Mark Grewal - President, CEO Matthew Szot - CFO Robin Newell - VP of North American Sales Robert Blum - IR, Lytham Partners.

Brett Wong - Piper Jaffray. Mike Malouf - Craig-Hallum Capital Group Philip Shen - Roth Capital Partners Ian Gilson - Zacks Investment Research Douglas Russell - Brown Harris Stevens.

Good afternoon and welcome to the S&W Seed Company’s Third Quarter 2015 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I’d now like to turn the conference over to Robert Blum of Lytham Partners. Please go ahead..

Thank you, Laura, and thank you all for joining us today to discuss the financial results for S&W Seed Company for the third quarter of fiscal 2015, which ended March 31, 2015. With us on the call representing the Company today are Mark Grewal, President and Chief Executive Officer; and Matthew Szot, Chief Financial Officer.

At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. Before we begin with the prepared remarks, we submit for the record the following statement.

Statements made by the management team of S&W Seed Company during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually or projected.

Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the Company’s 10-K for the fiscal year ended June 30, 2014, and other filings made by the Company with the Securities and Exchange Commission.

With that said, let me turn the call over to Mark Grewal, Chief Executive Officer for S&W Seed Company. Mark, please go ahead..

Thank you, Robert, and good afternoon to all of you. For the last number of years, we’ve talked about the opportunities that can be created by building a largest and most diversified alfalfa seed company in the world. I believe the results of this quarter provides an initial indication of what those opportunities can produce.

During the quarter, we had record quarterly revenues of $30.5 million, generated record quarterly adjusted EBITDA of $4.6 million, produced record quarterly adjusted net income of $2 million or $0.16 per diluted share and showed strong improvements in gross margins, which came in at 23.3%.

Over the last five years, we’ve built a Company that have significantly expanded and diversified its distribution capabilities, product offerings, seed production base, and development initiatives to take advantage of one of the most compelling agricultural opportunities in the world, the expanding desire for increased protein consumption, and a growing global population.

Five years ago we were a company growing 3 million pounds of non-dormant seed in the San Joaquin Valley of California. And today we represent approximately 20% of the world’s alfalfa seed supply, the production across the Western United States, Canada, and Australia. We supply the world with both non-dormant and dormant seed varieties.

We offer both classically bred and transgenic products through biotechnology, and have a strong pipeline of products in development that we expect will be highly sought after as we bring them to the market. This is an incredible transformation that has taken place and we’re excited about what these opportunities provide.

Before I turn the call over to Matt, for a detailed review of the financial results for the quarter, let me touch on something that has been nearly front page news for the last few months, the drought in California.

I’m going to stay away from my political feelings about all the various factors at play and focus my commentary on what we’ve done to minimize any significant impact for S&W. As I spoke about a moment ago, five years ago we were all -- we were producing all of our seed in the San Joaquin Valley of California.

This is the area that has been discussed in the news, the most in terms of water allocation and so on. I’ve been in the business for more than 35 years and realize that you cannot build a successful agricultural company with 100% of your production coming from a single region that inevitably is going to be affected by weather or other factors.

We made a strategic decision to expand outside the San Joaquin Valley down to the Imperial Valley of California which has strong water rides from the Colorado River, not to mention it is an area that currently does not allow GMO production.

We then made the strategic decision to expand our production into the other largest non-dormant seed production region in the world, Australia.

These moves helped us to significantly diversify our non-dormant production base, and most recently we’ve expanded into the dormant alfalfa seed market with production across additional parts of the Western U.S and Canada.

Five years ago, 100% of our seed production came from the San Joaquin Valley where the current water issues that are being discussed today represent approximately 10% of our global seed production and sourcing from -- that comes from the San Joaquin Valley.

As it pertains to that approximate 10% of our production, this is comprised of about 25 different contracted farmers in the region in the San Joaquin Valley and based on our conversations; we don’t believe that there will be any significant issues in producing the desired contracted acreage for this upcoming season.

So as a whole, we do not expect to see any significant impact to our business as it pertains to the water issues in California, affecting our seed production capabilities. Now let’s turn to the other side of the equation, our seed sales to hay growers in the San Joaquin Valley.

As many of you are aware the vast majority of our non-dormant alfalfa seed sales are export. Our key markets are the Middle East, Northern Africa, parts of Mexico, and South America. Historically, about 20% of our seed sales were to domestic customers and distributors.

With the acquisition of the alfalfa seed operations from Pioneer, our seed sales are now relatively more evenly split between domestic and international. However, the vast majority of those sales are by Pioneer to regions outside of California.

When we look at our sales of seed to areas affected by the drought, we estimate that only 1% to 2% of our fiscal 2015 sales will be to this region. Again, we expect that only 1% to 2% of our fiscal 2015 seed sales will be to the region affected by the water issues in California.

So I’d hope you can see that the various initiatives that we’ve taken over the last five years was done with an eye towards expanding our operations as a whole, but also that with a very strategic eye towards diversifying ourselves to be less dependent on any one particular region.

We certainly did not anticipate the weather patterns that were going to take effect this year, but the strategy has always been to minimize the environmental factors could affect our business. One last comment on this topic for those of you on the line. Alfalfa is a desert plant that is drought tolerant.

That’s why it was introduced, selected and bred in the hot climates of the world. It has been bred and become adaptive to many climates, but too much water can kill it. It’s a perfect crop for areas that require reclamation, have water tables, core soils, etcetera.

And as many of you know, we’ve bred the highest yielding, drought tolerant, and salt tolerant varieties in the world. It is my opinion that the protein expansion needs of the world are not going to change. However, there may very well be a change in one of the alfalfa hays grown from cycle-to-cycle.

It is this very reason that we have positioned ourselves in the way that we have to take advantage of this global crop expansion. Let me turn the call over to Matt Szot for a review of the quarterly results.

I will then come back and discuss what we see taking place within our end markets, a few of our growth initiatives, and the outlook for the rest of the year.

Matt?.

Thank you, Mark and thank you to everyone on the call today. Since most of you should have a copy of the financial results and the press release, let me spend some time going through some of the more pertinent details of the quarter and discuss some of the impacts in the financial model on a go forward basis.

Before I begin, let me remind everyone that we completed the acquisition of the DuPont Pioneer alfalfa business on December 31.

The financial statements have not been presented on a pro-forma basis, and therefore the fiscal ’15 results of operations and statement of cash flows reflect only one quarter of activity from the combined business, and the fiscal ’14 results of operation and statement of cash flows reflect only the legacy business.

Now for the third quarter revenues totaled $30.5 million, up from $8.1 million a year-ago and above our original expectations of approximately $27 million to $30 million.

As we indicated in our press release today, the increase in revenue over the comparable period in the prior year is primarily attributable to the distribution and production agreements with DuPont Pioneer.

Approximately 75% of the revenue during the quarter was attributed to sales to Pioneer, while the remaining 25% was derived from our legacy operations.

We are currently estimating that we will generate revenues of approximately $27 million to Pioneer during all of fiscal year ’15 and approximately $40 million of incremental annual revenues in fiscal year 2016.

There is potential upside to these numbers in fiscal year ’16 and beyond which will be dependent on our ability to increase production acreage. Mark is going to be talking about these efforts in a few moments.

Now based on the information we have available at this time, we are anticipating revenues of approximately $79 million to $82 million for fiscal year 2015, which is lining up to be a record fourth quarter for us.

When we look at our sales order book, we have the orders to achieve these numbers with any variant hopefully being items generally outside of our control such as the speed of shipments from the port or other timing differences.

Gross margin during the third quarter were 23.3% compared to gross margins of 20.3% in last year’s third quarter and compared to adjusted gross margins of 16.2% in the immediately preceding second quarter of this year.

This is the Company’s highest gross margin percentage in more than 12 quarters and reflects the stronger margin contributions from the acquisition of Pioneer’s alfalfa seed operations, as well as improved margin contributions from our optimization program within our legacy operations.

As we communicated during recent quarters, gross margins will vary quarter-to-quarter based on the mix of seed sold. As a whole, the Company continues to anticipate strong gross margin as a result of a number of initiatives the Company is deploying, as well as pricing improvement in certain key alfalfa seed markets.

Adjusted SG&A for the second quarter totaled $2.2 million, which was in line with our previous guidance and compared to $1.7 million for the comparable period of the prior year. The increase is attributable to the newly acquired operations.

As we mentioned in the press release, we did incur approximately $111,000 and one-time non-recurring transaction expenses associated with the Pioneer acquisition, which incurred in the third quarter. We estimate that SG&A for the fourth quarter is going to be approximately $2.3 million to $2.4 million.

We touched on this during our acquisition conference call, but on an annualized basis after taking into account our acquisition, we expect to add approximately $700,000 to our annual SG&A spend, which should be split pretty evenly across the year and lines up with what we saw in the third quarter.

During the quarter, R&D was approximately $600,000 compared to $167,000 in the year-ago period. To remind you, we will continue to invest in our research and development program from the robust program that we acquired from Pioneer.

We estimate that on an annual basis we will add roughly $1.7 million to $1.8 million of additional R&D expense on top of our annualized historical spend. So the increase of approximately $450,000 this quarter is entirely attributable to our newly acquired operations.

Now as we talked about on the call in January, as well as our earnings call in February, we funded the upfront payment of the acquisition with a financing that consisted of convertible debt with warrants and a private placement of common stock to raise a total of $31.7 million in gross proceeds.

We issued $27 million of secured convertible debentures and $4.7 million of common stock. The debentures are convertible at a conversion price of $5 per share and bear interest at 8% per annum.

Given the recent $5 million prepayment on the debentures, which came off on the -- of the back-end of the payment schedule, the amortization of these debentures will be complete by June of 2017.

From an interest expense standpoint, the convertible notes, as well as the Pioneer seller note of $10 million, will result in incremental cash interest expense this fiscal year of approximately $1.1 million, of which $531,000 was recognized during the third quarter.

Next fiscal year that incremental cash interest expense would be roughly $1.6 million due to the fact that we have 12 months of expenses. And then when we look out to fiscal ’17 that would be back down to about $700,000 of incremental cash interest expense and then down to $150,000 in ’18.

These numbers assume that no conversions and we’re servicing all the convertible debt in cash. Now on last quarter’s call we also talked about noncash interest expenses related to the accretion of the debt discount associated with our derivative warrant liabilities and amortization of debt issuance cost.

Under the effect of interest method, non-cash interest expense is front-loaded and decreases as principal is paid down. During the accelerated payment from the $5 million in convertible debentures, there was also an acceleration from the previously discussed noncash debt discount amortization.

On the income statement, you will notice a line item called amortization of debt discount. That line item combines both the accretion of the debt discount associated with the derivative warrant liabilities and the amortization of debt issuance cost. During that -- during this quarter, that number was $2 million.

We are expecting another $900,000 of noncash expense during the fourth quarter. In fiscal 2016, these noncash charges should be approximately $2.9 million and then $1 million in the final year of 2017. You will see that there was a shifting from what we talked about last quarter due to the accelerated payment.

Now in addition to the noncash amortization of debt discount, there is another noncash charge in the quarter of $1.1 million related to the change in fair value of the derivative warrant liability.

This charge is not an actual cash liability and strictly a function of the GAAP requirements to mark-to-market estimated fair value of the warrants recently issued. Going forward, we will continue to record gains and losses to the P&L on a quarterly basis, driven by changes in the estimated fair value of the warrant.

As you can see from the press release, we specifically break these two noncash, non-operating related items, out to provide a non-GAAP net income and EPS number. In addition to our adjusted EBITDA data, we will continue to provide this number on a go-forward basis.

Now as Mark mentioned at the beginning of the call, adjusted EBITDA during the quarter was a record $4.6 million, compared to adjusted EBITDA loss of $20,000 during the third quarter of last year. A full reconciliation is in our press release.

Our adjusted EBITDA margin was 15% for the quarter, which is a dramatic improvement from our historical levels and compared to 6.2% during last fiscal year.

Again the ability to leverage the operating infrastructure of S&W, coupled with newly acquired operations, should allow us to continue to produce strong adjusted EBITDA margins on a go forward basis.

Non-GAAP net income was $2 million for the quarter or $0.16 per basic and diluted share, compared to a loss of $399,000 or $0.03 per share in the third quarter of ’14.

Again, this backs our adjusted non-recurring one-time transaction expenses for the acquisition as well as noncash amortization of debt discount and change in derivative warrant liability account. Now let me spend a little time discussing our inventory balances and receivables.

Regarding inventory, we ended the quarter with approximately $36 million of inventory on hand compared to $43 million last year. And as you would expect, we sold the large majority of our Pioneer inventories during the quarter, offset by some increases from our current Australia harvest.

Our receivables decreased approximately $1.5 million from December as we continue to manage our collections on an orderly basis. Our accounts payable decreased $16.5 million during the quarter, as we paid off our contract grower application. As a whole, networking capital increase from 15.9 million to $17 million.

Again I know we went through a lot of data here. So any of you have any questions, please feel free to ask. Let me turn it back over to Mark..

Thank you, Matt. Let me touch on a couple of key initiatives we are focused on and provide a bit of an update on a couple of areas. First, we’ve made a lot of progress expanding our seed production base and meet the growth plans; the Pioneer has within their pack plan for the distribution next year.

As Matt mentioned, we expected revenues of approximately $40 million in the fiscal 2016 from Pioneer, up from about $27 million in the fiscal 2015. In order for us to meet that increase in production, we need to secure additional contract acreage.

I’m pleased to report that production team has successfully secured the required acreage to meet the demand plan of Pioneer and depending on yield, should provide an opportunity for us to produce additional quantities of seed to begin growing our dormant alfalfa seed program beyond the pioneer distribution channels.

The ability to secure acreage is a key component to our dormant growth initiatives and we’ve done a nice job in securing the required acreage to meet some non-Pioneer related dormant orders that I expect we will again to develop in the next 18 months.

We also have increased our S&W variety acreage in Australia, paving the way for increased quantities of our multiple lead varieties. On the R&D front, we continue to make progress, moving new products forward.

As I indicated last quarter, we’re less than a year away from bringing to the market initial quantities above of our GMO or transgenic non-dormant alfalfa seed varieties that we’re developed with Monsanto and FGI.

We’ve seed production acres in the ground right now, with the transgenic non-dormant varieties, we expect to have Monsanto conduct final verification testing later this year and if all goes as anticipated, we’d commit sales in fiscal 2016.

With our tropical variety we continue to do onsite testing and various environments around the world with potential customer locations. We’ve seen a lot of interest in the variety.

We’ve really stepped up our efforts in terms of R&D over the last number of years and with the integration of S&W’s germplasm and breeding base, coupled with the team from Australia, our joint venture with Bioceres, our agreements with Monsanto and FGI, and now a world class research organization from Pioneer, we believe we’re establishing one of the very best alfalfa seed breeding platforms in the world.

On distribution, we’re making progress with our joint corporation in Argentina with Bioceres. We have shipped seed to Argentina and are finalizing the development of our jointly owned Argentina based alfalfa seed distribution company.

As a reminder, the newly formed research and distribution company allows S&W to market its leading non-dormant alfalfa seed varieties directly to the end-user customer at a higher operating margin.

The joint corporation will be addressing an Argentine market estimated to be more than 6 million pounds annually, but has been nearly absent over the last 24 months or so, as the country work through currency and economic issues. We certainly expect a rebound in the coming years.

We believe Argentina represents one of the largest growth opportunities available for S&W’s leading non-dormant alfalfa seed varieties. By teaming up with Bioceres, one of the country’s most influential, agricultural biotech companies, we will be creating a unique platform that allows for a strong new market opportunity for us.

Before I provide an outlook on the markets and wrap up, let me provide an update on our Stevia efforts. We continue to engage in high-end conversations with a number of companies that are looking to grow Stevia in North America and South America.

Again, on a go forward basis, we’re looking to create various licensing agreements or other similar agreements of our patent filed Stevia varieties, where we would provide the base Stevia plant, [indiscernible] farmer that would then be responsible for the continued farming of the plant similar in a way to our alfalfa seed production.

We are ramping up our Stevia green house efforts to have the required plant material ready to propagate new Stevia plants. There can be no assurances that we kind of arrive at an agreement, but the level and quantity of conversations we’ve ongoing, raise me to have the confidence that we can get something exciting done.

Overall, we’re seeing a strengthening and demand in certain of our key markets that is providing strong tailwinds for the rest of the year and into next year. As we talked about, we don’t believe that the drought is going to have any material impact on our operations.

And perhaps the only key item that we’re looking at that can’t have a near-term impact for us, is the shipping related issues at the ports. We are doing everything we can to overcome these issues. Overall, we’re expecting revenues during the year in to be approximately $79 million to $82 million.

We believe that our markets are strengthening and have a favorable outlook for the remainder of the year. The last few months have been transformational for S&W Company. We have positioned ourselves to be a leader in a very important agricultural crop.

We’ve a product portfolio, research platform, production and distribution base that we believe is unmatched by anyone else in the industry. As I’ve mentioned recently, the building blocks are in place to take this company to the next level by driving growth in revenues and profitability. We thank you for your support.

And now let’s open-up the call for your questions.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Brett Wong of Piper Jaffray..

Hi, gentlemen. Thank you for taking my questions. I appreciate it, and congratulations on the nice quarter. First, just wanted to ask about the margin profile, I understand the higher gross margin this quarter is largely due to the contractual agreement with the Pioneer business acquisition.

But how should we think about margins as we go forward here?.

Brett, I think as we’ve indicated anyone particular quarter margins can fluctuate due to product mix. But overall, we do have fundamentally the long-term sort of initiatives are playing out, so we think we will be able to achieve continued strong gross margins.

Again, it’s going to fluctuate any quarter, but the plan is in place and we feel good about our margins on a go forward basis..

So just for a little more clarification Matt, so on an annual basis kind of looking forward, should we expect that we’d be in this kind of 23 range on an annual basis?.

I think it would be more probably reasonable to assume low 20s, Brett on an annual basis..

Okay, great. Yes, that’s great. Thanks.

And then just kind of in that same line of questioning, just wondering if you can provide any color on what you’ve seen here recently with seed prices, of course with the proprietary S&W non-dormant seed as well as [indiscernible] what you’re seeing on the dormant side and just any comparisons you can provide there would be helpful? Thanks..

Yes, Brett, we don’t really want to dive into actual pricing, but the optimization program for our margin enhancement is a critical component of us shifting acreage basis and into our optimization plan where we go into Australia, go ahead south on the dormant side starting working into Canada, because these areas are lower cost of production.

And the one thing that I can tell you and that you can look at yourself as you -- as I know you research very diligently is that the low-end market has rise substantially, so you need to kind of look at what’s happening with the basic fundamental public varieties like Si River and see where there were a year-ago to now.

And it’s a significant increase in the base. So we believe demand is up quite a bit. This is a very big demand play right now and at the same time there could be a restriction on supply also. So it’s looking exciting. I don’t want to push it too high right now. We want to stay conservative that we’re very happy with what’s going on..

Okay. That’s good to hear about pricing is improving, demand is taken up. I’m wondering you mentioned Mark, kind of get to my next question about the optimization program. I know it fluctuates pretty significantly on a quarterly basis.

But is there anything that you can provide there for us in terms of kind of how it was in the quarter or what percent of sales were on a ballpark standpoint part of that optimization and what we should think of looking forward?.

I will let Matt, go on too, but the bulk -- remember that this was a very big quarter with Pioneer and the dormant end, so most of that is direct product going to DuPont Pioneer. At the same time, I want you to also remember that we’ve 50 plus different varieties and mixes.

And so they sit here and you will need math to like try to figure out at some type of mean average, because I have no idea we’ve so many different varieties Brett that are in different types of unique packaging, private label and stuff that the -- to best way, its so hard for me to just say it about pricing.

We know that our efforts in margin enhancement are strengthening because of the optimization and how we’re shifting those product mixes into the marketplace.

Matt, I don’t know if you want to add?.

Yes, Brett, I will just say that a high percentage of our legacy business included some sort of optimized product for the quarter. But each one of those product sales, it could be a 5% optimized product or a 95% optimized product, and really sort of everywhere in between. So, the optimization program is intact.

We’re continuing to make progress in that, and I think that the margins we’ve demonstrated this quarter are reflective of that. And I think that, as we look to the future years there’s an opportunity to certainly improve upon that..

Is there any way to -- I mean, or can you tell us kind of how the legacy margin was in the quarter? I mean, or just on a correction sense, if that has improved?.

Yes, the legacy business, Brett was in the low 20s..

Great. Okay. Perfect. Thanks, Matt. And then, just one last one for me, just wondering if you can talk a little bit more about Australia, what you’re seeing over there with the harvest, yields and all of back up stuff [ph]. Thanks..

Brett, the Australian harvest is down a bit. How far down it is? We got to wait till we get all the clean seed completed. But it’s probably a little bit below average which again is going to have an impact on demand and the strengthening of the market. So, we’re pretty bullish of what's going on, and we have the ability to source what we need.

So we don’t see an impact on S&W as far as our product mix. And we’re excited about what the gentlemen are doing over there, because they’re actually expanding out of not just the key area of South Australia, but they’re getting new production starting in New South Wales and Victoria and other locations that’s actually diversifying them even further.

And so, we’re actually pretty excited about the mix, what we can do and get into new distributors at the same time. So, it’s getting exciting. I think if you wait a month or so Matt, can give you a better update on where Australia is as they start cleaning all the seed..

Excellent. Thank you very much for all the color..

You are welcome..

And the next question comes from Mike Malouf of Craig-Hallum..

Great. Thank you guys, and well done this quarter..

Thanks, Mike..

Thanks, Mike..

If I can just talk a little bit more about the gross margins. You said that the Pioneer -- I mean the legacy came in, in the low 20s. Does that mean that basically the Pioneer was roughly the same as that? Because I was under the assumption that maybe Pioneer was around the 20% level.

So did that come in higher than you expected?.

Yes, the Pioneer margins did come in a bit higher than that, Mike. They were probably closer to the 24% range, and offsetting that with our legacy business in the low 20s..

Got it.

And was Pioneer a little bit higher than you expected?.

It was a bit higher than we expected. More happy about that obviously..

Great. And then, can you talk a little bit about inventory levels. I know that in the past we’ve seen inventory go up when prices have been a little bit weak.

Prices have obviously strengthened here a bit, and I’m just wondering, where you feel comfortable with inventory levels looking out? Is this a level that you feel comfortable with or could that come down even further? Thanks..

Well, I think we feel comfortable with where our inventory levels are now. I would say we wouldn’t want them to come down any further. We wouldn’t have product to sell.

Inventories decreased roughly $7 million over December, and $14 million of that decrease was from the Pioneer varieties that we sold through, and we’ll sell through the reminder of those varieties in this quarter. Partially offsetting that was an increase in our Australian inventories as the harvest has begun. And we’re also starting to ramp up U.S.

product, non-proprietary product to use and optimize blends as we’re expecting to shrunk Q4 sales season. So, I wouldn’t -- we’re certainly not running long on inventory. We’re strategically accumulating inventories at this point in anticipation of some relatively strong demand..

Okay.

So, basically inventories are sort of back to a normalized level?.

I think they’re at their appropriate level, Mike..

Okay. And then maybe we could just -- a quick question on Stevia. I wondered if you have the ability now to kind of talk us through some of the economic opportunities.

I mean, how will this work as far as selling? Are you going to sell basically sprout’s to farmers or is this still seed to farmers, and just wondered how the numbers work on that?.

Mike, currently the initial offerings would be transplanted plants that are under total control. As we get total IP protection you would definitely try to go into seed production.

And so seed and the majority of these types of agreements if there, if we’re successful would be royalty type payments or even some R&D behind the scenes where we’re getting collaboration on specific unique product developments that a company wants..

Right. And what do you say the timing is on getting Stevia if it keeps progressing at the pace.

When do you think we’ll actually see this start impacting the P&L?.

We’re still working on the data collection for our third patent -- Mike, our third patent filing. As soon as we get the actual patents approved in their back which is probably a minimum of six months. As soon as we get that going, we are moving forward with the ramp up of green houses at Nampa. We’re actually drilling additional well on site.

We’re really doing some work. They’re going to be putting up some green houses on eight acres that we own. And we’re going to be doing more testing at the labs, getting implemented into higher end analysis, and we’ll just have to see.

I can't -- I personally can't project to you that this is six months out or 12 months out, but it’s getting closer than we’ve ever been..

Okay. Thanks a lot for the help..

You are welcome, Mike..

[Operator Instructions] And our next question will come from Philip Shen of Roth Capital Partners.

Here you go. Congrats on a nice quarter..

Thank you, Phil..

Thank you..

Hey, now that you’re nearly half year into the merger. I was wondering if you could give us an update on your outlook for different revenue opportunities as a result of the acquisition.

Specifically what kind of progress are you making tapping into Pioneer’s strong distribution network and to what you can quantify the benefits of that network over the near-term?.

Okay. Well, the strong network that Dupont Pioneer has is really, their sales component to maintain their corn customers, and then when they have to rotate, they want to make sure they have a product that’s available for rotation out of that crop which is alfalfa, for their market share so no one else enters their market.

What we’re looking at is taking some of those varieties that they maybe long on or they’ve got new products in the line that they want to use instead of.

And we’re headed to other regions personally with S&W like Pacific North West into Europe and other areas Philip where we’re going to create branded optimized products that will have a unique label on. It could be private label. It could be S&W. It could be something else.

And those are what's really, really exciting because we have an order book that’s filled with potential orders. But again we have to get the production up, and first and foremost we have to provide what Pioneer needs. And then once we get beyond that then we’ll move forward with that. So, we’ve actually put a buffering of at least 10% already.

And we’re trying to enhance that even more Philip. It’s very exciting, the Pacific North West is kind of a mid-dormant area, its not totally low dormancy, it’s not high, but they want some products. And there’s some other things going on in branding too, like AP and the lack of AP have intentious presence.

There are some areas that where they’re exporting hay. Where they have to ensure that the transgenics are not tested into the product. And so they’re looking at potentially, we’re shifting some potential product lines not just in Canada, but also to Australia for some of those unique brandings..

Great. You mentioned that, in your preferred remarks that the production team has been quite successful securing acreage.

Can you tell us what else there -- what's the head for this team? Can we expect them to continue to drive acreage growth to lay the foundation for more international and cross selling opportunities?.

Phil, that’s a strategy. It’s continually switching our mix into higher margin profile varieties..

And how much more acreage do you think -- sorry, go ahead..

Yes, I don’t think we’re going to get specific numbers. I can't tell you that -- we said that Pioneer we anticipate doing $40 million worth of revenue to them next year and Mark just mentioned that the production team has successfully secured acreage with a 10% buffer to fulfill that order.

And its absolutely our objective of the production team is to continue to recruit contract growers across the globe to continue to meet the demand that we’re experiencing..

Is there any way you can quantify what the expansion targets might be?.

Well, Philip we’re not even close to our target. So, I mean just in theory I would like to see a switch of 50% of what's in Australia acreage and to other varieties. So, the first thing you do is, you get the growers to reduce the length of their contracts in their current varieties, and you slowly transition those guys. It’s been a slow-go last year.

I think we might have maxed out at 1000 acres of new S&W that was out, and then maybe we’ll hopefully have double that or so. And I got to wait on Dennis Jury or Chief Operation Officer; he’s working very hard on this right now. He knows the goal is to get as many acres as we can. So, I mean, if we could get 4000 acres ago, we’d have four.

If we could get 7000, we get seven. So we want to get as much as we can and we’re not anywhere, we haven’t touched the surface, there’s so much low hanging fruit. So at the same time for the first time ever we’re growing seed in Kansas. We’re in different mid-west states in addition to moving upwards into Canada.

We’re going to be looking pretty hard at the State of Washington and more North West production into Washington.

So, this is a continual play, and the whole strategy behind it is trying to get into areas where we think we can reduce cost and we can optimize a branded product that brings the grower a better overall yield for his crop, and make him money and make us money..

Great. Sounds exciting. Thanks much and I’ll jump back in queue..

Thank you, Phil..

[Operator Instructions] And our next question comes from Ian Gilson of Zacks Investment Research..

Thank you. I’ve got a few questions here. Can you discuss Matt, the accents of the U.S. dollar? It’s been extremely volatile including the ratio of the U.S. dollar versus the Australian dollar.

Could you discuss the potential impact on the income statement of that?.

Well, Ian in general we do not try to speculate on currency. We take a -- as close as possible try to take a net balance sheet exposure from currency perspective. Now, I believe you’re aware that, all of our global sales contracts are denominated in U.S. dollars..

That’s correct, but your production is not..

Right. So, as we continue to move more and more production to Australia which obviously carries a lower cost production, a strengthening dollar or a weakening Australian dollar is obviously a trend that boards well for us..

Okay..

But that, if the Australian dollar continued to weaken that is a positive trend from a margin perspective. But again we place foreign exchange contracts in place to mitigate any sort of dramatic swings in currencies..

All right. And when we discuss the inventory question out there in the market place with your customers, we had some overhang and consequently weakening prices a year-ago.

Now how was that external inventory -- how does it look for you at the moment?.

How does the -- Ian, can you repeat that last -- the last part of your question..

How does the market inventory look at this point in time? Not your direct inventory, but the overhang of seed in the general market in there and what you saw?.

I would say that there is in very recent weeks and recent months, there’s probably a perception that the market is short..

Okay.

And finally, obviously new production areas in Australia, is that crop or what is being produced in those acres? Are you going to have to start out and basically sterilize them before you can grow alfalfa?.

No, you take New South Wales for example; it’s a major cotton area. I spent 26 years, a month a year for a lot of years there with another company, Ian. And where you can grow cotton, you can grow seed. And these are great agronomist.

They are fantastic farmers in their country and so there’s no issues with them growing a product and understanding what they need to do to make a yield.

So, I don’t see that as the same as a brand new area or a new guy say and a different country like Africa or somewhat that would try to get in production where he doesn’t know anything or would have to have a lot of data and a lot of consulting help to get him through a production cycle..

But if the acreage is under a different crop, to translate that out to alfalfa, what would you have to do and how long will it take you?.

Well it would only take exactly a very big crop in New South Wales, for example cotton, that’s an annual. So, as soon as the cotton crop is harvested in March or April it would go right in, and you prepare the ground and you immediately plant the seed of alfalfa crop which would come out actually next year March or April..

Okay.

Well you’ve been discussing some of the opportunities and what you’re doing about revenue; is that -- when you talk about 2016, are you talking about fiscal year or calendar year?.

Fiscal..

Okay, great. Thank you very much.

You are welcome, Ian..

And next we have a question from Doug Russell of Brown Harris Stevens..

Hello, Doug..

Hi, Mark. Congratulations on a fabulous quarter, very exciting. Just a quick question, with the recent consolidation in the ag sector, i.e.

Monsanto offering Syngenta $45 billion which they’ve turned down, is anyone interested in S&W or are we just too small?.

We’re not too small, but what you’re seeing in the ag sector is, is a strategy that’s been ongoing for a very long time, consolidation is going to occur.

I think what's really interesting now if you look at the Monsanto offer is it boards well for some of the Piper Jaffray reports on what seed companies are worth when you look at multiples of revenue versus EBITDA. So, I think that’s what’s exciting to us right now..

What would our valuation be based on what you’ve just said?.

They offer three times revenue for the company..

So that’s six times what it is now or five times what it is now?.

Billion in sales, they offer $45 billion..

Right. Well, that would be very interesting. Thank you, and again congratulations on a great call..

Thank you very much. End of Q&A.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks..

Well again my thanks to everyone for participating on today's call. We look forward to talking with you again at the conclusion of the current quarter. I know Matt is going to work very hard on trying to get maybe a little bit earlier mid September last quarter call. So we’ll go as fast as we can. We’re looking forward to the future.

We’ve got a great team that we’ve assembled, and it’s pretty exciting. I want to thank you guys for supporting us. Have a good evening..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..