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8-K/A - 8-K/A - S&W Seed Cobody8ka.htm
EX-99.1 - AUDITED FINANCIAL STATEMENTS OF IMPERIAL VALLEY SEEDS, INC. - S&W Seed Coexh99-1.htm
EX-23.1 - CONSENT - S&W Seed Coexh23-1.htm

EXHIBIT 99.2

S&W Seed Company

Unaudited Pro Forma Combined Financial Statements

 

The following unaudited pro forma combined financial information is provided for informational purposes only. The unaudited pro forma combined financial information was based on and should be read in conjunction with the (i) historical consolidated financial statements of S&W Seed Company (S&W) included in its Annual Report on Form 10-K for the year ended June 30, 2012; (ii) the historical consolidated financial statements of S&W for the three months ended September 30, 2012 included in its Form 10-Q; (iii) the audited financial statements of Imperial Valley Seeds ("IVS") as of and for the years ended December 31, 2011 and 2010, respectively, which are included in Exhibit 99.2 to this Current Report Form 8-KA; and (iv) the unaudited interim financial statements of IVS for the nine months ended September 30, 2012 which are also included in Exhibit 99.2 to this Current Report Form 8-K/A.

The unaudited pro forma combined consolidated balance sheet as of September 30, 2012, and the unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012, are presented herein. The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on September 30, 2012, and combines the unaudited consolidated balance sheet of S&W Seed Company and the assets acquired from IVS. The unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012 give effect to the acquisition as if it had occurred on July 1, 2011.

S&W's fiscal year ended June 30, 2012 and IVS's fiscal year ended December 31, 2011.The unaudited pro forma combined balance sheet was prepared using the historical balance sheets of S&W and IVS as of September 30, 2012. The unaudited pro forma combined statements of operations were prepared using the historical statements of operations of S&W for the year ended June 30, 2012 and three months ended September 30, 2012, and the historical statements of operations of IVS for the twelve months ended June 30, 2012 and three months ended September, 2012. IVS audited results were adjusted to exclude the six months ended June 30, 2011 and to include the six months ended June 30, 2012 to recast twelve months of operations ending June 30, 2012.

The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition, are factually supportable and are expected to have a continuing impact on the combined results. The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited combined financial statements, and is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future results of operations or financial position of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this Current Report on Form 8-K/A. Actual results may differ from the amounts reflected in the unaudited pro forma combined financial statements, and the differences may be material.


S&W SEED COMPANY
Unaudited Pro Forma Combined Balance Sheet
As of September 30, 2012

      Historical     Pro Forma           Pro Forma
      S&W Seed Company     Imperial Valley Seeds     Adjustments     Notes     Combined
ASSETS                              
                               
CURRENT ASSETS                              
     Cash and cash equivalents   $ 8,652,433    $ 123,978    $ (3,123,978)     a   $ 5,652,433 
     Accounts receivable, net     6,069,461      3,320,955      (3,320,955)     b     6,069,461 
     Inventories     8,273,667                    8,273,667 
     Prepaid expenses and other current assets     96,374      5,823      (5,823)     b     96,374 
     Deferred tax asset     158,277                    158,277 
          TOTAL CURRENT ASSETS     23,250,212      3,450,756      (6,450,756)           20,250,212 
                               
Property, plant and equipment, net of accumulated depreciation     7,855,043                    7,855,043 
Other intangibles, net     647,999          6,182,000      c     6,829,999 
Crop production costs     1,358,160                    1,358,160 
Deferred tax asset - long term     464,375                    464,375 
          TOTAL ASSETS   $ 33,575,789    $ 3,450,756    $ (268,756)         $ 36,757,789 
                               
LIABILITIES AND STOCKHOLDERS' EQUITY                              
                               
                               
CURRENT LIABILITIES                              
     Accounts payable   $ 6,773,250    $ 90,187    $ (90,187)     b   $ 6,773,250 
     Accounts payable - related party     250,437      733,276      (733,276)     b     250,437 
     Accrued expenses and other current liabilities     170,711      91,818      (91,818)     b     170,711 
     Current portion of long-term debt     153,776          150,000      d     303,776 
          TOTAL CURRENT LIABILITIES     7,348,174      915,281      (765,281)           7,498,174 
                               
Long-term debt, less current portion     2,455,010          600,000      d     3,055,010 
                               
TOTAL LIABILITIES     9,803,184      915,281      (165,281)           10,553,184 
                               
STOCKHOLDERS' EQUITY                              
     Common stock     7,473      10,000      (9,600)     b, e     7,873 
     Additional paid-in capital     23,349,793          2,431,600      e     25,781,393 
     Retained earnings     415,339      2,525,475      (2,525,475)     b     415,339 
          TOTAL STOCKHOLDERS' EQUITY     23,772,605      2,535,475      (103,475)           26,204,605 
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 33,575,789    $ 3,450,756    $ (268,756)         $ 36,757,789 

See accompanying notes to Unaudited Pro Forma Combined Financial Statements


S&W SEED COMPANY
Unaudited Pro Forma Combined Statement of Operations
For the Three Months Ended September 30, 2012

      Historical     Pro Forma           Pro Forma
      S&W Seed Company     Imperial Valley Seeds     Adjustments     Notes     Combined
Revenue                              
     Seed and crop revenue   $ 6,356,052    $ 4,513,631    $         $ 10,869,683 
     Milling and other revenue     363,683                    363,683 
          Total revenue     6,719,735      4,513,631                11,233,366 
                               
Cost of revenue                              
     Cost of seed and crop revenue     5,549,419      4,005,379                9,554,798 
     Cost of milling and other revenue     91,914                    91,914 
          Total cost of revenue     5,641,333      4,005,379                9,646,712 
                               
Gross profit     1,078,402      508,252                1,586,654 
                               
Operating expenses                              
     Selling, general and administrative expenses     750,351      103,242      (18,608)     g     834,985 
     Research and development expenses     103,431                    103,431 
     Depreciation and amortization     69,785          78,267      f     148,052 
                               
          Total operating expenses     923,567      103,242      59,659            1,086,468 
                               
Income from operations     154,835      405,010      (59,659)           500,186 
                               
Other expense                              
     Interest expense, net     7,868          2,250      h     10,118 
                               
Net income before income tax expense     146,967      405,010      (61,909)           490,068 
     Income tax expense     58,211      6,075      129,781      i     194,067 
Net income   $ 88,756    $ 398,935    $ (191,690)         $ 296,001 
                               
Net income per common share:                              
     Basic   $ 0.01                      $ 0.04 
     Diluted   $ 0.01                      $ 0.04 
                               
Weighted average number of common shares outstanding:                              
     Basic     6,839,560            400,000      j     7,239,560 
     Diluted     6,950,155            400,000      j     7,350,155 

See accompanying notes to Unaudited Pro Forma Combined Financial Statements


S&W SEED COMPANY
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended June 30, 2012

      Historical     Pro Forma           Pro Forma
      S&W Seed Company     Imperial Valley Seeds     Adjustments     Notes     Combined
Revenue                              
     Seed and crop revenue   $ 13,261,853    $ 15,817,579    $         $ 29,079,432 
     Milling and other revenue     885,764                    885,764 
          Total revenue     14,147,617      15,817,579                29,965,196 
                               
Cost of revenue                              
     Cost of seed and crop revenue     9,912,781      13,738,035                23,650,816 
     Cost of milling and other revenue     327,133                    327,133 
          Total cost of revenue     10,239,914      13,738,035                23,977,949 
                               
Gross profit     3,907,703      2,079,544                5,987,247 
                               
Operating expenses                              
     Selling, general and administrative expenses     2,772,711      358,050      14,200      k     3,144,961 
     Research and development expenses     242,523                    242,523 
     Depreciation and amortization     272,855          313,067      f     585,922 
                               
          Total operating expenses     3,288,089      358,050      327,267            3,973,406 
                               
Income from operations     619,614      1,721,494      (327,267)           2,013,841 
                               
Other expense                              
     Loss on disposal of fixed assets     24,532                      24,532 
     Interest expense, net     20,937          11,250      h     32,187 
                               
Net income before income tax expense     574,145      1,721,494      (338,517)           1,957,122 
     Income tax expense     199,310      28,216      451,874      l     679,400 
Net income   $ 374,835    $ 1,693,278    $ (790,390)         $ 1,277,722 
                               
Net income per common share:                              
     Basic   $ 0.06                      $ 0.20 
     Diluted   $ 0.06                      $ 0.20 
                               
Weighted average number of common shares outstanding:                              
     Basic     5,904,110            400,000      j     6,304,110 
     Diluted     5,906,899            400,000      j     6,306,899 

See accompanying notes to Unaudited Pro Forma Combined Financial Statements


S&W Seed Company
Notes to Unaudited Pro Forma Combined Financial Statements

Note 1 - Basis of Presentation

The unaudited pro forma combined consolidated balance sheet as of September 30, 2012, and the unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012, are presented herein. The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on September 30, 2012, and combines the unaudited consolidated balance sheet of S&W Seed Company ("the Company or S&W") and the assets acquired from IVS. The unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012 give effect to the acquisition as if it had occurred on July 1, 2011.

S&W's fiscal year ended June 30, 2012 and IVS's fiscal year ended December 31, 2011.The unaudited pro forma combined balance sheet was prepared using the historical balance sheets of S&W and IVS as of September 30, 2012. The unaudited pro forma combined statements of operations were prepared using the historical statements of operations of S&W for the year ended June 30, 2012 and three months ended September 30, 2012, and the historical statements of operations of IVS for the twelve months ended June 30, 2012 and three months ended September, 2012. IVS audited results were adjusted to exclude the six months ended June 30, 2011 and to include the six months ended June 30, 2012 to recast twelve months of operations ending June 30, 2012.

The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited combined financial statements, and is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not reflect any cost savings or integration costs. The unaudited pro forma combined financial information does not purport to project the future results of operations or financial position of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this Current Report on Form 8-K/A. Certain valuations are currently in process. Actual results may differ from the amounts reflected in the unaudited pro forma combined financial statements, and the differences may be material.

Note 2 - Transaction and Purchase Consideration

On October 1, 2012, the Company purchased substantially all of the assets of Imperial Valley Seeds, Inc. ("IVS"). Pursuant to the acquisition agreement, the Company purchased substantially all of the assets of IVS not including cash on hand, all accounts and other receivables of IVS, and all inventory of the IVS alfalfa seed business. The Company did not assume any IVS liabilities.

Pursuant to the acquisition agreement, the Company paid the following consideration: cash in the amount of $3,000,000, a five-year unsecured, subordinated promissory note in the principal amount of $500,000, 400,000 shares of the Company's unregistered common stock valued at $2,432,000 and $250,000 to be paid over a five-year period for a non-competition agreement, for total consideration of $6,182,000. The non-compete portion of the consideration will be paid in five annual installments of $50,000 to Mr. Fabre, who joined the Company as Vice President of Sales and Marketing.


The acquisition has been accounted for as a business combination and the Company valued all assets and liabilities acquired at their estimated fair values on the date of acquisition. Accordingly, the assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition.

The estimated purchase price allocation is based on preliminary estimates of fair value as follows:

Technology/IP   $ 1,058,000 
Customer relationships     1,467,000 
Trade-name and brands     1,859,000 
Non-compete     293,000 
Goodwill     1,505,000 
     Total acquisition cost allocated   $ 6,182,000 

The purchase price consists of the following:

Cash   $ 3,000,000 
Unsecured 5 year promissory note     500,000 
Non-compete payment obligation     250,000 
Common stock     2,432,000 
    $ 6,182,000 

Note 3 - Pro Forma Adjustments

  1. Represents the cash paid at closing of the acquisition net of the cash balances not acquired.
  2. Represents elimination of the assets, liabilities and equity that were not acquired in the transaction.
  3. To reflect the estimated fair value of identifiable intangible assets and goodwill acquired in the acquisition.
  4. To reflect the $500,000 unsecured promissory note and the $250,000 non-compete obligation recorded at closing. Of the total $750,000 of obligations, $150,000 is classified as current on the combined balance sheet and the remaining balances are classified as long-term.
  5. To reflect the common stock issued as consideration in the acquisition net of IVS.
  6. Represents the amortization expense related to the fair value of identifiable amortizable intangible assets acquired in the transaction, as if the acquisition had been completed on July 1, 2011.
  7. To eliminate $22,158 of transaction expenses, partially offset by an increase in wages and benefits by $3,550.

  1. The consideration paid included a $500,000 unsecured promissory note. Interest expense is calculated based on 1-month LIBOR plus 2% and assumes the promissory note was issued on July 1, 2011.
  2. To reflect the additional income tax expense for the three months ended September 30, 2012 assuming a combined Company's effective tax rate of 39.6%.
  3. To reflect the issuance of 400,000 shares of common stock on the date of acquisition.
  4. To reflect an increase in wages and benefits by $14,200.
  5. To reflect the additional income tax expense for the year ended June 30, 2012 assuming a combined Company's effective tax rate of 34.7%.