Robert Blum - Investor Relations, Lytham Partners LLC Mark Grewal - President and Chief Executive Officer Matthew Szot - Executive Vice President and Chief Financial Officer.

Brett Wong - Piper Jaffray Mike Malouf - Craig-Hallum Capital Group Gerard Sweeney - ROTH Capital Partners, LLC.

Good afternoon and welcome to the S&W Seed Company Third Quarter 2016 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 that this event is being recorded.

I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead, sir..

Thanks, Chad. And thank you all for joining us today to review the financial results for S&W Seed Company for the third quarter of fiscal year 2016 ended March 31, 2016. 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 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, 2015, 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?.

Thank you. Thank you, Robert, and good afternoon to everyone. Fiscal 2016 continues to be a pivotal year in the growth and evolution of S&W Seed Company in becoming a leader in the alfalfa seed industry. Year-to-date revenues have increased by 17% to $61.4 million, and we remain on track to generate $95 million for the year.

We have also done an excellent job in setting the stage for future organic growth and gross margin expansion with a 15% increase in the number of contracted acres under production for the 2016 calendar year, all the while expanding our distribution footprint and making tremendous strides in our research and development program.

Overall, I am extremely pleased with the progress being made. Prevailing market dynamics continue to be characterized by strong demand and decreased supply on a global basis. The recent 2016 Australia harvest has largely been characterized as average with our overall seed volumes increasing by approximately 14% from a year-ago.

This level of production from Australia should allow the current market dynamics to remain generally stable, while providing us with the opportunities to drive additional volumes through our optimization program, a key to our gross margin enhancement strategy.

In North America, it’s too early to have any read on what the yields from the harvest will look like, but what we do have is clarity on our overall acres of seed production in the ground with an expected increase of 15% over a year-ago period, which I mentioned a moment ago.

The production team has done a great job working with growers, to highlight the benefits and opportunities of growing for S&W and we look forward to longstanding relationships with all of our growers. I’ll go into more details on this momentarily.

With the recent elimination of our production contracts and other arrangements that carry farming and yield risk, strong production, grower recruitment, increased levels of seed available from Australia to be sold through our optimization program, and a strong alfalfa seed market, we believe 2017 is shaping up to be a year of strong margins for S&W.

We feel really good about the operational execution of our alfalfa seed business right now. Before I turn the call over to Matt Szot for a review of our financials, let me provide an update on some recent developments within our research and development program.

First, we have made significant progress with our collaboration between Monsanto and FGI to bring to market our leading S&W variety with the Roundup Ready trait. This is a program that we embarked on approximately five years ago that is coming to fruition.

Most recently, we have completed the performance review testings by Monsanto and FGI for the first variety. We have recently signed an extension of our commercial agreement with Monsanto and FGI to begin selling that variety.

Currently, we have limited quantities of seed available, therefore we have to increase production for planting this fall and expect to be increasing our volumes of our Roundup Ready variety in the fall of 2017 and beyond. And hopefully, the second variety testing review will be completed this fall.

From a market perspective, the only area where the transgenic alfalfa varieties are currently available to be sold is in North America. There have been a lot of discussions about other countries permitting the varieties, but to this point North America will be the focal-point for this product.

As I have stated in the past, our focus is on creating a wide portfolio of products that can meet the needs of farmers around the world. The introduction of this highly sought-on non-dormant variety with Roundup Ready trait to get another example of the breadth of the S&W product portfolio.

Our R&D team is also focus on a number of other exciting initiatives. We are building upon our presence in Nampa, Idaho with the expansion of the additional greenhouses and field dry locations. Our location in Nampa, we are now be focused on research and development for our alfalfa seed production as well as our stevia development program.

While, our location in Arlington was constant will be focused on R&D for alfalfa forage production. By combining all of the seed research in Nampa, we can leverage the expertise from our alfalfa group, particularly in the areas of entomology and plant pathology. Meanwhile, in Arlington, we have embarked on Marker Assisted Selection program or MAS.

Focused on utilizing genetic markers to predict performance of alfalfa varieties in the field. This new program will develop - will reduce the development time of newly introduced variety - by providing a prediction outperformance in the field.

Lastly, our collaboration with Calyxt, to apply their next generation gene editing technology to research, develop, produce and commercialize alfalfa seed products continues to progress. We expect to have the first trialing from Calyxt breeding technology, and the field this fall for testing.

Calyxt technology allows for custom gene editing of plant varieties to breed various novel traits in a way, which is currently classified as non-GMO. The approach is based on the simply principle as classical plant breeding, while allowing for a much accelerated development timeline.

This is truly novel technology that we believe will have far-reaching applications, especially within alfalfa seed industry. We are excited about the various developments taking place within the R&D group, all of which will be key drivers to the future success of S&W.

Now, let me return briefly to a discussion on our product expectations here in calendar year 2016. As I talked in detail about last quarter, the lifeblood of our ability to increase revenue, margins and profitability starts with our available seed for sale, which is largely a reflection of our acres under contract production.

Without production acres, we simply do not have product to sell. I am extremely pleased that based on preliminary expectations and production agreements that we already have in place for 2016 an increase of approximately 15%.

A large drive of the increase in acreage dedicated to the newly acquired Pioneer Germplasm, which is an increase of 40% from last year. The increase in production is all organically derived expansion, that will have a beneficial impact on our operations in fiscal 2017 and beyond.

Just as a note of caution, Mother Nature certainly has her hand in how many pounds of seed will come off those acres.

As we have discussed during the last couple of calls, the harvest in 2015 have been weaker than anticipated both in Australia and the U.S., which has impacted our overall cost per unit, resulting in a drag our gross margins in the current fiscal year. We are working through these dynamics in fiscal 2016.

However, as we look to fiscal 2017, we believe the story will look much different.

With the added acres that we have under contract coupled with the termination of production arrangements, where we carried farming and yield risk and a return to more normalized harvest, we expect that our overall inventories will be comprised of higher quality seed at lower costs. Even with the harvest yields are weak, like they were this last year.

We are still in a much better position due to the increased acres and decreased reliance on lower margin sourced seed to meet the demands of our customers. For the last five years, S&W has been built upon bringing and expanding portfolio of superior products to farmers around the world.

While, diversifying our production and sales channels to minimize weather impacts as well as regional and other factors. We have a tremendous opportunity to take advantage of one of the key drivers of growth in agriculture. The increased demand of protein growing global economy.

I feel like the backbone of S&W is very strong allowing us to continue to look for complementary product lines beyond alfalfa grow and leverage the strengths of our infrastructure. With that said, let me turn the call over to Matt Szot, for a review of the quarterly results.

Matt?.

Thank you, Mark. And thank you 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 of the financial model on a go forward basis.

For the third quarter, revenues were $25 million compared to $30.5 million in the third quarter of the prior year. Year-to-date, revenues have increased $61.4 million from $52.5 million an increase of 17%.

As we indicated in our press release today, and discuss last quarter the decrease in third quarter revenue versus the comparable period in the prior year was due to the timing of sales and our distribution and production agreements with DuPont Pioneer.

Shipments that were originally scheduled for delivery in the third quarter of fiscal 2016 were shipped during the second quarter of 2016. Excluding this timing difference and shipments to DuPont Pioneer, we experienced organic revenue growth of 17%.

As we mentioned in the release year-to-date shipments to DuPont Pioneer have totaled $30.8 million compared to $22.9 million in the year ago period, an increase of 34%. Gross profit margin during the quarter were 22% compared to gross profit margins of 23% in the third quarter of last year.

The change in gross profit margins reflect a change in product mix from the year ago period. As we accelerated certain shipments to DuPont Pioneer during the second quarter of 2016. These generally carry a higher margin profile than our non-dormant operations.

Also, as we mentioned during our last few calls we continue to be impacted by higher seed cost within our non-dormant operation, driven by lower than expected yields in the 2015 alfalfa seed harvests.

To limit variability of future production cost due to farming yields, we have terminated all production arrangements or production costs of variable on a per unit basis. As I mentioned last quarter, these factors are resulting in about 250 basis point drag on gross margins during fiscal 2016 from where the otherwise would have been.

So we’re looking at gross margins in high teens for 2016 and however, as we look to 2017, we expect a reversal of that impact and hopefully improvement beyond that as we ramp up acreage of our higher margin varieties and other initiatives that Mark has discussed.

SG&A for the quarter totaled $2.5 million compared to adjusted SG&A of $2.1 million for the third quarter of the prior year. A portion of the increase can be attributed to professional fees associated with our tax planning strategy that we successfully implemented in Q3.

As we previously discussed, we issued $27 million of secured convertible debentures in December 2014. Through today, we have made principal repayments of $18.2 million. So the remaining outstanding balance as of today is $8.8 million. We are focused on continued debt reduction.

And we expect to have the remaining convertible debt balance retired by March 1, 2017. We incurred approximately $439,000 in cash interest expense during the quarter. As we continue to pay down the convertible notes, we expect that cash interest number to steadily decrease over the remaining term of the notes.

Now, on the last few calls, I’ve also talked about non-cash interest expenses related to the accretion of the debt discount associated with a derivative warrant liabilities and amortization of debt issuance costs. Under the effective interest method, non-cash interest expenses frontloaded and decreased as this principals paid on.

On the income statement, you will notice a line item called interest expense 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 the quarter, that number was $1.2 million.

In fiscal 2016, these non-cash charges totaled approximately $3.9 million and $1 million next year as we repay the remaining debt. Again, this will steadily decrease over the remaining term of the note.

Now, we also had a non-cash gain in the quarter of $695,000 related to the change in fair value of our derivative warrant liability and a $49,000 loss from the change in fair value of our contingent consideration obligation. These changes are strictly a functioning of GAAP requirements.

Going forward, we will continue to record gains or losses to the P&L on a quarterly basis driven by changes in the estimated fair value of these items.

Adjusted EBITDA during the third quarter was $2.7 million compared to $3.8 million during the third quarter of last year, with our expected year over year revenue growth in Q4 adjusted EBITDA will improve in the fourth quarter of this fiscal year compared to the fourth quarter of last year.

This will leverage the effect of our existing infrastructure. Non-GAAP net income was 600,000 or $0.04 for basic and diluted share compared to net income of $2 million or $0.16 for basic and diluted share in the third quarter of 2015. Again, this backs up certain non-recurring one-time expenses as well as non-cash gains and losses.

Now, on a GAAP basis, net income was 600,000 or $0.04 per basic and diluted share compared to a GAAP net loss of 500,000 last year or $0.04 loss for basic and diluted share.

Overall, we continue to make stride to strengthen our balance sheet with the completion of our rights offering, our commitment to debt reduction and cash flow from operations we are well positioned for our next stage of growth. Now, I went through a lot of data here. So if you have any questions, please feel free to ask.

And I’ll turn the call back over to Mark..

Thank you Matt. As I said at the beginning of the call, I feel very good about the direction that companies had. The demand for alfalfa seed remains strong, as global suppliers down. While weaker than expected 2015 harvest are impacting margins in fiscal 2016. I feel we have done a great job to address these items in fiscal 2017.

Where we are now expecting overall production increases of approximately 15%. We are seeing improved harvest in 2016 already out of Australia and have terminated our contracts where we carry farming and yield risk, all of which should improve margins.

Our demand plan from DuPont Pioneer remain strong and our outlook within our non-dormant operations, as well as our opportunity to expand our dormant operations outside the pioneer channels is significant.

We’ve built the great foundation with strong agricultural pillars for success and look forward to capitalizing and leveraging them in the coming years. As always, we thank you for your support and now let’s open up the call for your questions.

Chad?.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily to assemble our roster. First question comes from Brett Wong with Piper Jaffray. Please go ahead..

Hey, guys..

Hey, Brett..

Good to talk to you. Thanks for taking my questions.

First, just wanted to dig into the quarter just a little bit, wondering what drove the growth in non-pioneer sales, will there be any growth that high-teens and was there kind of - seems there are some significant pull-forward from the fourth quarter?.

Well, Brett, we are reaffirming revenue guidance for the year at $95 million. So we do have timing differences going on, but the markets feel strong to us.

Our non-dormant business, which is heavily concentrated in the Middle East and North Africa, those markets continue to show strong demand and we expect that trend to continue throughout next year as well..

So, did most of those organic sales was that all Middle East? So would be domestic, right?.

No, that would be, no, that’s been driven by growth in the Middle East and North Africa..

Okay. Then you guys have talked about cost expected to improve as we move into 2017, but just wondering if you can talk a little about on the side of pricing and with the tighter supply now that feels been happening for a little bit plus the robust demand.

Has been any changes in pricing, any lift in pricing? And ultimately, are we ever going to see a lift in pricing? I know it’s a difficult aspect given yield uncertainties with alfalfa?.

Well, pricing remains stable especially on the high-end. I know you were specifically on the call last quarter, but what do you have to look at is the low-end of varieties are the benchmark varieties like Siriver in Australia and CUF out of United States, California is based at your price and that’s rising.

So you have a narrowing gap, because of the amount of inventory that’s available, that’s actually squeezing the entire product line. That’s not to say - one of the things you asked if there was a rain or something this fall you definitely see oil pricing go up.

And if there were some really high yield phenomenon, you might see a drop a little bit, but you have a basic bottom floor, that floor has been raised. On the high-end to maintain your major customer base in a lot of these contracts are already set. Brett, we’re pretty well base set.

And what’s going on right now as most of our sales guys are in Uruguay at the - in ISF, the International Seed Federation and they’re actually working forward contracting for the following year.

And so, once we get all that data we can see what’s the anticipation; what’s going to happen, what’s the feelings of the crop in the United States, what’s the feeling of the crop in Canada, what’s the feeling of where the crop is going to go on a acreage basis in Australia.

And those three main regions are going to really have a big impact on where guys want to go out forward sell or actually forward price what they’re willing to buy..

And when does that happen, Mark?.

Guys are there now and it will happen this week and through next week, so 15, 16, 17, and 18, right in there, Brett..

Okay. And even if - we don’t obviously have all that visibility into what the different markets and production is going to be, these forward sales.

I mean, are you expecting to see a price lift for the higher end for these next year contracts given that the floor for the generic varieties have improved?.

I think we’re pretty stable on our contracting with our main distributors. And in most cases, we basically set where we need to be and we’re basing that on what we think our cost are or where we can drive the margin growth..

Okay. And then digging into Roundup a little bit, just wondering, if you can remind me what the pricing premium is for Roundup varieties right now over non-GM and basically trying to get on idea of what that margin impacts going to be. And really when should we expect Roundup Ready sales to start to contribute.

I know, you’ve said you’ve got minimal volumes and you’re looking to expand that seed this year.

But when can we get an idea of seeing that start to impact the model?.

We have to look at that together next year, but basically your margin number is not going to be changed any dramatic or any significant way with the Roundup Ready addition. But what is going to occur as you’re going to expand your market base and you’re actually going to improve your total volume of sales.

So we have to see how big that is, what types of market share we can grab say in the San Joaquin Valley of California and domestically and what that ramp is going to be. I think we have a very popular variety that now has Roundup Ready in it. We have to produce the seed. We’ll get it out in the marketplace.

We’ll see how much people are willing to pay for it. We have a base on that. We know we’re at least as good at where we are today a little bit better and then will move from there.

So this fall maybe will have a little bit better, will be in a better position with Matt, myself to talk to you Brett about where we think that margin basic margin will be especially once our guys are just getting the word out at the International Seed Federation about what’s occurred..

Okay.

And so just to clarify, Mark, I thought there was, I mean, in our discussions previously around GM varieties, I thought there is always a nice premium on pricing there?.

There is definitely a premium on pricing, but when you’re in negotiations with Monsanto and FGI and what their takes are, we’re not - I’m not certain that I can tell you that it’s going to be X amount of total margin, because those guys are going to make, they’re going to clip some coupons off that price..

Okay. I see what you’re saying. Perfect. Well, thanks a lot guys for the answers and the color..

You’re welcome..

The next question is from Mike Malouf with Craig-Hallum capital group. Please go ahead..

Hey, Michael..

Hey, how you’re doing. Thanks for taking my questions..

Any time..

Hey, Mike..

I’m wondering if you could just as we look into the fourth quarter, can you help us a little bit with gross margins that were certainly high in the third quarter at least, higher than I thought.

And I imagine that was probably just a beneficial mix and so where should we be thinking about for the fourth quarter?.

Yes. I’m glad you asked, Mike. So you should expect our Q4 margins, they will be lower than Q3 and that’s purely been driven by product mix.

I think, you’re well aware of the fact that Q4 really is a quarter with higher concentration of non-dormant sales which carry a lower margin profile and particularly since we’re sort of in the last quarter of selling through our higher cost of good seed that we’ve been talking about, that will have a drag on Q4 margins.

I think, it’s reasonable to assume high teens for Q4 and for the full year, but we’re certainly optimistic that as we sell through that remaining seed through the end of June or substantially in the vast majority of it, we feel comfortable that we’re well positioned to drive at least 250 basis point improvement in margin as we go into next year just by reducing our seed cost..

Okay. Great. That’s - that would be nice to get that behind you. Mark, I’m wondering you spent some time in Australia and got a good sense of how the Australian harvest is going. Can you just give us a little bit more color? You sort of characterize it as average.

What do you think that means to you?.

It actually ended up a little bit better than I thought it was, but average for us is getting our $8 million tones out of there, a year we touched - we’re a little bit lower than that, not much say 7.8 around there, but a good year would be - to me a good year would be £10 million to £11 million and we’ve done that down there.

So what we, actually we’re working on the last three weeks when I was there Mike was going out of South Australia where we have our main 128 grower base area moving into Victoria, moving into New South Wales and getting some new growers, which I think our production guys were very effective at getting completed.

And I think, we’ll slowly start to see an actual acreage ramp up that will allow us to get up to those £10 million of seed numbers that we expect to get out of there for our optimization program and for direct shipping..

And Mike, maybe I could. Mark did touch on earlier that Mark is referring to an average yield on Australia that’s going to result in about a 14% increase in volumes year-over-year, given the fact that yields were so low last year..

Remind me whether yields were versus at 7.8 that you got….

They’re on $6.8 million last year and we’re on $7.8 million this year..

Got it. Okay. Great. That is a nice improvement. And then can you update us a little bit more on the stevia product, you’ve been still had a serious of patterns that have come through.

Where do you think withstand now with regards to getting some seed into the ground?.

We’ve filed the fourth patent in the patent office. We have four patent pending. We feel very strongly about all four individual varieties. What’s happening in the greenhouse right now Mike is we’re focusing on seed production.

What that seed quality is, what’s the termination of that seed, because to be very successful on this very large market and it is big.

We have to be able to, if we want to grow it in North America or South America, we have to be able to go out with seed planting seed and set that up with various growers versus having a plant that you take to the greenhouse, you plant the seed then you take the transplants any transplant.

I don’t think that we will be competitive against China for example, if we’re transplanting. We have to be direct seeded. And so we still have a little bit more research to go out on the seeding side with those varieties once that’s taking care with the R&D guys.

I think you’ll see a very quick expansion and interest in getting a whole of specific varieties for specific product lines with North American companies and then we’re off to the races. So we’re going extremely slow; we’re being extremely cautious. And there is a reason for that. In such a large market we don’t want to make a mistake.

And we’ve already made past the production, we’re not going to do that again. So there is a lot of interest in our product line. Various people have called in for a specific, say, royalty agreements that they’d like to have this variety or that variety. But we want to make sure that we have everything set properly before we pull the trigger..

Okay, great. Thanks a lot for answering my questions..

Thank you very much, Mike..

Thanks, Mike..

[Operator Instructions] The next question is from Gerry Sweeney with ROTH Capital. Please go ahead..

Hey, Gerry..

Hey, good afternoon, Mark and Matt.

How are you, guys?.

Doing great..

Thanks, Gerry..

Another quick question on the margins, to get that 250 basis point improvement, it sounds like through the optimization program, you needed a - it sounded like an average harvest of that, looks like 7.8 million to 8 million pounds, is that correct?.

So the 250 basis point margin improvement that we’re referring to that’s dragging on the current year margins, which will not be a factor for next year. That’s really driven by the fact that we’re carrying higher cost of our non-dormant seed..

Okay. Got it..

Am I answering your question, Gerry?.

Yes….

Yes, let me - Gerry, let me add one thing that Matt just said. The real critical component is what percentage of our crop do we have to go out and smart purchase or pay a higher price for that versus fixed rate contracting and what that yield is going to be.

So as we expand our acre base, as we - as Matt has a solid contracting setup on a fixed price, where we know what we have those margins are going to ramp up.

Now, the added real plus is, when we can optimize, when we can blend out and when we can direct-ship proprietary varieties that are wanted across the globe directly from Australia, there you’re going to see some big jumps.

And so what is that product mix, how successful are we in the production, that’s going to determine how big that margin increase ramp-up will be..

Got it, understood, I appreciate that. And then, again, looking at 15% acreage growth, I know those variables at the Helavad [ph] flows through to revenue. But maybe you can spend 30 seconds, a minute on what are the potentials and some of the opportunities that falls where that 15% could flow through on the revenue line..

Well, Gerry, there is couple of main variables here. One is the upcoming yields in North America..

Yes..

So just because we have 15% acreage growth doesn’t mean we’re going to have 15% more seed, we could have more, we could have less. And also a big factor is, how much do we replenish our carryover stock. As Mark has talked about in the last couple of quarters, we don’t have enough a seed of certain of our key varieties.

And as we move into next year we want to replenish that carryover seed, so we can react to market demands, and not really start be replacing that market demand with lower quality seed. So those two factors come into play, but all we are focused on year over year is continuing to increase acreage dedicated to seed production.

And by doing that, that lays the platform for continued year-over-year revenue growth..

Got it. Okay. That’s helpful. I appreciate it. That’s it for me..

Thank you, Gerry..

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mark Grewal for any closing remarks..

Thank you. Chad. We are very pleased with the progress made over the quarter with an eye towards building this business over the long-term. We have differentiated products to address a growing global market opportunity. We have made significant strides during the year to drive organic growth in the business through additional contracted acre production.

Our R&D team is making significant progress in bringing next-generation products to the market, allowing us to expand market share. And we continue to build out our distribution platform, which will be a key driver of expansion going forward as we look for complementary products to sell to our existing customer base.

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. And I hope you have a good evening..

Thank you, Mr. Grewal. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Take care..