You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included in Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements as referred to on page 2 of this Quarterly Report on Form 10-Q. Factors that could cause or contribute to these differences include those discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, particularly in Part I, Item 1A, "Risk Factors".

Executive Overview

We are a global multi-crop, middle-market agricultural company. We are market leaders in the breeding, production and sale of alfalfa seed and sorghum seed. We also have a growing commercial market presence in sunflower, wheat and pasture seed and maintain an active stevia development program.

Our seed platform develops and supplies high quality germplasm designed to produce higher yields for farmers worldwide. We sell over 500 seed products in more than 40 countries. We maintain an active product pipeline and expect to introduce more than 20 new products during the 2022-2023 fiscal years.

Founded in 1980, we began our operations as a limited producer of non-dormant alfalfa seed varieties bred for warm climates and high-yields, including varieties that can thrive in poor, saline soils. Over the years we have built a diversified, global agricultural platform through a combination of organic growth and strategic acquisitions and collaborations, including:

• Our 2012 acquisition of Imperial Valley Seeds, Inc., which enabled us to


   expand production of non-GMO alfalfa seed into California's Imperial Valley,
   thereby ensuring a non-GMO uncontaminated source of alfalfa seed due to the
   prohibition on growing GMO crops in the Imperial Valley, as well as enabling
   us to diversify our production areas and distribution channels;

• Our 2012 acquisition of a portfolio of dormant alfalfa germplasm, which

launched our entry into the dormant alfalfa market;

• Our 2013 acquisition of Seed Genetics International Pty Ltd (now S&W Seed

Company Australia Pty Ltd, or S&W Australia), the leading producer of
   non-dormant alfalfa seed in South Australia, which made us the largest
   non-dormant alfalfa seed company in the world, with production capabilities in
   both hemispheres;

• Our 2014 acquisition of alfalfa production and research facility assets and


   conventional (non-GMO) alfalfa germplasm from Pioneer Hi-Bred International,
   Inc., or Pioneer (now a subsidiary of Corteva Agriscience, Inc., or Corteva),
   which substantially broadened and improved our dormant alfalfa germplasm
   portfolio and deepened our production, research and product development
   capabilities;

• Our 2016 acquisition of the business and assets of SV Genetics Pty Ltd, a


   developer of proprietary hybrid sorghum and sunflower seed germplasm, which
   expanded our crop focus into two areas which we believe have high global
   growth potential;

• Our 2018 acquisition of the assets of Chromatin, Inc. and related companies,


   which positioned us to become a global leader in the hybrid sorghum seed
   market and enhanced our distribution channels both internationally and within
   a U.S.-based farmer-dealer network;

• Our 2018 joint venture with AGT Foods Africa Proprietary Limited and 2019


   joint venture with Zaad Holdings Limited, both based in South Africa, each of
   which were formed to produce our hybrid sunflower, grain sorghum and forage
   sorghum seed in Africa for sale in Africa, the Middle East and Europe;

• Our 2019 license of commercialized and developmental wheat germplasm from

Corteva, through which we entered the largest grain crop market in Australia;

• Our 2020 acquisition of Pasture Genetics Ltd., or Pasture Genetics, the third


   largest pasture seed company in Australia, which further diversified our
   product offerings in Australia and strengthened our Australian sales team and
   distribution relationships;

• Our 2020 collaboration with ADAMA Ltd., or ADAMA, a subsidiary of China

National Chemical Engineering Co Ltd., or ChemChina, to bring to the U.S.
   sorghum market the DoubleTeam™ grassy weed management system, consisting of
   ADAMA's proprietary herbicides and our non-GMO, herbicide tolerant sorghum
   hybrids; and

• Our 2020 licensing agreement with The Agricultural Alumni Seed Improvement

Association, Inc., an affiliate of Purdue University in West Lafayette, IN, to
   develop and commercialize worldwide a non-GMO, dhurrin-free trait in sorghum
   species, which essentially eliminates potential livestock death from hydrogen
   cyanide poisoning when grazing sorghum.


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In 2019, we restructured our relationship with Corteva, under which, among other things:

o We received $45.0 million in fiscal 2019, $16.7 million in fiscal 2020, and

approximately $8.3 million in fiscal 2021

o Corteva received a fully pre-paid, exclusive license to produce and

distribute certain of our alfalfa varieties world-wide (except South

America). The licensed varieties include certain of our existing commercial

conventional (non-GMO) alfalfa varieties and six pre-commercial dormant

alfalfa varieties. Corteva received no license to our other commercial

alfalfa varieties or pre-commercial alfalfa pipeline products and no rights

to any future products developed by us.

o We assigned to Corteva grower production contract rights, and Corteva assumed

grower production contract obligations, related to the licensed and certain

other alfalfa varieties.

o Our prior Distribution Agreement, related to conventional (non-GMO) alfalfa

varieties, and Contract Alfalfa Production Services Agreement, related to

GMO-traited alfalfa varieties, with Corteva both terminated. Under the

Distribution Agreement, Corteva was obligated to make minimum annual

purchases from us.

As a result of the 2018 Chromatin acquisition, the 2019 restructuring of our relationship with Corteva, and our February 2020 acquisition of Pasture Genetics, we expect that our results of operations for fiscal 2022 and future periods will differ significantly from prior periods as the mix of our product portfolio rebalances away from a reliance on alfalfa sales (sales of alfalfa seed to Corteva totaled $14.2 million and $19.7 million during the year ended June 30, 2021 and 2020) to a more diverse product mix. We do not expect any other significant revenue from sales to Corteva in the future.

COVID-19 Update

We are monitoring the impact of the COVID-19 global pandemic on our business and have implemented measures designed to protect the health and safety of our workforce, including a voluntary work-from-home policy for employees who can perform their jobs offsite. We are continuing our activities and are taking precautionary measures to protect our employees working in our facilities.

As the COVID-19 pandemic continues to affect the areas in which we operate, we believe the outbreak has and will continue to have a negative impact on our sales, operating results and financial condition. The extent of the impact of the COVID-19 pandemic on our sales, operating results and financial condition will depend on certain developments, including the duration and spread of the outbreak, impact on our customers, employees and vendors, all of which are uncertain and cannot be predicted.

Our sales efforts historically involved significant in-person interaction with potential customers and distributors. Throughout the COVID-19 pandemic, many national, state and local governments in our target markets implemented various stat-at-home, shelter-in-place and other quarantine measures in response to the COVID-19 pandemic. As a result, we have shifted certain of our sales activities to video conferencing and similar customer interaction models. We continue to evaluate our sales approach, but we have found these alternative approaches to generally be less effective than in-person sales efforts. In particular, our sales cycle is highly seasonal, and the majority of our sales season activities for the United States and Australia are typically concentrated between March and June each year. If ongoing measures designed to protect against COVID-19 remain in effect throughout the 2022 sales season, we may experience similar negative impacts that we experienced during the 2020 and 2021 sales seasons.

Further, vaccine mandates may be enforced in jurisdictions in which our business operates. Although it is not possible to predict with certainty the impact of these measures on our business and workforce, these requirements may result in attrition, difficulty securing future labor needs, and may further disrupt the national supply chain, all of which could have a material adverse effect on our business, financial condition and results of operations.

In addition, our product revenue is predicated on our ability to timely fulfill customer orders, which depends in large part upon the consistent availability and operation of shipping and distribution networks operated by third parties. Farmers typically have a limited window during which they can plant seed, and their buying decisions can be shaped by actual or perceived disruptions in our distribution and supply channels. If our customers delay or decrease their orders due to potential disruptions in our distribution and supply channels, this will adversely affect our product revenue. During the year ended June 30, 2021 and three months ended September 30, 2021, we experienced numerous logistical challenges due to limited availability of trucks for product deliveries, congestion at the ports, and overall rising costs of shipping and transportation costs. We expect these logistical challenges to persist throughout fiscal 2022.

Given these uncertainties, at this time we cannot reasonably estimate the overall impact of the COVID-19 pandemic on our business, operating results and financial condition.



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Components of Our Statements of Operations Data

Revenue and Cost of Revenue

Product and Other Revenue

We derive most of our revenue from the sale of our proprietary seed varieties and hybrids. We expect that over the next several years, a substantial majority of our revenue will be generated from the sale of alfalfa, sorghum, and pasture seed, although we are continually assessing other possible product offerings or means to increase revenue, including expanding into other, higher margin crops.

The mix of our product offerings will continue to change over time with the introduction of new seed varieties and hybrids resulting from our robust research and development efforts, including our potential expansion into gene-edited products in future periods, and our strategic acquisitions.

Our revenue will fluctuate depending on the timing of orders from our customers and distributors. Because some of our large customers and distributors order in bulk only one or two times per year, our product revenue can fluctuate significantly from period to period. However, some of this fluctuation is offset by having operations in both the northern and southern hemispheres.

Our stevia breeding program has yet to generate any meaningful revenue. However, management continues to evaluate this portion of our business and assess various means to monetize the results of our effort to breed new, better-tasting stevia varieties. Such potential opportunities include possible licensing agreements and royalty-based agreements.

Cost of Revenue

Cost of revenue relates to sale of our seed products and consists of the cost of procuring seed, plant conditioning and packaging costs, direct labor and raw materials and overhead costs.

Operating Expenses

Research and Development Expenses

Research and development expenses consist of costs incurred in the discovery, development, breeding and testing of new products incorporating the traits we have specifically selected. These expenses consist primarily of employee salaries and benefits, consultant services, land leased for field trials, chemicals and supplies and other external expenses.

Overall, we have been focused on controlling research and development expenses, while balancing that objective against the recognition that continued advancement in product development is an important part of our strategic planning. We intend to focus our resources on high value activities. For alfalfa seed, we plan to invest in further development of differentiating forage quality traits. For sorghum, we plan to invest in higher value grain products, proprietary herbicide tolerance traits and improved safety and palatability in forage products. We expect our research and development expenses will fluctuate from period to period as a result of the timing of various research and development projects.

Our internal research and development costs are expensed as incurred, while third-party research and developments 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 construed for research and development activities that have alternative future uses are capitalized and depreciated on a straight-line basis over the estimated useful life of the asset.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses consist primarily of employee costs, including salaries, employee benefits and share-based compensation, as well as professional service fees, insurance, marketing, travel and entertainment expense, public company expense and other overhead costs. We proactively take steps on an ongoing basis to control selling, general and administrative expense as much as is reasonably possible.

Depreciation and Amortization

We amortize intangible assets, including those acquired from Pasture Genetics in 2020, Chromatin in 2018 and from SV Genetics in May 2016, using the straight-line method over the estimated useful life of the asset, consisting of periods of 3-30 years for technology/IP/germplasm, 5-20 years for customer relationships and trade names and 3-20 years for other intangible assets. Property,



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plant and equipment is depreciated using the straight-line method over the estimated useful life of the asset, consisting of periods of 5-35 years for buildings, 2-20 years for machinery and equipment and 2-5 years for vehicles.

Other (Income) Expense

Other expense consists primarily of foreign currency gains and losses, change in contingent consideration obligation, changes in the estimated fair value of assets held for sale and interest expense in connection with amortization of debt discount. Interest expense primarily consists of interest costs related to outstanding borrowings on our working capital credit facilities and our financing with Conterra Agricultural Capital, LLC, or Conterra.

Provision (Benefit) for Income Taxes

Our effective tax rate is based on income, statutory tax rates, differences in the deductibility of certain expenses and inclusion of certain income items between financial statement and tax return purposes, and tax planning opportunities available to us in the various jurisdictions in which we operate. Under U.S. GAAP, if we determine that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. Tax regulations require certain items to be included in the tax return at different times than when those items are required to be recorded in the consolidated financial statements. As a result, our effective tax rate reflected in our consolidated financial statements is different from that reported in our tax returns. Some of these differences are permanent, such as meals and entertainment expenses that are not fully deductible on our tax return, and some are temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which we have already recorded the tax benefit in our consolidated statements of operations. In the fourth quarter of fiscal year 2017, we recorded a valuation allowance against all of our deferred tax assets. The full valuation allowance was recorded during the fiscal year 2017 as a result of changes to our operating results and future projections, resulting from a decline in export sales to Saudi Arabia. As a result, we do not believe that it is more likely than not that our deferred tax assets will be realized.

Results of Operations

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

Revenue and Cost of Revenue

Revenue for the three months ended September 30, 2021 was $15.5 million compared to $13.9 million for the three months ended September 30, 2020. The $1.6 million increase in revenue for the three months ended September 30, 2021 was primarily due to $3.0 million increase in core product revenue in alfalfa and pasture products, partially offset by a $1.6 million decrease in product revenue received from Pioneer (subsidiary of Corteva). In May 2019, we terminated the production and distribution agreements with Pioneer, and entered into a new license agreement with Corteva. As of June 30, 2021, we have fully recorded all revenue from Pioneer under its agreement announced in May 2019. During the three months ended September 30, 2021 we recorded no sales to Pioneer, compared to $1.6 million for the three months ended September 30, 2020.

Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for the three months ended September 30, 2021 was $15.5 million compared to Core Revenue for the three months ended September 30, 2020 of $12.2 million, representing an increase of $3.3 million or 27%. Due to the revised agreements with Pioneer in May 2019, we plan to provide Core Revenue as a metric to track performance of our business until product revenue attributable to our revised agreements with Pioneer is no longer reflected in comparisons between fiscal periods. The increase in Core Revenue for the three months ended September 30, 2021 can be attributed to an increase in alfalfa revenues in the Middle East and North Africa region and pasture products in Australia.



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Sales into international markets represented 76% and 61% of our total revenue during the three months ended September 30, 2021 and 2020, respectively. Domestic revenue accounted for 24% and 39% of our total revenue for the three months ended September 30, 2021 and 2020, respectively. The decrease in domestic revenue as a percentage of total revenue was primarily attributable to the termination of the Pioneer and Corteva agreement mentioned above.

The following table shows revenue from external sources by destination country:





                          Three Months Ended September
                         2021                       2020
United States   $  3,665,328        24 %   $  5,361,777        39 %
Saudi Arabia       3,467,210        22 %      1,198,909         9 %
Australia          3,434,005        22 %      2,782,464        20 %
Libya              1,044,000         7 %        225,000         2 %
Sudan                819,618         5 %        484,700         3 %
China                473,125         3 %              -         0 %
South Africa         464,229         3 %        664,075         5 %
Egypt                402,300         3 %        394,200         3 %
Argentina            350,839         2 %             85         0 %
Mexico               228,420         1 %      1,136,090         8 %
Other              1,182,608         8 %      1,608,086        11 %
Total           $ 15,531,682       100 %   $ 13,855,386       100 %

Cost of revenue of $12.4 million for the three months ended September 30, 2021 was equal to 79.9% of total revenue for the three months ended September 30, 2021, while the cost of revenue of $12.1 million for the three months ended September 30, 2020 was equal to 87.1% of total revenue for the three months ended September 30, 2020. Cost of revenue for the three months ended September 30, 2021 and 2020 included inventory write-downs of $0.3 million and $0.9 million, respectively. The write-down of inventory during the three months ended September 30, 2021 related to certain inventory lots that deteriorated in quality and germination rates during the quarter.

Gross profit margin for the three months ended September 30, 2021 was 20.1% compared to 12.9% in the three months ended September 30, 2020. The increase in gross margin for the three months ended September 30, 2021 is primarily driven by the decrease in inventory write-downs, coupled with higher margin alfalfa seed and pasture product sales. During the three months ended September 30, 2021, the Company experienced numerous logistical challenges due to limited availability of trucks for product deliveries, congestion at the ports, and overall rising costs increases of shipping and transportation costs. The Company expects these logistical challenges to persist throughout the remainder of fiscal 2022.

Selling, General and Administrative Expenses

Selling, General and Administrative, or SG&A, expense for the three months ended September 30, 2021 totaled $5.6 million compared to $4.7 million for the three months ended September 30, 2020. The $0.9 million increase in SG&A expense versus the comparable period of the prior year was primarily due to $0.2 million of increases in sales and marketing expenditures as well as a $0.7 million change in our incentive compensation accruals. As a percentage of revenue, SG&A expenses were 36.0% for the three months ended September 30, 2021, compared to 33.8% for the three months ended September 30, 2020.

Research and Development Expenses

Research and development expenses for each of the three months ended September 30, 2021 and September 30, 2020 totaled $2.0 million. We expect that research and development costs will total approximately $8.0 million for the year ended June 30, 2022.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended September 30, 2021 was $1.3 million compared to $1.4 million for the three months ended September 30, 2020. Included in these amounts was amortization expense for intangible assets, which totaled $0.6 million for the three months ended September 30, 2021 and $0.6 million for the three months ended September 30, 2020.



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Foreign Currency Loss

We recorded a foreign currency loss of $0.2 million for the three months ended September 30, 2021 compared to a loss of $0.1 million for the three months ended September 30, 2020. The foreign currency gains and losses are primarily associated with S&W Australia and S&W Hungary, our wholly-owned subsidiaries.

Change in Contingent Consideration Obligation

The contingent consideration obligation is considered a level 3 fair value financial instrument and will be measured at each reporting period. The $0.1 million benefit to non-cash change in contingent consideration obligation for the three-months ended September 30, 2021 represents the decrease in the estimated fair value of the contingent consideration obligation associated with the February 2020 Pasture Genetics acquisition.

Interest Expense - Amortization of Debt Discount

Non-cash amortization of debt discount expense for the three months ended September 30, 2021 was $0.2 million compared to $0.1 million for the three months ended September 30, 2020. The expense in both periods represents the amortization of the debt issuance costs associated with our working capital facilities, our secured property note, and our equipment capital leases.

Interest Expense

Interest expense for each of the three months ended September 30, 2021 and September 30, 2020 totaled $0.6 million. Interest expense for the three months ended September 30, 2021 and 2020 primarily consisted of interest incurred on the working capital credit facilities, the secured property loan entered into in November 2017, and equipment capital leases.

Provision for Income Taxes

Income tax benefit totaled $165,802 for the three months ended September 30, 2021 compared to income tax expense of $1,833 for the three months ended September 30, 2020. Our effective tax rate was 2.5% for the three months ended September 30, 2021 compared to an effective tax rate of 0.0% for the three months ended September 30, 2020. Our effective tax rate was relatively consistent period over period. Our effective tax rate for the three months ended September 30, 2020 was 0.0% due to the valuation allowance recorded against substantially all of our deferred tax assets. Due to the valuation allowance, we do not record the income tax expense or benefit related to substantially all of our current year operating results, with the exception of our operations in Australia, as such results are generally incorporated in our net operating loss deferred tax asset position, which has a full valuation allowance against it. As of June 30, 2021, we converted to a net deferred tax liability position in Australia, as our GAAP basis currently exceeds our tax basis in certain intangible assets in that jurisdiction. Therefore, we are recording a tax benefit related to losses incurred in the quarter by our Australian subsidiaries. Our effective tax rate for the current quarter is driven by this Australian tax benefit and minor state taxes.

Liquidity and Capital Resources

Our working capital and working capital requirements fluctuate from quarter to quarter depending on the phase of the growing and sales cycle that falls during a particular quarter. Our need for cash has historically been highest in the second and third fiscal quarters (October through March) because we historically have paid our North American contracted growers progressively, starting in the second fiscal quarter. In fiscal year 2021, we paid our North American growers approximately 50% of amounts due in the fall of 2020 and the balance was paid in the spring of 2021. This payment cycle to our growers was similar in fiscal year 2020, and we expect it to be similar for fiscal year 2022. S&W Australia and Pasture Genetics, our Australian-based subsidiaries, have production cycles that are counter-cyclical to North America; however, this also puts a greater demand on our working capital and working capital requirements during the second, third and fourth fiscal quarters based on timing of payments to growers in the second through fourth quarters.

Historically, due to the concentration of sales to certain distributors, our month-to-month and quarter-to-quarter sales and associated cash receipts are highly dependent upon the timing of deliveries to and payments from these distributors, which varies significantly from year to year.





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We continuously monitor and evaluate our credit policies with all of our customers based on historical collection experience, current economic and market conditions and a review of the current status of the respective trade accounts receivable balance. Our principal working capital components include cash and cash equivalents, accounts receivable, inventory, prepaid expense and other current assets, accounts payable and our working capital lines of credit.

On February 24, 2020, S&W Australia acquired all of the issued and outstanding shares of Pasture Genetics, the PG Acquisition, for an initial consideration that consisted of an upfront cash payment at closing of USD $7.5 million (AUD $11.4 million). A potential earn-out payment of up to USD $5.3 million (AUD $8.0 million), or the Earn-Out, is payable on September 30, 2022, or the Earn-Out Date. The amount of any Earn-Out will be equal to the excess, if any, of (a) 7.5, multiplied by the average of an agreed-upon calculation of Pasture Genetics' earnings over fiscal years 2021 and 2022, above (b) USD $7.5 million (AUD $11.4 million). At S&W Australia's election, up to 50% of the Earn-Out may be paid in shares of our common stock at a per share purchase price equal to the volume-weighted average purchase price of our common stock during the 10-day period ending immediately prior to the Earn-Out Date.

In addition to funding our business with cash from operations, we have historically relied upon occasional sales of our debt and equity securities and credit facilities from financial institutions, both in the United States and South Australia.

Capital Resources and Requirements

We are not profitable and have had negative cash flow from operations for the last several years. To help fund our operations, we have in part relied on equity and debt financings. We currently expect that our cash and cash equivalents may be sufficient to enable us to fund our operations for at least the next 12 months. However, we will need to obtain additional funds to finance our operations in the future, and we could spend our available financial resources much faster than we currently expect. Our loan and security agreement with CIBC Bank USA, or CIBC, and our secured promissory notes with Conterra contain various operating and financial covenants, and the COVID-19 pandemic has increased the risk of our inability to comply with these covenants, which could result in acceleration of our repayment obligations and foreclosure on our pledged assets. For example, we were not in compliance with certain of these covenants as of June 30, 2021 and we were required to obtain waivers and/or amendments from CIBC and Conterra. We believe it is uncertain we will be able to generate sufficient cash flow from operations or maintain sufficient liquidity to meet these covenants in future periods. These factors raise substantial doubt regarding our ability to continue as a going concern. If we are unable to meet these covenants, we will need to raise additional capital in the future to enhance our working capital. This may include, for example, the need to finance our cash needs through a combination of equity and debt financings, as well as potentially entering into collaborations, strategic alliances and licensing arrangements.

Our future liquidity and capital requirements will be influenced by numerous factors, including:





  • the timing of repayment of our debt;


  • the extent and duration of future operating income;


  • the level and timing of future sales and expenditures;


  • working capital required to support our growth;


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  • investment capital for plant and equipment;


  • our sales and marketing programs;


  • investment capital for potential acquisitions;


  • our ability to renew and/or refinance our debt on acceptable terms;


  • competition;


  • market developments; and


  • developments related to the COVID-19 pandemic.



We cannot assure you that we will be successful in raising additional capital or securing future waivers and/or amendments from CIBC or our other lenders. If we are unable to raise sufficient additional capital or secure future waivers and/or amendments, we may need to reduce the scope of our operations, repay amounts owing to our lenders or sell certain assets. If we are required or desire to raise additional capital in the future, such additional financing may not be available on favorable terms, or available at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest could be diluted and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may be secured by all or a portion of our assets. If we fail to obtain additional capital as and when required, such failure could have a material impact on our business, results of operations and financial condition.

Below is a summary of our material sources of capital in recent periods:

Debt Financings

Loan and Security Agreement with CIBC

On December 26, 2019, we entered into a Loan and Security Agreement with CIBC, or the Loan Agreement, which we amended on September 22, 2020, December 30, 2020, May 12, 2021 and September 27, 2021. As amended, the Loan Agreement provides for a $25.0 million credit facility, or the CIBC Credit Facility. The key terms of the amended Loan Agreement include the following:





   •  Advances under the CIBC Credit Facility are to be used: (i) to finance our
      ongoing working capital requirements; and (ii) for general corporate
      purposes. We may also use a portion of the CIBC Credit Facility to finance
      permitted acquisitions and related costs.


   •  All amounts due and owing, including, but not limited to, accrued and unpaid
      principal and interest due under the CIBC Credit Facility, will be payable
      in full on December 23, 2022.


   •  The Credit Facility generally establishes a borrowing base of up to 85% of
      eligible domestic accounts receivable (90% of eligible foreign accounts
      receivable) plus up to the lesser of (i) 65% of eligible inventory, (ii) 85%
      of the appraised net orderly liquidation value of eligible inventory, and
      (iii) an eligible inventory sublimit as more fully set forth in the Loan
      Agreement, in each case, subject to lender reserves.


   •  Loans may be based on (i) a Base Rate plus 1.0% per annum or (ii) LIBOR Rate
      plus 3.0% per annum (both as defined in the Loan Agreement), generally at
      our option. Pursuant to the September 27, 2021 amendment, the Loans will now
      be based on Prime plus 2.0% per annum. In the event of a default, at the
      option of CIBC, the interest rate on all obligations owing will increase by
      2% per annum over the rate otherwise applicable.


   •  The CIBC Credit Facility is secured by a first priority perfected security
      interest in substantially all of our assets (subject to certain exceptions),
      including intellectual property.


   •  The Loan Agreement contains customary representations and warranties,
      affirmative and negative covenants and customary events of default that
      permit CIBC to accelerate our outstanding obligations under the Credit
      Facility, all as set forth in the Loan Agreement and related documents. The
      CIBC Credit Facility also contains customary and usual financial covenants
      imposed by CIBC.



Pursuant to the September 2021 amendment to the Loan Agreement, CIBC waived noncompliance with our fixed charge coverage ratio as of June 30, 2021 and suspended our fixed charge coverage ratio financial covenants for the fiscal quarters ended September 30, 2021 and December 31, 2021 and replaced that financial covenant with the minimum EBITDA threshold tested quarterly for the quarters ending September 30, 2021 and December 31, 2021. Pursuant to the September 2021 amendment, we revert back to our previous financial covenant to require that we maintain a fixed charge coverage ratio equal to or greater than (i) 1.00 to 1.00, beginning with the fiscal quarters ending March 31, 2022 and (ii) 1.15 to 1.00 for each fiscal quarter thereafter. In addition, pursuant to the September 2021 amendment, we are required to maintain liquidity of no less than $3,000,000 at all times for the remainder of the term of the Loan Agreement. As of September 30, 2021, we were in compliance with the Loan Agreement.



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We cannot guarantee that we will be able to comply with our covenants in the Loan Agreement in the future, or secure additional waivers if or when required. If we are unable to comply with or obtain a waiver of any noncompliance under the Loan Agreement, CIBC could declare an event of default or require us to further renegotiate the Loan Agreement on terms that may be significantly less favorable to us, or we may be required to seek additional or alternative financing. If we were to seek additional or alternative financing, any such financing may not be available to us on commercially reasonable terms or at all. Any declaration by CIBC of an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of our securities to decline.

Australian Facilities

At September 30, 2021, S&W Australia has debt facilities with NAB, all of which are guaranteed by S&W Seed Company up to a maximum of AUD $15,000,000 (USD $10,801,500 at September 30, 2021) and cross-guaranteed by S&W Australia.

In June 2020, S&W Australia executed documentation to consolidate the Pasture Genetics debt facility with NAB into its debt facilities with NAB. The documentation became effective in July 2020. The consolidated debt facilities with NAB provide up to an aggregate of AUD $35,500,000 (USD $25,563,550) of credit as of September 30, 2021, and include the following:



   •  S&W Australia finances the purchase of most of its seed inventory from
      growers pursuant to a seasonal credit facility comprised of two facility
      lines: (i) an overdraft line having a credit limit of AUD $3,000,000 (USD
      $2,160,300 at September 30, 2021) and (ii) a borrowing base line having a
      credit limit of AUD $26,000,000 (USD $18,722,600 at September 30, 2021). In
      March 2021, S&W Australia entered into an amendment with NAB which
      temporarily increased the Overdraft Facility to AUD $3,000,000 (USD
      2,160,300) for a three-month period and extended the maturity date of the
      seasonal credit facility to June 30, 2022. As of September 30, 2021, the
      Borrowing Base Line accrued interest on Australian dollar drawings at
      approximately 3.5% per annum calculated daily. 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 September 30, 2021, the Overdraft Facility
      accrued interest at approximately 5.47% per annum calculated daily. As of
      September 30, 2021, AUD $32,097,203 (USD $23,113,196) was outstanding under
      S&W Australia's seasonal credit facility with NAB.  The seasonal credit
      facility is secured by a fixed and floating lien over all the present and
      future rights, property and undertakings of S&W Australia.


   •  S&W Australia has a flexible rate loan, or the Term Loan, in the amount of
      AUD $4,500,000 (USD $3,240,450) at September 30, 2021. Required annual
      principal payments of AUD $500,000 on the Term Loan commenced on November
      30, 2020, with the remainder of any unpaid balance becoming due on March 31,
      2025. Monthly interest amounts outstanding under the Term Loan will be
      payable in arrears at a floating rate quoted by NAB for the applicable
      pricing period, plus 2.6%. The Term Loan is secured by a lien on all the
      present and future rights, property and undertakings of S&W Australia.


   •  S&W Australia finances certain equipment purchases under a master asset
      finance facility with NAB.  The master asset finance facility has various
      maturity dates through June 2026 and have interest rates ranging from 2.86%
      to 5.31%.  The credit limit under the facility is AUD $2,000,000 (USD
      $1,440,200) at September 30, 2021. As of September 30, 2021, AUD $731,109
      (USD $526,472) was outstanding under S&W Australia's master asset finance
      facility.

S&W Australia was in compliance with all debt covenants under the debt facilities with NAB at September 30, 2021.





Equity Issuances


On September 23, 2020 and as amended on September 27, 2021, we entered into an At Market Issuance Sales Agreement, or the ATM Agreement, with B. Riley Securities, Inc., or B Riley, under which we may offer and sell from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $17.1 million through B. Riley as our sales agent.

For the year ended June 30, 2021, we received gross proceeds of approximately $10.9 million from the sale of 3,008,015 shares of our common stock pursuant to the ATM Agreement. For the three months ended September 30, 2021, we received gross proceeds of approximately $2,586 from the sale of 848 shares of our common stock pursuant to the ATM Agreement.

As of September 30, 2021, the Company had $6.2 million remaining under the ATM Agreement.





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On October 14, 2021, we entered into a Securities Purchase Agreement, or the Purchase Agreement, with the purchasers named therein, or the Purchasers, pursuant to which we agreed to sell and issue to the Purchasers an aggregate of 1,847,343 shares of our common stock, or the Shares, at a purchase price of $2.73 per share, for aggregate gross proceeds of approximately $5.0 million.

The Purchasers included MFP Partners, L.P., our largest stockholder, Starlight 4, LLLP, an entity affiliated with Mark W. Wong, our Chief Executive Officer and a member of our board of directors, and Alan D. Willits, Charles B. Seidler and Robert Straus, each a member of our board of directors. Alexander C. Matina, a member of our board of directors, is Vice President of Investments of the general partner of MFP.

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