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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (61247)	8/30/2018 11:06:26 AM
From: E_K_S	Respond to of 78774

Re: S&W Seed Company (SANW) Had a chance to go through the 10K and the recent 8K's issued. There are a few specific items that will limit the upside: 1) many options/warrants outstanding that have been used to raise capital w/ latest that exercise at $3.50/share (started at $5.00/share about 18 months ago). 2) Goodwill almost $0.50/share so one could argue that stated BV of $3.54/share is too high and is closer to $3.00/share. 3) Recent acquisition of assets from Pioneer Hybrid (a division of Dupont) for $7mln did not meet earlier production/revenue points that triggered asset re-valuation. Looks like deal did not close. This customer also represents over 80% of contracted revenues through 2024. The Asset Purchase and Sale Agreement for the Pioneer Acquisition previously contemplated that, subject to the satisfaction of certain conditions, the Company would acquire certain GMO germplasm varieties and other related assets from DuPont Pioneer for a purchase price of $7.0 million. The conditions for this additional acquisition were not satisfied by the required date, and DuPont Pioneer has informed the Company that it does not intend to extend the deadline or complete the transaction at this point in time. As a result, the Company does not expect to close the acquisition of DuPont Pioneer's GMO germplasm varieties and related assets in the previously disclosed structure or pay the $7,000,000 purchase price. 4) Company is diversifying product portfolio into other seed crops specifically sorghum and sunflower. The main operation is in Australia and s/d be a net positive for future revenue growth. Based on the limited upside due to outstanding warrants and limited diversification of revenues will exit position at/above $3.50/share. CEO recently purchased shares at this price. FWIW, debt was reduced significants (due to repayments & Pioneer Hybrid deal restructure) and EBITDA positive last 3 months (and 6 months except for a warrant adjustment). The POSITVE is this new Australian partner and diversification into hybrid sorghum and sunflower is quite interesting and could be quite profitable. However, until those warrants expire and/or are exercised (6/2020) there is limited upside for SANW. EKS