default under the other Note. On December 1, 2017, the Company used the proceeds from the Loan Transaction to repay the Pioneer Note. | |
NAB Facility | ||
Long-term Debt, Description | S&W Australia finances the purchase of most of its seed inventory from growers pursuant to a seasonal credit facility with National Australia Bank Ltd ("NAB"). The current facility, referred to as the 2016 NAB Facilities, was amended as of April 13, 2018 and expires on March 30, 2020. As of June 30, 2018, AUD $10,400,000 (USD $7,697,040) was outstanding under the 2016 NAB Facilities. The 2016 NAB Facilities, as currently in effect, comprises two distinct facility lines: (i) an overdraft facility (the "Overdraft Facility"), having a credit limit of AUD $1,000,000 (USD $740,100 at June 30, 2018) and a borrowing base facility (the "Borrowing Base Facility"), having a credit limit of AUD $12,000,000 (USD $8,881,200 at June 30, 2018). The Borrowing Base Facility permits S&W Australia to borrow funds for periods of up to 180 days, at S&W Australia's discretion, provided that the term is consistent with its trading terms. Interest for each drawdown is set at the time of the drawdown as follows: (i) for Australian dollar drawings, based on the Australian Trade Refinance Rate plus 1.5% per annum and (ii) for foreign currency drawings, based on the British Bankers' Association Interest Settlement Rate for the relevant foreign currency for the relevant period, or if such rate is not available, the rate reasonably determined by NAB to be the appropriate equivalent rate, plus 1.5% per annum. As of June 30, 2018, the Borrowing Base Facility accrued interest on Australian dollar drawings at approximately 5.3% calculated daily. The Borrowing Base Facility is secured by a lien on all the present and future rights, property and undertakings of S&W Australia, the mortgage on S&W Australia's Keith, South Australia property and the Company's corporate guarantee (up to a maximum of AUD $15,000,000). The Overdraft Facility permits S&W Australia to borrow funds on a revolving line of credit up to the credit limit. Interest accrues daily and is calculated by applying the daily interest rate to the balance owing at the end of the day and is payable monthly in arrears. As of June 30, 2018, the Overdraft Facility accrued interest at approximately 6.77% calculated daily. For both the Overdraft Facility and the Borrowing Base Facility, interest is payable each month in arrears. In the event of a default, as defined in the NAB Facility Agreement, the principal balance due under the facilities will thereafter bear interest at an increased rate per annum above the interest rate that would otherwise have been in effect from time to time under the terms of each facility ( i.e. Both facilities constituting the 2016 NAB Facilities are secured by a fixed and floating lien over all the present and future rights, property and undertakings of S&W Australia and are guaranteed by the Company as noted above. The 2016 NAB Facilities contain customary representations and warranties, affirmative and negative covenants and customary events of default that permit NAB to accelerate S&W Australia's outstanding obligations, all as set forth in the NAB facility agreements. S&W Australia was in compliance with all NAB debt covenants at June 30, 2018. In January 2015, NAB and S&W Australia entered into a new business markets - flexible rate loan (the "Keith Building Loan") and a separate machinery and equipment facility (the "Keith Machinery and Equipment Facility"). In February 2016, NAB and S&W Australia also entered into a master asset finance facility (the "Master Assets Facility"). The Master Asset Facility has various maturity dates through 2021 and have interest rates ranging from 4.86% to 5.31%. The Keith Building Loan and Keith Machinery and Equipment Facility are used for the construction of a building on S&W Australia's Keith, South Australia property, purchase of adjoining land and for the machinery and equipment for use in the operations of the building. The Keith Building Loan matures on November 30, 2024. The interest rate on the Keith Building Loan varies from pricing period to pricing period (each such period approximately 30 days), based on the weighted average of a specified basket of interest rates (6.31% as of June 30, 2018). Interest is payable each month in arrears. The Keith Machinery and Equipment Facility bears interest, payable in arrears, based on the Australian Trade Refinance Rate quoted by NAB at the time of the drawdown, plus 2.9%. The Keith Credit Facilities contain customary representations and warranties, affirmative and negative covenants and customary events of default that permit NAB to accelerate S&W Australia's outstanding obligations, all as set forth in the facility agreement. They are secured by a lien on all the present and future rights, property and undertakings of S&W Australia, the Company's corporate guarantee and a mortgage on S&W Australia's Keith, South Australia property. |
Senior Convertible Notes and Wa
Senior Convertible Notes and Warrants (Narrative) (Details) | 12 Months Ended |
Jun. 30, 2018 | |
Senior Convertible Notes And Warrants Narrative | |
Long-term Debt, Description | On December 31, 2014, the Company consummated the sale of senior secured convertible debentures (the "Debentures") and common stock purchase warrants (the "Warrants") to various institutional investors ("Investors") pursuant to the terms of a securities purchase agreement among the Company and the Investors. At closing, the Company received $27,000,000 in gross proceeds. Offering expenses of $1,931,105 attributed to the Debentures were recorded as deferred financing fees and recorded as a debt discount and offering expenses of $424,113 attributed to the Warrants were expensed during the year ended June 30, 2015. The net proceeds were paid directly to DuPont Pioneer in partial consideration for the purchase of certain DuPont Pioneer assets, the closing for which also took place on December 31, 2014. Debentures At the date of issuance, the Debentures were due and payable on November 30, 2017, unless earlier converted or redeemed. The Debentures bore interest on the aggregate unconverted and then outstanding principal amount at 8% per annum, payable in arrears monthly beginning February 2, 2015. The monthly interest was payable in cash, or in any combination of cash or shares of the Company's common stock at the Company's option, provided certain "equity conditions" defined in the Debentures were satisfied. Beginning on July 1, 2015, the Company was required to make monthly payments of principal as well, payable in cash or any combination of cash or shares of its common stock at the Company's option, provided all of the applicable equity conditions are satisfied. As of June 30, 2017, the Debentures were fully retired and had no outstanding balance. The Debentures were initially convertible, at the holder's option, into the Company's common stock at a conversion price of $5.00. Pursuant to the terms of the Debentures, the conversion price was reset to $4.63 on September 30, 2015. During the year ended June 30, 2017, certain holders of the Debentures converted an aggregate of $3,168,342 of principal and interest into 684,321 shares of the Company's common stock in accordance with the terms of the Debentures. Upon conversion, the Company recognized interest expense of $194,939 related to unamortized debt discount on the Debentures and incurred $7,070 of stock issuance costs. Warrants The Warrants entitle the holders to purchase, in the aggregate, 2,699,999 shares of the Company's common stock. The Warrants are exercisable through their expiration on June 30, 2020, unless earlier redeemed. The Warrants were initially exercisable at an exercise price equal to $5.00. On September 30, 2015, pursuant to the terms of the Warrants, the exercise price was reset to $4.63. In addition, if the Company issues or is deemed to have issued securities at a price lower than the then applicable exercise price during the three-year period ending December 31, 2017, the exercise price of the Warrants will adjust based on a weighted average anti-dilution formula ("down-round protection"). On November 24, 2015, the Company closed on a private placement transaction in which 1,180,722 common shares were sold at $4.15 per share. Pursuant to the down-round protection terms of the Warrants, the exercise price was adjusted to $4.59 on November 24, 2015. On February 29, 2016, the Company completed a rights offering and accompanying noteholders' participation rights offering in which an aggregate of 2,125,682 shares of common stock were sold at $4.15 per share, triggering an adjustment of the exercise price of the Warrants to $4.53. On July 19, 2017, the Company completed a private placement transaction in which an aggregate of 2,685,000 shares of common stock were sold at $4.00 per share, triggering an adjustment of the exercise price of the Warrants to $4.46. On December 22, 2017, the Company completed a rights offering and backstop commitment in which an aggregate of 3,500,000 shares of common stock were sold at $3.50 per share, triggering an adjustment of the exercise price of the Warrants to $4.32. The down-round protection provision of the warrants expired on December 31, 2017. The Warrants may be exercised for cash, provided that, if there is no effective registration statement available registering the exercise of the Warrants, the Warrants may be exercised on a cashless basis. At any time that (i) all equity conditions set forth in the Warrants have been satisfied, and (ii) the closing sales price of the common stock equals or exceeds $12.00 for 15 consecutive trading days (subject to adjustment for stock splits, reverse stock splits and other similar recapitalization events), the Company may redeem all or any part of the Warrants then outstanding for cash in an amount equal to $0.25 per Warrant. Accounting for the Conversion Option and Warrants Due to the down-round price protection included in the terms of the Warrants, the Warrants were treated as a derivative liability in the consolidated balance sheet, measured at fair value and marked to market each reporting period until December 31, 2017, when the down-round protection expires. The down-round price protection expired on December 31, 2017, accordingly, the fair value of the Warrants as of December 31, 2017 was reclassified to additional paid in capital within the equity section of the balance sheet. At December 31, 2017 and June 30, 2017, the fair value of the Warrants was estimated at $2,405,300 and $2,836,600, respectively. The Warrants were valued at December 31, 2017 using the Monte Carlo simulation model, under the following assumptions: (i) remaining expected life of 2.5 years, (ii) volatility of 39.0%, (iii) risk-free interest rate of 1.92% and (iv) dividend rate of zero. The aggregate fair value of the Warrants derived via the Monte Carlo analysis were also weighted by a prior third-party market transaction and third-party indications of fair value. The prior third-party market transaction was provided a weighting of 10.0% while the third-party indications of fair value were provided a 50% weighting in the fair value analysis. The Warrants were valued at June 30, 2017 using the Monte Carlo simulation model, under the following assumptions: (i) remaining expected life of 3 years, (ii) volatility of 45.6%, (iii) risk-free interest rate of 1.54% and (iv) dividend rate of zero. The aggregate fair value of the Warrants derived via the Monte Carlo analysis were also weighted by a prior third-party market transaction and third-party indications of fair value. The prior third-party market transaction was provided a weighting of 10.0% while the third-party indications of fair value were provided a 50% weighting in the fair value analysis. |
Income Taxes (Loss Before Incom
Income Taxes (Loss Before Income Taxes - US and Foreign) (Detail) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes Loss Before Income Taxes - Us And Foreign | ||
United States | $ (5,112,254) | $ (3,545,631) |
Foreign | 530,213 | (648,706) |
Loss before income taxes | $ (4,582,041) | $ (4,194,337) |
Income Taxes (Income Tax Provis
Income Taxes (Income Tax Provision) (Detail) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Current: | ||
Federal | $ 0 | $ 0 |
State | 0 | 1,680 |
Foreign | 100,122 | 0 |
Total current provision | 100,122 | 1,680 |
Deferred: | ||
Federal | 20,785 | 6,945,260 |
State | 22,142 | 691,135 |
Foreign | 0 | (10,370) |
Total deferred provision (benefit) | 42,927 | 7,626,025 |
Provision for income taxes | $ 143,049 | $ 7,627,705 |
Income Taxes (Reconciliation of
Income Taxes (Reconciliation of Taxes Provided to Federal Statutory Rate) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes Reconciliation Of Taxes Provided To Federal Statutory Rate | ||
Tax expense (benefit) at statutory rate | $ (1,262,509) | $ (1,426,075) |
State taxes (benefit) net of federal tax (benefit) | (133,666) | (112,798) |
Mark to market on financial instruments | (118,838) | (515,950) |
Section 965 toll tax | 584,086 | 0 |
Other permanent differences | (144,049) | 33,251 |
Federal and state research credits - current year | (89,572) | (103,006) |
Foreign rate differential | (971) | 25,407 |
Shortfall on restricted stock vest | 155,783 | 129,627 |
Tax Cuts and Jobs Act | 3,264,391 | 0 |
Valuation allowance | (2,145,250) | 9,615,586 |
Other | 33,644 | (18,337) |
Income tax expense (benefit) | $ 143,049 | $ 7,627,705 |
Inome Taxes (Deferred Tax Asset
Inome Taxes (Deferred Tax Assets) (Detail) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 6,771,974 | $ 8,511,398 |
Compensation accruals | 144,550 | 327,462 |
Allowance for bad debts | 151,972 | 182,723 |
Stock compensation | 241,837 | 451,303 |
Tax credit carryforwards | 434,245 | 341,411 |
Deferred rent | 90,466 | 153,656 |
Other, net | 277,065 | 220,208 |
Total deferred tax assets | 8,112,109 | 10,188,161 |
Valuation allowance for deferred tax assets | (7,506,759) | (9,617,331) |
Deferred tax assets, net of valuation allowance | 605,350 | 570,830 |
Deferred tax liabilities | ||
Intangible assets | (519,942) | (235,218) |
Fixed assets | (355,491) | (562,763) |
Total deferred tax liabilities | (875,433) | (797,981) |
Net deferred tax asset / (liability) | $ (270,083) | $ (227,151) |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) | 12 Months Ended |
Jun. 30, 2018USD ($) | |
Accrued penalties and interest | $ 0 |
Federal | |
Operating Loss Carryforwards | $ 27,860,303 |
Operating loss carryforwards, expiration dates | Jun. 30, 2030 |
Research Tax Credit Carryforwards | $ 414,425 |
Research Tax Credit Carryforwards, Expiration Dates | Jun. 30, 2031 |
Undistributed Earnings of Foreign Subsidiaries | $ 4,109,000 |
Foreign Tax Credit Carryforwards | $ 157,859 |
Foreign Tax Credit Carryforwards, expiration dates | Jun. 30, 2023 |
State | |
Operating Loss Carryforwards | $ 12,512,969 |
Operating loss carryforwards, expiration dates | Jun. 30, 2030 |
Research Tax Credit Carryforwards | $ 25,089 |
Warrants Outstanding (Details)
Warrants Outstanding (Details) - $ / shares | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Warrants outstanding, beginning | 2,699,999 | 2,749,999 | |
Warrant issuances | 0 | 0 | |
Warrants expired | (50,000) | ||
Warrants outstanding. ending | 2,699,999 | 2,699,999 | |
Underwriter warrants | |||
Warrant issue date | 2012-05 | ||
Warrants outstanding, beginning | 0 | 50,000 | |
Exercise price per share | $ 6.88 | ||
Warrant expiration date | 2017-02 | ||
Warrant issuances | 0 | ||
Warrants expired | (50,000) | ||
Warrants outstanding. ending | 0 | ||
Warrants | |||
Warrant issue date | 2014-12 | 2014-12 | |
Warrants outstanding, beginning | 2,699,999 | 2,699,999 | |
Exercise price per share | $ 4.32 | $ 4.53 | |
Warrant expiration date | 2020-06 | 2020-06 | |
Warrant issuances | 0 | 0 | |
Warrants expired | 0 | 0 | |
Warrants outstanding. ending | 2,699,999 | 2,699,999 |
Foreign Currency Contract (Narr
Foreign Currency Contract (Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Foreign Currency Contract Narrative | ||
Foreign Currency Transactions, Description | The Company's subsidiary, S&W Australia, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company manages through the use of foreign currency forward contracts. These foreign currency contracts are not designated as hedging instruments; accordingly, changes in the fair value are recorded in current period earnings. These foreign currency contracts had a notional value of $3,980,100 at June 30, 2018 and their maturities range from July to December 2018. The Company records an asset or liability on the consolidated balance sheet for the fair value of the foreign currency forward contracts. | |
Foreign exchange contract asset | $ 166,629 | |
Foreign exchange contract liability | $ 100,138 | |
Gain on foreign exchange contracts | $ 205,531 | |
Loss on foreign exchange contracts | $ 272,801 |
Commitments and Contingencies63
Commitments and Contingencies (Operating Leases) (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | ||
Year ending June 30: | |||
2,019 | $ 411,055 | ||
2,020 | 358,099 | ||
2,021 | 239,012 | ||
2,022 | 143,083 | ||
2,023 | 118,772 | ||
2024 and beyond | 116,800 | ||
Total | [1] | 1,386,821 | |
Operating Leases, Rent Expense, Minimum Rentals | 401,375 | $ 555,583 | |
Operating Leases, Rent Expense, Sublease Rentals | (43,800) | (223,200) | |
Operating Leases, Rent Expense, Net | $ 357,575 | $ 332,383 | |
[1] | Minimum payments have not been reduced by minimum subleases rentals of $525,600 due in the future under noncancelable subleases. |
Related Party Transactions (Nar
Related Party Transactions (Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Accounts Payable, Related Parties, Current | $ 0 | $ 331,694 |
IVM | ||
Related Party Transaction, Description of Transaction | Glen D. Bornt, a member of the Company's Board of Directors until January 9, 2018, is the founder and President of Imperial Valley Milling Co. ("IVM"). He is IVM's majority shareholder and a member of its Board of Directors. Glen D. Bornt is also a majority shareholder of Kongal Seeds Pty. Ltd. ("Kongal"). IVM had a 15-year supply agreement with IVS, and this agreement was assigned by IVS to the Company when it purchased the assets of IVS in October 2012. IVM contracts with alfalfa seed growers in California's Imperial Valley and sells its growers' seed to the Company pursuant to a supply agreement. Under the terms of the supply agreement, IVM's entire certified and uncertified alfalfa seed production must be offered and sold to the Company, and the Company has the exclusive option to purchase all or any portion of IVM's seed production. The Company paid $2,682,946 and $8,482,663 to IVM during the years ended June 30, 2018 and June 30, 2017, respectively. Amounts due to IVM totaled $97,136 and $326,941 at June 30, 2018 and June 30, 2017, respectively. The Company paid $159,156 and $94,744 to Kongal during the years ended June 30, 2018 and June 30, 2017, respectively. Amounts due to Kongal totaled $357 and $4,753 at June 30, 2018 and June 30, 2017, respectively. | |
Related Party Transaction, Purchases from Related Party | $ 2,682,946 | 8,482,663 |
Accounts Payable, Related Parties, Current | $ 97,136 | 326,941 |
Kongal Seeds | ||
Related Party Transaction, Description of Transaction | Glen D. Bornt, a member of the Company's Board of Directors until January 9, 2018, is the founder and President of Imperial Valley Milling Co. ("IVM"). He is IVM's majority shareholder and a member of its Board of Directors. Glen D. Bornt is also a majority shareholder of Kongal Seeds Pty. Ltd. ("Kongal"). IVM had a 15-year supply agreement with IVS, and this agreement was assigned by IVS to the Company when it purchased the assets of IVS in October 2012. IVM contracts with alfalfa seed growers in California's Imperial Valley and sells its growers' seed to the Company pursuant to a supply agreement. Under the terms of the supply agreement, IVM's entire certified and uncertified alfalfa seed production must be offered and sold to the Company, and the Company has the exclusive option to purchase all or any portion of IVM's seed production. The Company paid $2,682,946 and $8,482,663 to IVM during the years ended June 30, 2018 and June 30, 2017, respectively. Amounts due to IVM totaled $97,136 and $326,941 at June 30, 2018 and June 30, 2017, respectively. The Company paid $159,156 and $94,744 to Kongal during the years ended June 30, 2018 and June 30, 2017, respectively. Amounts due to Kongal totaled $357 and $4,753 at June 30, 2018 and June 30, 2017, respectively. | |
Related Party Transaction, Purchases from Related Party | $ 159,156 | 94,744 |
Accounts Payable, Related Parties, Current | $ 357 | $ 4,753 |
Wynnefield | ||
Related Party Transaction, Description of Transaction | On July 19, 2017, the Company entered into a Securities Purchase Agreement with certain purchasers, including MFP Partners, L.P. ("MFP"), a stockholder of the Company, and certain entities related to Wynnefield Capital Management LLC (collectively, "Wynnefield"), pursuant to which MFP purchased approximately $3.7 million of shares of its common stock and Wynnefield purchased approximately $3.0 million of shares of its common stock. Each of MFP and Wynnefield is a beneficial owner of more than 5% of the Company's common stock. Alexander C. Matina, a member of the Company's Board, is Vice President, Investments of MFP. Robert D. Straus, a member of the Company's Board since January 9, 2018, is a Portfolio Manager and Analyst at Wynnefield. On December 22, 2017, the Company completed the closing of its previously announced rights offering. At the closing, the Company sold and issued an aggregate of 2,594,923 shares of its Common Stock at a subscription price of $3.50 per share pursuant to the exercise of subscriptions and oversubscriptions in the rights offering from its existing stockholders. Pursuant to an Investment Agreement, dated October 3, 2017, between the Company and MFP, MFP agreed to purchase, at the subscription price, all of the shares not purchased in the Rights Offering (the "Backstop Commitment"). Accordingly, on December 22, 2017, the Company and MFP completed the closing of the Backstop Commitment, in which the Company sold and issued 905,077 shares of its Common Stock to MFP. Combined, the Company sold and issued an aggregate of 3,500,000 shares of its common stock for aggregate gross proceeds of $12.25 million. | |
MFP | ||
Related Party Transaction, Description of Transaction | On July 19, 2017, the Company entered into a Securities Purchase Agreement with certain purchasers, including MFP Partners, L.P. ("MFP"), a stockholder of the Company, and certain entities related to Wynnefield Capital Management LLC (collectively, "Wynnefield"), pursuant to which MFP purchased approximately $3.7 million of shares of its common stock and Wynnefield purchased approximately $3.0 million of shares of its common stock. Each of MFP and Wynnefield is a beneficial owner of more than 5% of the Company's common stock. Alexander C. Matina, a member of the Company's Board, is Vice President, Investments of MFP. Robert D. Straus, a member of the Company's Board since January 9, 2018, is a Portfolio Manager and Analyst at Wynnefield. On December 22, 2017, the Company completed the closing of its previously announced rights offering. At the closing, the Company sold and issued an aggregate of 2,594,923 shares of its Common Stock at a subscription price of $3.50 per share pursuant to the exercise of subscriptions and oversubscriptions in the rights offering from its existing stockholders. Pursuant to an Investment Agreement, dated October 3, 2017, between the Company and MFP, MFP agreed to purchase, at the subscription price, all of the shares not purchased in the Rights Offering (the "Backstop Commitment"). Accordingly, on December 22, 2017, the Company and MFP completed the closing of the Backstop Commitment, in which the Company sold and issued 905,077 shares of its Common Stock to MFP. Combined, the Company sold and issued an aggregate of 3,500,000 shares of its common stock for aggregate gross proceeds of $12.25 million. | |
Mark Wong | ||
Related Party Transaction, Description of Transaction | On October 11, 2017, the Company entered into a Securities Purchase Agreement with Mark W. Wong, the Company's President and Chief Executive Officer, pursuant to which the Company sold and issued an aggregate of 75,000 shares of its Common Stock at a purchase price of $3.50 per share, for aggregate gross proceeds of $262,500. |
Equity-Based Compensation (2009
Equity-Based Compensation (2009 Equity Incentive Plan Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Description of the 2009 Equity Incentive Plan | During the year ended June 30, 2018, the Company issued 78,642 restricted stock units to its directors, certain members of the executive management team and other employees. The restricted stock units vest in either quarterly or annual periods over one to three-years. The fair value of the awards totaled $279,611 and was based on the closing stock price on the date of grants. | During the year ended June 30, 2017, the Company issued 77,275 restricted stock units to its directors, certain members of the executive management team, and other employees. The restricted stock units have varying vesting periods ranging from immediate vesting to annual installments over a three-year period. The fair value of the awards totaled $374,530 and was based on the closing stock price on the date of grants. |
Restricted stock units granted | 77,275 | |
Share-based compensation | $ 748,516 | $ 1,409,368 |
Fair value of RSU on date of grant | $ 374,530 | |
Unvested restricted shares outstanding | 48,666 | |
2009 Plan | ||
Description of the 2009 Equity Incentive Plan | 2009 Equity Incentive Plan In October 2009 and January 2010, the Company's Board of Directors and stockholders, respectively, approved the 2009 Equity Incentive Plan (as amended and/or restated from time to time, the "2009 Plan"). The plan authorized the grant and issuance of options, restricted shares and other equity compensation to the Company's directors, employees, officers and consultants, and those of the Company's subsidiaries and parent, if any. In October 2012 and December 2012, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 1,250,000 shares. In September 2013 and December 2013, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 1,700,000 shares. In September 2015 and December 2015, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 2,450,000 shares. The term of incentive stock options granted under the 2009 Plan may not exceed ten years, or five years for incentive stock options granted to an optionee owning more than 10% of the Company's voting stock. The exercise price of options granted under the 2009 Plan must be equal to or greater than the fair market value of the shares of the common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than 10% of voting stock must have an exercise price equal to or greater than 110% of the fair market value of the common stock on the date the option is granted. | |
Plan Modification, Description and Terms | The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Stock options issued to non- employees are accounted for at their estimated fair value. The fair value of options granted to non-employees is re-measured as they vest. The Company amortizes stock-based compensation expense on a straight-line basis over the requisite service period. The Company utilizes a Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of the Company's common stock to estimate the fair value of employee options grants. | |
Number of shares reserved for issuance under the plan | 2,450,000 | |
Shares available for future grants and awards | 713,636 | |
Terms of awards and other restrictions | The term of incentive stock options granted under the 2009 Plan may not exceed ten years, or five years for incentive stock options granted to an optionee owning more than 10% of the Company's voting stock. The exercise price of options granted under the 2009 Plan must be equal to or greater than the fair market value of the shares of the common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than 10% of voting stock must have an exercise price equal to or greater than 110% of the fair market value of the common stock on the date the option is granted. |
Equity-Based Compensation (Weig
Equity-Based Compensation (Weighted Average Assumptions) (Details) - Stock Options | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Risk-free rate of interest | 1.70% | 1.20% |
Risk Free Interest Rate, maximum | 2.30% | 2.00% |
Dividend yield | 0.00% | 0.00% |
Volatility of common stock, minimum | 45.30% | 46.90% |
Volatility of common stock, maximum | 45.50% | 50.80% |
Average forfeiture assumptions | 0.014 | 0.024 |
Equity-Based Compensation (Sche
Equity-Based Compensation (Schedule Of Stock Option Activity) (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Equity-based Compensation Schedule Of Stock Option Activity | |||
Options, Outstanding as of beginning of period | 990,528 | 1,021,418 | |
Options, Granted | 103,283 | 230,610 | |
Options, Exercised | (49,000) | (232,000) | |
Options, Forfeited, cancelled or expired | (252,737) | (29,500) | |
Options, Outstanding as of end of period | 792,074 | 990,528 | |
Options, vested and exercisable at end of period | 579,018 | ||
Options, vested and expected to vest | 791,493 | ||
Weighted-Average Exercise Prices, Outstanding as of beginnig of period | $ 5.12 | $ 5.14 | |
Weighted-Average Exercise Prices, Granted | 3.45 | 4.19 | |
Weighted-Average Exercise Prices, Exercised | 3.95 | 4.20 | |
Weighted-Average Exercise Prices, Forfeited, cancelled or expired | 6.46 | 5.95 | |
Weighted-Average Exercise Prices, Outstanding as of end of period | 4.55 | $ 5.12 | |
Weighted-Average Exercise Prices, Vested and Exercisable | 4.81 | ||
Weighted-Average Exercise Price, Vested and expected to vest | $ 4.55 | ||
Options Outstanding, Weighted-Average Remaining Contractual Term (in years) | 6 years 108 days | 4 years 108 days | |
Weighted-Average Remaining Contractual Term (in years), Vested and Exercisable | 5 years 144 days | ||
Weighted-Average Remaining Contractual Term (in years), Vested and expected to vest | 6 years 108 days | ||
Options, Outstanding, Aggregate Intrinsic Value | $ 10,413 | $ 100,344 | $ 142,381 |
Options, vested and xxercisable, Aggregate Intrinsic Value | 1,977 | ||
Options, Vested and expected to vest, Aggregate Intrinsic Value | $ 10,334 |
Equity-Based Compensation (Sc68
Equity-Based Compensation (Schedule Of Other Than Option Plan Activity) (Details) - Nonvested RSU's - $ / shares | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Nonvested units outstanding at beginning | 120,971 | |
Units granted | 78,642 | |
Units vested | (105,985) | |
Units forfeited | (4,435) | |
Nonvested units outstanding at end | 89,193 | 120,971 |
Nonvested units outstanding, weighted average grant date fair value per unit | $ 3.98 | $ 5.59 |
Granted in Period, Weighted Average Grant Date Fair Value | 3.56 | |
Vested in Period, Weighted Average Grant Date Fair Value | 5.49 | |
Forfeited in Period, Weighted Average Grant Date Fair Value | $ 4.45 | |
Weighted-average remaining contractual life (years) | 1 year 36 days |
Equity-Based Compensation (Narr
Equity-Based Compensation (Narrative) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Stock-based compensation | $ 748,516 | $ 1,409,368 |
Stock Options | ||
Stock-based compensation, total compensation cost not yet recognized, period for recognition | 1 year 245 days | |
Stock Options | ||
Unrecognized stock compensation expense, net of estimated forfeitures, related to options | $ 275,584 | |
Nonvested RSU's | ||
Unrecognized stock compensation expense related to restricted stock grants | $ 203,138 | |
Stock-based compensation, total compensation cost not yet recognized, period for recognition | 1 year 36 days | |
Stock-based compensation | $ 487,391 | $ 1,032,170 |
Non-Cash Investing Activities f
Non-Cash Investing Activities for Statements of Cash Flows (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Non-cash Investing Activities For Statements Of Cash Flows | ||
Issuance of common stock upon conversion of principal and interest of convertible debentures | $ 0 | $ 3,168,342 |
Reclassification of warrants upon expiration of repricing provisions | $ 2,405,300 | $ 0 |
Subsequent Events (Narrative) (
Subsequent Events (Narrative) (Details) | 12 Months Ended |
Jun. 30, 2018 | |
Subsequent Events Narrative | |
Subsequent Event, Description | On August 15, 2018, the Company closed on a sale-leaseback transaction with American AgCredit involving certain equipment located at the Company's Five Points, California and Nampa, Idaho production facilities. Under the terms of the sale-leaseback transaction: S&W sold the equipment to American AgCredit for $2,106,395 million in proceeds. The proceeds were used to pay off in full a note (in the principal amount of $2,081,527, plus accrued interest of $24,868) held by Conterra Agricultural Capital, LLC, which had an interest rate of 9.5% per annum and was secured by, among other things, the equipment. S&W entered into a lease agreement with American AgCredit relating to the equipment. The lease agreement has a five-year term and provides for monthly lease payments of $40,023 (representing an annual interest rate of 5.6%). At the end of the lease term, S&W will repurchase the equipment for $1. On September 5, 2018, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Novo Advisors (f/k/a Turnaround Advisory Group Inc.), solely in its capacity as the receiver (the "Receiver") for, and on behalf of, Chromatin, Inc., a Delaware corporation (together with certain of its subsidiaries and affiliates in receivership, "Chromatin"), in a receivership action pending in the United States District Court for the Northern District of Illinois (the "Court"). Pursuant to the Asset Purchase Agreement, the Company agreed to purchase substantially all of Chromatin's assets (the "Purchased Assets"), as well as assume certain contracts ("Assigned Contracts") and other liabilities of Chromatin (collectively, the "Chromatin Acquisition"), for a purchase price of $23.0 million. Pursuant to sale procedures approved by the Court, other parties had an opportunity to submit a competing bid by September 7, 2018 and, if a qualified competing bid was submitted, an auction would be held on September 13, 2018. At an auction held on September 13, 2018, the Company was designated the highest bidder, with a winning bid of $26.5 million. A hearing to consider approval of the Chromatin Acquisition was held before the Court on September 17, 2018, and the sale remains subject to the Court's approval. In connection with the Company's winning bid, on September 14, 2018, the Company entered into an updated Asset Purchase Agreement (the "Second Asset Purchase Agreement") with the Receiver to reflect the updated terms and conditions under which the Company agreed to complete the Chromatin Acquisition, including the purchase price of $26.5 million. The closing of the Chromatin Acquisition is contingent upon, among other things, (a) the entry of a sale order by the Court ("Order"), (b) the written consent of CIBC Bank USA (f/k/a The PrivateBank and Trust Company) and all other holders of any lien or other security interest in any of the Purchased Assets to the sale and transfer of the Purchased Assets to the Company, and (c) the Receiver obtaining executed written consents to the assignment to the Company of certain Assigned Contracts from the counterparties thereto, including a waiver and release of any termination or other contract rights based upon or related to Chromatin having been placed in receivership or the financial condition or insolvency of Chromatin. On September 5, 2018, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with MFP, pursuant to which the Company agreed to sell and issue to MFP 1,607,717 shares of its common stock (the "Common Shares") at a purchase price of $3.11 per share at an initial closing (the "Initial Closing") and, subject to the satisfaction of certain conditions, 7,235 shares of newly designated Series A Convertible Preferred Stock of the Company ("Preferred Shares") at a purchase price of $3,100 per share at a second closing (the "Second Closing"). The Initial Closing was completed on September 5, 2018. The consummation of the Second Closing is contingent upon, among other things, the Court's entry of the Order and the other conditions to the closing of the Chromatin Acquisition having been satisfied or reasonably expected to be satisfied. The Company will use the proceeds from the Second Closing for the Chromatin Acquisition and working capital purposes. The Securities Purchase Agreement may be terminated prior to the completion of the Second Closing if the Chromatin Acquisition has not been completed by October 31, 2018. |