| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation a nd Principles of Consolidation The Consolidated Financial Statements include the accounts of S&W Seed Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Consolidated Financial Statements were prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and include the assets, liabilities, revenue and expenses of all wholly-owned subsidiaries and majority-owned subsidiaries over which the Company's exercises control. Outside stockholders' interests in subsidiaries are shown in the Consolidated Financial Statements as Noncontrolling interests. The Company owns 50.1 % of a venture based in South Africa named SeedVision Proprietary Limited, or SeedVision. SeedVision is a variable interest entity as defined in ASC 810-10, Consolidation, because no substantive equity contributions have been made to it, and SeedVision is being funded through advances, as needed, from its investors . The Company has concluded that it is the primary beneficiary of SeedVision because it has the power, through a tie-breaking vote on the board of directors, to direct the sales and marketing activities of SeedVision, which are considered to be the activities that have the greatest impact on the future economic performance of SeedVision. Up until its liquidation in June 2024, the Company owned 51.0 % of Sorghum Solutions South Africa, which is a variable interest entity as defined in ASC 810-10, Consolidation, because no substantive equity contributions have been made to it, and Sorghum Solutions South Africa is being funded through advances, as needed, from its investors . The Company previously concluded that it was the primary beneficiary of Sorghum Solutions South Africa because it had the power, through a tie-breaking vote on the board of directors, to direct the sales and marketing activities of Sorghum Solutions South Africa, which were considered to be the activities that have the greatest impact on the future economic performance of Sorghum Solutions South Africa. Because the Company is their primary beneficiary, the financial results of SeedVision and Sorghum Solutions South Africa are included in these financial statements. The Company recorded a combined $ 0.1 million of current assets (restricted) and $ 0.0 million of current liabilities (nonrecourse) for these entities in our Consolidated Balance Sheets as of June 30, 2024. The Company recorded a $ 0.3 million of current assets (restricted) and $ 0.0 million of current liabilities (nonrecourse) for these entities in our Consolidated Balance Sheets as of June 30, 2023. For the years ended June 30, 2024 and 2023, the Company recorded a combined net loss of $ 0.0 million and $ 0.1 million, respectively, in the Consolidated Statements of Operations. The Company has three operating and reportable segments that correspond with its operating model, management structure, and internal reporting reviewed by its Chief Operating Decision Maker, who is the Chief Executive Officer. The Company's Chief Operating Decision Maker allocates resources and assesses performance based on these three segments. The Company's three operating segments, each its own reportable segment, are Americas, International, and AUSDOM. Management concluded that the Company's unaudited Condensed Consolidated Financial Statements as of and for each of the quarterly periods ended September 30, 2023, December 31, 2023, and March 31, 2024 should no longer be relied upon because of errors contained through the omission of footnote disclosure on the Company's business segments. Comparative prior period disclosures in this Annual Report on Form 10-K have been recast to conform to the current segment presentation. Refer to Note 17 for additional information regarding the Company's reportable segments and Item 7 for the Company's unaudited quarterly segmented information for the applicable periods noted above. Reverse Stock Split A reverse stock split of all issued and outstanding shares of the Company's common stock, at a ratio of 1-for-19 , or the Reverse Stock Split, was implemented at 5:00 p.m. Eastern Time on October 17, 2024. The Company has retroactively adjusted all share amounts and per share data herein to give effect to the Reverse Stock Split. Refer to Note 18 for additional information on the Reverse Stock Split. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are adjusted to reflect actual experience when necessary. Significant estimates and assumptions affect many items in the financial statements. These include allowance for credit losses related to trade receivables, inventory valuation, the carrying value of the Company's equity investments, asset impairments, provisions for income taxes, grower accruals (an estimate of amounts payable to farmers who grow seed for the Company), contingencies and litigation. Significant estimates and assumptions are also used to establish the fair value and useful lives of depreciable tangible and certain intangible assets as well as valuing stock-based compensation. Actual results may differ from those estimates and assumptions, and such results may affect income, financial position or cash flows. The Company believes the estimates and assumptions underlying the accompanying Consolidated Financial Statements are reasonable and supportable based on the information available at the time the financial statements were prepared. However, certain adverse geopolitical and macroeconomic events, such as the ongoing conflict between Ukraine and Russia and related sanctions, the armed conflict in Sudan, the conflict in the Middle East, the import ban on alfalfa seed in Saudi Arabia, and uncertain market conditions, including higher inflation and supply chain disruptions, have, among other things, negatively impacted the global economy, created significant volatility and disruption of financial markets, and significantly increased economic and demand uncertainty. These factors make many of the estimates and assumptions reflected in these Consolidated Financial Statements inherently less certain. Therefore, actual results may ultimately differ from those estimates to a greater degree than historically. Certain Risks and Concentrations The Company’s revenue is principally derived from the sale of seed, the market for which is highly competitive. The Company depend s on a core group of significant customers. No single customer accounted for more than 10 % of revenue for the years ended June 30, 2024 and 2 023. One customer accounted for 23 % and another customer accounted for an additional 12 % of the Company's accounts receivable as of June 30, 2024. No customer accounted for more than 10 % of the Company’s accounts receivable at June 30, 2023. The Company sells a substantial portion of its products to international customers. Sales to international markets represen ted 58 % and 70 % of revenue during the years ended June 30, 2024 and 2023, respectively. The net book value of fixed assets located outside the United States was 37 % and 31 % of total fixed assets at June 30, 2024 and 2023, respectively. The following table shows revenue from external sources by destination country:
Years Ended June 30,
2024 2023
United States $ 25,219,997 42 % $ 22,060,338 30 %
Australia 14,574,578 23 % 17,414,681 24 %
Mexico 3,995,295 7 % 5,502,421 8 %
Saudi Arabia 3,727,834 6 % 9,781,138 13 %
South Africa 2,268,241 4 % 1,620,601 2 %
Pakistan 2,204,096 4 % 2,494,981 3 %
Libya 2,187,000 3 % 4,678,973 6 %
Argentina 1,548,654 3 % 1,162,369 2 %
Sudan 1,421,527 2 % 2,612,603 4 %
China 405,183 1 % 794,500 1 %
Other 2,889,241 5 % 5,398,686 7 %
Total revenue $ 60,441,646 100 % $ 73,521,291 100 % Liquidity and Going Concern The Company’s product revenue is predicated on its 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 the Company’s distribution and supply channels. If the Company’s customers delay or decrease their orders due to potential disruptions in its distribution and supply channels, or if the Company is unable to timely fulfill their orders, this would adversely affect the Company’s product revenue. Additionally, the Company may experience adverse geopolitical and macroeconomic events that affect its ability to sell product. During the year ended June 30, 2024, the Company experienced both logistical challenges as well as adverse geopolitical events, including Saudi Arabia’s discontinuation of import permits for alfalfa seed and conflicts occurring in the Middle East. These effected its ability to sell product outside of the United States. The Company is not profitable and has recorded negative cash flows for the last several years. For the year ended June 30, 2024, the Company reported a net loss of $ 30.1 million and negative cash flows from operations of $ 5.6 million. The Company has an accumulated deficit of $ 122.1 million as of June 30, 2024. As of June 30, 2024, the Company had cash on hand of $ 0.3 million and negative working capital of $ 5.9 million. The Company had $ 2.9 million of unused availability from its working capital facilities as of June 30, 2024 (see Note 8 for further discussion). In relation to the partnerships formed in fiscal 2023, the Company received $ 1.0 million from Trigall Genetics S.A., or Trigall, in January 2024 and received $ 6.0 million from Equilon Enterprises LLC (dba Shell Oil Products, or Shell) in February 2024 as consideration from the initial agreements. The Company sold its remaining 20 % ownership interest in Trigall Australia in April 2024. In exchange for S&W Australia’s remaining 20 % ownership interest, S&W Australia received $ 0.1 million. S&W Australia also received $ 0.3 million in exchange for certain fixed assets owned by S&W Australia. The Company’s Amended and Restated Loan and Security Agreement, or the Amended CIBC Loan Agreement, with CIBC Bank USA, or CIBC, and S&W Australia's debt facilities with National Australia Bank, or NAB, listed under the NAB Finance Agreement, are classified as current on the Company's Consolidated Balance Sheets given that the debt is due within 12 months of the June 30, 2024. These debt facilities also contain various operating and financial covenants. Adverse geopolitical and macroeconomic events and other factors affecting the Company’s results of operations have increased the risk of the Company’s inability to comply with these covenants, which could result in acceleration of its repayment obligations and foreclosure on its pledged assets. While the Amended CIBC Loan Agreement doesn't contain specific covenants as of June 30, 2024, the NAB Finance Agreement contains two financial covenants S&W Australia was required to comply with as of June 30, 2024. S&W Australia failed to meet one of these covenants as of June 30, 2024 and has not obtained a waiver from NAB for such non-compliance, as S&W Australia is currently under voluntary administration and not under the Company's control. Additionally, the NAB Finance Agreement is guaranteed by the Company up to a maximum of AUD $ 15.0 million (USD $ 10.0 million as of June 30, 2024), or the Parent Guarantee, which is not subject to stay in connection to S&W Australia's voluntary administration. S&W Australia’s entry into voluntary administration constituted an event of default under the Company’s Amended CIBC Loan Agreement, as a result of a cross-default provision in the Amended CIBC Loan Agreement that is triggered by the event of default under the NAB Finance Agreement. On August 5, 2024, the Company received a waiver for the event of default from CIBC, which contained certain stipulations outside of the Company's control and detailed further in Note 18. The voluntary administration process is expected to conclude in November 2024. Refer to Note 18 for additional details on S&W Australia’s voluntary administration and the effects thereof. There can be no assurance the Company will be successful in meeting its covenants or securing waivers and/or amendments from its lenders in the future. If the Company is unsuccessful in meeting its covenants or securing future waivers and/or amendments from its lenders and cannot obtain other financing options, it may need to reduce the scope of its operations, repay amounts owed to its lenders and/or sell certain assets. Further, if the Company cannot renew or find other financing options when its debt facility with CIBC expires on November 8, 2024 (or November 30, 2024 if the Company delivers to CIBC by November 8, 2024 an amended letter of credit issued by JPMorgan Chase Bank, N.A. for the account of MFP Partners L.P., extending letter of credit to December 31, 2024), it may need to reduce the scope of its operations, repay amounts owed to its lenders and/or sell certain assets. Additionally, if the Company is not able to find a buyer for S&W Australia, it may be required to pay the Parent Guarantee, which, in turn, could cause the Company to reduce the scope of its operations, repay amounts owed to its lenders, and/or sell certain assets. These operating and liquidity factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. Reclassifications Certain prior year amounts have been reclassified in order to conform to the current year presentation. These reclassifications had no effect on reported Consolidated Statements of Operations. International Operations The Company translates its foreign operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative translation account, a component of accumulated other comprehensive income (loss). Gains or losses from foreign currency transactions are included in the Consolidated Statements of Operations. For the years ended June 30, 2024 and 2023, the Co mpany recognized the following foreign currency transaction gains in Cost of revenue and losses in Foreign currency loss within Other (income) expense in the Consolidated Statements of Operations:
Years Ended June 30,
2024 2023
Cost of revenue $ ( 813,544 ) $ ( 877,302 )
Foreign currency loss 1,213,732 859,696
Total $ 400,188 $ ( 17,606 ) Cost of Revenue (Excluding Depreciation and Amortization) The Company records purchasing and receiving costs, inspection costs and warehousing costs in Cost of revenue (excluding depreciation and amortization). When the Company is required to pay for outward freight and/or the costs incurred to deliver products to its customers, the costs are included in Cost of revenue, excluding depreciation and amortization. Cash and Cash Equivalents For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation. Cash and cash equivalents totaled $ 0.3 million and $ 3.4 million as of June 30, 2024 and 2023, respectively. Cash balances located outside of the United States may not be insured and t otaled $ 0.0 million and $ 0.2 million on June 30, 2024 and 2023, respectively. Cash balances residing in the United States exceeding the Federal Deposit Insurance Corporation limit of $ 250,000 totaled $ 0.0 million and $ 3.0 million on June 30, 2024 and 2023, respectively. Accounts Receivable The Company provides an allowance for credit losses equal to the estimated uncollectible amounts. Prior to July 1, 2023, that estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. Effective July 1, 2023, in determining the Company's reserve for credit losses, receivables are assigned an expected loss based on historical information adjusted for forward-looking economic factors. The allowance for credit lo sses was $ 0.5 million and $ 0.2 million on June 30, 2024 and 2023, respectively. Inventories Inventories consist of seed and packaging materials. Inventories are stated at the lower of cost or net realizable value, and an inventory reserve permanently reduces the cost basis of inventory. Inventories are valued as follows: Actual costs are used to value raw materials such as packaging materials, as well as goods in process. Costs for substantially all finished goods, which include the cost of carryover crops from the previous year, are valued at actual cost. Actual costs for finished goods include plant conditioning and packaging costs, direct labor, raw materials and manufacturing overhead costs based on normal capacity. The Company records abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) as current period charges and allocates fixed production overhead to the costs of finished goods based on the normal capacity of the production facilities. Inventory is periodically reviewed to determine if it is marketable, obsolete or impaired. Inventory that is determined to be obsolete or impaired is written off to expense at the time the impairment is identified. Inventory quality is a function of germination percentage. Our experience has shown that our alfalfa seed quality tends to be stable under proper storage conditions; therefore, we do not view inventory obsolescence for alfalfa seed as a material concern. Hybrid crops (sorghum and sunflower) seed quality may be affected by warehouse storage pests such as insects and rodents. The Company maintains a strict pest control program to mitigate risk and maximize hybrid seed quality. Components of inventory are:
As of June 30,
2024 2023
Raw materials and supplies $ 2,247,234 $ 3,309,211
Work in progress 4,833,108 6,409,554
Finished goods 31,026,761 35,379,503
Inventories, net $ 38,107,103 $ 45,098,268 Property, Plant and Equipment Property, plant and equipment is stated at historical cost, less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets on a straight-line basis. Expenditures for repairs and maintenance are expensed as incurred. Construction-in-progress is stated at historical cost and is transferred to its respective depreciable asset class once the underlying asset is ready for its intended use. Depreciation of construction-in-progress begins only once placed into service, over the estimated useful life on a straight-line basis. Assets are depreciated using the straight-line method over the estimated useful life of the asset - typically periods of 5 to 35 years for buildings, 3 to 20 years for machinery and equipment, 7 to 10 years for leasehold improvements, and 2 to 5 years for vehicles. Intangible Assets Intangible assets acquired in business acquisitions are reported at their initial fair value less accumulated amortization. Intangible assets are amortized using the straight-line method over the estimated useful life of the asset. Periods of 10 to 30 years for technology/IP/germplasm, 5 to 20 years for customer relationships and trade names and 10 to 20 for other intangible assets. The weighted average estimated useful lives are 25 years for technology/IP/germplasm, 19 years for customer relationships, 16 years for trade names, and 18 years for other intangible assets. Impairment of Long-Lived Assets The Company assesses the carrying value of its long-lived assets, consisting primarily of intangible assets, property, plant and equipment and lease right-of-use, or ROU, assets, when there is evidence that events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable. Such events or changes in circumstances may include a significant decrease in the market price of a long-lived asset, a significant change in the extent or manner in which an asset is used, a significant change in legal factors or in the business climate, a significant deterioration in the amount of revenue or cash flows expected to be generated from a group of assets, a current expectation that, more likely than not a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, or any other significant adverse change that would indicate that the carrying value of an asset or group of assets may not be recoverable. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable and the expected undiscounted future cash flows attributable to the asset group are less than the carrying amount of the asset group, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. During the fourth quarter of fiscal 2024, the Company quantitatively evaluated the recoverability of its long-lived assets, including its finite-lived intangible assets, for impairment in conjunction with its annual long-lived assets impairment assessment. The Company identified a $ 3.5 million impairment related to its finite-lived intangible assets for the year ended June 30, 2024. For the year ended June 30, 2023, the Company did not record any impairment loss related to its finite-lived intangible assets. The impairment loss related to its long-lived assets is recorded to Impairment charges on the Consolidated Statements of Operations. Refer to Note 5 for additional information regarding the Company's intangible assets impairment assessments. Investments In fiscal 2023, the Company entered into two partnerships resulting in a 34 % ownership interest in Vision Bioenergy and a 20 % ownership interest in Trigall Australia. Following the initial recording of each investment, the Company assesses and records its share of equity earnings from each investment on a quarterly basis, resulting in the investment carrying value increasing or decreasing depending on whether a gain or loss is recorded. For Trigall Australia, the Company is also required to make capital contributions, which increases the carrying value of the investment. In April 2024, the Company sold its remaining 20 % ownership interest in Trigall Australia. In exchange for S&W Australia’s remaining 20 % ownership interest, S&W Australia received $ 0.1 million. This transaction resulted in the Company recording a $ 0.5 million loss on the sale of this equity method investment. S&W Australia also received $ 0.3 million in exchange for certain fixed assets owned by S&W Australia. Research and Development Costs The Company is engaged in ongoing research and development, or R&D, of proprietary seed varieties. All R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D 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 constructed for R&D activities that have alternative future uses are capitalized and depreciated on a straight-line basis over the estimated useful life of the asset. Employee Retention Credit In response to the COVID-19 pandemic, the Employee Retention Credit, or ERC, was established under the Coronavirus Aid, Relief, and Economic Security Act. The ERC is a refundable tax credit meant for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to December 31, 2021. Companies who meet the eligibility requirements can claim the ERC on an original or adjusted employment tax return for a period within those dates. In March 2023, the Company determined that it qualifies for $ 1.4 million in relief for the period from April 1, 2021 to September 30, 2021. Upon receipt of the relief, the Company will owe $ 0.2 million in tax advisory costs associated with the assessment of the tax credit, which is accrued for as of June 30, 2024. Further research is ongoing to determine if the Company qualifies for any other reporting periods. As there is no authoritative guidance under U.S. GAAP for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standards 20, or IAS 20, Accounting for Government Grants and Disclosure of Government Assistance . In accordance with IAS 20, management determined it has reasonable assurance of receipt of the identified ERC amount and recorded the $ 1.4 million benefit under Government grant income in the Consolidated Statements of Operations during the year ended June 30, 2023. A corresponding accrual of the tax credit receivable was recorded under Prepaid expenses and other current assets on the Consolidated Balance Sheets, where it still resides as of June 30, 2024. Income Taxes The Company accounts for income taxes in accordance with the applicable accounting standards. These standards prescribe a minimum threshold a tax position is required to meet before being recognized in the Consolidated Financial Statements. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on the enacted tax law. Changes in enacted tax rates are reflected in the tax provision as they occur. Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s effective tax rate for the years ended June 30, 2024 and 2023 has been affected by the valuation allowance on the Company’s deferred tax assets. Net (Loss) In come Per Common Share Data Basic net (loss) income per common share, or EPS, is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated by adjusting both the numerator (net (loss) income) and the denominator (weighted-average number of shares outstanding) for the dilutive effects of potentially dilutive securities, including options and restricted stock awards. The treasury stock method is used for stock options and restricted stock awards. Under this method, consideration that would be received upon exercise (as well as remaining compensation cost to be recognized for awards not yet vested) is assumed to be used to repurchase shares of stock in the market, with net number of shares assumed to be issued added to the denominator. The Company computes earnings per share using the two-class method. The two-class method requires an earnings allocation formula that determines earnings per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings. The Series B Redeemable Convertible Non-Voting Preferred Stock, par value $ 0.001 per share, or the Series B Preferred Stock, and warrant are participating securities because holders of such shares have non-forfeitable dividend rights and participate in any undistributed earnings with common stock. Under the two-class method, total dividends provided to the holders of participating securities and undistributed earnings allocated to participating securities are subtracted from net income attributable to the Company in determining net loss attributable to common shareholders. Additionally, any accretion to the redemption value for the Series B Preferred Stock is treated as a deemed dividend in the two-class EPS calculation. The calculation of basic and diluted EPS is shown in the table below:
Years Ended June 30,
2024 2023
Numerator:
Net (loss) income attributable to S&W Seed Company $ ( 30,030,977 ) $ 14,410,078
Dividends accrued for participating securities ( 391,267 ) ( 365,979 )
Accretion of Series B Preferred Stock redemption value ( 103,350 ) ( 103,350 )
Numerator for net (loss) income per common share - basic and diluted $ ( 30,525,594 ) $ 13,940,749
Denominator:
Denominator for basic EPS - weighted average shares 2,273,112 2,250,146
Less: weighted average shares - dilutive securities:
Employee stock options — 2,633
Employee restricted stock awards — 6,988
Denominator for diluted EPS - weighted average shares 2,273,112 2,259,766
Net (loss) income per common share - basic $ ( 13.43 ) $ 6.20
Net (loss) income per common share - diluted $ ( 13.43 ) $ 6.17 Anti-dilutive shares, which have been excluded from the computation of diluted (loss) income per share, included 279,671 employee stock options, 64,595 restricted stock units, 89,211 shares issuable upon conversion of the Series B Convertible Preferred Stock, warrants to purchase 138,600 shares of common stock related to the MFP Loan Agreement (as defined below), and 29,440 warrants issued with the Company's Series B Convertible Preferred Stock. The terms and conditions of these securities are more fully described in Note 12, Note 13, and Note 14 in these Consolidated Financial Statements. Derivative Financial Instruments The Company’s subsidiary, S&W Australia, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company at times manages through the use of foreign currency derivative financial instruments. The Company has entered into foreign currency forward contracts and foreign currency call options (refer to Note 10) and accounts for these instruments in accordance with ASC Topic 815, “Derivatives and Hedging,” which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. The Company’s foreign currency contracts and options are not designated as hedging instruments under ASC 815; accordingly, changes in the fair value are recorded in current period earnings. Premiums paid for foreign currency options with strike prices below the spot market price when acquired represent the time value of the option, as there is no intrinsic value. Such premiums are recorded as a current asset and amortized over the option term if deemed material. Currency options are measured at fair value if the market price at the reporting date exceeds the strike price. When the strike price exceeds the market price, no liability is recorded as the Company has no obligation to exercise the options. Fair Value of Financial Instruments The Company discloses assets and liabilities that are recognized and measured at fair value, presented in a three-tier fair value hierarchy, as follows: • Level 1. Observable inputs such as quoted prices in active markets; • Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying value of cash and cash equivalents, accounts payable, short-term and all long-term borrowings, as reflected in the Consolidated Balance Sheets, approximate fair value because of the short-term maturity of these instruments or interest rates commensurate with market rates. There have been no changes in operations and/or credit characteristics since the date of issuance that could impact the relationship between interest rate and market rates. S&W received a $ 6.0 million note receivable due from Shell in connection with th |
