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EX-5.1 - Cullen Agricultural Holding Corp | v207769_ex5-1.htm |
EX-23.1 - Cullen Agricultural Holding Corp | v207769_ex23-1.htm |
As
filed with the Securities and Exchange Commission on January 14,
2011
Registration
No. 333-170165
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
AMENDMENT NO. 2
TO
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
CULLEN
AGRICULTURAL HOLDING CORP.
(Exact
name of registrant as specified in its charter)
Delaware
|
2020
|
27-0863248
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
No.)
|
1431
N. Jones Plantation Road
Millen,
Georgia 30442
(706)
621-6737
|
Eric
J. Watson, Chief Executive Officer
Cullen
Agricultural Holding Corp.
1431
N. Jones Plantation Road
Millen,
Georgia 30442
(706)
621-6737
|
(Address,
including zip code, and telephone number,
including
area code, of each registrant’s principal
executive
offices)
|
(Name,
address, including zip code, and telephone
number,
including area code, of agent for
service)
|
Copies
to:
David
Alan Miller, Esq.
Graubard
Miller
The
Chrysler Building
405
Lexington Avenue
New
York, New York 10174
Telephone:
(212) 818-8800
Fax:
(212) 818-8881
Approximate
date of commencement of proposed sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the “Securities Act”), check the following box. x
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
form is a post effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
form is a post effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
(Do
not check if a smaller reporting company)
|
CALCULATION
OF REGISTRATION FEE
Title of each class of securities being
registered
|
Amounts
being
registered(1)
|
Proposed
maximum
offering price
per unit(2)
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration
fee
|
||||||||||||
Common
Stock, par value $0.0001 per share, issued in business
combination(3)
|
15,881,148 | $ | 0.25 | $ | 3,970,287.00 | $ | 283.08 | |||||||||
Common
Stock held by founders of predecessor(4)
|
2,420,000 | $ | 0.25 | $ | 605,000.00 | $ | 43.14 | |||||||||
Common
Stock held by certain selling shareholders(5)
|
300,000 | $ | 0.25 | $ | 75,000.00 | $ | 5.35 | |||||||||
Warrants,
each to purchase one share of common stock, held by founders of
predecessor(6)
|
13,800,000 | $ | 0.07 | $ | 966,000.00 |
$
|
68.87
|
|||||||||
Common
Stock underlying warrants held by founders of
predecessor(7)
|
13,800,000 | $ | 0.25 | $ | 3,450,000.00 | $ | 245.99 | |||||||||
Common
Stock underlying warrants held by founders of
predecessor(8)
|
13,800,000 | $ | 0.25 | $ | — | — | (7) | |||||||||
Warrants,
each to purchase one share of common stock, held by sponsors of
predecessor’s initial public offering(9)
|
5,000,000 | $ | 0.07 | $ | 350,000.00 | $ | 24.95 | |||||||||
Common
Stock underlying warrants held by sponsors of predecessor’s initial public
offering(10)
|
5,000,000 |
$
|
0.25
|
$ | 1,250,000.00 | $ | 89.13 | |||||||||
Common
Stock underlying warrants held by sponsors of predecessor’s initial public
offering(11)
|
5,000,000 | $ | 0.25 | $ | — | — | (10) | |||||||||
Total
|
$ | 10,666,287.00 | $ | 760.51 | (12) |
(1)
|
Pursuant
to Rule 415 of the Securities Act of 1933, as amended, or the Securities
Act, this registration statement also registers such additional shares of
common stock of the Registrant as may hereafter be offered or issued to
prevent dilution resulting from stock splits, stock dividends,
recapitalizations or other capital
adjustments.
|
(2)
|
Based
upon the last sale price of the common stock and warrants, as reported on
the OTC Bulletin Board on October 21, 2010, in accordance with Rule 457(c)
promulgated under the Securities Act of 1933, as
amended.
|
(3)
|
Represents
shares of our common stock issued to the former holder of the equity
interests of Cullen Agricultural Technologies Inc. (“Cullen Agritech”) in
connection with the business combination between our company, Triplecrown
Acquisition Corp. (“Triplecrown”) and Cullen
Agritech.
|
(4)
|
Represents
shares of Triplecrown common stock that were issued to Triplecrown’s
founders in connection with Triplecrown’s formation and were automatically
converted into shares of our common stock in connection with the business
combination.
|
(5)
|
Represents
shares of common stock held by one entity that purchased such stock in a
private placement in October 2010.
|
(6)
|
Represents
warrants to purchase Triplecrown common stock that were issued to
Triplecrown’s founders in connection with Triplecrown’s formation and were
automatically converted into warrants to purchase our common stock in
connection with the business combination (“Founders’
Warrants”).
|
(7)
|
Represents
shares of common stock underlying the Founders’
Warrants.
|
(8)
|
Represents
the issuance of shares of common stock underlying the warrants described
in footnote 6 above to the extent the warrants are transferred prior to
exercise. The filing fee is included in the filing fee for the shares of
common stock underlying the warrants described in footnote 6
above.
|
(9)
|
Represents
warrants to purchase Triplecrown common stock that were purchased by the
sponsors of Triplecrown’s initial public offering simultaneously with the
initial public offering and were automatically converted into warrants to
purchase our common stock in connection with the business combination
(“Sponsors’ Warrants”).
|
(10)
|
Represents
shares of common stock underlying the Sponsors’
Warrants.
|
(11)
|
Represents
the issuance of shares of common stock underlying the warrants described
in footnote 9 above to the extent the warrants are transferred prior to
exercise. The filing fee is included in the filing fee for the shares of
common stock underlying the warrants described in footnote 9
above.
|
(12)
|
The
filing fee has been previously
paid.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is not
permitted.
|
Subject
to completion, dated January 14, 2011
CULLEN
AGRICULTURAL HOLDING CORP.
37,401,148
Shares of Common Stock
18,800,000
Redeemable Common Stock Purchase Warrants
This
prospectus relates to the resale of:
|
·
|
15,881,148
shares of our common stock issued to Cullen Inc. Holdings Ltd. (“Cullen
Holdings”), the former holder of the equity interests of Cullen
Agricultural Technologies Inc. (“Cullen Agritech”) and an entity which is
controlled by Eric J. Watson, our Chief Executive Officer, Secretary,
Chairman of the Board and Treasurer, in connection with the business
combination between our company, Triplecrown Acquisition Corp.
(“Triplecrown”) and Cullen Agritech – we refer to these shares as the
merger shares.
|
|
·
|
2,420,000
shares of our common stock held by Triplecrown’s initial stockholders
(“Triplecrown Founders”), representing shares of Triplecrown common stock
that were issued to the Triplecrown Founders in connection with
Triplecrown’s formation and were automatically converted into shares of
our common stock in connection with the business combination – we refer to
these shares as the founders’
shares.
|
|
·
|
300,000
shares of our common stock held by an entity that purchased such
shares in a private placement that occurred in October
2010.
|
|
·
|
13,800,000
warrants to purchase shares of our common stock held by the Triplecrown
Founders, representing warrants to purchase shares of Triplecrown common
stock that were issued to the Triplecrown Founders in connection with
Triplecrown’s formation and were automatically converted into warrants to
purchase shares of our common stock in connection with the business
combination – we refer to these warrants as the founders’
warrants.
|
|
·
|
13,800,000
shares of our common stock issuable upon exercise the founders’
warrants.
|
|
·
|
5,000,000
warrants to purchase shares of our common stock held by Eric J. Watson and
Jonathan J. Ledecky (collectively, the “Triplecrown Sponsors”),
representing warrants to purchase shares of Triplecrown common stock that
were purchased by the Triplecrown Sponsors simultaneously with
Triplecrown’s initial public offering and were automatically converted
into warrants to purchase shares of our common stock in connection with
the business combination – we refer to these warrants as the sponsors’
warrants.
|
|
·
|
5,000,000
shares of our common stock issuable upon exercise the sponsors’
warrants.
|
Each of
the sponsors’ warrants and founders’ warrants entitles the holder to purchase
one share of our common stock at a price of $12.00 per share. The sponsors’
warrants are currently exercisable. The founders’ warrants will not
become exercisable until the last sales price of our common stock exceeds $13.75
per share for any 20 trading days within any 30-trading day period. The
sponsors’ warrants and founders’ warrants expire on October 21, 2013 at 5:00
p.m., New York City time.
The
selling securityholders identified in this prospectus (which term as used herein
includes its pledgees, donees, transferees or other successors-in-interest) may
offer the shares and warrants from time to time as they may determine through
public or private transactions or through other means described in the section
entitled “Plan of Distribution” beginning on page 55. We will not receive any of
the proceeds from the resale by the selling securityholders of the shares or
warrants offered by this prospectus. However, we may receive up to $225,600,000
from holders of the sponsors’ warrants and founders’ warrants upon exercise of
such warrants.
Our
common stock and warrants trade on the Over-the-Counter Bulletin Board under the
symbols “CAGZ” and “CAGZW,” respectively. The last reported sale price of our
common stock and warrants on January 5, 2011 was $0.15 per share and $0.007 per
warrant, respectively.
Investing
in our common stock involves significant risks. See “Risk Factors” beginning on
page 6 to read about factors you should consider before buying shares of
our common stock.
Neither
the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the adequacy of
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
Prospectus
dated __________ __, 2011
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
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1
|
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RISK
FACTORS
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6
|
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INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
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14
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USE
OF PROCEEDS
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15
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DIVIDEND
POLICY
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15
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CAPITALIZATION
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16
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SELECTED
FINANCIAL AND OTHER DATA
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17
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BUSINESS
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19
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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29
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MANAGEMENT
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34
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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44
|
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PRINCIPAL
STOCKHOLDERS
|
47
|
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SELLING
SECURITYHOLDERS
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50
|
|
PLAN
OF DISTRIBUTION
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53
|
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DESCRIPTION
OF SECURITIES
|
55
|
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LEGAL
MATTERS
|
58
|
|
EXPERTS
|
|
58
|
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information contained in this prospectus is accurate
as of any date other than the date on the front of this prospectus.
As
indicated in this prospectus, we have included market data and industry
forecasts that were obtained from industry publications.
PROSPECTUS
SUMMARY
This
summary highlights key information contained elsewhere in this prospectus and is
qualified in its entirety by the more detailed information and financial
statements that follow. It may not contain all of the information that is
important to you. You should read the entire prospectus, including “Risk
Factors,” our financial statements and the related notes thereto, and the other
documents to which this prospectus refers, before making an investment decision.
In this prospectus, the terms the “Company,” “we,” “our” and “us” refer to
Cullen Agricultural Holding Corp. and, where the context requires, its
subsidiaries.
Our
Company
We are a
development stage company. We conduct our operations through our wholly-owned
subsidiary, Cullen Agritech. Cullen Agritech conducts its operations primarily
through its wholly-owned subsidiary, Natural Dairy Inc. (“Natural Dairy”). To date,
we have not generated any revenue and will not do so until we have sufficient
funds to implement our business plan described in the section entitled
“Business.” Since October 22, 2009, our activities have been primarily focused
on raising capital to fund our business plan.
Our
principal focus is to use our intellectual property in forage and animal
sciences to improve agricultural yields. The Company was formed to develop,
adapt and implement grazing-based farming systems in regions of the world where
the geophysical and climatic conditions are suitable for a pasture-based model.
While the potential for the pasture or grazing model is significant in many of
the world’s developed and developing economies, the systems are highly specific
and require significant adaptation and modification to be successful. We have
identified the global dairy industry as a primary opportunity in which our
systems can be applied to improve yields on land and drive cost-base
efficiencies. We believe that cost savings of up to 40-50% are achievable in the
long term. Further, we believe the high cost structure, which is employed by
over 95% of milk producers in the U.S. and supported by government subsidies,
will help to maintain a floor to milk prices in the U.S. and provide us with
long term margin protection. By having direct access to a domestic market, we
believe our business plan provides a unique opportunity to invest directly into
food production while limiting earnings volatility linked to foreign exchange
exposure, typically associated with returns from commodity production in
exporting countries, such as New Zealand. In addition, we believe the potential
opportunity to vertically integrate, while maintaining control of the supply
chain, provides a further opportunity to reduce volatility and maximize
profitability.
We
have been in the process of attempting to obtain land development financing
backed by the property we own and operate to support our working capital needs
and implement our business plan. However, due to the recent performance of
similar types of farming operations in the region, as well as the general
economic downturn, financial institutions have been unwilling to provide such
financing. As a result, we have been unable to obtain the necessary funding to
support the implementation of our business plan at this time. Accordingly, we
are in the process of exploring all financing and strategic alternatives
available to us, including the possibility of disposing of or leasing additional
portions of our land in order to continue to support our working capital needs
and retire certain of our outstanding debt to reduce our interest obligations.
During
October 2010, we sold an aggregate of approximately 1,360 acres of agricultural
land we owned in the state of Georgia to various third parties for an aggregate
of approximately $3,340,000. We also granted a third party an option
to purchase an additional approximate 500 acres of land for approximately
$1,490,000. As of December 7, 2010, we owned approximately 1,150 acres of land.
We continue to explore the possibility of disposing of the remaining acres we
own. We are
currently in various stages of negotiations with potential buyers for some or
all of our remaining land, although we have not finalized any agreements and
have not accepted any offers that we have received at this
time. There is no assurance that we will be successful in
disposing of any of our remaining land. Additionally, we have reduced
salaries paid to our employees and curtailed operations in order to reduce
operating expenses. We will also look to explore alternative
opportunities available to us unrelated
to forage and animal sciences and farming systems which makes up our
current business plan in an effort to maximize shareholder value.
To
this end, we have had preliminary discussions with a potential merger candidate
wishing to become publicly traded. However, such discussions are only
preliminary and no formal terms have been discussed or agreed
to. There is no assurance, however, that we will be
successful in such efforts. If we are unable to secure additional financing or
find another alternative, we will not have sufficient capital to implement our
business plan and may be forced to suspend all operations until such time as
capital or another alternative is available to us.
1
Until
such time where we can dispose of the remaining land we currently own or raise
adequate financing to deploy our pasture based dairy and beef business plan, we
have begun to utilize our pasture and general farming expertise to conduct
various farming activities on the land. We are also considering utilizing a
portion of the land for the production of pasture-finished beef products.
Grass-fed beef has been proven to be better for your health, better for the
environment and promotes improved animal ethics. As a result, there is a rapidly
growing market for grass-fed beef products in the U.S., which at the retail
levels can sell for a 50-100% premium over grain-fed beef. We believe the
existing supply-chain infrastructure would provide us with immediate access to
sell into the grass-fed market.
We were
incorporated in Delaware on August 27, 2009. Our executive offices
are located at 1431 N. Jones Plantation Road, Millen, Georgia 30442 and our
telephone number at that location is (706) 621-6737.
Background
of the Offering
We were
formed as a wholly-owned subsidiary of Triplecrown, a blank check company, in
order to allow Triplecrown to complete a business combination with Cullen
Agritech, as contemplated by the Agreement and Plan of Reorganization (the
“Merger Agreement”), dated as of September 4, 2009, as amended, among
Triplecrown, us, CAT Merger Sub, Inc. (“Merger Sub”), Cullen Agritech and Cullen
Holdings. Merger Sub was a wholly-owned subsidiary of ours formed for the
purpose of effectuating the business combination. At the time, Cullen Agritech
was a newly formed company committed to the development and commercialization of
advanced agricultural technologies and Cullen Holdings, an entity controlled by
Eric J. Watson, was the owner of all of the equity interests of Cullen
Agritech.
On
October 22, 2009, the transactions contemplated by the Merger Agreement were
consummated. Triplecrown merged with and into the Company, with the Company
surviving, and Merger Sub merged with and into Cullen Agritech, with Cullen
Agritech surviving as a wholly owned subsidiary of the Company (the “Merger”).
In connection with the Merger, we issued 15,881,148 shares of our common stock
(the merger shares) to Cullen Holdings in exchange for all of the equity
interests of Cullen Agritech. In addition, the outstanding shares of
Triplecrown common stock and outstanding warrants to purchase shares of
Triplecrown common stock were automatically converted on a one-to-one basis into
shares of our common stock and warrants to purchase shares of our common
stock. Thus, we became a public holding company and Cullen Agritech
became our operating subsidiary.
2
In
connection with its formation, Triplecrown issued 13,800,000 units to the
Triplecrown Founders for an aggregate purchase price of $25,000. Each unit
consisted of one share of common stock and one warrant to purchase one share of
common stock. Simultaneously with its initial public offering (“IPO”),
Triplecrown sold an additional 5,000,000 warrants to purchase common stock to
the Triplecrown Sponsors for an aggregate purchase price of $5,000,000. As
mentioned above, in connection with the Merger, the outstanding shares of
Triplecrown common stock and outstanding warrants to purchase shares of
Triplecrown common stock were automatically converted on a one-to-one basis into
shares of our common stock and warrants to purchase our common stock. However,
in accordance with the Merger Agreement, the Triplecrown Founders surrendered
for cancellation 11,380,000 of the shares they received upon the conversion.
Accordingly, immediately after the closing of the Merger, the Triplecrown
Founders held 2,420,000 shares of our common stock (the founders’ shares) and
13,800,000 warrants to purchase shares of our common stock (the founders’
warrants) and the Triplecrown Sponsors held an additional 5,000,000 warrants to
purchase shares of our common stock (the sponsors’ warrants).
The
selling stockholders identified in this prospectus are offering the merger
shares, the founders’ shares, the founders’ warrants (and the shares underlying
such warrants) and the sponsors’ warrants (and the shares underlying such
warrants) for resale pursuant to this prospectus.
We
also completed a private placement of 300,000 shares of our common stock in
October 2010 raising gross proceeds of $600,000. Those shares are
being offered for resale pursuant to this prospectus.
3
The
Offering
Common
stock outstanding prior to the offering
|
19,630,714
|
|
Common
stock to be outstanding after this offering
|
38,430,7141
|
|
Total
proceeds raised by offering
|
We
will not receive any proceeds from the resale of our common stock or
warrants pursuant to this offering. However, we may receive up to
$225,600,000 upon exercise of the founders’ warrants and the sponsors’
warrants.
|
|
Use
of proceeds
|
We
will not receive any proceeds from the resale of our common stock or
warrants pursuant to this offering. We will use the proceeds, if any, from
the exercise of the founders’ warrants and the sponsors’ warrants for
working capital and other general corporate purposes.
|
|
OTCBB
symbols
Common
Stock
Warrants
|
CAGZ
CAGZW
|
|
Warrants
|
Each
of the founders’ warrants and sponsors’ warrants entitles the registered
holder to purchase one share of our common stock at a price of $12.00 per
share, subject to adjustment. The sponsors’ warrants are currently
exercisable. The founders’ warrants will not become exercisable until the
last sales price of our common stock exceeds $13.75 per share for any 20
trading days within any 30-trading day period. The founders’ warrants and
sponsors’ warrants expire on October 21, 2013 at 5:00 p.m., New York City
time.
We
may call the warrants for redemption (excluding any founders’ warrants and
sponsors’ warrants still held by the original purchasers of such warrants
or their affiliates), (i) in whole and not in part, (ii) at a price of
$0.01 per warrant at any time after the warrants become exercisable, (iii)
upon not less than 30 days’ prior written notice of redemption to each
warrant holder, and (iv) if, and only if, the reported last sale price of
the shares of common stock equals or exceeds $17.00 per share, for any 20
trading days within a 30 trading day period ending on the third business
day prior to the notice of redemption to warrant
holders.
|
4
Risk
factors
|
|
See
the section entitled “Risk Factors” and the
other information included in this prospectus for a discussion of risk
factors you should carefully consider before deciding to invest in our
common stock or warrants.
|
5
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risk factors described below as well as the other
information contained in this prospectus before buying shares of our common
stock. If any of the following risks or uncertainties occurs, our business,
financial condition and operating results could be materially and adversely
affected. As a result, the trading price of our common stock could decline and
you may lose all or a part of your investment in our common stock.
Cullen
Agritech has a limited operating history and may not be able to successfully
operate its business or generate sufficient revenue to make or sustain
distributions to its stockholders.
We were
incorporated in August 2009 in order to consummate the Merger and acquire Cullen
Agritech. Cullen Agritech was incorporated in June 2009, is a development stage
company and has only a limited operating history. We cannot assure you that we
will be able to operate our business successfully or implement our policies and
strategies as described in this annual report.
We
do not have sufficient funds to implement our business plan.
The
implementation of our business plan relies on our ability to purchase land,
livestock and other material assets. In connection the Merger, we purchased a
piece of land and intended to purchase additional land thereafter in order to
implement our business plan. However, we do not currently have
sufficient funds available to implement our business plan as originally
anticipated. We have been in the process of attempting to obtain land
development financing secured by the property we own and operate to support our
working capital needs and implement our business plan. However, due
to the recent performance of farming operations in the region, as well as the
general economic downturn, financial institutions have been unwilling to provide
such financing. Accordingly, we have sold portions of our unused
land, reduced salaries paid to our employees and curtailed operations in
order to raise capital and reduce operating expenses. Additionally, we are
in the process of exploring all financing and strategic alternatives available
to us, including the possibility of disposing of or leasing additional portions
of our land in order to continue to support our working capital needs or
alternatively to retire certain of our outstanding debt to reduce our interest
obligations. We will also look to explore alternative
opportunities available to us
unrelated to forage and animal sciences and farming systems which makes up
our current business plan in an effort to maximize shareholder
value. There is no assurance, however, that we will be successful in such
efforts. If we are unable to secure additional financing or find
another strategic alternative, we will not have sufficient capital to implement
our business plan and may be forced to suspend all operations until such time as
capital or another strategic alternative is available to us.
The
land we currently own is subject to a mortgage.
We own
approximately 1,150 acres of farmland in the State of Georgia. Such land is
the subject of a mortgage granted to Cullen Holdings securing our obligations
owed to it pursuant to a promissory note that is due on January 20, 2011. If we
fail to repay this promissory note when due, Cullen Holdings may foreclose on
the land and take possession of it. We cannot assure you that we will have
sufficient capital to repay the note or our other obligations when they come
due. If we are unable to pay our obligations as they come due, it could have a
material adverse effect on our operations.
6
Certain
of our directors are subject to litigation that may have a negative effect
on our financial condition and business operations.
On
December 9, 2009, a second amended class action complaint, styled Goodman v.
Watson, et al., was filed in the Court of Chancery of the State of Delaware
against the former directors of Triplecrown (several of whom are current
directors of our company). The complaint alleges that the
defendants breached their fiduciary duties and their duty of disclosure in
connection with the Merger. The plaintiff seeks, as alternative
remedies, damages in the amount of approximately $9.74 per share, to have
Triplecrown’s trust account restored and distributed pro rata to members of the
putative class, a quasi-appraisal remedy for members of the putative class, and
an opportunity for members of the putative class to exercise conversion rights
in connection with the Merger. The
defendants filed an answer on December 23, 2009. We and the former directors are
currently in settlement discussions with the plaintiff. If an
acceptable settlement cannot be reached, the defendants intend to defend this
action vigorously. If the court finds in favor of the
plaintiff (who represents a purported class of stockholders that held
approximately 490,000 shares of Triplecrown’s common stock) and the defendants
are required to pay damages to the plaintiff (which could
be approximately $5 million), we will have an obligation to indemnify the
defendants for such damages. In such event, we will seek to recover
such payments from our D&O insurance carrier as we believe such claims
are covered by our insurance policies. However, there is no
assurance that the carrier will agree in this analysis and not deny coverage of
such claims. If this occurred, our financial condition and business
operations could be materially adversely affected. See the
section titled “Business-Legal Proceedings” for a complete description of this
matter.
The
recent disruptions in the overall economy and the financial markets may
adversely impact our business and results of operations.
The
agricultural industry is sensitive to changes in general economic conditions,
both nationally and locally. Recent disruptions in global financial markets and
banking systems have made it more difficult for companies to access credit and
capital markets. The economic crisis may adversely affect our business in a
variety of ways. Access to lines of credit or the capital markets may be
severely restricted, which may preclude us from raising funds required for
operations. It may be more difficult for us to complete strategic transactions
with third parties. Continuing volatility in the credit and capital markets
could potentially impair our customers’ ability to access these markets and
increase associated costs, and we may be materially affected by these financial
market disruptions as economic events and circumstances continue to evolve. The
financial and credit market turmoil could also negatively impact our potential
suppliers and customers, which could decrease our ability to source, produce and
distribute our products and could decrease demand for its products.
If
economic conditions continue to worsen, it is possible these factors could
significantly impact our financial condition and ability to implement our
strategic growth plan.
Any
negative public perception regarding our products or industry, or any ill
effects of product liability claims, could harm our reputation, damage our
brand, result in costly and damaging recalls and expose us to government
investigations and sanctions, which would materially and adversely affect its
results of operations.
We intend
to sell products for human consumption, which involves a number of risks.
Product contamination, spoilage or other adulteration could result in the
inability to sell our products. We also may be subject to liability if our
products or operations violate applicable laws or regulations or in the event
our products cause injury, illness or death. A significant product liability or
other legal judgment against us or a widespread product recall may negatively
impact our profitability. Even if a product liability or consumer fraud claim is
unsuccessful or is not merited, the negative publicity surrounding such
assertions regarding our products or processes could materially and adversely
affect our reputation, brand image and results of operations. Finally, serious
product quality concerns could result in governmental action against us, which,
among other things, could result in the suspension of production or distribution
of our products, or other governmental penalties, including possible criminal
liability.
7
We
may not realize anticipated benefits from our strategic growth
plan.
If we can
obtain the necessary financing, we intend to implement a strategic growth plan,
which includes a number of initiatives, that we believe are necessary in order
to position our business for future success and growth. Over the next several
years, these initiatives will require investments in people, systems, tools and
facilities. Our success and earnings growth depends in part on our ability to
maintain budgeted costs and efficiencies. If we are unable to successfully
implement these initiatives, or fail to implement them as timely as anticipated,
our results of operations could be adversely impacted.
Our
business is subject to various environmental laws, which may increase our
compliance costs.
Our
business operations are subject to various environmental and governmental
regulations. These laws and regulations cover the discharge of pollutants,
wastewater, and hazardous materials into the environment. In addition, various
laws and regulations addressing climate change are being considered or
implemented at the federal and state levels. New legislation, as well as current
federal and other state regulatory initiatives, relating to these environmental
matters could require us to replace equipment, install additional pollution
controls, purchase various emission allowances or curtail operations. These
costs could adversely affect our results of operations and financial
condition.
Our
operations are subject to numerous laws and regulations, exposing us to
potential claims and compliance costs that could adversely affect our
business.
We are
subject to federal, state and local laws and regulations relating to the
manufacturing, labeling, packaging, health and safety, sanitation, quality
control, fair trade practices, and other aspects of its business. In addition,
zoning, construction and operating permits are required from governmental
agencies which focus on issues such as land use, environmental protection, waste
management, and the movement of animals across state lines. These laws and
regulations may, in certain instances, affect our ability to develop and market
new products and to utilize technological innovations in our business. In
addition, changes in these rules might increase the cost of operating our
facilities or conducting our business which would adversely affect our
finances.
Our dairy
business will be affected by federal price support programs and federal and
state pooling and pricing programs to support the prices of certain products we
sell. Federal and certain state regulations help ensure that the supply of raw
milk flows in priority to fluid milk and soft cream producers before producers
of hard products such as cheese and butter. If any of these programs was no
longer available to us, the prices we sell our milk for could decrease and
reduce our profitability.
Several
states also have laws that restrict the ability of corporations to engage in
farming activities. These regulations may require us to alter or restrict our
operations or cause us to incur additional costs in order to comply with the
regulations.
Inability
to protect our trademarks and other proprietary rights could damage our
competitive position.
Any
infringement or misappropriation of our intellectual property could damage its
value and could limit our ability to compete. We may have to engage in
litigation to protect our rights to intellectual property, which could result in
significant litigation costs and require a significant amount of management’s
time.
8
We
believe that the know-how associated with our farming systems for the production
of raw milk are trade secrets. In addition, we have amassed a large body of
knowledge regarding animal nutrition and pasture-based farming which we believe
to be proprietary. Because most of this proprietary information is not patented,
it may be more difficult to protect. We rely on security procedures and
confidentiality agreements to protect this proprietary information; however,
such agreements and security procedures may be insufficient to keep others from
acquiring this information. Any such dissemination or misappropriation of this
information could deprive us of the value of our proprietary information and
negatively affect our results.
Our
proprietary farming system could be replicated creating additional competition
in the grass-fed dairy industry.
Despite
our first mover advantage and the substantial amount of research and development
that we believe would be required to replicate our farming system, over time and
with significant capital, it is possible that other producers could replicate
our model with a certain degree of success. This could put our market share and
competitive advantages at risk.
The
efficiencies of our farming system may not be scalable.
Our
farming system has only been tested on a farm which is smaller than those farms
we are expecting to roll-out in the future. If our system is not as efficient on
a larger scale, this could impair our ability to implement our strategic plan
and negatively affect our operating results.
Key
assets such as land, livestock and infrastructure could increase in price,
reducing the ability to roll-out farms under the current budgeted capital
requirements.
An
increase in the cost of our key capital items such as land, livestock and
infrastructure could reduce our ability to roll-out farms. Key assets may
increase substantially in price and additional capital may not be available to
us on acceptable terms when needed.
The
price of land could decrease, reducing the underlying asset value of the
business.
Our
current business plan involves buying land assets once we can obtain adequate
financing. If these assets were to be acquired and then the value of these
assets decreased, this could reduce the strength of our balance sheet in the
future and affect our ability to obtain additional capital and implement our
business plan.
We
may establish and maintain relationships with only a small number of
co-operatives for the collection and processing of our raw milk.
The dairy
processing industry is made up of a number of co-operatives that collect and
process all raw milk produced at farms. Our business plan anticipates that we
will establish and maintain relationships with co-operatives for the collection
and processing of our raw milk. It is anticipated that we will not initially, if
at all, establish contracts with a large number of different co-operatives,
which could expose us to a customer concentration risk.
9
Milk
and corn price volatility could reduce revenues and negatively affect our
results of operations.
If the
price of milk decreased to that which is substantially lower than expected, this
could result in a material reduction in our revenues and negatively affect our
results of operations.
Our
feeding strategy will utilize a certain proportion of other feedstocks, some of
which are corn-based, the price of which fluctuates according to the price of
corn. If corn prices were to rise significantly, we could experience a material
reduction in our operating margins.
Raw
milk production is influenced by a number of factors that are beyond our
control, such factors may have a material adverse effect on our
business.
Raw milk
production is influenced by a number of factors that are beyond our control,
including, not limited to, the following:
|
·
|
Seasonal Factors: dairy
cows generally produce more milk in temperate weather than in cold or hot
weather and extended unseasonably cold or hot weather could lead to lower
than expected production;
|
|
·
|
Environmental Factors:
the volume and quality of milk produced by dairy cows is closely linked to
the quality of the nourishment provided by the environment around them,
and, therefore, if environmental factors cause the quality of nourishment
to decline, our milk production could decline;
and
|
|
·
|
Governmental Agricultural and
Environmental Policy: declines in government grants, subsidies,
provision of land, technical assistance and other changes in agricultural
and environmental policies may have a negative effect on the viability of
our farms, and the numbers of dairy cows and quantities of milk they are
able to produce.
|
Such
factors could have a material adverse effect on our business.
The
milk production business is highly competitive and, therefore, we face
substantial competition in connection with the sale of our
products.
We face
competition from other milk producers across the U.S. Most of our competitors
are well established, have greater financial, marketing, personnel and other
resources, have been in business for longer periods of time than we have, and
have products that have gained wide customer acceptance in the marketplace. We
may be unable to compete successfully or our competitors may develop products
which have superior qualities or gain wider market acceptance than
ours.
Large-scale
disease could harm a significant portion of our livestock, reducing our ability
to produce revenue.
The
productivity and profitability of Natural Dairy’s businesses depend on animal
and crop health and on disease control. Natural Dairy will face the risk of
outbreaks of bovine spongiform encephalopathy (“BSE”) which could lead to
decreased milk and livestock sales and increased costs to produce its products.
There have been three confirmed cases of BSE in the U.S. in Washington, Alabama
and Texas. Various countries have halted the import of U.S. fed beef in response
to the discovery of BSE in the U.S. marketplace. In response to the discovery of
BSE in the U.S. marketplace, the USDA has increased testing requirements for
cows and is exploring additional inspection requirements which could increase
the cost of production of dairy products. The discovery of additional cases of
BSE could lead to widespread destruction of dairy cows, could cause consumer
demand for dairy products to decrease and could result in increased inspection
costs and procedures as well as reduce revenues from the sale of livestock. If
this occurs, Natural Dairy could have decreased production and sales of its
dairy products due to decreased consumer demand or decreased milk supply and
decreased operating margins as a result of increased dairy production
costs.
10
Natural
Dairy will face the risk of outbreaks of foot-and-mouth disease, which could
lead to a significant destruction of cloven-hoofed animals such as dairy cattle,
beef cattle, swine, sheep and goats and significantly reduce the demand for meat
products. Because foot-and-mouth disease is highly contagious and destructive to
susceptible livestock, any outbreak of foot-and-mouth disease could result in
the widespread destruction of all potentially infected livestock. If this
happens, Natural Dairy could also have difficulty procuring the livestock it
needs for its dairy operations and incur increased cost to produce its dairy
products, which could reduce its production, sales and operating
margins.
Our
ability to produce revenue will be dependent on the continual survival and
health of Natural Dairy’s livestock. If a significant number of Natural Dairy’s
livestock died or were infected with a disease, Natural Dairy’s ability to
produce revenue form the sale of milk would be reduced.
Our
results of operations will fluctuate by season and will be affected by weather
conditions.
Any
adverse or major deviations from the typical weather conditions expected in a
region could negatively impact our ability to produce revenue under our current
strategy. In addition, severe weather conditions and natural disasters, such as
floods, droughts, frosts or earthquakes, or adverse growing conditions, diseases
and insect-infestation problems may reduce the quantity and quality of our milk
production. For example, dairy cows produce less milk when subjected to extreme
weather conditions, including hot and cold temperatures. A significant reduction
in the quantity or quality of milk produced due to adverse weather conditions,
disease, insect problems or other factors could result in increased processing
costs and decreased production, with adverse financial consequences to
us.
A
change in the water availability may negatively impact the efficiency of the
business model.
The
success of our farming system is dependent on the availability of water to
successfully grow forage. If there was a reduction in water availability on a
farm subsequent to acquiring and converting that property, due to drought,
contamination or otherwise, our ability to produce milk on that farm could be
negatively affected.
We
depend upon our key personnel and our ability to retain and recruit additional
qualified personnel to implement our business strategy. The loss of such key
personnel or the inability to retain or recruit qualified personnel in the
future could have a material adverse impact on the implementation of the
business strategy.
Our
success depends largely on our ability to attract, develop, motivate and retain
highly skilled professionals. The loss or unavailability of any of our key
personnel or the inability to train and retain additional qualified personnel
and advisory board members for any significant period of time or at all would
have a material adverse effect on the business, prospects, financial condition
and results of operations.
We
may be unable to develop and implement a marketing strategy for our advisory and
consulting services, which may have a material adverse effect on our
business.
We do not
have any long-term agreements with clients for the provision of advisory and
consulting services we intend to offer. Although we have not included consulting
revenues in our forecasts, the success of our business will depend in part on
our ability to secure advisory clients. If we are unable to secure advisory
clients due to ineffective marketing, because of an economic downturn decreasing
the demand for outsourced professional services or otherwise, our business is
likely to be materially adversely affected.
11
Inability
to obtain required import permits could reduce our ability to achieve certain
long term operating efficiencies.
Our
business plan includes the potential future requirement for importation of
certain farm products, technologies or animal products into the U.S. as well as
movement of these products or technologies between States within the U.S. The
importation of these products from New Zealand into the U.S. is subject to
various regulatory and licensing restrictions including but not limited to those
imposed by the U.S. Customs Service; the U.S. International Trade Commission;
the U.S. Department of Agriculture; the Food and Drug Administration; the Animal
& Plant Health Inspection Service; the Farm Service Agency; the
Environmental Protection Agency and the Occupational Health & Safety
Administration. We might also be exposed to certain quota limitations.
Specifically, for animal products including semen and embryos, U.S. federal law
requires that the USDA Animal and Plant Health Inspection Service (APHIS) issue
a permit. The current regulatory environment in the U.S. in regards to
importation of farm products, technologies or animal products from New Zealand
could change sometime in the future. As such, it is possible that we might be
unable to obtain such permits or our activities will be limited by an inability
to comply with the required regulatory and licensing restrictions. This could
limit the ability for us to achieve our financial forecasts.
A
forage-based strategy could result in reduced production in the winter
months.
Due to
the reliance on forage as a primary feed source, the colder winter months could
reduce forage growth and therefore reduce feed availability for the farm’s
livestock. This could result in either the requirement to increase the use of
supplemental feed or reduced milk production. This could negatively impact our
ability to produce milk or maintain expected operating margins.
Our
warrants may be exercised in the future, which would increase the number of
shares eligible for future resale in the public market.
We have
outstanding warrants to purchase an aggregate of 74,000,000 shares of common
stock. To the extent such warrants are exercised, additional shares of our
common stock will be issued, which would dilute the ownership of existing
stockholders.
An
investor will not be able to exercise the warrants if an effective registration
statement is not in place when the investor desires to do so.
None of
the warrants will be exercisable and we will not be obligated to issue shares of
common stock unless, at the time a holder seeks to exercise such warrant, a
prospectus relating to the common stock issuable upon exercise of the warrant is
current. Under the terms of the warrant agreement, we are required to use our
best efforts to meet these conditions and to maintain a current prospectus
relating to the shares of common stock issuable upon exercise of the warrants
until the expiration of the warrants. However, we may not be able to do so, and
if we do not maintain a current prospectus related to the shares of common stock
issuable upon exercise of the warrants, holders will be unable to exercise their
warrants. Additionally, we will have no obligation to settle the warrants for
cash or “net cash settle” any warrant exercise. Accordingly, if the prospectus
relating to the common stock issuable upon the exercise of the warrants is not
current, the warrants may have no value, the market for the warrants may be
limited and the warrants may expire worthless.
An
investor will only be able to exercise a warrant if the issuance of shares of
common stock upon such exercise has been registered or qualified or is deemed
exempt under the securities laws of the state of residence of the holder of the
warrants.
None of
our warrants will be exercisable and we will not be obligated to issue shares of
common stock unless the shares of common stock issuable upon such exercise have
been registered or qualified or deemed to be exempt under the securities laws of
the state of residence of the holder of the warrants. If a warrant
holder is unable to exercise his warrants in a particular state, he may be
forced to sell his warrant and therefore lose the benefit of purchasing our
stock. Furthermore, the price he receives for his warrant may not equal the
difference between the exercise price and the stock price.
The
sponsors’ warrants and founders’ warrants may expire before exercising such
warrants would be advantageous to an investor.
Each sponsors’ warrant and founders’
warrant entitles the holder to purchase one share of our common stock at a price
of $12.00 per share. To date, our stock price has not exceeded $6.20
per share. Accordingly, it is possible that the sponsors’ warrants
and founders’ warrants will expire before our stock price makes exercising such
warrants advantageous to an investor. Furthermore, the founders’
warrants will not become exercisable until the last sales price of our common
stock exceeds $13.75 per share for any 20 trading days within any 30-trading day
period. Accordingly, the founders’ warrants may never become
exercisable due to our stock price and therefore may expire
worthless.
Once
sold, the sponsors’ warrants and founders’ warrants will be callable by
us.
The
sponsors’ warrants and founders’ warrants are not redeemable by us so long as
they are held by the original purchasers of such warrants or their affiliates.
However, once sold to anyone other than their affiliates, we may call them for
redemption like all other public warrants.
Eric
J. Watson effectively controls us.
Eric
Watson beneficially owns the 15,881,148 shares of our common stock held by
Cullen Holdings and effectively controls us through such ownership. Because of
this ownership, he will be able to have considerable influence over our
corporate actions in the future.
Our
stock price could fluctuate and could cause you to lose a significant part of
your investment.
The
market price of our securities may be influenced by many factors, some of which
are beyond our control, including those described above and the
following:
|
·
|
changes
in financial estimates by analysts;
|
12
|
·
|
fluctuations
in its quarterly financial results or the quarterly financial results of
companies perceived to be similar to
it;
|
|
·
|
general
economic conditions;
|
|
·
|
changes
in market valuations of similar
companies;
|
|
·
|
terrorist
acts;
|
|
·
|
changes
in its capital structure, such as future issuances of securities or the
incurrence of additional debt;
|
|
·
|
future
sales of common stock;
|
|
·
|
regulatory
developments in the U.S., foreign countries or
both;
|
|
·
|
litigation
involving us, our subsidiaries or our general industry;
and
|
|
·
|
additions
or departures of key personnel.
|
13
INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this prospectus that are not purely historical are
forward-looking statements. Our forward-looking statements include, but are not
limited to, statements regarding our or our management’s expectations, hopes,
beliefs, intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other characterizations of
future events or circumstances, including any underlying assumptions, are
forward-looking statements. The words “anticipates,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predicts,” “project,” “should,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. Forward-looking statements in this
prospectus may include, for example, statements about:
|
·
|
our
ability to obtain financing to support our working capital needs and
implement our business plan;
|
|
·
|
our
ability to obtain financing to purchase land and to enable us to implement
our business plan;
|
|
·
|
our
future financial performance;
|
|
·
|
our
ability to protect our intellectual
property;
|
|
·
|
our
competition;
|
|
·
|
the
loss of our key personnel including Eric J. Watson and Dr. Richard
Watson;
|
|
·
|
increasing
costs of our operations;
|
|
·
|
continued
compliance with governmental
regulations;
|
|
·
|
our
public securities’ potential liquidity and trading;
and
|
|
·
|
general
economic conditions.
|
The
forward-looking statements contained in this prospectus are based on our current
expectations and beliefs concerning future developments and their potential
effects on us. There can be no assurance that future developments affecting us
will be those that we have anticipated. These forward-looking statements involve
a number of risks and uncertainties (some of which are beyond our control) and
other assumptions that may cause actual results or performance to be materially
different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, those factors
described under the heading “Risk Factors.” Should one or
more of these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary in material respects from
those projected in these forward-looking statements. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required under
applicable securities laws.
Potential
investors should not place undue reliance on our forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.
14
USE
OF PROCEEDS
We will
not receive any proceeds from the resale of our common stock or warrants
pursuant to this offering. However, we may receive up to $225,600,000 upon
exercise of the founders’ warrants and the sponsors’ warrants.
DIVIDEND
POLICY
We have
not paid any cash dividends on our common stock to date. The payment of any
dividends is within the discretion of our board of directors. It is the present
intention of the board of directors to retain all earnings, if any, for use in
the business operations and, accordingly, the board does not anticipate
declaring any dividends in the foreseeable future. The payment of dividends in
the future, if any, will be contingent upon our revenues and earnings, if any,
capital requirements and our general financial condition.
15
CAPITALIZATION
The
following table sets forth our cash and cash equivalents and our capitalization
as of September 30, 2010.
You
should read this table in conjunction with the sections of this prospectus
entitled “Prospectus Summary –
Summary Financial Data” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and with our financial
statements and the notes thereto included elsewhere in this
prospectus.
|
September 30, 2010
|
|||
Cash
|
|
$
|
56,188
|
|
Equipment
purchased through issuance of debt
|
|
40,120
|
||
Mortgage
payable, related party
|
|
$
|
3,938,668
|
|
Stockholders’
equity:
|
|
|||
Preferred
stock - $0.0001 par value; authorized 1,000,000 shares; no shares issued
and outstanding
|
|
-0-
|
||
Common
stock, par value $0.0001; 200,000,000 shares authorized; 19,255,714 shares
issued and outstanding
|
|
1,926
|
||
Additional
paid-in capital
|
|
6,111,919
|
||
Deficit
accumulated during the development stage
|
|
(3,024,769
|
)
|
|
Total
stockholders’ equity
|
|
3,089,076
|
||
Total
capitalization
|
|
$
|
7,124,052
|
16
SELECTED
FINANCIAL AND OTHER DATA
Financial
Data
We are
providing the following selected financial information to assist you in your
analysis of our company.
Our
selected consolidated balance sheet data as of December 31, 2009 and condensed
consolidated statements of operations data for the period from June 3, 2009
(inception) through December 31, 2009 are derived from our audited condensed
consolidated financial statements for the period from June 3, 2009 (inception)
to December 31, 2009. Our selected consolidated balance sheet data as
of September 30, 2010 and condensed consolidated statements of operations
data for the nine months ended September 30, 2010 are derived from our
unaudited condensed consolidated financial statements for the nine months
ended September 30, 2010.
The
selected financial information is only a summary and should be read in
conjunction with our historical financial statements and related notes thereto
and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” contained
elsewhere in this prospectus. The historical results included below and
elsewhere in this prospectus may not be indicative of our future
performance.
For the period
from
|
||||||||
June 3, 2009
|
||||||||
(inception)
through
|
For the nine
|
|||||||
December 31,
2009
|
months ended
September 30, 2010
|
|||||||
Total
revenues
|
$ | — | $ | — | ||||
Loss
from operations
|
(524,924 | ) | (2,247,034 | ) | ||||
Net
loss
|
(612,526 | ) | (2,412,243 | ) | ||||
Earnings
per share basic and diluted
|
(0.03 | ) | (0.13 | ) | ||||
Weighted
average shares outstanding
|
19,247,311 | 19,254,975 | ||||||
Working
capital (deficiency)
|
2,199,282 | (3,703,984 | ) | |||||
Total
assets
|
11,855,329 | 7,399,900 | ||||||
Stockholders’
equity
|
$ | 5,451,319 | $ | 3,089,076 |
Market
Price for Our Securities
Our
common stock and warrants are quoted on the OTC Bulletin Board under the symbols
CAGZ and CAGZW, respectively. The following table sets forth the range of high
and low bid prices for the common stock and warrants for the periods indicated
since the common stock and warrants commenced public trading on October 23,
2009. The over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily reflect
actual transactions.
Common
Stock
|
Warrants
|
|||||||||||||||
High
|
Low
|
High
|
Low
|
|||||||||||||
Fiscal Year 2011: | ||||||||||||||||
First
Quarter*
|
$ | 0.15 | $ | 0.15 | $ | 0.007 | $ | 0.0035 | ||||||||
Fiscal
Year 2010:
|
||||||||||||||||
Fourth
Quarter
|
$ | 0.40 | $ | 0.14 | $ | 0.01 | $ | 0.0028 | ||||||||
Third
Quarter
|
$ | 2.50 | $ | 0.40 | $ | 0.02 | $ | 0.0075 | ||||||||
Second
Quarter
|
$ | 2.50 | $ | 1.50 | $ | 0.04 | $ | 0.01 | ||||||||
First
Quarter
|
$ | 3.95 | $ | 1.75 | $ | 0.05 | $ | 0.02 | ||||||||
Fiscal
Year 2009:
|
||||||||||||||||
Fourth
Quarter
|
$ | 6.20 | $ | 3.60 | $ | 0.12 | $ | 0.03 |
*
|
Through
January 5, 2011.
|
17
Holders
As of
January 5, 2011, there were 18 holders of record of our common stock and 14
holders of record of our warrants.
18
BUSINESS
Introduction
We are a
development stage company. We conduct our operations through our wholly-owned
subsidiary, Cullen Agritech. Cullen Agritech conducts its operations primarily
through its wholly-owned subsidiary, Natural Dairy Inc. (“Natural Dairy”). To date,
we have not generated any revenue and will not do so until we have sufficient
funds to implement our business plan described in the section entitled
“Business.” Since October 22, 2009, our activities have been primarily focused
on raising capital to fund our business plan.
Our
principal focus is to use our intellectual property in forage and animal
sciences to improve agricultural yields. The Company was formed to develop,
adapt and implement grazing-based farming systems in regions of the world where
the geophysical and climatic conditions are suitable for a pasture-based model.
While the potential for the pasture or grazing model is significant in many of
the world’s developed and developing economies, the systems are highly specific
and require significant adaptation and modification to be successful. We have
identified the global dairy industry as a primary opportunity in which our
systems can be applied to improve yields on land and drive cost-base
efficiencies. We believe that cost savings of up to 40-50% are achievable in the
long term. Further, we believe the high cost structure, which is employed by
over 95% of milk producers in the U.S. and supported by government subsidies,
will help to maintain a floor to milk prices in the U.S. and provide us with
long term margin protection. By having direct access to a domestic market, we
believe our business plan provides a unique opportunity to invest directly into
food production while limiting earnings volatility linked to foreign exchange
exposure, typically associated with returns from commodity production in
exporting countries, such as New Zealand. In addition, we believe the potential
opportunity to vertically integrate, while maintaining control of the supply
chain, provides a further opportunity to reduce volatility and maximize
profitability.
We
have been in the process of attempting to obtain land development financing
backed by the property we own and operate to support our working capital needs
and implement our business plan. However, due to the recent performance of
similar types of farming operations in the region, as well as the general
economic downturn, financial institutions have been unwilling to provide such
financing. As a result, we have been unable to obtain the necessary funding to
support the implementation of our business plan at this time. Accordingly, we
are in the process of exploring all financing and strategic alternatives
available to us, including the possibility of disposing of or leasing additional
portions of our land in order to continue to support our working capital needs
and retire certain of our outstanding debt to reduce our interest obligations.
During
October 2010, we sold an aggregate of approximately 1,360 acres of agricultural
land we owned in the state of Georgia to various third parties for an aggregate
of approximately $3,340,000. We also granted a third party an option
to purchase an additional approximate 500 acres of land for approximately
$1,490,000. As of December 7, 2010, we owned approximately 1,150 acres of land.
We continue to explore the possibility of disposing of the remaining acres we
own. We are
currently in various stages of negotiations with potential buyers for some or
all of our remaining land, although we have not finalized any agreements and
have not accepted any offers that we have received at this time.
There is no assurance that we will be successful in disposing of any of
our remaining land. Additionally, we have reduced salaries paid to our
employees and curtailed operations in order to reduce operating
expenses. We will also look to explore alternative opportunities
available to us unrelated
to forage and animal sciences and farming systems which makes up our
current business plan in an effort to maximize shareholder value. To this
end, we have had preliminary discussions with a potential merger candidate
wishing to become publicly traded. However, such discussions are only
preliminary and no formal terms have been discussed or agreed
to. There is no assurance, however, that we will be
successful in such efforts. If we are unable to secure additional financing or
find another alternative, we will not have sufficient capital to implement our
business plan and may be forced to suspend all operations until such time as
capital or another alternative is available to us.
Until
such time where we can dispose of the remaining land we currently own or raise
adequate financing to deploy our pasture based dairy and beef business plan, we
have begun to utilize our pasture and general farming expertise to conduct
various farming activities on the land. We are also considering utilizing a
portion of the land for the production of pasture-finished beef products.
Grass-fed beef has been proven to be better for your health, better for the
environment and promotes improved animal ethics. As a result, there is a rapidly
growing market for grass-fed beef products in the U.S., which at the retail
levels can sell for a 50-100% premium over grain-fed beef. We believe the
existing supply-chain infrastructure would provide us with immediate access to
sell into the grass-fed market.
Corporate
History
We were
formed as a wholly-owned subsidiary of Triplecrown. Merger Sub was incorporated
as our wholly-owned subsidiary on August 31, 2009. We were formed in order to
allow Triplecrown to complete the Merger with Cullen Agritech, as contemplated
by the Merger Agreement. Cullen Agritech was formed on June 3, 2009. Cullen
Agritech’s primary operations are conducted through Natural Dairy Inc., a wholly
owned subsidiary of Cullen Agritech. Cullen Holdings is an affiliated entity
controlled by Eric J. Watson, our Chief Executive Officer, Secretary, Chairman
of the Board and Treasurer and, prior to the Merger, was the holder of all of
the outstanding common stock of Cullen Agritech.
Pursuant
to the Merger, (i) Triplecrown merged with and into the Company with the Company
surviving as the new publicly-traded corporation and (ii) Merger Sub merged with
and into Cullen Agritech with Cullen Agritech surviving as a wholly owned
subsidiary of the Company. As a result of the Merger, the former security
holders of Triplecrown and Cullen Agritech became the security holders of the
Company. Thus, the Company became a holding company, operating through its
wholly-owned subsidiary, Cullen Agritech. The Merger was consummated on October
22, 2009.
Business
Plan Upon Funding
Our
principal focus is to use our intellectual property in forage and animal
sciences to improve agricultural yields. Cullen Agritech was formed to develop,
adapt and implement grazing-based farming systems in regions of the world where
the geophysical and climatic conditions are suitable for a pasture-based model.
While the potential for the pasture or grazing model is significant in many of
the world’s developed and developing economies, the systems are highly specific
and require significant adaptation and modification to be successful. The
construction of a robust management framework is essential to deploy the systems
effectively in regions of the world where unique sets of geophysical, climatic
and social conditions exist. Specifically, Chile, China, Uruguay, the U.S. and
parts of Eastern Europe fit this criteria. We have identified the
global dairy industry as a primary opportunity in which our systems can be
applied to improve yields on land and drive cost-base efficiencies.
19
Natural
Dairy intends to utilize the farmland to produce Class I raw milk for the liquid
market in the Eastern Seaboard and it will strive to produce milk that is of the
highest quality in conformation with food safety standards. Natural Dairy
intends to use a majority of crossbred cows that have a higher milk solid
content (butter fat, protein and lactose) than U.S. Holsteins which we believe
will consistently produce milk which will exceed the 3.5% butter fat standard
for Class I milk. Natural Dairy will not use the Bovine Growth Hormone to
produce its milk. Natural Dairy milk should receive Class I (fluid) milk grading
and pricing with its high butter fat content, low somatic cell and bacteria
counts. As a result of its milk production operations, Natural Dairy will also
be generating revenue from the sale of livestock. This could take various forms,
including, but not limited to the sale of surplus livestock as well as the sale
of livestock that will be strategically culled as part of a herd management
program. The Company is also considering utilizing a portion of the land for the
production of pasture-finished beef products.
In
addition to the planned operation of our farmland, we intend to offer a range of
farm management and technology services such as forage techniques and genetics
and feed management strategies that are designed to help improve the
productivity and profitability of food animal production. While we specialize in
grazing systems and pasture technologies, products and services can be provided
for the traditional confinement-based dairy farm operator to integrate one or
more grazing technologies into their operations or refine their feed and animal
management strategies to improve profitability within a confinement
system.
We plan
to work with producers, industry leaders and governments to improve the economic
and environmental sustainability of food animal production. This includes whole
farm management plans and feasibility studies, feed production, storage and
feeding strategies, genetic improvement and rearing of replacement stock and
engineering waste management solutions.
Intellectual
Property
Upon
consummation of the Merger, we acquired the intellectual property that makes up
our proprietary farming system. Our intellectual property includes all
constituent components of the proprietary farming system (including forage
growth and yields, animal genetics and milking systems) that has been developed
by adapting established grazing science, processes, technology and genetics to
liquid milk production in the Southeastern U.S.
Although
we may seek to register this intellectual property at a later date, none of the
intellectual property is currently registered. In the absence of registration,
protection of the intellectual property will be afforded by the scientifically
advanced nature of the information subsisting in the proprietary system. This
complexity means our system could not be readily imitated or adopted by current
or future market participants. We will seek to protect our intellectual property
by using a combination of trademark, patent and trade secrets laws, licensing
and nondisclosure agreements and other security measures.
20
Key
Components to Cullen Agritech’s Pasture-Based Farming System
Our first
proprietary farming system is applicable to the U.S. dairy industry and has the
potential to significantly increase yields on land in the Southeastern U.S. This
system is based on a grazing-based farming model, whereby dairy cows are
primarily fed a renewable pasture resource as opposed to a corn-based feed. We
believe that with time, effort and resources the intellectual property can be
adapted for implementation in markets beyond the Southeastern U.S. Key
components to the farming system are as follows:
Farm Selection and
Design: The pasture-based farming system requires land with specific
characteristics. These characteristics include key soil properties and base
fertility suitable for high quality forage crop production. It also requires
contiguous blocks with shapes that minimize walking distances of grazing animals
and a high proportion of clear irrigated crop acres that enable the system to
achieve its optimum production efficiency. The farming system intellectual
property includes paddock designs that provide a high level of control over the
pasture feed resource – allowing many different varieties of pasture to be grown
and various different rates throughout the year. Paddock area and layout is a
fundamental tool that enables pasture to be accurately allocated to meet the
nutritional demand of the livestock. Paddocks and lanes are also designed to
minimize walking distances to and from the milk harvesting system and enable
efficient irrigation of grazed acreage and cooling of livestock in the summer.
Water reticulation and stock watering systems are also designed to ensure that
milking cows receive adequate fresh water to each paddock. In addition, nutrient
management plans are produced for each system so that they meet environmental
regulations. The farming system intellectual property incorporates the knowledge
and understanding of the above elements that are required to successfully
identify and convert land into a successful pasture-based dairy.
We have
identified over 40,000 effective acres (farmable acres, typically 75-80% of the
property) suitable for deployment of the pasture-based farming systems which may
be acquired and developed as capital availability allows. These sites are
primarily located in the State of Georgia and have access to an ample supply of
high quality water. Engineers and other contractors have been identified to
complete the conversion of land as well as manufacturing companies for the
installation of sheds and milking systems. Livestock required to stock the
potential farms is also being identified through multiple breeders. We currently
own approximately 2,300 acres of farmland in the State of Georgia that we
believe is suitable for the use of our proprietary farming system. We intend to
begin utilizing this property once we have sufficient capital to acquire the
necessary livestock and supplies for the farmland. As additional
capital becomes available to us, we will also begin to attempt to acquire more
acreage and deploy our pasture-based farming system on such
acreage.
Pasture Sciences: The
farming system incorporates a proprietary pasture production strategy that
optimizes annual cow feed supply and milk production through an integrated mix
of different pasture crop species and varieties, and management thereof. The
system incorporates a matrix of summer and winter active species that provide a
year-round supply of quality forage. The different pastures are designed to
achieve the desired quantitative and qualitative traits, including provision of
sufficient energy, protein, and trace elements to the livestock to ensure a
targeted milk production is achieved. The intellectual property includes a
detailed understanding of pasture inventory methodologies such as indirect
pasture assessment technologies, feed budgeting and pasture wedge construction
for the specific forage species used in the system. This allows efficient
utilization of the pasture resource and can identify where supplemental feeds
are required to address any quantitative or qualitative deficiency in the
pasture. The intellectual property delivers the knowledge and understanding of
the pasture production strategy including the management tools required to
manage it on a day to day basis. Without this understanding, an efficient
pasture-based production system cannot be achieved. In addition,
pasture-specific fertilization and irrigation strategies are also a key
component of the farming system intellectual property. Soil moisture sensors are
planned to be installed to ensure that irrigation is used optimally to achieve
maximum plant growth rates for the specific crop species. To complement this,
the intellectual property delivers an understanding of fertilizer application
strategies, which are used to ensure that soil fertility is not limiting forage
growth.
21
Animal Genetics, Breeding
& Health: The farming system intellectual property includes an
understanding of animal management systems and genetic selection criteria to
compliment the pasture-based grazing model. The farming system intellectual
property incorporates an understanding of key selection criteria to optimize cow
type for grazing. These traits include body size and conformation aspects that
improved structural health, lower feed requirements for body maintenance, and
improved tolerance to environmental extremes (heat and cold). Animals are
selected for improved conception rates and maternal traits to increase calf
numbers, reduce culling due to reproductive failure and ensure seasonal calving.
The environment where the farming system is deployed has hot summers where
production is affected if tolerance to heat is not included as a breeding
objective. The intellectual property delivers an understanding of specific
strategies for identifying heat tolerant animals and building this trait more
quickly into the herd. These strategies include low pressure misting lines on
center pivot irrigators to cool cows in the summer months as well as mister and
sprinkler systems in the milking parlor to further lower body temperature in the
summer. Specific milk harvesting strategies such as timing of the milking
process have been developed to maximize milk production and cow comfort during
milking.
Genetic
selection pressure is also driven towards animals that have greater efficiency
in the conversion of cellulosic plant (forage-based) diets into milk. Genetic
improvement programs are planned be further enhanced with the use of automated
animal management systems with radio frequency ID tags that individually track
animal performance, feeding, and health status, and allow animals to be selected
on these criteria. The understanding of these genetic-selection criteria, which
is a key component of the intellectual property, will enable rapid development
of livestock lines that are ideally adapted to pasture based production in the
Southeast U.S. environment.
Farm Management: In
addition to the pasture management strategies and breeding and culling programs,
the pasture-based farming system is designed around significant labor, herd
management and waste management efficiencies. The intellectual property includes
an understanding of how to maximize the speed and efficiency of the milking
systems, which, if used correctly, can allow two people to milk up to 500 cows
per hour, greatly reducing labor requirements and waste production. Animal
management systems such as fencing, lanes and yards allow animals to be quickly
moved to various pasture crops on the farm and brought in for milking twice a
day with little labor required. The fencing and stock water systems also allow
the animals to be allocated variable amounts of pasture feed as needed by the
movement of herds between pasture blocks as well as the use of temporary
electric fencing. A key component of the farming system intellectual property is
an understanding of how to execute this movement of the herds on a daily basis
in order to maximize the pasture utilization. The herd management systems also
allow the separate management of different herds in their contemporary groups by
calving season, age structure, and production targets enabling differential
feeding to individual groups as their status requires. The understanding and
management of such systems is critical in order to achieve the expected
operational efficiencies that a pasture-based system can deliver. Effluent
management systems quickly and efficiently recycle waste water by reapplication
back onto the pasture using a holding sump, pump and traveling irrigator system
designed for grazing systems, eliminating the need for any storage of animal
waste, as is necessary in confinement animal operations. The effluent applied
over a relatively large land base becomes a valuable source of fertilizer rather
than a costly waste product with a significant risk of environmental
contamination.
22
Systems & Training: Day
to day management of the farms is critical to success. Therefore, highly trained
farm managers who are skilled in grazing management, pasture crop production and
animal sciences will need to be trained. As explained, the system includes
various specific requirements including detailed management processes such as
those associated with pasture production, culling strategies, herd management
and effluent management systems. Therefore, an accurate understanding how to
communicate and train the key day to day farm managers will be essential to
efficiently run a large pasture-based dairy operation. A key part of the
intellectual property includes the understanding of how to train and manage the
farm management staff to ensure the key performance criteria are
achieved.
Testing
of Cullen Agritech’s Farming System
During
2008 and 2009, our intellectual property was tested on several research farms.
This testing was led by Dr. Richard Watson, the Company’s Chief Scientific
Officer and director. None of the testing procedures or results have been
independently verified by a third party.
Forage
Systems
The
research farm conducted forage variety and species testing on both a ‘small
plot’ and whole farm scale to determine key forage characteristics such as dry
matter (yield) growth profiles by month, nutrient content (energy and crude
protein), persistence under grazing and compatibility with other forage species.
Species evaluated include C4 perennials such as Bermuda Grass (Cynodon
dactylon), several C4 annual species such as Millet and Sudangrass, C3 annual
and perennial temperate grasses and legumes, as well as perennial herbs such as
chicory. Monthly samples were collected from the replicated small plots to
analyze dry matter growth (pounds of dry matter per acre per day), metabolizable
energy and crude protein. The ‘small plot’ trials are in a ‘replicated complete
block design’ according to strict scientific rigor that is embedded within
larger pastures on the research farm. These plot trials allow the simultaneous
evaluation of many species and forage varieties in a common environment, across
a range of key parameters. The larger whole paddock and farm systems trials were
a phase 2 follow-on from the small plot work where the most promising candidates
can be assessed on a larger scale.
The
results of these trials provided us with a nutritional and growth profile
database of many forage crop species and varieties. This database has been used
to create a forage species matrix that provides a best fit solution to the
nutritional (qualitative) and dry matter (quantitative) requirements of the
dairy herd. Such research and development strategies will continue to be used to
develop and evaluate new forage species as they become available through
commercial breeding programs and from within our own breeding
collaborations.
Animal Genetics and Type
Evaluations
The
research farm acquired livestock across a range of breed types and calving
seasons. Detailed records have been kept on productivity (milk yield),
reproductive performance (conception rate to artificial insemination and natural
mating), health, body condition and heat tolerance. Analysis of these records
has resulted in the development of a livestock strategy that will complement the
forage strategy and produce the desired performance both on a production and
cost basis. The key findings indicated that U.S. Holsteins are less suitable for
the pasture-based farming systems than Holstein / Jersey crosses and purebred
Jersey breeds. The ideal calving season to make most effective use of grown
forage and minimize environmental stress on the cow is to have herd calving
seasons in the spring and autumn and in particular avoid trying to calve and
mate in the summer when heat adversely affects both production and reproductive
performance in the cow. Specific mating systems and seasonal calving strategies
are a key differentiator of a pasture-based system when compared to a
traditional, confinement dairy system. The results of such testing allowed us to
develop strategies which are instrumental to the intellectual property including
those surrounding species selection, culling programs and reproduction
management strategies.
23
Supplemental Feed
Inputs
The
prevalence of U.S. genetics in the herd required that supplemental feed input
analysis be undertaken to assess what feed levels and feed formulations were
necessary to complement a pasture-based diet. This analysis is required in order
to achieve the targeted stocking rates while maintaining a feed plan that will
deliver sufficient energy to the livestock. The use of supplementary feeds is
contrary to a New Zealand-based system where it would not be unusual for there
to not be any supplemental feeding strategy utilized. Led by Dr. Watson, we
undertook a close examination of energy and trace element intake, which is
required to ensure that a complete diet is fed to the livestock to meet the
nutritional requirements for body maintenance and milk production.
Results
of this work have indicated that a pasture only diet is not possible with a 100%
U.S. genetic base. The research has resulted in the development of a specific
supplemental feeding strategy which incorporates between 25% and 30%
concentrated corn-based feed. An understanding of how to manage this
supplemental feeding strategy on a day to day basis, in response to monitoring
forage development and key performance indicators such as production per cow, is
also core to the intellectual property that has been developed through this
research. Such a strategy must be included in the overall system to balance
energy and mineral requirements of the milking animal. From this data, a genetic
improvement program has been developed that will look to increase the proportion
of Jersey and Jersey crosses and incorporate smaller framed New Zealand Holstein
genetics into the herd to improve reproductive performance and feed efficiency
on a pasture-based system.
Nutrient
Management
The
research farm has undertaken studies to evaluate the environmental impact of the
pasture based system and associated effluent management processes. Serial soil
analyses have been used to track the profile of key nutrients and organic matter
in the soil including nitrates, phosphate and potassium and carbon
sequestration. Results to date indicate that the system developed on the
research farms delivers no nutrient loading, an improvement in nitrogen
fertilizer use efficiency over row crop production and an improvement in soil
physical properties (organic matter, and structure). It is anticipated that
these trials will identify key areas where pasture based animal production has
significant environmental advantages.
Research
has been undertaken to quantify the impact of animal waste production and
management in the grazing system. We have worked closely with Land Grant
Universities and State Departments of Agriculture to quantify waste management
parameters and implement policy changes that reflect the improvements of the
grazing system over the confinement feeding systems.
Competitive
Strengths
Key
Cullen Agritech personnel have extensive experience in improving yields through
applying pasture based farming techniques
Significant
time and resources have been invested by our key personnel, including Dr.
Richard Watson, a member of our board of directors and the Chief Scientific
Officer of Natural Dairy, in developing the necessary capabilities to deploy our
pasture-based technologies. Dr. Watson has an extensive background in pastoral
science and technology, from the laboratory to commercialization and industry
application of technologies.
24
We have
also assembled an experienced group of pastoral scientists and dairy science
industry participants to serve on our advisory board to further enhance our
position as an innovative technology company with the ability to bring efficient
pasture-based production systems to the agricultural community in the U.S. The
members of our advisory board have access to embryo, semen and genetic screening
technologies (SNP-chip) that may accelerate genetic improvement and deployment
of these lines in the U.S. dairy industry.
Tested
model through research farms developed by key Cullen Agritech personnel to
provide cost advantages
Our
proprietary farming system was developed and tested on research farms in Girard,
Georgia. These farms were established to develop and test the proprietary
grazing system that Natural Dairy plans to roll-out in the Southeastern U.S.
Although we do not own these research farms, we own all the intellectual
property associated with the farming system developed on these farms. The first
research farm began producing milk in March 2008. During 2008, it was used to
refine and develop the farming system. This research was focused on the
development of a pasture crop system that maximized the production and
utilization of grown pastures. Breeding and calving season trials have been
conducted to optimize the relationship between feed grown on farm and the feed
demand of the herd. During 2010, the farming system was refined and has achieved
favorable production cost results, proving the efficiency of the
system.
Forage
based system provides lower cost per hundred pounds (“cwt”) of dairy
production
The cost
of producing milk will vary greatly depending on the region, the exact
management practices and quality of farmers. For a majority of dairy farmers,
the high dependence on the use of corn-based concentrate as a feedstock results
in a high cost base. The use of pasture as a replacement for corn-based
concentrate in our model reduces this expense, creating a much more
economically-sustainable cost structure. Our model will also be less labor
intensive and is more likely to have reduced animal health costs due to
healthier and less confined conditions.
The chart
below depicts the cost structures of various dairy farm operating models. The
New Zealand pasture-based grazing model has generally operated at $8.00-$10.00
per cwt cost levels. Given the research and development completed to date,
Natural Dairy’s management believes that a cost structure as low as $10.00 per
cwt is achievable in the long term. In comparison, the traditional U.S.
confinement based model operated at an average of $19.10 per cwt during 2007 and
2008 ($20.02 per cwt for the U.S. Southern Seaboard region).
Chart 1:
Cost Comparison of Different Farming Models.
Source:
U.S. Department of Agriculture (“USDA”), Cullen Agritech
Management.
Natural
Dairy is strategically located in a region of high demand coupled with a
shortage in supply
Natural
Dairy’s roll-out will be focused in the Southeastern U.S. where there is
currently a shortage in the supply of fresh liquid milk. In addition, the U.S.
represents the third largest liquid milk market in the world, a large proportion
of which is represented by the Eastern Seaboard. Natural Dairy will be
strategically positioned to help fill that supply gap and produce milk for this
market, which is currently undersupplied.
25
Efficient
production per cow
We intend
to utilize pasture production systems that optimize seasonal qualitative
attributes of the pasture to best match the energy demands of its herds. Under
these systems, the cow is provided sufficient nutrients to meet her needs for
body maintenance and milk production. We intend to employ energy balances (the
difference between the energy gained from feed intake and the energy expenditure
associated with different physiological functions such as maintenance, milk
production, pregnancy, and growth) to ensure that the cows are fed enough
pasture to achieve the highest possible production targets in the most cost
effective manner. Management believes this level of feed management sets us
apart from other grazing operations in the U.S.
Cullen
Agritech’s system will result in healthier livestock and increased
longevity
The
common U.S. dairy industry cow is the U.S. Holstein. Our model is suited to
smaller framed livestock such as Jersey/Holstein cross-breeds or a Friesian
Holstein. These breeds of livestock generally have longer productive lives than
a typical U.S. Holstein, which is further lengthened by the healthier conditions
associated with our pasture-based farming system which we own. This longevity is
expected to result in reduced livestock culling rates and additional revenue
from surplus livestock sales. Livestock managed under the system are also likely
to have fewer health issues due to increased exercise and exposure to cleaner,
less confined living conditions. As a result animals are healthier and the speed
at which infection can spread throughout a herd is reduced. This, in turn,
results in increased longevity as well as reduced health-related operating
expenses on the farms.
Reduced
labor costs
We will
utilize milking systems which are custom made to maximize efficiency and
minimize labor costs. This technology, combined with a unique and efficient farm
design and management strategy, results in reduced labor costs, further reducing
the cost of production under the system that we will utilize.
Potential
to achieve higher pricing in the future
Management
believes the demand for naturally produced food animal products is increasing as
the population’s concern with how their food is produced increases. General
awareness of the animal ethics and human health benefits of the grazing-based
production system have also grown. For instance, a USDA survey showed that 48%
of U.S. consumers now recognize “Grass-fed” as a brand.
Products
from animals fed on a pasture dominant diet have been found to contain higher
levels of a number of naturally occurring metabolites that have proven human
health benefits. The fermentation of the pasture diet in grazing animals by
rumen bacteria create higher levels of conjugated linoleic acid (CLA), omega-3
and 6 fatty acids and vitamins A and E in the milk. Production of these
qualities in milk produced by confinement cows is reduced by the heavy-starch
grain diet, which reduces the formation of these beneficial fermentation
products.
Currently,
there is a small but rapidly growing market for grass-fed or pasture-fed beef
products. However, grass-fed milk products are limited due to dominance of the
confinement model and the lack of producers who have the technical knowledge to
produce milk on pasture year round.
26
Natural
Dairy has the ability to produce grass-fed milk year round in selected markets.
Further, expected milk production levels may in the future result in
availability of separate processing, with Natural Dairy’s grass-fed milk being
processed separately from other milk. However, Natural Dairy milk will be
initially sold as standard milk along with milk from confinement production.
This means it will not initially receive premium pricing for its milk products
on the basis of its “grass-fed” product. The Company is also exploring the
ability to produce grass-fed beef products, which also could be sold for a
premium in the marketplace.
Strategic
agreements and relationships allow for efficient large scale rollout of pasture
based system
As
described in more detail below, Cullen Agritech entered into a strategic
cooperation agreement with New Zealand Agritech, Inc. (“NZ Agritech”), New
Zealand’s national representative body for agricultural technology companies
operating in New Zealand, to promote the interests of NZ Agritech and its
members. Cullen Agritech will assist members of NZ Agritech to mitigate barriers
of market entry and provide the opportunity to realize potential growth in
various markets. This alliance reflects an important connection to participants
of New Zealand’s agricultural technology industry and enables us to offer its
customers the benefit of our advanced technologies.
We
believe that this and other potential strategic relationships will help to build
our business and operations.
Joint
Venture Opportunities
Our
business encompasses a broad exposure to third parties operating within the
agricultural science industry, including those which have developed or that
otherwise promote products and/or technologies that compliment our business
objectives. A number of these third parties are seeking to expand into markets
in which we will undertake business activities. Management believes that we are
positioned to partner with such third parties to assist with market entry and
that joint venture opportunities exist in respect to product and technology
adaptation services, in addition to potential marketing
arrangements.
On August
11, 2009, Cullen Agritech entered into a strategic cooperation agreement with NZ
Agritech. Pursuant to the agreement, Cullen Agritech will assist members of NZ
Agritech to mitigate barriers of market entry and provide the opportunity to
realize the potential growth in various markets. NZ Agritech in turn will
actively promote to its members its alliance with Cullen Agritech. Accordingly,
this relationship with NZ Agritech presents Cullen Agritech with the opportunity
to enter joint ventures and strategic alliances with New Zealand companies
offering innovative products and technologies which promote efficient farming
systems, including those seeking assistance with adaptation to the Southeastern
U.S. The agreement is perpetual in nature but may be terminated by either party
upon three months’ notice. Cullen Agritech is obligated to pay a fee to NZ
Agritech annually, in arrears, based on its dealings with NZ Agritech’s members.
No such dealings have taken place to date and therefore no fee is currently
owed. The fee is to be negotiated on a year by year basis.
Within
the U.S., we believe the know-how residing in its pasture-based farming system
will present the opportunity for joint ventures with federal and state
departments and businesses including dairy cooperatives, universities, training
institutions and farmers.
27
Customers/Sales
and Marketing
We intend
to partner with and provide services to some of the world’s largest agricultural
companies, including producer cooperatives, corporate farmers, investment funds
and agricultural technology providers. Our expertise can be applied across a
range of global regions and production systems that utilize pasture systems and
technologies for food animal production and can assist industry and government
organizations in adapting these technologies to their regions and production
requirements. Natural Dairy’s customer base will be predominately milk
cooperatives that supply processing facilities.
Competition
Potential
competitors are large agricultural technology and service providers that might
develop a globally focused consultancy capacity that is focused on the grazing
model and technologies. To our knowledge, there is currently no other entity
operating in the global grazing technology industry, provided, however companies
could potentially develop this capability. These potential competitors include
PGG Wrightson (NZ), Livestock Improvement Corporation (NZ), New Zealand Farming
System Uruguay (NZ), Grasslands Consultancy LLC (Mo, USA), Manuka Farming
(Chile) and Fonterra. To management’s knowledge, none of these companies
currently provide agricultural consultancy services of significance outside
their country of incorporation and may have limited capacity to move to other
regions as a technology provider.
Although
Natural Dairy will face competition from other liquid milk producers across the
U.S., the effect of such competition is not expected to be adverse given the
supply gap that exists in the liquid milk market in the Southeastern
U.S.
Employees
Currently,
we have two employees, none of which are represented by any unions, nor are we
otherwise subject to any collective bargaining agreements. We have never
experienced a strike or similar work stoppage. We consider our relations with
our employees to be good.
Properties
We
maintain our executive offices at 1431 N. Jones Plantation Road, Millen, Georgia
30442. This land is included in the approximately 1,150 acres of
farmland we own in the State of Georgia. Cullen Holdings loaned us part of the
purchase price for the land and the land is subject to a mortgage securing this
loan. The loan is evidenced by a promissory note that accrues
interest at the rate of 8% per annum. As of September 30, 2010, the
principal balance outstanding on the promissory note was
$3,938,668.
Legal
Proceedings
We are
not party to any litigation.
On
December 9, 2009, a second amended class action complaint, styled Goodman v.
Watson, et al., was filed in the Court of Chancery of the State of Delaware
against the former directors of Triplecrown, several of whom are current
directors of our company. The complaint alleges that the defendants breached
their fiduciary duties and their duty of disclosure in connection with the
Merger. The plaintiff seeks, as alternative remedies, damages in the amount of
approximately $9.74 per share, to have Triplecrown’s trust account restored and
distributed pro rata to members of the putative class, a quasi-appraisal remedy
for members of the putative class, and an opportunity for members of the
putative class to exercise conversion rights in connection with the
Merger. The defendants filed an answer on December 23, 2009. We
and the former directors are currently in settlement discussions with the
plaintiff. If an acceptable settlement cannot be reached, the
defendants intend to defend this action vigorously but can provide no
assurance as to the manner or timing of its resolution. If the
court finds in favor of the plaintiff (who represents a purported class of
stockholders that held approximately 490,000 shares of Triplecrown’s common
stock) and the defendants are required to pay damages to the
plaintiff (which could be approximately $5 million), we will have an
obligation to indemnify the defendants for such damages. In such
event, we will seek to recover such payments from our D&O insurance
carrier as we believe such claims are covered by our insurance
policies. However, there is no assurance that the carrier will agree
in this analysis and not deny coverage of such claims. Adjustments,
if any, that might result from the resolution of this matter have not been
reflected in the condensed consolidated financial statements.
28
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with “Selected Financial and Other
Data” and our financial statements and the related notes to those statements
included elsewhere in this prospectus. In addition to historical financial
information, the following discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. The Company’s
actual results and timing of selected events may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those discussed under “Risk Factors” and elsewhere in this
prospectus.
Overview
We are a
development stage company. Since October 22, 2009, our activities have been
primarily focused on raising capital to fund our business plan.
Our
principal focus is to use our intellectual property in forage and animal
sciences to improve agricultural yields. The Company was formed to develop,
adapt and implement grazing-based farming systems in regions of the world where
the geophysical and climatic conditions are suitable for a pasture-based model.
While the potential for the pasture or grazing model is significant in many of
the world’s developed and developing economies, the systems are highly specific
and require significant adaptation and modification to be successful. To date,
we have not generated any revenue and will not do so until we have sufficient
funds to implement our business plan described below.
We have
been in the process of attempting to obtain land development financing secured
by the property we own and operates to support our working capital needs and
implement our business plan. However, due to the recent performance
of farming operations in the Southeastern United States, as well as the general
economic downturn, financial institutions have been unwilling to provide such
financing. As a result, we have been unable to obtain the necessary
funding to support the implementation of our business plan at this
time. In order
to continue to support our working capital needs and retire certain of our
outstanding debt, during September 2010, we entered into contracts with
unrelated parties for the sale of approximately 1,800 acres or approximately 58%
of the land we owned at the time. During the three months ended September 30,
2010, we had sold 95 acres associated with those contracts. During October 2010,
we completed the sale of an additional 1,354 acres with the same unrelated
parties, which represented 45% of the land we owned at September 30, 2010, not
including the effect of an option we granted a buyer for the sale of 500
acres. We continue to explore the disposition of the remaining
property we own. We are
currently in various stages of negotiations with potential buyers for some or
all of our remaining land, although we have not finalized any agreements and
have not accepted any offers that we have received at this time.
There is no assurance that we will be successful in disposing of
any of our remaining land. The
following is a chart detailing the contracts we have entered into relating to
the sale of our land to date:
Number
of Acres Involved
|
Date Contract
Signed
|
Status of
Contract
|
||
95
|
9/2/2010
|
Closed
9/22/10
|
||
1,203
|
9/23/2010
|
Terminated
10/8/10
|
||
498
|
9/28/2010
|
Closed
10/28/10
|
||
683
|
10/15/2010
|
Closed
10/26/10
|
||
520
|
10/15/2010
|
Pending
|
||
154
|
10/22/2010
|
Closed
10/27/10
|
||
3,100
|
Total
acres owned as of September 1, 2010
|
|||
(1,430)
|
Total
acres sold from September 1, 2010 through January 4,
2011
|
|||
1,670
|
Total
acres owned at January 4, 2011
|
|||
(520)
|
Total
acres under contract to be sold as of January 4,
2011
|
|||
1,150
|
Total
acres owned at January 4, 2011 (excluding land under
contract)
|
Until
such time where we can dispose of the remaining land we currently own
or raise adequate financing to deploy our pasture based dairy and beef
business plan, we have begun to utilize our pasture and general farming
expertise to conduct various farming activities on the property. These
activities include, but are not limited to, the growing of pasture to raise
calves, the growing of corn for use as feed and sale to third parties and the
grazing of beef cattle on pasture.
Grass-fed
beef has been proven to be better for your health, better for the environment
and promotes improved animal ethics. As a result, there is a rapidly growing
market for grass-fed beef products in the U.S., which at the retail levels can
sell for a 50-100% premium over grain-fed beef. We believe the existing
supply-chain infrastructure would provide us with immediate access to sell into
the grass-fed market.
29
Results
of Operations
For nine
months ended September 30, 2010, we had a net loss of $2,412,243. We did not
generate any revenues during this period and we are development stage company.
Our expenses of $2,247,034 for nine months ended September 30, 2010 consisted
primarily of land impairment losses, legal, accounting and consulting fees,
payroll and employee related expenses, and other general corporate and
administrative expenses of $963,172, $294,879, $180,145, $542,471, and $266,367,
respectively.
For three
and nine months ended September 30, 2009, we had a net loss of $66,133. Our
expenses of $66,133 for three and nine months ended September 30, 2009 consisted
primarily of legal, payroll and employee related expenses, and other general
corporate and administrative expenses of $22,553, $36,493, and $7,087,
respectively.
For three
months ended September 30, 2010 and for the period from June 3, 2009 (inception)
through September 30, 2010, we had a net loss of $1,303,496 and $3,024,769
respectively. We did not generate any revenues during these periods and we are a
development stage company. Our expenses of $1,280,862 for three months ended
September 30, 2010 consisted primarily of land impairment losses, legal,
accounting and consulting fees, payroll and employee related expenses, and other
general corporate and administrative expenses of $963,172, $49,305, $35,794,
$134,293, and $98,298, respectively. For the period from June 3, 2009
(inception) through September 30, 2010, the Company’s expenses of $2,771,958,
consisted primarily of land impairment losses, legal, accounting and consulting
fees, payroll and employee related expenses, and other general corporate and
administrative expenses of $963,172, $488,706, $317,584, $672,323 and $330,173,
respectively. Prior to October 22, 2009, we and our wholly-owned subsidiary were
“shell companies” and conducted no business operations and did not own or lease
any real estate or other property.
Additionally,
upon the Merger, we issued to Cullen Holdings a promissory note in the amount of
$6,853,918, representing part of the purchase price of a certain piece of land
to be used by us following the Closing (see Note 3 to the condensed consolidated
financial statements). This amount was to be repaid to Cullen Holdings at
Closing but sufficient funds were not available. On March 30, 2010, the parties
amended the terms of the promissory note to extend the maturity date to January
20, 2011. The
parties are currently in discussion to further extend the maturity date of the
promissory note but no agreement has been reached at this time. The
new promissory note in the amount of $5,066,985 accrues interest at the rate of
8% per annum. For the three months ended September 30, 2010 and for the period
from June 3, 2009 (inception) through September 30, 2010, we had interest
expense of $82,079 and $394,208, respectively, related to this note. For the nine months ended
September 30, 2010, we had interest expense of $282,849, related to this
note.
For the
three months ended September 30, 2010, we had other income, net of $59,945
related to lease income, interest income, the sale of corn and hay and loss from
the sale of land and a $314 provision for income tax. For the nine months ended
September 30, 2010, we had other income, net of $118,895 related to lease
income, interest income, rental of property, the sale of corn, hay and timber
and gain from the sale of land and a $976 provision for income tax. For the
period from June 3, 2009 (inception) through September 30, 2010, we had other
income, net related to lease income, interest income, rental of property, the
sale of corn, hay and timber and gain from the sale of land of $142,972 and a
$1,296 provision for income tax.
Financial
Condition and Liquidity
We were
formed as a wholly owned subsidiary of Triplecrown. From our inception in June
3, 2009 until the completion of the Merger on October 22, 2009, our activities
were limited to its organization, the preparation and filing with the SEC of a
Registration Statement on Form S-4 and other matters related to the Merger.
Since October 22, 2009, our activities have been primarily focused on raising
capital to fund its business plan. As of September 30, 2010, we had $56,188 of
available cash and during the period from June 3, 2009 (inception) through
September 30, 2010, did not have any sources of revenue, other than lease,
interest, corn sales, hay sales and timber sale income. We had a net loss of
$3,024,769 for the period from June 3, 2009 (inception) through September 30,
2010. As of September 30, 2010, we had working capital deficiency of
$3,703,984.
30
Upon
the consummation of the Merger, we issued to Cullen Holdings a promissory note
in the amount of $6,853,918, representing part of the purchase price of the land
to be used by us following the Closing. The note was to be repaid as soon as
practicable but no later than January 20, 2010 (90 days from the date of
issuance). This amount was to be repaid to Cullen Holdings at Closing of the
Merger but sufficient funds were not available. At September 30, 2010 and for
the period from June 3, 2009 (inception) through September 30, 2010 we had
repaid Cullen Holdings $150,000 and $3,150,000 of the note, respectively,
consisting of $144,368 of principal and $5,632 of interest and $3,091,959 of
principal and $58,041 of interest, respectively. On March 30, 2010, Cullen
Holdings issued a new note in replacement of the original note which was past
due. The new promissory note is in the amount of $5,066,985 and accrues interest
at 8% per annum and is due on January 20, 2011. The
parties are currently in discussion to further extend the maturity date of the
promissory note but no agreement has been reached at this time. At
September 30, 2010, the amount outstanding on the note was $3,938,668. In
consideration of this extension, we granted to Cullen Holdings a mortgage on the
land that is the subject of the promissory note. The note continues to accrue
interest at the rate of 8% per annum.
In
January 2010, we entered into an agreement to sell 340 non irrigated acres of
our property. The sale of the parcel of land closed on February 6, 2010 for an
aggregate sales price of $613,170 or approximately $1,800 per acre. The sale
price per acre of the 340 acres sold was lower than the average price per acre
at which the 3,600 acres we previously owned were purchased. This is due to the
fact that the 340 acres sold were non irrigated, while the 3,600 acres that were
originally purchased were a mixture of irrigated and non irrigated acres. We
estimate the original purchase price for this land to be $594,794 and have
booked a gain from the sale of this property of $6,321 as other income, net
during the three and nine months ended September 30, 2010.
In June
2010, we entered into an agreement to sell 240 acres of land, of which 200 acres
were irrigated and 40 acres were non irrigated. The sale of the parcel of land
closed on June 25, 2010 for a sales purchase price of $776,688 or approximately
$3,236 per acre. The sale price per acre sold was higher than the average price
per acre at which the 3,600 acres we previously owned were originally purchased.
This is due to the fact that the 240 acres sold were mostly irrigated, while the
3,600 acres that were originally purchased were a mixture of irrigated and non
irrigated acres. We estimate the original purchase price for this land to be
$807,239 and have booked a loss from the sale of this property of $53,489 as
other expense during the three and nine months ended September 30,
2010.
In
September 2010, we entered into an agreement to sell 95 acres of non irrigated
land. The sale of the parcel of land closed on September 23, 2010 for an
aggregate sales price of $170,244 or approximately $1,800 per acre. The sale
price per acre was higher than the average price per acre at which the 3,600
acres we previously owned were originally purchased. This is due to the fact
that the 95 acres sold were non irrigated, while the 3,600 acres that we
originally purchased were a mixture of irrigated and non irrigated acres. We
estimate the original purchase price for this land to be $165,192 and have
recorded a loss from the sale of this property of $3,641 which is included in
other income, net during the three and nine months ended September 30,
2010.
For the
three and nine months ended September 30, 2010, the Company recognized a gain on
sale of equipment totaling $2,701.
31
We
have been attempting to obtain land development financing backed by the property
we own and operate to support our working capital needs and implement our
business plan. However, due to the recent performance of similar
types of farming operations in the region, as well as the general economic
downturn, financial institutions have been unwilling to provide such
financing. As a result, we have been unable to obtain the necessary
funding to support the implementation of our business plan at this
time. In order to continue to support its working capital needs or
alternatively to retire certain of its outstanding debt, during September 2010,
we entered into contracts with unrelated parties for the sale of approximately
1,800 acres or approximately 58% of the land we owned at the time. During the
three months ended September 30, 2010 we had sold 95 acres associated with those
contracts. During October 2010, we completed the sale of an additional 1,354
acres with the same unrelated parties, which represented 45% of the land
we owned at September 30, 2010, not including the effect of the option for the
sale of 500 acres. We continue to explore the disposition of the
remaining property we own. We are
currently in various stages of negotiations with potential buyers for some or
all of our remaining land, although we have not finalized any agreements and
have not accepted any offers that we have received at this time.
There is no assurance that we will be successful in disposing of any of
our remaining land. We have also reduced salaries paid to our employees and
curtailed operations in order to raise capital and reduce operating
expenses. Additionally, we are in the process of exploring all
financing and strategic alternatives available to us, including alternative
opportunities available to us unrelated to forage and animal sciences and
farming systems which makes up our current business plan in an effort to
maximize shareholder value. To this
end, we have had preliminary discussions with a potential merger candidate
wishing to become publicly traded. However, such discussions are only
preliminary and no formal terms have been discussed or agreed to.
There is no assurance, however, that we will be successful in any of such
efforts. If we are unable to attain further debt or equity financing
on terms acceptable to us, our funds may not be sufficient to execute our
business plan. These factors raise substantial doubt about our ability to
continue as a going concern. The unaudited condensed consolidated financial
statements do not include any adjustments that might be necessary if it is
unable to continue as a going concern.
Off-Balance
Sheet Financing Arrangements
We have
no obligations, assets or liabilities which would be considered off-balance
sheet arrangements. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often
referred to as variable interest entities, which would have been established for
the purpose of facilitating off-balance sheet arrangements.
We
have not entered into any off-balance sheet financing arrangements, established
any special purpose entities, guaranteed any debt or commitments of other
entities, or acquired any non-financial assets.
Contractual
Obligations
On June
1, 2010, we entered into an agreement with an unrelated third party for the
lease 753 acres of the Company’s property, from June 1, 2010 through December
31, 2010. This area of land consists of 500 irrigated acres and 253 non
irrigated acres. The agreement calls for the unrelated third party to pay, in
advance, $175 per acre of irrigated land and $50 per acre of non irrigated land.
We received $100,150 for the lease of this land during June 2010.
On June
1, 2010, we entered into an agreement with Hart for the lease 120 acres of our
property, from June 1, 2010 through December 31, 2010. This area of land
consists of 100 irrigated acres and 20 non irrigated acres. The agreement calls
for Hart to pay, in advance, $175 per acre of irrigated land and $50 per acre of
non irrigated land. We have received $18,500 for the lease of this land during
June 2010.
On
September 23, 2010, we entered into a sales contract with Landee Acres, LLC
(“Landee”) pursuant to which we were to sell to Landee approximately 1,200
acres of land for approximately $2.8 million. The number of acres to be
sold represented approximately 40% of the acres of land we owned. The agreement
was subject to a 14-day due diligence period for Landee to examine the land,
during which time Landee could terminate the contract for any reason with no
penalty. On October 8, 2010, we were notified that Landee was terminating the
contract because it was unable to obtain the necessary financing to purchase the
land. On October 15, 2010, we entered into a new sales contract with Landee
pursuant to which we were to sell to Landee approximately 700 acres of land for
an aggregate of $1.45 million, which approximates the carry value of the land as
of September 30, 2010. This sale of 700 acres closed on October 26, 2010. We
also granted to Landee an option to purchase an additional approximate 500 acres
of land for approximately $1.49 million, which approximates the carry value of
the land as of September 30, 2010. This option must be exercised and such sale
must occur by September 1, 2011; provided however that if the option is
exercised and the sale is consummated on or before March 31, 2011, the purchase
price for this land would be reduced by $50,000.
On
September 28, 2010, we entered into a Sales Contract with Benny Mims pursuant to
which we were to sell to the buyer approximately 500 acres of land for
approximately $1.6 million which approximate the carry value of the land as of
September 30, 2010. This sale closed on October 28,
2010.
32
Critical
Accounting Policies
Our
significant accounting policies are more fully described in Note 1 to the
consolidated financial statements and Note 1 to the unaudited condensed
consolidated interim financial statements. However certain accounting policies
are particularly important to the portrayal of financial position and results of
operations and require the application of significant judgments by management.
In applying those policies, management used its judgment to determine the
appropriate assumptions to be used in determination of certain estimates. Our
accounting policy will be to use estimates based on terms of existing contracts,
observance of trends in the industry and information available from outside
sources, as appropriate.
Market
Risk
Our
primary exposure to market risk consists of risk related to changes in interest
rates. We have not used derivative financial instruments for speculation or
trading purposes.
33
MANAGEMENT
Directors
and Executive Officers
Our
current directors and executive officers are as follows:
Name
|
Age
|
Position
|
||
Eric
J. Watson
|
51
|
Chief
Executive Officer, Secretary, Treasurer and Director
|
||
Richard
Watson
|
38
|
Director
and Chief Scientific Officer of Natural Dairy
|
||
Edward
J. Mathias
|
68
|
Director
|
||
Robert
B. Hersov
|
50
|
Director
|
||
Kerry
Kennedy
|
51
|
Director
|
||
Richard
Y. Roberts
|
59
|
Director
|
||
Edward
Hanson
|
35
|
Director
|
Eric J.
Watson has been our chief executive officer, secretary and treasurer and
a member of our board of directors since our inception in August 2009. Mr.
Watson was also the chairman and treasurer of Triplecrown from its inception in
June 2007 until the Merger in October 2009. He has also been the chief executive
officer of Cullen Agritech since its inception in June 2009. He has been
instrumental in our early development and his business experience includes
numerous acquisitions which make him well-suited to act as our chief executive
officer as we seek to expand our business.
Since
January 1995, Mr. Watson has been the executive chairman of, and interests
associated with him own, Cullen Investments Limited, an international private
investment company which has its origins in a start up founded by Mr. Watson
through which he has actively invested his own capital in a range of successful
mergers and acquisitions. Mr. Watson and his associated interests have a
substantial portfolio comprising interests in the fashion retail, financial
services, real estate, sports and entertainment sectors. Cullen Investments
interests include ownership of Bendon, a global lingerie company whose prestige
brands include the licensed Elle Macpherson Intimates and Stella McCartney
labels.
From July
2005 until December 2007, Mr. Watson served as the chairman of the board and
treasurer of Endeavor Acquisition Corp., an NYSE Amex listed blank check company
formed to acquire an operating business. Endeavor Acquisition Corp. consummated
its business combination with American Apparel, Inc. on December 12, 2007. From
January 2007 to April 2009, Mr. Watson was the chairman of the board and
treasurer of Victory Acquisition Corp., a blank check company formed for the
purpose of effecting a merger, capital stock exchange, asset acquisition or
other similar business combination with an operating business in any industry
other than the franchising, financial services or healthcare industries. Victory
Acquisition Corp. did not consummate a business combination and liquidated as a
result.
Prior to
founding Cullen Investments, Mr. Watson was the founding chairman and largest
stockholder of Blue Star Group, a retail and distribution group he founded in
January 1992. In 1996, Blue Star Group was sold to U.S. Office Products, a
diversified supplier of a broad range of office products and business services
to corporate customers. Until August 1999, Mr. Watson continued as executive
chairman of Blue Star Group, a wholly-owned subsidiary of U.S. Office Products
after the acquisition. Following the acquisition of Blue Star Group by U.S.
Office Products, Mr. Watson served as a director of McCollam Printers from July
1997 to June 1998. Prior to serving with U.S. Office Products, Mr. Watson held
several positions with Xerox Corporation, an office products company, including
president of operations for Australasia.
Mr.
Watson received a Diploma of General Management from Auckland University in
1989. Mr. Watson is the half-brother of Dr. Richard Watson, a member of our
board of directors.
34
Richard
Watson has served as the chief scientific officer of Natural Dairy since
September 2009 and has served as a member of our board of directors since
October 2009. Dr. Watson was one of the key individuals that helped create and
refine the intellectual property utilized in our business. From June 2008 until
September 2009, Dr. Watson was employed by Cullen Investments. From October 2006
to June 2008, Dr. Watson served as a senior scientist in the Forage Improvement
Group at AgResearch (NZ), New Zealand’s largest Crown Research Institute with
expertise in biological science. While there, he led the development of the
proprietary farming system and completed all the testing and research related to
the forage, livestock and farm management strategies that is utilized by Cullen
Agritech. From January 2004 to August 2006, Dr. Watson was affiliated with the
Department of Plant and Soil Sciences at Mississippi State University where he
served as the State Extension Forage Specialist and Assistant Research Professor
(the first non-U.S. person to hold this position and the first New Zealander to
hold a State Forage Extension appointment in the U.S.). From April 2000 to
December 2002, Dr. Watson served in a post-doctoral faculty position with the
Department of Crop and Soil Science at the University of Georgia. Dr. Watson
received a Bachelor of Agricultural Science, Master of Applied Science (with
honors) and Doctor of Philosophy degrees from Massey University. Dr. Watson is
the half-brother of Eric J. Watson.
Edward J.
Mathias has been a member of our board of directors since October 2009.
We believe his public company and investing experience, together with his
contacts and relationships, make him well-qualified to be a member of our board
of directors. Mr. Mathias was involved with the founding of The
Carlyle Group, a global private equity firm headquartered in Washington, DC,
which now has more than $87.9 billion under management. He has been a managing
director since January 1994 and presently serves as an Investment Committee
member for a number of Carlyle’s partnerships. Previously, Mr. Mathias served on
the management committee and board of directors of T. Rowe Price Associates,
Inc., an investment management organization where he was employed from 1971 to
December 1993. He was a director of Endeavor Acquisition Corp. from July 2005 to
December 2007, a director of Victory Acquisition Corp. from January 2007 to
April 2009 and a director of Triplecrown from June 2007 to October 2009. He has
also been a director of NexCen Brands, formerly Aether Systems, since June 2002
and Allied Capital Corp. since January 2009. Mr. Mathias also serves on The
Howard Hughes Institute’s Investment Advisory Committee. Mr. Mathias received an
M.B.A. from the Harvard Business School in 1971 where he is on The Board of
Dean’s Advisors and a B.A. from The University of Pennsylvania in 1964 where he
is currently a trustee and member of The Penn Investment Board which oversees
the University’s endowment.
Robert
Hersov has been a member of our board of directors since October 2009. We
believe his public company and investing experience, together with his contacts
and relationships, make him well-qualified to be a member of our board of
directors. We also believe Mr. Hersov’s investment background will
assist us in sourcing new avenues of financing needed to expand our
business. Since January 2004, Mr. Hersov has been the vice chairman
of NetJets Europe Ltd., a subsidiary of NetJets, Inc., a private aviation and
fractional jet ownership company which was acquired by Berkshire Hathaway Inc.
in 1998. Mr. Hersov founded and, from December 2002 to April 2004, served as the
chief executive officer of Marquis Jet Europe, a private aviation company which
was acquired by NetJets, Inc. in 2004. Since September 2007, Mr. Hersov has
served as a non-executive director of Australian privately-owned company Global
Aviation Leasing Group. Mr. Hersov is also chairman of Sapinda Limited, a UK
private company, which is the main shareholder of Vatas GmbH, a private German
investment company. Mr. Hersov also founded and, from October 1998 to December
2002, served as the chairman of Sportal Ltd., a company that operates an
Internet site that offers sports-related games and videos. From October 1996 to
September 1998, he served as the executive director of Enic plc, a holding
company listed on the London Stock Exchange that invests primarily in the sports
and media sectors. From September 1995 to September 1997, Mr. Hersov was the
chief executive officer of Telepiu PayTV in Milan, Italy, a pay TV and digital
satellite company. From March 1993 to August 1995, Mr. Hersov served as an
executive director of Richemont, a tobacco, luxury and media conglomerate listed
on the SWX Swiss Exchange.. Since June 2005, Mr. Hersov has been a member of the
board of directors of Shine Media Acquisition Corp., a blank check company that
was formed to acquire a direct or indirect interest in an operating business in
the media and advertising industry in the People’s Republic of China. He was a
director of Endeavor Acquisition Corp. from July 2005 to December 2007, a
director of Victory Acquisition Corp. from January 2007 to April 2009 and a
director of Triplecrown from June 2007 to October 2009. Mr. Hersov received a
B.B.S. from the University of Cape Town in 1982 and a M.B.A. from the Harvard
Business School in 1989.
35
Kerry
Kennedy has been a member of our board of directors since October 2009.
We believe her public company experience, together with her contacts and
relationships, make her well-qualified to be a member of our board of
directors. She is an American human rights activist and writer. In
April 1988, she established the Robert F. Kennedy Memorial Center for Human
Rights and acted as its executive director until January 1995 working on diverse
human rights issues. Ms. Kennedy has been the Chair of the Amnesty International
Leadership Council since January 1996. She was a director of Endeavor
Acquisition Corp. from July 2005 to December 2007, a director of Victory
Acquisition Corp. from January 2007 to April 2009 and a director of Triplecrown
from June 2007 to October 2009. She also serves on the board of directors of the
International Center for Ethics and Justice and Public Life at Brandeis
University. Ms. Kennedy received a B.A. from Brown University in 1982 and an LLM
from Boston College Law School in 1987.
Richard Y.
Roberts has been a member of our board of directors since October 2009.
We believe his public company experience, together with his contacts and
relationships, make him well-qualified to be a member of our board of
directors. We also believe his experience at the Securities and
Exchange Commission will provide us with necessary insight into the requirements
and needs of an emerging public company like ours. In March 2006, Mr. Roberts
co-founded a regulatory/legislative consulting firm, Roberts, Raheb &
Gradler LLC. He was a partner with Thelen Reid & Priest LLP, a national law
firm, from January 1997 to March 2006. From August 1995 to January 1997, Mr.
Roberts was a consultant at Princeton Venture Research, Inc., a private
consulting firm. From 1990 to 1995, Mr. Roberts was a commissioner of the
Securities and Exchange Commission, and, in this capacity, was actively involved
in, has written about or has testified on, a wide range of subjects affecting
the capital markets. Since leaving the Commission, Mr. Roberts has been a
frequent media commentator and writer on various securities public policy issues
and has assisted the Governments of Romania and Ukraine in the development of a
securities market. He was a director of Nyfix, Inc. from September 2005 to
December 2009, Endeavor Acquisition Corp. from July 2005 to December 2007, a
director of Victory Acquisition Corp. from January 2007 to April 2009 and a
director of Triplecrown from June 2007 to October 2009. From 1987 to 1990, he
was the chief of staff for Senator Richard Shelby. He is a member of the Alabama
Bar and the District of Columbia Bar. Mr. Roberts is a member of the Advisory
Board of Securities Regulation & Law Reports, of the Advisory Board of the
International Journal of Disclosure and Governance, and of the Editorial Board
of the Municipal Finance Journal. Mr. Roberts also previously served as a member
of the District 10 Regional Consultative Committee of the Financial Industry
Regulatory Authority, the Market Regulation Advisory Board of the FINRA, and the
Legal Advisory Board of the FINRA. Mr. Roberts received a B.E.E. from Auburn
University in 1973, a J.D. from the University of Alabama School of Law in 1976,
and a Master of Laws from the George Washington University Law Center in
1981.
36
Edward
Hanson has been a member of our board of directors since October 2009. We
believe his public company and investing experience, together with his contacts
and relationships, make him well-qualified to be a member of our board of
directors. Mr. Hanson is a Director of Babcock & Brown (UK)
Limited. Babcock & Brown is a principal investment firm headquartered in
Sydney and Mr. Hanson has worked in the London office since 1997. He also runs
the private equity fund, Babcock & Brown Global Partners, which he raised in
July 2005. Babcock & Brown invest in asset backed businesses around the
world. We believe Mr. Hanson’s investment background will assist us in sourcing
new avenues of financing needed to expand our business. From 1996 to 1997, Mr.
Hanson worked at Cavill White Securities, an investment bank in New Zealand. Mr.
Hanson is a member of the board of directors of BGP Investment S.à r.l., a
European real estate joint venture that pursues a range of property related
activities including the acquisition and management of new assets and selected
development projects. Mr. Hanson is also on the board of Corvus Capital, an AIM
listed investment company. Mr. Hanson was a director of Triplecrown from June
2007 to October 2009. Mr. Hanson received a Bachelor of Commerce from the
University of Auckland in New Zealand.
Advisory
Board
We will
seek guidance and advice from members of our advisory board. These individuals
are not required to commit any particular amount of time to our business and
will simply provide advice, introductions to potential customers, and assistance
to us, at our request, only if they are able to do so. Nevertheless, we believe
with their business background and extensive contacts, they will be helpful to
our business.
Dr. Hugh Blair,
Ph.D., has been a professor and head of the animal science department at
Massey University since 1995. He was also appointed the deputy head of the
Institute of Veterinary, Animal and Biomedical Sciences in 1998 and served as
its acting head in 2009. Dr. Blair has held lectureships in the U.S., Scotland,
Denmark, Canada and Ireland and has authored over 170 peer-review
articles.
Dr. Joe Bouton,
Ph.D., has been a senior vice president and forage improvement division
director at the Samuel Roberts Nobel Foundation, a nonprofit organization
conducting agricultural, forage improvement and plant biology research,
providing grants to non-profit charitable, educational and health organizations,
and assisting farmers and ranchers through educational and consultative
agricultural programs, since May 2004. Previously, Dr. Bouton was a professor at
the University of Georgia. He has 17 commercialized cultivars released for use
in the U.S.
Bill Te
Brake has served as a business development manager for the Institute of
Veterinary, Animal and Biomedical Sciences at Massey University since June 2003.
Mr. Brake has also hosted lectures in agricultural business and finance at
Massey University.
Dr. Todd White,
Ph.D., was an employee of Cullen Agritech from January 2010 to August
2010. From 2003 to 2010, Dr. White was a scientist with the Agricultural Systems
Group of AgResearch and was appointed a senior scientist in 2008. At AgResearch,
Dr. White lead research and development programs aimed at developing
pasture-based animal production models. Prior to joining AgResearch, Dr. White
spent three years in a post-doctoral forage research position at Iowa State
University.
Dr. Brian
McBride has been a professor at the Centre for Nutrition Modeling at the
University of Guelph in Canada since September 1999. Prior to this, Dr. McBride
served on the Board of Agriculture and Natural Resources for the U.S. National
Academy of Sciences. Dr. McBride has also been a long-time member of the
Committee on Animal Nutrition at the U.S. National Research Counsel (“NRC”),
which coordinated the publication of the NRC’s Nutrient Requirement series on
nutrient requirements of domestic animals. Dr. McBride has authored over 275
scientific publications in his career.
Mike
Culpepper has been a private investor/consultant since June 2009.
Previously, Mr. Culpepper served with the Georgia Department of Agriculture from
June 1999 to June 2009 where his responsibilities included guidance for
compliance of animal production systems.
37
Dr. Nick Hill,
Ph.D., has served as a professor of plant sciences in the Department of
Crop and Soil Sciences at the University of Georgia since January 1986. Dr. Hill
leads research programs aimed at exploring the application of new forage species
and the environmental impacts of grazing dairies in Georgia. Dr. Hill has also
been a founding partner and president of Agrinostics Ltd., a diagnostic
production company that tests corps for pathogens and toxins, since September
1997.
Independence
of Directors
We adhere
to the rules of the NYSE Amex in determining whether a director is independent.
As a result, our board of directors consults with its counsel to ensure that the
board’s determinations are consistent with those rules and all relevant
securities and other laws and regulations regarding the independence of
directors. The NYSE Amex requires that a majority of the board must be composed
of “independent directors,” which is defined generally as a person other than an
officer of a company, who does not have a relationship with the company that
would interfere with the director’s exercise of independent judgment in carrying
out the responsibilities of a director. Consistent with these considerations,
our board of directors has affirmatively determined that Messrs. Mathias,
Hersov, Kennedy, Roberts and Hanson are our independent directors.
Executive
and Director Compensation
Our
policies with respect to the compensation of our executive officers will be
administered by our board in consultation with the compensation committee. Our
compensation policies will be intended to provide for compensation that is
sufficient to attract, motivate and retain executives of outstanding ability and
potential and to establish an appropriate relationship between executive
compensation and the creation of shareholder value. To meet these goals, the
compensation committee will be charged with recommending executive compensation
packages to our board of directors.
It is
anticipated that performance-based and equity-based compensation will be an
important foundation in executive compensation packages as we believe it is
important to maintain a strong link between executive incentives and the
creation of shareholder value. We believe that performance and equity-based
compensation can be an important component of the total executive compensation
package for maximizing shareholder value while, at the same time, attracting,
motivating and retaining high-quality executives. The adoption of the proposed
incentive compensation plan and the management incentive compensation plan
reflect and will reflect what we believe is a focus on performance- and
equity-based compensation.
Executive
Compensation
The
following table sets forth compensation for our principal executive and
financial officer and our only other executive officer (together, our “Named
Executive Officers”) for the fiscal year ended December 31, 2009:
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Total
($)
|
||||||||||
Eric
J. Watson
Chief
Executive Officer, Secretary and Treasurer
|
2009
|
- | - | - | ||||||||||
Richard
Watson
Chief
Scientific Officer of Natural Dairy, Inc.
|
2009
|
$ | 28,962 | - | $ | 28,962 |
38
Eric
Watson has agreed that he will not receive any salary or bonus from us until we
have positive earnings before interest, taxes, depreciation and amortization. At
that time, Mr. Watson will be paid a salary and bonus as approved by our board
of directors.
Richard
Watson is employed by Natural Dairy as Chief Scientific Officer pursuant to a
three-year employment agreement entered on August 31, 2009. Pursuant
to the agreement, he receives a base salary of $35,000 and is issued $56,000
worth of our common stock on August 1st of each
year that the employment agreement is still in effect. The stock to
be issued to Dr. Watson is to be valued at the average trading price of our
common stock for the 60-day period prior to the date of issuance. Dr.
Watson is also entitled to receive a bonus of up to 50% of the base salary
subject to the sole discretion of Natural Dairy’s board of
directors.
Director
Compensation
Our
directors received no compensation in the fiscal year ended December 31, 2009.
As described above, we currently do not have a definitive compensation plan for
our directors.
Risk
Management Relating to Compensation Policies
Due to
the limited nature of compensation that we currently pay, we do not believe
there is any risk arising from our compensation policies and
practices.
2009
Long-Term Incentive Equity Plan
Our 2009
Long-Term Incentive Equity Plan is designed to enable us to offer our employees,
officers, directors and consultants whose past, present and/or potential
contributions to us have been, are or will be important to our success, an
opportunity to acquire a proprietary interest in us. The various types of
incentive awards that may be provided under the plan are intended to enable us
to respond to changes in compensation practices, tax laws, accounting
regulations and the size and diversity of its business. The plan reserves
2,405,914 shares of common stock for issuance in accordance with the plan’s
terms.
All of
our officers, directors and employees, as well as those of our subsidiaries, are
eligible to be granted awards under the plan. An incentive stock option may be
granted under the plan only to a person who, at the time of the grant, is an
employee of ours or our subsidiaries. No awards have been granted under the plan
as of the date of this prospectus. All awards will be subject to the
recommendations of the compensation committee and approval by the board of
directors or the compensation committee.
Administration
The plan
is administered by our board of directors or our compensation committee. Subject
to the provisions of the plan, the committee determines, among other things, the
persons to whom from time to time awards may be granted, the specific type of
awards to be granted, the number of shares subject to each award, share prices,
any restrictions or limitations on the awards, and any vesting, exchange,
deferral, surrender, cancellation, acceleration, termination, exercise or
forfeiture provisions related to the awards.
39
Stock
Subject to the Plan
Shares of
stock subject to other awards that are forfeited or terminated will be available
for future award grants under the plan. If a holder pays the exercise price of a
stock option by surrendering any previously owned shares of common stock or
arranges to have the appropriate number of shares otherwise issuable upon
exercise withheld to cover the withholding tax liability associated with the
stock option exercise, then, in the board’s or committee’s discretion, the
number of shares available under the plan may be increased by the lesser of the
number of such surrendered shares and shares used to pay taxes and the number of
shares purchased under the stock option.
Under the
plan, on a change in the number of shares of common stock as a result of a
dividend on shares of common stock payable in shares of common stock, common
stock forward split or reverse split or other extraordinary or unusual event
that results in a change in the shares of common stock as a whole, the terms of
the outstanding award will be proportionately adjusted.
Eligibility
Awards
may be granted under the plan to employees, officers, directors and consultants
who are deemed to have rendered, or to be able to render, significant services
to us and who are deemed to have contributed, or to have the potential to
contribute, to our success.
Types
of Awards
Options. The plan provides
both for “incentive” stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (“Code”), and for options not qualifying as
incentive options, both of which may be granted with any other stock based award
under the plan. The board or committee determines the exercise price per share
of common stock purchasable under an incentive or non-qualified stock option,
which may not be less than 100% of the fair market value on the day of the grant
or, if greater, the par value of a share of common stock. However, the exercise
price of an incentive stock option granted to a person possessing more than 10%
of the total combined voting power of all classes of stock may not be less than
110% of the fair market value on the date of grant. The aggregate fair market
value of all shares of common stock with respect to which incentive stock
options are exercisable by a participant for the first time during any calendar
year (under all of our plans), measured at the date of the grant, may not exceed
$100,000 or such other amount as may be subsequently specified under the Code or
the regulations thereunder.
An
incentive stock option may only be granted within a ten-year period commencing
on October 22, 2009 and may only be exercised within ten years from the date of
the grant, or within five years in the case of an incentive stock option granted
to a person who, at the time of the grant, owns common stock possessing more
than 10% of the total combined voting power of all classes of our stock. Subject
to any limitations or conditions the board or committee may impose, stock
options may be exercised, in whole or in part, at any time during the term of
the stock option by giving written notice of exercise to us specifying the
number of shares of common stock to be purchased. The notice must be accompanied
by payment in full of the purchase price, either in cash or, if provided in the
agreement, in our securities or in combination of the two.
Generally,
stock options granted under the plan may not be transferred other than by will
or by the laws of descent and distribution and all stock options are exercisable
during the holder’s lifetime, or in the event of legal incapacity or
incompetency, the holder’s guardian or legal representative. However, a holder,
with the approval of the board or committee, may transfer a non-qualified stock
option by gift to a family member of the holder, by domestic relations order to
a family member of the holder or by transfer to an entity in which more than 50%
of the voting interests are owned by family members of the holder or the holder,
in exchange for an interest in that entity.
40
Generally,
if the holder is an employee, no stock options granted under the plan may be
exercised by the holder unless he or she is employed by us or a subsidiary of
ours at the time of the exercise and has been so employed continuously from the
time the stock options were granted. However, in the event the holder’s
employment is terminated due to disability, the holder may still exercise his or
her vested stock options for a period of 12 months or such other greater or
lesser period as the board or committee may determine, from the date of
termination or until the expiration of the stated term of the stock option,
whichever period is shorter. Similarly, should a holder die while employed by us
or a subsidiary of ours, his or her legal representative or legatee under his or
her will may exercise the decedent holder’s vested stock options for a period of
12 months from the date of his or her death, or such other greater or lesser
period as the board or committee may determine or until the expiration of the
stated term of the stock option, whichever period is shorter. If the holder’s
employment is terminated due to normal retirement, the holder may still exercise
his or her vested stock options for a period of 12 months from the date of
termination or until the expiration of the stated term of the stock option,
whichever period is shorter. If the holder’s employment is terminated for any
reason other than death, disability or normal retirement, the stock option will
automatically terminate, except that if the holder’s employment is terminated
without cause, then the portion of any stock option that is vested on the date
of termination may be exercised for the lesser of three months after termination
of employment, or such other greater or lesser period as the board or committee
may determine but not beyond the balance of the stock option’s
term.
Stock Appreciation Rights.
Under the plan, stock appreciation rights may be granted to participants who
have been, or are being, granted stock options under the plan as a means of
allowing the participants to exercise their stock options without the need to
pay the exercise price in cash. In conjunction with non-qualified stock options,
stock appreciation rights may be granted either at or after the time of the
grant of the non-qualified stock options. In conjunction with incentive stock
options, stock appreciation rights may be granted only at the time of the grant
of the incentive stock options. A stock appreciation right entitles the holder
to receive a number of shares of common stock having a fair market value equal
to the excess fair market value of one share of common stock over the exercise
price of the related stock option, multiplied by the number of shares subject to
the stock appreciation rights. The granting of a stock appreciation right will
not affect the number of shares of common stock available for awards under the
plan. The number of shares available for awards under the plan will, however, be
reduced by the number of shares of common stock acquirable upon exercise of the
stock option to which the stock appreciation right relates.
Restricted Stock. Under the
plan, shares of restricted stock may be awarded either alone or in addition to
other awards granted under the plan. The board or committee determines the
persons to whom grants of restricted stock are made, the number of shares to be
awarded, the price if any to be paid for the restricted stock by the person
receiving the stock from us, the time or times within which awards of restricted
stock may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the restricted stock
awards.
Restricted
stock awarded under the plan may not be sold, exchanged, assigned, transferred,
pledged, encumbered or otherwise disposed of, other than to us, during the
applicable restriction period. In order to enforce these restrictions, the plan
requires that all shares of restricted stock awarded to the holder remain in our
physical custody until the restrictions have terminated and all vesting
requirements with respect to the restricted stock have been fulfilled. Other
than regular cash dividends and other cash equivalent distributions as we may
designate, pay or distribute, we will retain custody of all distributions made
or declared with respect to the restricted stock during the restriction period.
A breach of any restriction regarding the restricted stock will cause a
forfeiture of the restricted stock and any retained distributions. Except for
the foregoing restrictions, the holder will, even during the restriction period,
have all of the rights of a stockholder, including the right to receive and
retain all regular cash dividends and other cash equivalent distributions as we
may designate, pay or distribute on the restricted stock and the right to vote
the shares.
41
Other Stock-Based Awards.
Under the plan, other stock-based awards may be granted, subject to limitations
under applicable law, that are denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, shares of common
stock, as deemed consistent with the purposes of the plan. These other
stock-based awards may be in the form of purchase rights, shares of common stock
awarded that are not subject to any restrictions or conditions, convertible or
exchangeable debentures or other rights convertible into shares of common stock
and awards valued by reference to the value of securities of, or the performance
of, one of our subsidiaries. These other stock-based awards may include
performance shares or options, whose award is tied to specific performance
criteria. These other stock-based awards may be awarded either alone, in
addition to, or in tandem with any other awards under the plan or any of our
other plans.
Accelerated Vesting and
Exercisability. If any one person, or more than one person acting as a
group, acquires the ownership of stock of the company that, together with the
stock held by such person or group, constitutes more than 50% of the total fair
market value or combined voting power of the our stock, and our board of
directors does not authorize or otherwise approve such acquisition, then the
vesting periods of any and all stock options and other awards granted and
outstanding under the plan shall be accelerated and all such stock options and
awards will immediately and entirely vest, and the respective holders thereof
will have the immediate right to purchase and/or receive any and all common
stock subject to such stock options and awards on the terms set forth in the
plan and the respective agreements respecting such stock options and awards. An
increase in the percentage of stock owned by any one person, or persons acting
as a group, as a result of a transaction in which we acquire our stock in
exchange for property is not treated as an acquisition of stock.
The
committee may, in the event of an acquisition by any one person, or more than
one person acting as a group, together with acquisitions during the 12-month
period ending on the date of the most recent acquisition by such person or
persons, of assets from the company that have a total gross fair market value
equal to or more than 50% of the total gross fair market value of all of our
assets immediately before such acquisition or acquisitions, or if any one
person, or more than one person acting as a group, acquires the ownership of our
stock that, together with the stock held by such person or group, constitutes
more than 50% of the total fair market value or combined voting power of our
stock, which has been approved by our board of directors, (i) accelerate the
vesting of any and all stock options and other awards granted and outstanding
under the plan, or (ii) require a holder of any award granted under the plan to
relinquish such award to us upon the tender by us to the holder of cash in an
amount equal to the repurchase value of such award. For this purpose, gross fair
market value means the value of the assets of the company, or the value of the
assets being disposed of, determined without regard to any liabilities
associated with such assets.
Notwithstanding
any provisions of the plan or any award granted thereunder to the contrary, no
acceleration shall occur with respect to any award to the extent such
acceleration would cause the plan or an award granted thereunder to fail to
comply with Section 409A of the Code.
Repurchases. Unless otherwise
provided in the grant of an award, the board or committee may, in the event of a
corporate transaction that has been approved by our board of directors, require
a holder of any award granted under the plan to relinquish the award to us upon
payment by us to the holder of cash in an amount equal to the fair market value
of the award.
Award Limitation. No
participant may be granted awards for more than 100,000 shares in any calendar
year.
42
Other Limitations. The board
or committee may not modify or amend any outstanding option or stock
appreciation right to reduce the exercise price of such option or stock
appreciation right, as applicable, below the exercise price as of the date of
grant of such option or stock appreciation right. In addition, no option or
stock appreciation right may be granted in exchange for, or in connection with,
the cancellation or surrender of an option or stock appreciation right or other
award having a higher exercise price.
Equity
Compensation Plans
The
following table gives the information about common stock that may be issued upon
the exercise of options, warrants and rights under all of our existing equity
compensation plans as of December 31, 2009.
Plan Category
|
Number of securities to
be issued upon exercise of outstanding options, warrants and rights (a) |
Weighted-average
exercise price of outstanding options, warrants and rights (b) |
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
|||||||||
Equity compensation
plans approved by security holders
|
2,405,914 | – | 2,405,914 | |||||||||
Equity
compensation plans not approved by security
holders
|
– | – | – | |||||||||
Total
|
2,405,914 | – | 2,405,914 |
43
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to
Triplecrown’s IPO, the Triplecrown Founders acquired 13,800,000 units of
Triplecrown, representing 13,800,000 shares of common stock of Triplecrown and
13,800,000 warrants to purchase shares of common stock of Triplecrown for an
aggregate purchase price of $25,000. All of these securities were placed in
escrow with Continental Stock Transfer & Trust Company, as escrow agent. The
securities were to be released from escrow one year from the consummation of a
business combination, except that they were to be released earlier than this
date if (i) Triplecrown’s common stock had a last sales price equal to or
exceeding $13.75 per unit for any 20 trading days within any 30-trading day
period or (ii) Triplecrown consummated a subsequent liquidation, merger, stock
exchange or other similar transaction which results in all of its stockholders
having the right to exchange their shares of common stock for cash, securities
or other property. In connection with the Merger, the Triplecrown Founders had
cancelled an aggregate of 11,380,000 shares of our common stock that they
acquired when their 11,380,000 shares of Triplecrown common stock were converted
into shares of our common stock upon consummation of the Merger. The remaining
2,420,000 shares that they acquired (the founders’ shares), as well as all of
the warrants that they received in exchange for their warrants (the founders’
warrants), were placed in escrow pursuant to the original terms of the
escrow agreement. The shares and warrants were released on October 22,
2010 in accordance with the terms of the escrow agreement.
In
connection with the closing of the IPO, Triplecrown sold 2,500,000 warrants (the
sponsors’ warrants) to each of Eric J. Watson and Jonathan J. Ledecky,
Triplecrown’s president and secretary, at a purchase price of $1.00 per warrant.
These purchases took place on a private placement basis simultaneously with the
consummation of the IPO. If we call our warrants for redemption, the sponsors’
warrants are not redeemable so long as such warrants are held by Messrs. Watson,
Ledecky or their affiliates, including any permitted transferees.
Eric J.
Watson and Jonathan J. Ledecky were Triplecrown’s “promoters” as that term is
defined under the Federal securities laws.
The
holders of the majority of the founders’ shares and founders’ warrants (or
underlying shares) and the holders of the majority the sponsors’ warrants (or
underlying shares) each will be entitled to make up to two demands that we
register such shares or warrants (or underlying shares) pursuant to a
registration rights agreement entered into with Triplecrown in connection with
the IPO. The holders of the majority of the founders’ shares and founders’
warrants can elect to exercise these registration rights at any time commencing
July 22, 2010 (nine months after the consummation of the Merger). The holders of
a majority of the sponsors’ warrants (or underlying shares) can elect to
exercise these registration rights at any time. In addition, these holders have
certain “piggy-back” registration rights on registration statements filed
subsequent to such date. We will bear the expenses incurred in connection with
the filing of any such registration statements. The founders’ shares,
founders’ warrants and sponsors’ warrants (and underlying shares) are being
registered on this prospectus as a result of a demand registration request by
the holders of such securities.
On August
30, 2009, Cullen Holdings, the former holder of all of the common stock of
Cullen Agritech which is beneficially owned and controlled by Eric J. Watson,
contributed 100 shares of Natural Dairy to Cullen Agritech. As a result of the
contribution, Natural Dairy became a wholly-owned subsidiary of Cullen
Agritech.
Effective
September 1, 2009, Dr. Richard Watson became an employee of Natural Dairy
pursuant to an employment agreement entered on August 31, 2009. Dr. Watson is
the half-brother of Eric Watson.
44
On
September 3, 2009, Cullen Agritech entered into an agreement with Cullen
Investments Limited, Hart, Natural Dairy and Dr. Watson whereby the parties
assigned the rights to certain intellectual property, including the proprietary
farming system, to Cullen Agritech upon consummation of the Merger.
Upon
completion of the Merger, Cullen Holdings was issued 15,881,148 shares of our
common stock (valued at $155 million, or $9.76 per share) for its interest in
Cullen Agritech.
In
connection with the Merger, Natural Dairy and Triplecrown entered into a land
purchase contract with Grimsley LLC on June 27, 2009, as amended, to purchase
3,618 acres of farmland in the State of Georgia. A deposit in the aggregate
amount of approximately $1.7 million was made and the parties intended to close
on the purchase contract on September 30, 2009. From September 30, 2009 to
October 16, 2009, Natural Dairy was waiting for the seller of the land to
satisfy its closing conditions which were satisfied and the closing on the sale
of the property occurred on October 16, 2009.
Upon the
closing of the Merger, we issued to Cullen Holdings a promissory note in the
amount of $6,853,918, representing part of the purchase price of the land (see
Note 6 to our financial statements for the period from June 3, 2009 (inception)
to December 31, 2009 and Note 3 to our financial statements for the nine
months ended September 30, 2010). The note was to be repaid as soon as
practicable but no later than January 20, 2010 (90 days from the date of
issuance). This amount was to be repaid to Cullen Holdings at closing of the
Merger but sufficient funds were not available. On March 30, 2010, the parties
amended the terms of the promissory note to extend the maturity date to January
20, 2011. The promissory note accrues interest at the rate of 8% per
annum. As of December 31, 2009, the Company had repaid Cullen
Holdings $1,000,000 of the note, consisting of $986,343 of principal and $13,657
of interest. As of September 30, 2010, the Company had repaid Cullen
Holdings $3,150,000 of the note, consisting of $3,091,959 of principal and
$58,041 of interest, and $3,938,668 of the principal remained
outstanding.
From June
3, 2009 (inception) through December 31, 2009, Cullen Investments Limited funded
part of the operations of both Cullen Agritech and Natural Dairy and incurred
costs of a combined total of $114,937. These costs consisted of $69,553 of legal
expenses, $28,396 of corporate formational costs and $16,984 of travel costs. As
of December 31, 2009, $113,937 was repaid to Cullen Investments Limited and
$1,000 is payable and included in due to affiliate.
From June
3, 2009 (inception) through December 31, 2009, Hart also funded part of the
operations of both Cullen Agritech and Natural Dairy and incurred costs of a
combined total of $47,307. These costs consisted of $5,114 of property related
expenses and $42,193 of employee related expenses. As of December 31, 2009,
$20,251 was repaid to Hart and the remainder of $27,055 was repaid during
February 2010.
During
the three and nine months ended September 30, 2010, Hart incurred
costs related to the operations of Cullen Agritech and Natural Dairy of a
combined total of $39,584 and $105,068, respectively. These costs consisted of
property related expenses $2,996 and $31,688, respectively and employee related
expenses of $36,588 and $73,380, respectively. During the three and nine
months ended September 30, 2010, the Company incurred costs related to the
operations of Hart of $185,027 and $223,409, respectively. During the three and
nine months ended September 30, 2010, these costs consisted of $185,027 and
$204,909 of property related expenses and $0 and $18,500 of lease
related expense (See Note 7 – Commitments and Contingencies for additional
related party transactions). During the three and nine months
ended September 30, 2010, $4,126 has been repaid to Hart, leaving $145,443
due to Hart at September 30, 2010. Additionally, at September 30, 2010, we
had $1,732 of other amounts we owed to other affiliates.
On June
1, 2010, we entered into an agreement with Hart for the lease 120 acres of our
property, from June 1, 2010 through December 31, 2010. This area of land
consists of 100 irrigated acres and 20 non-irrigated acres. The agreement calls
for Hart to pay, in advance, $175 per acre of irrigated land and $50 per acre of
non-irrigated land. We received $18,500 for the lease of this land during June
2010.
45
Related
party policy
Our Code
of Ethics requires us to avoid, wherever possible, all related party
transactions that could result in actual or potential conflicts of interest,
except under guidelines approved by the board of directors (or the audit
committee). Related-party transactions are defined as transactions in which (i)
the aggregate amount involved will or may be expected to exceed the lesser of
$120,000 or one percent of the average of our total assets at year end for the
last two completed fiscal years, (ii) we or any of our subsidiaries is a
participant and (iii) any (a) executive officer, director or nominee for
election as a director, (b) greater than 5 percent beneficial owner of our
common stock, or (c) immediate family member, of the persons referred to in
clauses (a) and (b), has or will have a direct or indirect material interest
(other than solely as a result of being a director or a less than 10 percent
beneficial owner of another entity). A conflict of interest situation can arise
when a person takes actions or has interests that may make it difficult to
perform his or her work objectively and effectively. Conflicts of interest may
also arise if a person, or a member of his or her family, receives improper
personal benefits as a result of his or her position.
Our audit
committee, pursuant to its written charter, is responsible for reviewing and
approving related-party transactions to the extent we enter into such
transactions. The audit committee will consider all relevant factors when
determining whether to approve a related party transaction, including whether
the related party transaction is on terms no less favorable than terms generally
available to an unaffiliated third-party under the same or similar circumstances
and the extent of the related party’s interest in the transaction. No director
may participate in the approval of any transaction in which he is a related
party, but that director is required to provide the audit committee with all
material information concerning the transaction. Additionally, we require each
of our directors and executive officers to complete a directors’ and officers’
questionnaire that elicits information about related party transactions. These
procedures are intended to determine whether any such related party transaction
impairs the independence of a director or presents a conflict of interest on the
part of a director, or officer.
46
PRINCIPAL
STOCKHOLDERS
The
following table sets forth information regarding the beneficial ownership of our
common stock as of January 14, 2011 by:
|
·
|
each
person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock;
|
|
·
|
each
of our officers and directors; and
|
|
·
|
all
of our officers and directors as a
group.
|
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them.
Name and Address of Beneficial Owner(1)
|
Amount of
Beneficial Ownership |
Approximate
Percentage of Outstanding Common Stock |
||||||
Eric
J. Watson(2)
|
18,381,148 | (3) | 84.5 | % | ||||
Kerry
Kennedy(4)
|
60,000 | (5) | * | |||||
Robert
B. Hersov(6)
|
60,000 | (5) | * | |||||
Edward
J. Mathias(7)
|
60,000 | (5) | * | |||||
Richard
Y. Roberts(8)
|
60,000 | (5) | * | |||||
Edward
Hanson(9)
|
60,000 | (5) | * | |||||
Richard
Watson
|
0 | * | ||||||
Pine
River Capital Management L.P.(10)
|
11,169,895 | (11) | 36.7 | % | ||||
Jonathan
J. Ledecky(12)
|
4,500,000 | (13) | 20.7 | % | ||||
President
and Fellows of Harvard College(14)
|
2,961,400 | (15) | 13.3 | % | ||||
Fortress
Investment Group LLC(16)
|
2,559,500 | (17) | 11.7 | % | ||||
The
Goldman Sachs Group, Inc.(18)
|
1,067,929 | (19) | 5.3 | % | ||||
All
directors and executive officers as a group (7
individuals)
|
18,681,148 | (20) | 85.6 | % |
*
|
Less
than one percent.
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals is
1431 N. Jones Plantation Road, Millen, Georgia
30442.
|
(2)
|
Mr.
Watson’s business address is Level 9, 68 Shortland Street, P.O. Box 91269,
Auckland, New Zealand.
|
(3)
|
Includes
(i) 15,881,148 shares of common stock held by Cullen Holdings and (ii)
2,500,000 shares of common stock issuable upon exercise of sponsors’
warrants held by Mr. Watson. Does not include 6,630,000 founders’ warrants
held by Summit Trust that are not exercisable and may not become
exercisable within 60 days.
|
(4)
|
Ms.
Kennedy’s business address is c/o Robert F. Kennedy Center, 1367
Connecticut Avenue N.W., Suite 200, Washington, D.C.
20036.
|
(5)
|
Does
not include 60,000 shares of common stock issuable upon exercise of
founders’ warrants that are not exercisable and may not become exercisable
within 60 days.
|
(6)
|
These
securities are held by Kilmer International Investments Limited as nominee
for Mr. Hersov. The business address of Kilmer International
Investments Limited is Sir Walter Raleigh House, 48-50 Esplanade, St.
Helier, Jersey, JE1 4HH, United Kingdom. Mr. Hersov has dispositive and
voting power over these
shares.
|
(7)
|
Mr.
Mathias’ business address is c/o The Carlyle Group, 1001 Pennsylvania
Avenue, NW, Washington, DC 20004.
|
47
(8)
|
Mr.
Roberts’ business address is Roberts, Raheb & Gradler, 805 15th
Street, NW, Suite 1101, Washington, DC
20005.
|
(9)
|
Mr.
Hanson’s business address is c/o Babcock & Brown Limited, 53 Davies
Street, London WIK 5JH.
|
(10)
|
The
business address of Pine River Capital Management L.P. is 601 Carlson
Parkway, Suite 330, Minnetonka, MN
55305.
|
(11)
|
Includes
(i) 9,256,483 shares of common stock issuable upon the exercise of
warrants beneficially owned by Nisswa Acquisition Master Fund Ltd. and
(ii) 1,830,705 shares of common stock issuable upon the exercise of
warrants beneficially owned by Nisswa Fixed Income Master Fund Ltd. Pine
River Capital Management L.P., as the investment manager of each of the
foregoing funds, and Brian Taylor, as the general partner of Pine River
Capital Management L.P., may be deemed to beneficially own all such
shares. Each of Mr. Taylor and the foregoing entities has shared power to
vote and dispose of the shares beneficially owned by them. The foregoing
information was derived from a Schedule 13D filed on November 3,
2009.
|
(12)
|
Mr.
Ledecky’s business address is 970 West Broadway, PMB 402, Jackson, WY
83001.
|
(13)
|
Includes
(i) 600,000 shares of common stock held by Hat Tricks LLC, an affiliate of
Mr. Ledecky, and (ii) 2,500,000 shares of common stock issuable upon
exercise of sponsors’ warrants held by Mr. Ledecky. Does not include
600,000 founders’ warrants held by Hat Tricks LLC and 6,030,000 founders’
warrants held by Mr. Ledecky that are not exercisable and may not become
exercisable within 60 days.
|
(14)
|
The
business address of the President and Fellows of Harvard College is c/o
Harvard Management Company, Inc., 600 Atlantic Avenue, Boston, MA
02210.
|
(15)
|
Includes
2,961,400 shares of common stock issuable upon the exercise of
warrants. The President and Fellows of Harvard College have
sole power to vote and dispose of such shares. The foregoing information
was derived from a Schedule 13G filed on November 10,
2009.
|
(16)
|
The
business address of the Fortress Investment Group LLC is 1345 Avenue of
the Americas, 46th Floor, New York, NY 10105, Attention: Michael
Cohn.
|
(17)
|
Includes
(i) 2,303,550 shares of common stock issuable upon the exercise of
warrants beneficially owned by Drawbridge DSO Securities LLC (“DSO”) and
(ii) 255,950 shares of common stock issuable upon the exercise of warrants
beneficially owned by Drawbridge OSO Securities LLC (“OSO”). Drawbridge
Special Opportunities Fund LP, Drawbridge Special Opportunities GP LLC and
Fortress Principal Investment Holdings IV LLC may be deemed to
beneficially own the shares beneficially owned by DSO. Drawbridge Special
Opportunities Fund Ltd., Drawbridge Special Opportunities Intermediate
Fund L.P., Drawbridge Special Opportunities Offshore GP LLC and Drawbridge
Special Opportunities Offshore Fund Ltd. may be deemed to beneficially own
the shares beneficially owned by OSO. Drawbridge Special Opportunities
Advisors LLC, FIG LLC, Fortress Operating Entity I LP, FIG Corp. and
Fortress Investment Group LLC may be deemed to beneficially own all such
shares. Each of the foregoing entities has shared power to vote and
dispose of the shares beneficially owned by them. The foregoing
information was derived from a Schedule 13G filed on November 12,
2009.
|
(18)
|
The
business address of Goldman, Sachs & Co. is 85 Broad Street, New York,
New York 10004.
|
(19)
|
Represents
shares beneficially owned by certain operating units of The Goldman Sachs
Group, Inc. and its subsidiaries and affiliates. The foregoing information
was derived from a Schedule 13G filed on February 12,
2010.
|
(20)
|
Includes
2,500,000 shares of common stock issuable upon exercise of sponsors’
warrants that became exercisable upon consummation of the Merger. Does not
include 6,870,000 shares of common stock issuable upon exercise of
founders’ warrants that are not exercisable and may not become exercisable
within 60 days.
|
48
The
founders’ shares and the founders’ warrants are held in escrow as described
above in the section entitled “Certain Relationships and Related
Transactions.”
49
SELLING
SECURITYHOLDERS
The
selling securityholders may from time to time offer and sell any or all of the
shares of our common stock set forth below pursuant to this prospectus. When we
refer to “selling securityholders” in this prospectus, we mean the companies
listed in the table below, and the pledges, donees, permitted transferees,
assignees, successors and others who later come to hold any of the selling
securityholders’ interests in shares of our common stock other than through a
public sale.
The
following table sets forth, as of the date of this prospectus, the name of the
selling securityholders for whom we are registering shares for resale to the
public, and the number of shares of common stock that the selling
securityholders may offer pursuant to this prospectus.
Based on
the information provided to us by the selling securityholders and as of the date
the same was provided to us, assuming that the selling securityholders sell all
of the shares of our common stock beneficially owned by it that have been
registered by us and do not acquire any additional shares during the offering,
the selling securityholders will not own any shares other than those appearing
in the column entitled “Number of Shares of Common Stock Owned After the
Offering.” We cannot advise you as to whether the selling securityholders will
in fact sell any or all of such shares of common stock. In addition, the selling
securityholders may have sold, transferred or otherwise disposed of, or may
sell, transfer or otherwise dispose of, at any time and from time to time, the
shares of our common stock in transactions exempt from the registration
requirements of the Securities Act after the date on which it provided the
information set forth on the table below.
Before Offering
|
To Be Offered
|
After Offering
|
||||||||||||||||||||||||||
Name of Selling
Securityholder
|
Number of
Shares of
Common
Stock
Owned Prior to the
Offering(1)
|
Number of
Warrants Owned Prior to Offering(1) |
Number of
Shares of Common Stock Underlying
Warrants(1) |
Number of
Shares of Common Stock Being
Registered (Including Shares Underlying Warrants) |
Number of
Warrants Being Registered |
Number of
Shares of Common Stock Owned After the Offering(2) |
Number of
Warrants Owned After the Offering(2) |
|||||||||||||||||||||
Eric
J. Watson(3)(4)
|
15,881,148 | 9,130,000 | 9,130,000 | 25,011,148 | 9,130,000 | 0 | 0 | |||||||||||||||||||||
Jonathan
J. Ledecky(3)(5)
|
2,000,000 | 9,130,000 | 9,130,000 | 11,530,000 | 9,130,000 | 0 | 0 | |||||||||||||||||||||
Kerry
Kennedy(3)(6)
|
60,000 | 60,000 | 60,000 | 120,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Kilmer
International Investments Limited(3)(6)
|
60,000 | 60,000 | 60,000 | 120,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Edward
J. Mathias(3)(6)
|
60,000 | 60,000 | 60,000 | 120,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Richard
Y. Roberts(3)(6)
|
60,000 | 60,000 | 60,000 | 120,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Edward
Hanson(3)(6)
|
60,000 | 60,000 | 60,000 | 120,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Jimmie
Lee Solomon, Jr.(3)(7)
|
30,000 | 60,000 | 60,000 | 90,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Jay
H. Nussbaum(3)(7)
|
30,000 | 60,000 | 60,000 | 90,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Jim
Gray(3)(7)
|
30,000 | 60,000 | 60,000 | 90,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Richard
A. Stein(3)(7)
|
30,000 | 60,000 | 60,000 | 90,000 | 60,000 | 0 | 0 | |||||||||||||||||||||
Moonlight
Investments Ltd.(8)
|
300,000 | 0 | 0 | 300,000 | 0 | 0 | 0 |
(1)
|
Includes
shares of common stock and warrants owned by such individual and his or
her affiliates.
|
(2)
|
Assumes
security holders will resell all the securities registered
hereunder.
|
50
(3)
|
Mr.
Watson, Mr. Ledecky, Ms. Kennedy, Mr. Mathias, Mr. Hersov, Mr. Roberts,
Mr. Hanson, Mr. Solomon, Mr. Nussbaum, Mr. Gray and Mr. Stein were the
Triplecrown Founders. In connection with its formation,
Triplecrown issued 13,800,000 units to the Triplecrown Founders and/or
their affiliates for an aggregate purchase price of $25,000. Each unit
consisted of one share of common stock and one warrant to purchase one
share of common stock. Simultaneously with its IPO, Triplecrown sold an
additional 5,000,000 warrants to purchase common stock to the Triplecrown
Sponsors, Mr. Watson and Mr. Ledecky, for an aggregate purchase price of
$5,000,000. As mentioned above, in connection with the Merger, the
outstanding shares of Triplecrown common stock and outstanding warrants to
purchase Triplecrown common stock were automatically converted on a
one-to-one basis into shares of our common stock and warrants to purchase
our common stock. However, in accordance with the Merger Agreement, the
Triplecrown Founders surrendered for cancellation 11,380,000 of the shares
they received upon the conversion (consisting of 6,630,000 surrendered by
Mr. Watson, 4,630,000 by Mr. Ledecky and 30,000 by each of Mr. Solomon,
Mr. Nussbaum, Mr. Gray and Mr. Stein). Accordingly, immediately after the
closing of the Merger, Triplecrown Founders held 2,420,000 shares of our
common stock (the founders’ shares) and 13,800,000 warrants to purchase
our common stock (the founders’ warrants) and the Triplecrown Sponsors
held an additional 5,000,000 warrants to purchase our common stock (the
sponsors’ warrants), as follows:
|
Name
|
Founders’ Shares
|
Founders’ Warrants
|
Sponsors’ Warrants
|
|||||||||
Eric
J. Watson
|
0 | 0 | 2,500,000 | |||||||||
Summit
Trust(a)
|
0 | 6,630,000 | 0 | |||||||||
Jonathan
J. Ledecky
|
1,400,000 | 6,030,000 | 2,500,000 | |||||||||
Hat
Tricks LLC(b)
|
600,000 | 600,000 | 0 | |||||||||
Kerry
Kennedy
|
60,000 | 60,000 | 0 | |||||||||
Robert
B. Hersov(c)
|
60,000 | 60,000 | 0 | |||||||||
Edward
J. Mathias
|
60,000 | 60,000 | 0 | |||||||||
Richard
Y. Roberts
|
60,000 | 60,000 | 0 | |||||||||
Edward
Hanson
|
60,000 | 60,000 | 0 | |||||||||
Jimmie
Lee Solomon, Jr.
|
30,000 | 60,000 | 0 | |||||||||
Jay
H. Nussbaum
|
30,000 | 60,000 | 0 | |||||||||
Jim
Gray
|
30,000 | 60,000 | 0 | |||||||||
Richard
A. Stein
|
30,000 | 60,000 | 0 |
|
(a)
|
Summit
Trust is a trust established for the benefit of Mr. Watson and his
beneficiaries.
|
|
(b)
|
Mr.
Ledecky owns and controls Hat Tricks
LLC.
|
|
(c)
|
These
securities are held by Kilmer International Investments Limited as nominee
for Mr. Hersov. The business address of Kilmer International
Investments Limited is Sir Walter Raleigh House, 48-50 Esplanade, St.
Helier, Jersey, JE1 4HH, United
Kingdom.
|
We agreed
to file a registration statement with the Securities and Exchange Commission
covering the resale of the foregoing shares of our common stock and warrants, as
described above in the section entitled “Certain Relationships and Related
Transactions.” As of the date of this prospectus, the founders’
shares and the founders’ warrants continue to be held in escrow, as described
above in the section entitled “Certain Relationships and Related
Transactions.”
(4)
|
Mr.
Watson is our Chief Executive Officer, Secretary and Treasurer and was the
Chairman of the Board and Treasurer of Triplecrown. Mr. Watson
also owns and controls Cullen Holdings. In connection with the
Merger, we issued 15,881,148 shares of our common stock (the merger
shares) to Cullen Holdings in exchange for all of the equity interests in
Cullen Agritech. Of the merger shares, 1,588,114 are held in escrow to
secure the indemnification obligations owed to Triplecrown under the
Merger Agreement.
|
(5)
|
Mr.
Ledecky was the President and Secretary and a member of the board of
directors of Triplecrown.
|
(6)
|
Each
of Ms. Kennedy, Mr. Hersov, Mr. Mathias, Mr. Roberts and Mr. Hanson is a
member of our board of directors and was a member of Triplecrown’s board
of directors.
|
(7)
|
Each
of Mr. Solomon, Mr. Nussbaum, Mr. Gray and Mr. Stein was a member of
Triplecrown’s board of directors.
|
51
(8)
|
The
business address of Moonlight Investments Ltd. is Barkly Wharf, Le
Caudan Waterfront, Port Louis, Republic of
Mauritius.
|
52
PLAN
OF DISTRIBUTION
The
selling securityholders of the common stock and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of its shares
of common stock on the OTC Bulletin Board or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The selling securityholders
may use any one or more of the following methods when selling
shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchases;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the selling securityholders to sell a specified number of
such shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling securityholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if available, rather than under
this prospectus.
Broker-dealers
engaged by the selling securityholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling securityholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with
NASD Rule 2440 and in the case of a principal transaction a markup or markdown
in compliance with NASD Rule IM-2440-1.
In
connection with the sale of the common stock or interests therein, the selling
securityholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
securityholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
securityholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
53
The
selling securityholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The selling securityholders have informed us
that they do not have any written or oral agreement or understanding, directly
or indirectly, with any person to distribute the common stock. In no event shall
any broker-dealer receive fees, commissions and markups that, in the aggregate,
would exceed eight percent (8%).
We are
required to pay certain fees and expenses incurred by us incidental to the
registration of the shares. We have agreed to indemnify the selling
securityholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
Because
the selling securityholders may be deemed to be “underwriters” within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
securityholders.
We agreed
to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the selling securityholders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the selling securityholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the selling securityholders or any other
person. We will make copies of this prospectus available to the selling
securityholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
54
DESCRIPTION
OF SECURITIES
General
Our
certificate of incorporation authorizes us to issue up to 200,000,000 shares of
common stock, par value $0.0001 per share, and 1,000,000 shares of preferred
stock, par value $0.0001 per share. Our common stock and warrants trade on the
OTC Bulletin Board under the symbols CAGZ and CAGZW, respectively. The closing
bid price for each share of common stock and warrant on January 5, 2011 was
$0.15 and $0.007, respectively. There are currently 19,630,714 shares of common
stock and no shares of preferred stock outstanding. In addition, there are
74,000,000 shares of common stock subject to outstanding
warrants.
Common
Stock
Our
stockholders of record are entitled to one vote for each share held on all
matters to be voted on by stockholders. Holders of shares of our common stock do
not have any conversion, preemptive or other subscription rights and there are
no sinking fund or redemption provisions applicable to the shares of common
stock. Our board is divided into three classes, designated as Class A, Class B
and Class C, with only one class of directors being elected in each year and
each class serving a three-year term. Our certificate of incorporation does not
provide for cumulative voting.
Preferred
Stock
Our
certificate of incorporation authorizes the issuance of up to 1,000,000 shares
of preferred stock with such designations, rights and preferences as may be
determined from time to time by our board of directors. Accordingly, our board
of directors is empowered, without stockholder approval, to issue preferred
shares with dividend, liquidation, conversion, voting or other rights which
could adversely affect the voting power or other rights of the holders of shares
of common stock. In addition, the preferred shares could be utilized as a method
of discouraging, delaying or preventing a change in control in the
Company.
Warrants
We
currently have 74,000,000 redeemable common stock purchase warrants outstanding,
consisting of 13,800,000 founders’ warrants, 5,000,000 sponsors’ warrants and
55,200,000 warrants held by the public (which we refer to as the public
warrants). The public warrants were issued in Triplecrown’s IPO and
were converted into warrants to purchase our common stock in connection with the
Merger.
Each
warrant issued entitles the registered holder to purchase one share of our
common stock at a price of $12.00 per share, subject to adjustment as discussed
below, at any time commencing after the completion of the merger. The sponsors’
warrants are currently exercisable. The founders’ warrants will not
become exercisable until the last sales price of our common stock exceeds $13.75
per share for any 20 trading days within any 30-trading day period. The public
warrants will be exercisable only if a registration statement relating to the
shares of common stock issuable upon exercise of the warrants is effective and
current, as described below. The warrants expire on October 21, 2013 at 5:00
p.m., New York City time.
We may
call the warrants for redemption (excluding any founders’ warrants and sponsors’
warrants still held by the original purchasers of such warrants or their
affiliates),
55
|
·
|
in
whole and not in part,
|
|
·
|
at
a price of $0.01 per warrant at any time after the warrants become
exercisable,
|
|
·
|
upon
not less than 30 days’ prior written notice of redemption to each warrant
holder, and
|
|
·
|
if,
and only if, the reported last sale price of the shares of common stock
equals or exceeds $17.00 per share, for any 20 trading days within a 30
trading day period ending on the third business day prior to the notice of
redemption to warrant holders.
|
Notice of
redemption shall be mailed by first class mail to the warrant holders not less
than 30 days prior to the date fixed for redemption. The right to exercise will
be forfeited unless the warrants are exercised prior to the date specified in
the notice of redemption. On and after the redemption date, a record holder of a
warrant will have no further rights except to receive the redemption price for
such holder’s warrant upon surrender of such warrant.
The
redemption criteria for the warrants have been established at a price which is
intended to provide warrant holders a reasonable premium to the initial exercise
price and provide a sufficient differential between the then-prevailing common
stock price and the warrant exercise price so that if the stock price declines
as a result of the redemption call, the redemption will not be expected to cause
the stock price to drop below the exercise price of the warrants.
The
warrants were issued in registered form under a warrant agreement between
Continental Stock Transfer & Trust Company, as warrant agent, and
Triplecrown (as predecessor-in-interest to the Company). The warrant agreement
was amended by Triplecrown, the Company and the warrant agent upon the closing
of the Merger. You should review a copy of the warrant agreement,
which has been filed as an exhibit to the Registration Statement on Form S-1 for
Triplecrown’s IPO (SEC File Nos. 333-144523 and 333-146850), and the amendment
to the warrant agreement, which has been filed as an exhibit to the Registration
Statement on Form S-4 for the Merger (SEC File No. 333-161773), for a complete
description of the terms and conditions applicable to the warrants. The warrant
agreement, as amended, provides that the terms of the warrants may be amended
without consent of any holder to cure any ambiguity or correct any defective
provision, but requires the written consent of the registered holders of a
majority of the then outstanding warrants in order to make any change that
adversely affects the interests of the registered holders.
The
exercise price and number of shares of common stock issuable on exercise of the
warrants may be adjusted in certain circumstances including in the event of a
stock dividend, recapitalization, reorganization, merger or consolidation.
However, the warrants will not be adjusted for issuances of our common stock at
a price below their respective exercise prices.
The
warrants may be exercised upon surrender of the warrant certificate on or prior
to the expiration date at the offices of the warrant agent, with the exercise
form on the reverse side of the warrant certificate completed and executed as
indicated, accompanied by full payment of the exercise price, by certified or
official bank check payable to us, for the number of warrants being exercised.
The warrant holders do not have the rights or privileges of holders of common
stock and any voting rights until they exercise their warrants and receive
shares of common stock. After the issuance of shares of common stock upon
exercise of the warrants, each holder will be entitled to one vote for each
share held of record on all matters to be voted on by stockholders.
56
No public
warrants will be exercisable and we will not be obligated to issue shares of
common stock unless at the time a holder seeks to exercise such warrant, a
prospectus relating to the shares of common stock issuable upon exercise of the
warrants is current and the shares of common stock have been registered or
qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the warrants. Under the terms of the warrant
agreement, we will use our best efforts to meet these conditions and to maintain
a current prospectus relating to the shares of common stock issuable upon
exercise of the warrants until the expiration of the warrants. However, we
cannot assure you that we will be able to do so and, if we do not maintain a
current prospectus relating to the shares of common stock issuable upon exercise
of the warrants, holders will be unable to exercise their warrants and we will
not be required to settle any such warrant exercise. If the prospectus relating
to the shares of common stock issuable upon the exercise of the warrants is not
current or if the shares of common stock are not qualified or exempt from
qualification in the jurisdictions in which the holders of the warrants reside,
we will not be required to net cash settle or cash settle the warrant exercise,
the warrants may have no value, the market for the warrants may be limited and
the warrants may expire worthless.
No
fractional shares will be issued upon exercise of the warrants. If, upon
exercise of the warrants, a holder would be entitled to receive a fractional
interest in a share, we will, upon exercise, round up or down to the nearest
whole number of shares of common stock.
The
founders’ warrants are identical to the public warrants except that they will
become exercisable after the merger if and when the last sales price of our
common stock exceeds $13.75 per share for any 20 trading days within any
30-trading day period and the founders’ warrants will be exercisable on a
cashless basis and will not be redeemable by us, in each case, as long as they
are held by the Triplecrown Founders or their permitted transferees. In
addition, they may be exercised for unregistered shares if a registration
statement relating to the common stock issuable upon exercise of the warrants is
not effective and current and commencing on the date such warrants become
exercisable, the founders’ warrants and the underlying common stock are entitled
to registration rights.
The
sponsors’ warrants are identical to the public warrants except that if we call
the warrants for redemption, the sponsors’ warrants will be exercisable on a
cashless basis and will not be redeemable so long as such warrants are held by
Messrs. Watson, Ledecky or their affiliates, including any permitted
transferees. In addition, they may be exercised for unregistered shares if a
registration statement relating to the common stock issuable upon exercise of
the warrants is not effective and current and the sponsors’ warrants and the
underlying common stock are entitled to registration rights.
Transfer
Agent and Warrant Agent
The
transfer agent for Cullen Agricultural Holding’s securities and warrant agent is
Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New
York 10004.
57
LEGAL
MATTERS
Graubard
Miller has passed upon the validity of the common stock offered hereby on behalf
of the Company.
EXPERTS
The
financial statements of the Company as of December 31, 2009 and for the period
from June 3, 2009 (inception) to December 31, 2009 included in this registration
statement have been audited by Marcum LLP, an independent registered public
accounting firm, to the extent set forth in their report appearing elsewhere in
this registration statement and in the registration statement. The financial
statements and the report of Marcum LLP are included in reliance upon their
report given upon the authority of Marcum LLP as experts in auditing and
accounting.
58
INDEX
TO FINANCIAL STATEMENTS
Annual
Financial Statements
Report
of independent registered public accounting firm
|
F-2
|
|
Consolidated
Financial Statements:
|
||
Balance
Sheet as of December 31, 2009
|
F-3
|
|
Statement
of Operations for the period from June 3, 2009 (inception) through
December 31, 2009
|
F-4
|
|
Statement
of Changes in Stockholders’ Equity for the period from June 3, 2009
(inception) through December 31, 2009
|
F-5
|
|
Statement
of Cash Flows for the period from June 3, 2009 (inception) through
December 31, 2009
|
F-6
|
|
Notes
to the Consolidated Financial Statements
|
F-7
|
Quarterly
Financial Statements
Condensed
Consolidated Balance Sheets as of September 30, 2010 (Unaudited)
and December 31, 2009
|
F-21
|
|
Condensed
Consolidated Statement of Operations (Unaudited) for the three
and nine months ended September 30, 2010, for the period from
June 3, 2009 (inception) through September 30, 2009 and for the
period from June 3, 2009 (inception) through September 30,
2010
|
F-22
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for
the period from June 3, 2009 (inception) through September 30,
2010
|
F-23
|
|
Condensed
Consolidated Statement of Cash Flows (Unaudited) for the nine months
ended September 30, 2010, for the period from June 3, 2009
(inception) through September 30, 2009 and for the period from
June 3, 2009 (inception) through September 30, 2010
|
F-24
|
|
F-25
|
F-1
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Audit Committee of the
Board of
Directors and Stockholders
of Cullen
Agricultural Holding Corp. and Subsidiaries
We have audited the accompanying
consolidated balance sheet of Cullen
Agricultural Holding Corp. and Subsidiaries (a development stage
corporation) (the “Company”) as of December 31, 2009, and the related consolidated statements of operations, changes in stockholders’ equity and
cash flows for the period
from June 3, 2009 (inception) through December 31, 2009. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cullen Agricultural Holding Corp.
and Subsidiaries, (a development
stage corporation) as of December 31, 2009 and the results of its operations and
its cash flows for the period from June 3, 2009 (inception)
through December 31, 2009
in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company
is in the
development stage, has incurred a loss of $612,526 for the period from June 3, 2009
(inception) through December 31, 2009 and to date has not generated any
revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note
1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/
Marcum LLP
Melville,
New York
March 31,
2010
F-2
Cullen
Agricultural Holding Corp. and Subsidiaries
(a
development stage corporation)
Consolidated
Balance Sheet
December 31, 2009
|
||||
ASSETS
|
||||
CURRENT
ASSETS
|
||||
Cash
|
1,292,204 | |||
Rent
receivable
|
7,461 | |||
Prepaid
expenses and other current assets
|
86,083 | |||
Federal
tax receivable
|
1,349,969 | |||
Total
Current Assets
|
2,735,717 | |||
PROPERTY,
PLANT AND EQUIPMENT, Net
|
9,119,612 | |||
TOTAL
ASSETS
|
$ | 11,855,329 | ||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
CURRENT
LIABILITIES
|
||||
Accrued
expenses
|
508,380 | |||
Due
to affiliates
|
28,055 | |||
Total
Current Liabilities
|
536,435 | |||
Note
payable to related party
|
5,867,575 | |||
TOTAL
LIABILITIES
|
6,404,010 | |||
COMMITMENTS
AND CONTINGENCIES
|
||||
STOCKHOLDERS'
EQUITY
|
||||
Preferred
stock - $0.0001 par value; authorized 1,000,000 shares; no shares issued
and outstanding
|
— | |||
Common
stock, par value $0.0001 ;200,000,000 shares authorized; 19,247,311 shares
issued and outstanding
|
1,925 | |||
Additional
paid in capital
|
6,061,920 | |||
Accumulated
deficit
|
(612,526 | ) | ||
TOTAL
STOCKHOLDERS' EQUITY
|
5,451,319 | |||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 11,855,329 |
The
accompanying notes are an integral part of these consolidated financial
statements.
F-3
Cullen
Agricultural Holding Corp. and Subsidiaries
(a
development stage corporation)
Consolidated
Statement of Operations
For
the Period From June 3, 2009 (Inception) Through December 31, 2009
Revenues
|
$ | — | ||
General
and administrative expenses
|
524,924 | |||
LOSS
FROM OPERATIONS
|
(524,924 | ) | ||
OTHER
INCOME (EXPENSE)
|
||||
Interest
expense - related party
|
(111,359 | ) | ||
Other
income
|
24,077 | |||
TOTAL
OTHER EXPENSE
|
(87,282 | ) | ||
LOSS
BEFORE INCOME TAXES
|
(612,206 | ) | ||
INCOME
TAXES
|
320 | |||
NET
LOSS
|
$ | (612,526 | ) | |
Weighted
average number of common shares outstanding – basic and
diluted
|
19,247,311 | |||
Basic
and diluted net loss per share
|
$ | (0.03 | ) |
The
accompanying notes are an integral part of these consolidated financial
statements.
F-4
Cullen
Agricultural Holding Corp. and Subsidiaries
(a
development stage corporation)
Consolidated
Statement of Changes in Stockholders’
Equity
For
the Period From June 3, 2009 (Inception) Through December 31, 2009
Common
Stock
|
Additional
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
Deficit
|
Total
|
||||||||||||||||
BALANCE - Beginning
June 3, 2009 (inception)
|
— | $ | — | $ | — | $ | — | $ | — | |||||||||||
Issuance
of stock to initial stockholder – 100 shares
|
||||||||||||||||||||
at $0.0001
per share
|
100 | — | 100 | — | 100 | |||||||||||||||
Issuance
of stock due to Merger – 19,247,211 shares
|
||||||||||||||||||||
at
$0.0001 per share on October 22, 2009
|
19,247,211 | 1,925 | 6,061,820 | — | 6,063,745 | |||||||||||||||
Net
(loss) for the period from June 3, 2009
|
||||||||||||||||||||
(inception) through
December 31, 2009
|
— | — | — | (612,526 | ) | (612,526 | ) | |||||||||||||
BALANCE - December 31,
2009
|
19,247,311 | $ | 1,925 | $ | 6,061,920 | $ | (612,526 | ) | $ | 5,451,319 |
The
accompanying notes are an integral part of these consolidated financial
statements.
F-5
Cullen
Agricultural Holding Corp. and Subsidiaries
(a
development stage corporation)
Consolidated
Statements of Cash Flows
For
the Period From June 3, 2009 (Inception) Through December 31, 2009
CASH FLOWS FROM OPERATING
ACTIVITIES
|
||||
Net
loss
|
$ | (612,526 | ) | |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||
Depreciation
and amortization
|
2,639 | |||
Changes
in operating assets and liabilities:
|
||||
Rent
receivable
|
(7,461 | ) | ||
Prepaid
expenses and other current assets
|
(86,083 | ) | ||
Accrued
expenses
|
466,558 | |||
TOTAL
ADJUSTMENTS
|
375,653 | |||
NET
CASH USED IN OPERATING ACTIVITIES
|
(236,873 | ) | ||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||
Purchases
of property and equipment
|
(561,769 | ) | ||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||
Repayment
of note payable
|
(986,343 | ) | ||
Advances
from affiliate
|
19,434 | |||
Cash
acquired in reverse merger
|
3,057,755 | |||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
2,090,846 | |||
NET
INCREASE IN CASH
|
1,292,204 | |||
CASH
– Beginning
|
— | |||
CASH
– Ending
|
$ | 1,292,204 | ||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
|
||||
Cash
paid during the years for:
|
||||
Interest
|
$ | 13,657 | ||
Taxes
|
$ | 0 | ||
Non-cash
investing and financing activities:
|
||||
On
October 22, 2009, the Company completed its reverse merger and
recapitalization by acquiring certain assets and assuming certain
liabilities:
|
||||
Tax
refund receivable
|
$ | 1,349,969 | ||
Land
and land improvements
|
8,560,482 | |||
Loan
payable
|
(6,853,918 | ) | ||
Accrued
expenses
|
(41,822 | ) | ||
Due
to affiliate
|
(8,621 | ) | ||
Issuance
of stock
|
(1,925 | ) | ||
Net
non-cash recapitalization
|
$ | 3,004,165 |
The
accompanying notes are an integral part of these consolidated financial
statements.
F-6
Note
1 –Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration
Organization
and Nature of Operations
Cullen
Agricultural Holding Corp. (the “Company”, “we”, “us” or “our”) was incorporated
in Delaware on August 27, 2009. We are a development stage
company. Our principal focus is to use our intellectual property in
forage and animal sciences to improve agricultural yields. To date,
we have not generated any revenue and will not do so until we have sufficient
funds to implement our business plan described below.
We were
formed as a wholly-owned subsidiary of Triplecrown Acquisition Corp.
(“Triplecrown”), a blank check company. CAT Merger Sub, Inc. (“Merger
Sub”), a Georgia corporation, was incorporated as our wholly-owned subsidiary on
August 31, 2009. We were formed in order to allow Triplecrown to
complete a business combination (the “Merger”) with Cullen Agricultural
Technologies, Inc. (“Cullen Agritech”), as contemplated by the Agreement and
Plan of Reorganization (the “Merger Agreement”), dated as of September 4, 2009,
as amended, among Triplecrown, the Company, Merger Sub, Cullen Agritech and
Cullen Inc. Holdings Ltd. (“Cullen Holdings”). Cullen Agritech was
formed on June 3, 2009. Cullen Agritech’s primary operations are
conducted through Natural Dairy Inc., a wholly owned subsidiary of Cullen
Agritech. Cullen Holdings is an affiliated entity controlled by Eric
J. Watson, our Chief Executive Officer, Secretary, Chairman of the Board and
Treasurer and, prior to the Merger, was the holder of all of the outstanding
common stock of Cullen Agritech.
Pursuant
to the Merger, (i) Triplecrown merged with and into the Company with the Company
surviving as the new publicly-traded corporation and (ii) Merger Sub merged with
and into Cullen Agritech with Cullen Agritech surviving as a wholly owned
subsidiary of the Company. As a result of the Merger, the former
security holders of Triplecrown and Cullen Agritech became the security holders
of the Company. Thus, the Company became a holding company, operating
through its wholly-owned subsidiary, Cullen Agritech. The Merger was
consummated on October 22, 2009 as more fully described below.
On
October 22, 2009, $538,810,161 was held in Triplecrown’s trust account. Upon
consummation of the Merger, the funds were disbursed as follows: $149,007,989 to
stockholders who voted against the Merger and elected to convert their shares
into a pro rata portion of the Triplecrown trust account (approximately $9.76
per share); $384,950,260 to the third parties who entered into stock
purchase agreements with Triplecrown pursuant to which Triplecrown agreed to
purchase such parties’ Triplecrown shares in connection with the Merger;
$1,154,157 in fees paid to Victory Park Capital Advisors, LLC for the
aggregation of shares from such third parties; the remaining $3,697,755 from
Triplecrown’s trust account was received by the Company upon consummation of the
Merger. Of this amount, $640,000 was used to pay expenses and fees associated
with the transaction, resulting in net proceeds to the Company of $3,057,755.
The net proceeds received by the Company are expected to be used for general
working capital purposes.
F-7
Note
1 –Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration, continued
Basis
of Presentation and Accounting treatment of Merger
As of the
Closing, the former shareholders of Triplecrown had an approximate 18% voting
interest in the Company and Cullen Holdings had an approximate 82% voting
interest in the Company. The Merger was accounted for as a reverse merger
accompanied by a recapitalization of the Company. Under this accounting method,
Cullen Agritech is considered the acquirer for accounting purposes because it
has obtained effective control of the Company and Triplecrown as a result of the
Merger. This determination was primarily based on the following facts: the
Cullen Holdings’ retention of a majority voting interest in the Company; and
Cullen Holdings’ senior management serve as the senior management of the
Company. Under this method of accounting, the recognition and measurement
provisions of ASC 805, “Business Combinations” (“ASC 805”) do not apply and
therefore, the Company did not recognize any goodwill or other intangible assets
based upon fair value or related amortization expense associated with
amortizable intangible assets. Instead, the share exchange transaction utilizes
the capital structure of the Company with Cullen Agritech surviving as a
subsidiary and the assets and liabilities of Cullen Agritech are recorded at
historical cost.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, Cullen Agricultural Technologies, Inc., including its
wholly owned subsidiary, Natural Dairy Inc. All intercompany accounts and
transactions have been eliminated in consolidation.
Going
Concern Consideration
The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. Subsequent to
the closing of the Merger on October 22, 2009 and after payment of converting
stockholders and forward contracts (including fees), approximately $3.7 million
was disbursed to the Company. After payment of transaction related
expenses (excluding deferred underwriting commissions), there was approximately
$3.1 million available for the Company’s working capital requirements. As
reflected in the accompanying consolidated financial statements, the
Company is a development stage corporation and has incurred a net loss
of $612,526 for the period from June 3, 2009 (inception) through December 31,
2009, and $1,292,204 of cash as of December 31, 2009. Additionally, upon the
consummation of the Merger, the Company issued to Cullen Holdings a promissory
note in the amount of $6,853,918, representing part of the purchase price of a
certain piece of land to be used by the Company following the Closing (see Note
6 to the Company’s consolidated financial statements). This amount was to be
repaid to Cullen Holdings at Closing but sufficient funds were not
available. As of March 2010, the Company has repaid Cullen Holdings
$2,000,000 of the note, consisting of $1,963,642 of principal and $36,358 of
interest. The Company is due to receive a tax refund of approximately $1.4
million during 2010, which is subject to the processing of the Triplecrown short
year final tax return, which was filed with the Internal Revenue Service during
the fourth quarter of 2009.
F-8
Note
1 –Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration, continued
Going
Concern Consideration, continued
The
Company intends to seek further debt or equity financing to execute its business
plan. The Company may not be able to attain further financing on terms
acceptable to it or at all and the Company’s funds may not be sufficient to
execute its business plan. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might be necessary if it is
unable to continue as a going concern.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those
estimates.
Cash
The
Company deems all highly liquid financial instruments purchased with an original
maturity date of three months or less, to be cash equivalents. At December 31,
2009, there were no cash equivalents. Cash and cash equivalents are insured by
the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each
financial institution. Cash balances maintained at financial
institutions may, at times, exceed the FDIC limits.
Property,
Plant and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. The Company
charges to expense repairs and maintenance items, while major improvements and
betterments are capitalized.
Depreciation
and amortization is provided on the straight-line method over the following
estimated useful lives of the assets:
Buildings
|
15
years
|
|
Machinery
and equipment
|
5 –
7 years
|
|
Transportation
equipment
|
5
years
|
|
Land
improvements
|
15
years
|
F-9
Note
1 –Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration, continued
Web
Site Costs
Certain
costs incurred in creating the graphics and content of the Cullen Agritech web
site have been capitalized in accordance with the Accounting Standards
Codification (“ASC”) Topic 350, “Intangible – Goodwill and Other”,
issued by the Financial Accounting Standards Board (“FASB”).
When the
website is operational these costs will be amortized over a 3 year
period. Web site design and conceptual costs are expensed as
incurred. As of December 31, 2009, no amortization expense has been
recorded since the web site has not been placed into service.
Loss
Per Share
The
Company follows the provisions of the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (the “ASC”) ASC 260, “Earnings Per
Share” (“ASC 260”). In accordance with ASC 260, earnings per common share
amounts (“Basic EPS”) are computed by dividing earnings by the weighted average
number of common shares outstanding for the period. Earnings per common share
amounts, assuming dilution (“Diluted EPS”), gives effect to dilutive options,
warrants, and other potential common stock outstanding during the period. ASC
260 requires the presentation of both Basic EPS and Diluted EPS on the face of
the statements of operations. The effect of the Merger has been given
retroactive application in the EPS calculation. At December 31, 2009 there were
74,000,000 warrants outstanding that were not included in the calculation of
basic and diluted EPS because the effects of these securities would have been
anti-dilutive.
Basic
earnings per share is calculated using the average number of common shares
outstanding and diluted earnings per share is computed on the basis of the
average number of common shares outstanding plus the effect of outstanding
warrants using the “treasury stock method.”
December 31, 2009
|
||||
Net
income available to common shareholders
|
$ | 612,526 | ||
Weighted
average common shares outstanding – Basic
|
19,247,311 | |||
Net
effect of dilutive common stock warrants
|
— | |||
Weighted
average common shares and common shares equivalent –
Diluted
|
19,247,311 | |||
Basic
loss per share
|
$ | (0.03 | ) | |
Diluted
loss per share
|
$ | (0.03 | ) |
F-10
Note
1 – Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration, continued
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740, "Income Taxes"
("ASC 740"). ASC 740 requires an asset and liability approach for financial
accounting and reporting for income taxes and establishes for all entities a
minimum threshold for financial statement recognition of the benefit of tax
positions, and requires certain expanded disclosures. The provision for income
taxes is based upon income or loss after adjustment for those permanent items
that are not considered in the determination of taxable income. Deferred income
taxes represent the tax effects of differences between the financial reporting
and tax bases of the Company's assets and liabilities at the enacted tax rates
in effect for the years in which the differences are expected to reverse. The
Company evaluates the recoverability of deferred tax assets and establishes a
valuation allowance when it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Management makes judgments as to
the interpretation of the tax laws that might be challenged upon an audit and
cause changes to previous estimates of tax liability. In management's opinion,
adequate provisions for income taxes have been made. If actual taxable income by
tax jurisdiction varies from estimates, additional allowances or reversals of
reserves may be necessary. The Company has identified its federal tax return and
its state tax return in Georgia as "major" tax jurisdictions. Based on the
Company's evaluation, it has been concluded that there are no significant
uncertain tax positions requiring recognition in. the Company's financial
statements. Since the Company was incorporated on June 3, 2009 the evaluation
was performed for the 2009 tax year the only period subject to examination. The
Company believes that its income tax positions and deductions will be sustained
on audit and does not anticipate any adjustments that will result in a material
change to its financial position.
The
Company’s policy for recording interest and penalties associated with audits is
to record such items as a component of income tax expense. There were
no amounts accrued for penalties and interest as of or during the period from
June 3, 2009 (inception) through December 31, 2009. The Company does
not expect its uncertain tax position to change during the next twelve
months. Management is currently unaware of any issues under review
that could result in significant payments, accruals or material deviations from
its position. The adoption of the provisions of ASC 740 did not have
a material impact of the Company’s consolidated financial position, results of
operations and cash flows.
Recently
Issued and Adopted Accounting Pronouncements
During
the third quarter of 2009, the Company adopted the Financial Accounting
Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2009-01,
“Amendments Based on Statement of Financial Accounting Standards No. 168 – The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles” (the “ASC”). The ASC became the single source of
authoritative GAAP in the United States, other than rules and interpretive
releases issued by the SEC. The ASC reorganized GAAP into a topical format that
eliminates the previous GAAP hierarchy and instead established two levels of
guidance – authoritative and nonauthoritative. All non-grandfathered, non-SEC
accounting literature that was not included in the ASC became nonauthoritative.
The adoption of the ASC did not change previous GAAP, but rather simplified user
access to all authoritative literature related to a particular accounting topic
in one place. Accordingly, the adoption had no impact on the Company’s
consolidated financial position and results of operations.
F-11
Note
1 – Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration, continued
Recently
Issued and Adopted Accounting Pronouncements,continued
In
December 2007, the FASB issued guidance now codified in ASC 805. “Business
Combinations.” The new standard changes accounting for acquisitions that close
beginning in 2009 in a number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, In-process research &
development and restructuring costs. More transactions and events
will qualify as business combinations and will be accounted for at fair value
under the new standard. The new standard promotes greater use of fair
values in financial reporting. In addition, under the new standard, changes in
deferred tax asset valuation allowances and acquired income tax uncertainties in
a business combination after the measurement period will impact income tax
expense. Some of the changes will introduce more volatility into
earnings. The new standard is effective for fiscal years beginning on
or after December 15, 2008. The Company adopted this standard on June
3, 2009. This standard will have an impact on accounting for any business
acquired in the future.
In
December 2007, the FASB issued guidance now codified in ASC 810, “Consolidation”
(“ASC 810”). The new standard will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity. This new consolidation method will
significantly change the accounting for transactions with minority interest
holders. The new standard is effective for fiscal years beginning after December
15, 2008. The Company adopted this standard on June 3, 2009. This standard will
have an impact on the presentation and disclosure of the noncontrolling
interests of any non-wholly owned business acquired in the future.
In May
2009, the FASB issued guidance now codified in ASC 855, “Subsequent Events”.
This new standard is to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued. This new standard became effective June 15,
2009 for all subsequent reporting periods. The adoption of this standard
resulted in additional disclosure with respect to subsequent
events.
In
February 2010, Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2010-09,Subsequent Events (Topic 855) Amendments to
Certain Recognition and Disclosure Requirements , which amends disclosure
requirements within Subtopic 855-10. An entity that is an SEC filer is not
required to disclose the date through which subsequent events have been
evaluated. This change alleviates potential conflicts between Subtopic 855-10
and the SEC's requirements. ASU 2010-09 is effective upon issuance. The adoption
of ASU 2010-09 did not have a material impact on the Company's consolidated
financial statements.
F-12
Note
1 – Organization, Business Operations, Significant Accounting Policies and Going
Concern Consideration, continued
Recently
Issued and Adopted Accounting Pronouncements, continued
In
December 2009, FASB issued ASU 2009-17,Consolidations (Topic 810) Improvements
to Financial Reporting by Enterprises Involved with Variable Interest Entities ,
which replaces the quantitative-based risks and rewards calculation for
determining which enterprise, if any, has a controlling financial interest in a
variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity's economic performance and (1) the
obligation to absorb losses of the entity or (2) the right to receive benefits
from the entity. ASU 2009-17 also requires additional disclosures about an
enterprise's involvement in variable interest entities. ASU 2009-17 is effective
as of the beginning of each reporting entity's first annual reporting period
that begins after November 15, 2009. The Company does not expect the adoption of
ASU 2009-17 to have a material impact on its consolidated financial
statements.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
consolidated financial statements.
Note
2 – Merger
On
September 4, 2009, the Company entered into the Merger Agreement. Parties to the
Merger Agreement included the Company, Triplecrown, the Merger Sub, Cullen
Agritech and Cullen Inc. Holdings Ltd. (the “Parties”). Pursuant to
the Merger Agreement, the Parties (i) merged Triplecrown into the Company, with
the Company being the surviving public entity and (ii) merged Merger Sub into
Cullen Agritech, with Cullen Agritech being the surviving subsidiary of the
Company. The Merger was consummated on October 22,
2009. As a result, the holders of common stock and warrants of
Triplecrown received like securities of the Company, on a one-to-one basis, in
exchange for their existing securities, except that 11,380,000 shares of the
13,800,000 shares of common stock owned by Triplecrown’s founding shareholders
and directors were cancelled. The shares of Cullen Agritech’s common
stock were converted into 15,881,148 shares of the Company’s common stock as
purchase consideration. Upon consummation of the Merger, the Company became the
sole owner of Cullen Agritech’s common stock.
In
connection with the Merger, the stockholders of Triplecrown approved the
amendment of certain terms of the Warrant Agreement, dated as of October 22,
2007. Specifically the holders of Triplecrown’s warrants agreed to increase the
strike price of the warrants from $7.50 per share to $12.00 per share and to
extend the expiration date to October 22, 2013. No compensation expense was
recorded as a result of the modification to warrants.
F-13
Note
2 – Merger, continued
On
October 22, 2009, the Merger was consummated (the “Closing”). In
connection with the transactions, Triplecrown entered into “forward contracts”
to purchase approximately 39.4 million of the shares of its common stock sold in
its initial public offering in privately negotiated transactions from
stockholders who would otherwise have voted against the Merger for an aggregate
purchase price of approximately $385 million. The closing of such
purchases was effected on the closing out of the funds that were held in
Triplecrown’s trust account and were released as a result of the
Merger. In connection with such purchases, Triplecrown paid a fee to
Victory Park Capital Advisors, LLC of $1,154,157 for purchasing an aggregate of
approximately 15.5 million shares from stockholders who would otherwise have
voted against the Merger.
Upon
completion of the Merger, Cullen Holdings was issued 15,881,148 shares of the
Company’s common stock for its interest in Cullen Agritech. Of this amount,
1,588,114 shares were deposited in escrow to secure the indemnification
obligations owed to Triplecrown under the Merger Agreement. Additionally, two
consultants to Triplecrown were issued an aggregate of 455,000 shares of common
stock of the Company.
After
giving effect to the Merger and the issuances to Triplecrown’s two consultants,
as of October 22, 2009, 19,247,311 shares of the Company’s common stock were
outstanding and 74,000,000 warrants, each to purchase one share of the Company’s
common stock.
The
number of shares of common stock of the Company issued and outstanding upon
consummation of the Merger on October 22, 2009 is summarized as
follows:
Triplecrown
Public Shares outstanding prior to the Merger
|
55,200,000 | |||
Triplecrown
Founder shares
|
13,800,000 | |||
Total
Triplecrown shares outstanding prior to the Merger
|
69,000,000 | |||
Common
shares forfeited by Triplecrown Founders
|
(11,260,000 | ) | ||
Common
shares forfeited by Triplecrown non-continuing directors
|
(120,000 | ) | ||
Triplecrown
shares converted to a pro rata share portion of Triplecrown’s trust
account (1)
|
(15,267,212 | ) | ||
Triplecrown
shares purchased pursuant to stock purchase agreements (2)
|
(39,441,625 | ) | ||
Total
Triplecrown shares outstanding immediately prior to the effective date of
the Merger
|
2,911,163 | |||
Share
exchange ratio (1 to 1)
|
1:1
|
|||
Common
shares issued in connection with the Merger
|
2,911,163 | |||
Common
shares issued as purchase consideration to Cullen Holdings
|
15,881,148 | |||
Common
shares issued to consultants of Triplecrown
|
455,000 | |||
Total
common shares outstanding at closing, October 22, 2009
|
19,247,311 |
(1)
Reflects the 15,267,212 Triplecrown shares, representing 27.66% of the shares
sold in Triplecrown’s initial public offering, that were converted into a pro
rata portion of the funds in the Triplecrown trust account in connection with
the consummation of the Merger.
F-14
Note
2 – Merger, continued
(2) Prior
to Triplecrown’s stockholder meeting on October 22, 2009, Triplecrown entered
into stock purchase agreements with several third parties pursuant to which
Triplecrown agreed to purchase such parties’ Triplecrown shares in connection
with the Merger.
Note
3 – Property, Plant and Equipment
At
December 31, 2009, property, plant and equipment consisted of the
following:
Land
|
$ | 8,445,606 | ||
Buildings
|
185,375 | |||
Machinery
and equipment
|
6,170 | |||
Website
|
3,328 | |||
Land
improvements
|
$ | 481,772 | ||
9,122,251 | ||||
Less:
Accumulated depreciation and amortization
|
2,639 | |||
Property,
plant and equipment, net
|
9,119,612 |
Depreciation
and amortization expense for the period from June 3, 2009 (inception) through
December 31, 2009 was $2,639. Machinery and equipment, website cost and land
improvements, which amounted to $6,170, $3,327,
$481,772, respectively, have not been placed into service as of
December 31, 2009. Accordingly, no depreciation or amortization has been
recorded related to these assets.
Note
4 – 2009 Long-Term Incentive Equity Plan
The
Company’s 2009 Long-Term Incentive Equity Plan (the “Plan”) permits the granting
of stock options, stock appreciation rights, restricted stock and other stock
based awards to officers, employees, directors and consultants of the Company
for up to 2,405,914 shares. The Company believes that such awards
better align the interest of its employees with those of its
shareholders. Option awards are granted with an exercise price equal
to the market price on the date of grant and they generally vest over a three
year period and expire between 5 and 10 years from the date of
issuance. Stock appreciation rights may be awarded in tandem with an
option and shall no longer be exercisable upon termination or the exercise of
the related option. The term of the stock appreciation right is
determined by the Plan’s committee. Restricted stock and other stock
based awarded at the discretion of the Plan’s committee. As of
December 31, 2009, there have been no awards granted under this
Plan.
F-15
Note
5 – Income Taxes
The
components of the income tax provision are as follows:
Current:
|
||||
Federal
|
$ | — | ||
State
|
320 | |||
Deferred:
|
||||
Federal
|
— | |||
State
|
— | |||
Income
tax expense
|
$ | 320 |
Deferred
income taxes, if applicable, are provided for the differences between the basis
of assets and liabilities for financial reporting and income tax
purposes. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized.
As of
December 31, 2009, the Company had a net operating loss carry forward of
$609,572, which expires in 2029, if realized it would have a tax
benefit of $231,394. The Company has determined that this deferred
tax asset has no value at this time, as the Company does not believe it will
utilize these losses in the future, and accordingly has recorded a valuation
allowance of 100% of the deferred tax asset.
A
reconciliation of the provision for income taxes with the amounts computed by
applying the statutory Federal income tax to income from continuing operations
before provision for income taxes is as follows:
For the Period from
June 3, 2009 (inception)
through
December 31, 2009
|
||||
Tax
provision at statutory
|
34 | % | ||
State
and local taxes (net of federal benefit)
|
4 | % | ||
Change
in valuation allowance and non-deductible items
|
(38 | )% | ||
Effective
tax rate
|
0 | % |
F-16
Note
6 – Notes Payable
In
connection with the Merger, Triplecrown and Natural Dairy entered into a
contract to purchase a certain piece of land to be used by us following
consummation of the Merger. The total purchase price of the land was $8,662,500.
Triplecrown paid an initial deposit of $866,250 on the land. On August 10, 2009,
Triplecrown, Natural Dairy and the seller of the land extended the closing date
for the land purchase and Triplecrown paid an additional deposit on the land of
$833,750, interest of $48,070 and a leasing fee to use the land of $3,518 for a
total additional deposit of $885,338. Natural Dairy closed on this
contract and purchased the land on October 16, 2009. The balance of
the purchase price for such land was paid by Natural Dairy, which such funds
were advanced to it by Cullen Holdings. Upon the closing of the
Merger, we issued to Cullen Holdings a promissory note in the amount of
$6,853,918, representing the part of the purchase price that was advanced by
Cullen Holdings. This amount was to be repaid to Cullen Holdings at the closing
of the Merger but sufficient funds were not available. As of December
31, 2009 the Company had repaid Cullen Holdings $1,000,000 of the note,
consisting of $986,343 of principal and $13,657 of interest. As of March 2010,
the Company has repaid Cullen Holdings $2,000,000 of the note, consisting of
$1,963,642 of principal and $36,358 of interest. On March 30, 2010,
Cullen Holdings agreed to extend the maturity date of the note from January 20,
2010 to January 20, 2011. In consideration of this extension, the
Company granted to Cullen Holdings a mortgage on the land that is the subject of
the promissory note. The note continues to accrue interest at the rate of 8% per
annum.
F-17
Note
7 – Commitments and Contingencies
Litigation
On
December 9, 2009, a second amended class action complaint, styled Goodman v.
Watson, et al., was filed in the Court of Chancery of the State of Delaware
against the former directors of Triplecrown. The complaint alleges
that the defendants breached their fiduciary duties and their duty of disclosure
in connection with Triplecrown’s merger into the Company. The
plaintiff seeks, as alternative remedies, damages in the amount of $9.74 per
share, to have Triplecrown’s trust account restored and distributed pro rata to
members of the putative class, a quasi-appraisal remedy for members of the
putative class, and an opportunity for members of the putative class to exercise
conversion rights in connection with the merger. The defendants filed
an answer on December 23, 2009. The former directors intend to defend this
action vigorously but can provide no assurance as to the manner or timing of its
resolution. Adjustments, if any, that might result from the resolution of this
matter have not been reflected in the financial statements.
Related
Party
In
connection with the closing of the IPO, Triplecrown sold 2,500,000 Sponsors’
Warrants to each of Eric J. Watson and Jonathan J. Ledecky, Triplecrown’s
president and secretary, at a purchase price of $1.00 per warrant. These
purchases took place on a private placement basis simultaneously with the
consummation of the IPO. If we call our warrants for redemption, the Sponsors’
Warrants are not redeemable so long as such warrants are held by Messrs. Watson,
Ledecky or their affiliates, including any permitted transferees.
The
holders of the majority of the Founders’ Units and the holders of the majority
of the Sponsors’ Warrants (or underlying shares) each will be entitled to make
up to two demands that we register such units or warrants (or underlying shares)
pursuant to a registration rights agreement entered into with Triplecrown in
connection with the IPO. The holders of the majority of the Founders’ Units can
elect to exercise these registration rights at any time commencing July 22, 2010
(nine months after the consummation of the Merger). The holders of a majority of
the Sponsors’ Warrants (or underlying shares) can elect to exercise these
registration rights at any time. In addition, these holders have certain
“piggy-back” registration rights on registration statements filed subsequent to
such date. We will bear the expenses incurred in connection with the
filing of any such registration statements.
On
September 3, 2009, Cullen Agritech entered into an agreement with Cullen
Investments Limited, Hart Acquisitions, LLC, Natural Dairy and Dr. Watson
whereby the parties assigned the rights to certain intellectual property,
including the proprietary farming system, to Cullen Agritech upon consummation
of the Merger. Upon completion of the Merger, Cullen Holdings was issued
15,881,148 shares of our common stock (valued at $155 million, or $9.76 per
share) for its interest in Cullen Agritech.
F-18
Note
7 – Commitments and Contingencies, continued
From June
3, 2009 (inception) through December 31, 2009, Cullen Investments Limited funded
part of the operations of both Cullen Agritech and Natural Dairy and incurred
costs of a combined total of $114,937. These costs consisted of
$69,553 of legal expenses, $28,398 of corporate formational costs and $16,986 of
travel costs. As of December 31, 2009 $113,937 was repaid to Cullen Investments
Limited and $1,000 is payable and included in due to affiliate.
From June
3, 2009 (inception) through December 31, 2009, Hart Acquisitions, LLC also
funded part of the operations of both Cullen Agritech and Natural Dairy and
incurred costs of a combined total of $47,307. These costs consisted
of $5,114 of property related expenses and $42,193 of employee related expenses.
As of December 31, 2009, $20,251 was repaid to Hart Acquisitions, LLC and the
remainder of $27,055, was repaid during February 2010.
On
February 2, 2010, the Company signed an Escrow Agreement ( the “Escrow
Agreement”) related to the procurement and purchase of 350 cows. The Company,
Struve Technologies, Inc. (“Struve”) and the Seller where all party to this
agreement. Bill TeBrake, the Chairman of Struve, is also a member of our
advisory board. The Escrow Agreement governs the disbursement of funds to Struve
and the Seller at various points of the cow procurement process. On February 15,
2010 the Company signed a Sale and Purchase Agreement with the Seller related to
350 cows. The Sale and Purchase Agreement also governs additional
responsibilities of both the Company and the Seller. Should the seller fulfill
his obligations, the Company will be required to receive the 350 cows on May 15,
2010. The total purchase price of $472,500, less a 20% deposit would be due on
that date. On February 26, 2010 the Company funded the Escrow account
in the amount of $112,000, which represents a 20% deposit and 50% of Struve’s
fees. As per the terms of the Escrow Agreement, $8,750 was released
to Struve. On March 1, 2010 Struve and the Seller completed certain
responsibilities as required by the Escrow Agreement and an additional $8,750
(25% of Struve’s Fees) was disbursed to Struve as well as an initial deposit of
$94,500.
Employment
Agreements
Effective
September 1, 2009, Dr. Richard Hart Watson became an employee of Natural Dairy
pursuant to an employment agreement entered on August 31, 2009. Dr.
Watson is the half-brother of Eric Watson.
Effective
January 2010, we entered into a one year employment contract with Dr. Todd White
from New Zealand, pursuant to which he receives a base salary of $90,000 and is
entitled to receive a bonus of between 15% to 30% of the base salary subject to
the sole discretion of the board of directors. The Company also secured a 3 year
visa for Dr. White. Dr. White will assist in the development of our intellectual
property and farming strategy.
F-19
Note
8 – Subsequent Events
On
January 1, 2010, we signed a lease related to our executive offices in Athens,
Georgia. The lease expires on June 30, 2010. We have the option to
renew the lease for additional 6 months through December 31, 2010. We also have
a second option to renew the lease for an additional 12-month period through
December 31, 2011. This second option is a mutual option, which requires both
parties to be willing to exercise the option. The total rent commitment for the
premises through June 30, 2010 is approximately $8,300. The total
rent for the first and second option periods is approximately $8,900 and
$20,000, respectively.
During
January 2010, we signed an Agreement with Battle Lumber Co., Inc. for the sale
and removal of merchantable timber located on part of the 3,300 acres of our
property. During February and March of 2010 Battle Lumber has removed a portion
of the timber and remitted payment to us for approximately $30,000. The Company
expects to conclude the removal of timber during 2010.
In
January 2010, the Company entered into an agreement to sell 340 non irrigated
acres of our property. The sale of the parcel of land closed on February 6, 2010
for an aggregate purchase price of approximately $613,000 or approximately
$1,800 per acre. The sale price per acre of the 340 acres sold was lower than
the average price per acre at which the 3,600 acres were purchased. This is due
to the fact that the 340 acres sold were non irrigated, while the 3,600 acres
that were originally purchased were a mixture of irrigated and non irrigated
acres.
On
January 25, 2010, we issued 8,403 shares of Common Stock to Ladenburg Thalmann
& Co. Inc. as compensation for services performed related to our
merger on October 22, 2009.
The
Company evaluates events that occurred after the balance sheet date but before
the consolidated financial statements are issued. Based upon the evaluation the
company did not identify any recognized or non recognized subsequent events,
except as noted above, that would have required adjustment or disclosure in
the consolidated financial statements..
F-20
Part
I: Financial Information
Item
1 – Financial Statements (Unaudited)
Cullen
Agricultural Holding Corp. and Subsidiaries
(a
development stage company)
Condensed
Consolidated Balance Sheets
September 30, 2010
|
||||||||
(unaudited)
|
December 31, 2009
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
56,188 | 1,292,204 | ||||||
Rent
receivable
|
— | 7,461 | ||||||
Cattle
held for sale
|
269,467 | — | ||||||
Due
from affiliates
|
143,711 | |||||||
Inventory
|
86,200 | — | ||||||
Prepaid
expenses and other current assets
|
20,445 | 86,083 | ||||||
Refundable
taxes
|
314 | 1,349,969 | ||||||
Total
Current Assets
|
576,325 | 2,735,717 | ||||||
6,823,575 | 9,119,612 | |||||||
PROPERTY,
PLANT AND EQUIPMENT, Net
|
||||||||
TOTAL
ASSETS
|
$ | 7,399,900 | $ | 11,855,329 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accrued
expenses
|
281,028 | 508,380 | ||||||
Due
to affiliates
|
— | 28,055 | ||||||
Deferred
Income
|
51,008 | — | ||||||
Current
portion of note payable
|
9,605 | — | ||||||
Mortgage
payable, related party
|
3,938,668 | — | ||||||
Total
Current Liabilities
|
4,280,309 | 536,435 | ||||||
Mortgage
payable, related party
|
— | 5,867,575 | ||||||
Non
current portion of note payable
|
30,515 | — | ||||||
TOTAL
LIABILITIES
|
4,310,824 | 6,404,010 | ||||||
COMMITMENTS AND
CONTINGENCIES
|
||||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock - $0.0001 par value; authorized 1,000,000 shares; no shares issued
and outstanding
|
— | — | ||||||
Common
stock, par value $0.0001; 200,000,000 shares authorized; 19,255,714 and
19,247,311 shares issued and outstanding, respectively
|
1,926 | 1,925 | ||||||
Additional
paid in capital
|
6,111,919 | 6,061,920 | ||||||
Deficit
accumulated during the development stage
|
(3,024,769 | ) | (612,526 | ) | ||||
TOTAL
STOCKHOLDERS' EQUITY
|
3,089,076 | 5,451,319 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 7,399,900 | $ | 11,855,329 |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-21
Cullen
Agricultural Holding Corp. and Subsidiaries
(a
development stage company)
Condensed
Consolidated Statement of Operations
(unaudited)
For the period from
|
For the period from
|
|||||||||||||||||||
For the Three
|
For the Nine
|
For the Three
|
June 3, 2009
|
June 3, 2009
|
||||||||||||||||
months ended
|
months ended
|
months ended
|
(inception) through
|
(inception) through
|
||||||||||||||||
September 30, 2010
|
September 30, 2010
|
September 30, 2009
|
September 30, 2009
|
September 30, 2010
|
||||||||||||||||
Revenues
|
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Impairment
Loss on property, plant and equipment
|
963,172 | 963,172 | — | — | 963,172 | |||||||||||||||
General
and administrative expenses
|
317,690 | 1,283,862 | 66,133 | 66,133 | 1,808,786 | |||||||||||||||
LOSS
FROM OPERATIONS
|
(1,280,862 | ) | (2,247,034 | ) | (66,133 | ) | (66,133 | ) | (2,771,958 | ) | ||||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||||||
Interest
expense - related party
|
(82,079 | ) | (282,849 | ) | — | — | (394,208 | ) | ||||||||||||
Interest
expense - related to note payable
|
(186 | ) | (279 | ) | — | — | (279 | ) | ||||||||||||
Other
income, net
|
59,945 | 118,895 | — | — | 142,972 | |||||||||||||||
TOTAL
OTHER EXPENSE
|
(22,320 | ) | (164,233 | ) | — | — | (251,515 | ) | ||||||||||||
LOSS
BEFORE INCOME TAXES
|
(1,303,182 | ) | (2,411,267 | ) | (66,133 | ) | (66,133 | ) | (3,023,473 | ) | ||||||||||
INCOME
TAXES
|
314 | 976 | — | — | 1,296 | |||||||||||||||
NET
LOSS
|
$ | (1,303,496 | ) | $ | (2,412,243 | ) | $ | (66,133 | ) | $ | (66,133 | ) | $ | (3,024,769 | ) | |||||
Weighted
average number of common shares outstanding – basic and
diluted
|
19,255,714 | 19,254,975 | 100 | 100 | ||||||||||||||||
Basic
and diluted net loss per share
|
$ | (0.07 | ) | $ | (0.13 | ) | $ | (661.33 | ) | $ | (661.33 | ) |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-22
Cullen Agricultural Holding Corp. and
Subsidiaries
(a
development stage company)
Condensed
Consolidated Statement of Changes in Stockholders’ Equity
(unaudited)
For
the Period From June 3, 2009 (inception) through September 30, 2010
Deficit accumulated
|
||||||||||||||||||||
Common Stock
|
Additional
|
during the
|
||||||||||||||||||
Shares
|
Amount
|
Paid-in Capital
|
development stage
|
Total
|
||||||||||||||||
BALANCE
- Beginning June 3, 2009 (inception)
|
— | $ | — | $ | — | $ | — | $ | — | |||||||||||
Issuance
of stock to initial stockholder – 100 shares at
|
||||||||||||||||||||
$0.0001
per share
|
100 | — | 100 | — | 100 | |||||||||||||||
Issuance
of stock due to Merger – 19,247,211 shares at
|
||||||||||||||||||||
$0.0001
per share on October 22, 2009
|
19,247,211 | 1,925 | 6,061,820 | — | 6,063,745 | |||||||||||||||
Net
loss for the period from June 3, 2009 (inception)
|
||||||||||||||||||||
through
December 31, 2009
|
— | — | — | (612,526 | ) | (612,526 | ) | |||||||||||||
BALANCE
- December 31, 2009
|
19,247,311 | 1,925 | 6,061,920 | (612,526 | ) | 5,451,319 | ||||||||||||||
Issuance
of stock at $5.95 per share
|
8,403 | 1 | 49,999 | — | 50,000 | |||||||||||||||
Net
loss for the nine months ended September 30, 2010
|
— | — | — | (2,412,243 | ) | (2,412,243 | ) | |||||||||||||
BALANCE
- Spetember 30, 2010
|
19,255,714 | $ | 1,926 | $ | 6,111,919 | $ | (3,024,769 | ) | $ | 3,089,076 |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-23
Cullen Agricultural Holding Corp. and
Subsidiaries
(a
development stage company)
Condensed Consolidated
Statements of Cash Flows
(unaudited)
For
the period
|
For
the period
|
|||||||||||
For
the nine
|
from
June 3,
|
from
June 3,
|
||||||||||
months
ended
|
2009
(inception)
|
2009
(inception)
|
||||||||||
September
30,
|
to
September 30,
|
to
September 30,
|
||||||||||
2010
|
2009
|
2010
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
loss
|
(2,412,243 | ) | (66,133 | ) | (3,024,769 | ) | ||||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Loss
on sale of property and equipment
|
48,108 | - | 48,108 | |||||||||
Depreciation
and amortization
|
45,839 | - | 48,478 | |||||||||
Impairment
loss on property, plant and equipment
|
963,172 | - | 963,172 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Rent
receivable
|
7,461 | - | - | |||||||||
Cattle
held for sale
|
(269,467 | ) | - | (269,467 | ) | |||||||
Inventory
|
(86,200 | ) | - | (86,200 | ) | |||||||
Prepaid
expenses and other current assets
|
65,638 | (2,000 | ) | (20,445 | ) | |||||||
Refundable
taxes
|
1,349,655 | - | 1,349,655 | |||||||||
Accrued
expenses
|
(643 | ) | 11,767 | 465,915 | ||||||||
Deferred
income
|
51,008 | - | 51,008 | |||||||||
TOTAL
ADJUSTMENTS
|
2,174,571 | 9,767 | 2,550,224 | |||||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(237,672 | ) | (56,366 | ) | (474,545 | ) | ||||||
Cash
Flows from Investing Activities
|
||||||||||||
Purchases
of property and equipment
|
(240,990 | ) | (3,327 | ) | (802,759 | ) | ||||||
Proceeds
from sale of property and equipment
|
1,520,028 | - | 1,520,028 | |||||||||
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
1,279,038 | (3,327 | ) | 717,269 | ||||||||
Cash
Flows from Financing Activities
|
||||||||||||
Repayment
of mortgage payable to related party
|
(2,105,616 | ) | - | (3,091,959 | ) | |||||||
Advances
(to) from affiliates
|
(204,623 | ) | 63,307 | 246,140 | ||||||||
Repayments
from (to) affiliates
|
32,857 | - | (398,472 | ) | ||||||||
Cash
acquired in reverse merger
|
- | - | 3,057,755 | |||||||||
NET
CASH USED IN FINANCING ACTIVITIES
|
(2,277,382 | ) | 63,307 | (186,536 | ) | |||||||
NET
(DECREASE) INCREASE IN CASH
|
(1,236,016 | ) | 3,614 | 56,188 | ||||||||
CASH
- Beginning
|
1,292,204 | - | - | |||||||||
CASH
- Ending
|
56,188 | 3,614 | 56,188 | |||||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
44,384 | - | 58,041 | |||||||||
Taxes
|
1,300 | - | 1,300 | |||||||||
Non-cash
investing and financing activities:
|
||||||||||||
Acquisition
of property, plant and equipment through issuance of debt
|
40,120 | 518,879 | 558,999 | |||||||||
Issuance
of common stock to settle accrued expenses
|
50,000 | - | 50,000 | |||||||||
Conversion
of interest payable into mortgage payable to related party
|
176,709 | - | 176,709 | |||||||||
On
October 22, 2009, the Company completed its reverse merger and
recapitalization by acquiring certain assets and assuming certain
liabilities:
|
||||||||||||
Tax
refund receivable
|
- | - | 1,349,969 | |||||||||
Land
and land improvements
|
- | - | 8,560,482 | |||||||||
Loan
payable
|
- | - | (6,853,918 | ) | ||||||||
Accrued
expenses
|
- | - | (41,822 | ) | ||||||||
Due
to affiliates
|
- | - | (8,621 | ) | ||||||||
Additional
paid-in capital
|
- | - | - | |||||||||
Issuance
of stocks
|
- | - | (1,925 | ) | ||||||||
Net
non-cash recapitalization
|
- | - | (3,004,165 | ) |
The
accompanying notes are an integral part of these condensed consolidated financial
statements.
F-24
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
1. Interim Financial Information, Organization, Business
Operations, Significant Accounting Policies and Going Concern
Consideration
Basis
of Presentation
Cullen
Agricultural Holding Corp’s (the “Company”, “we”, “us” or “our”) accompanying
unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. Operating results for the three and nine month periods
ended September 30, 2010 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2010. In addition, the December 31,
2009 balance sheet data was derived from the audited consolidated financial
statements, but does not include all disclosures required by GAAP. The
accompanying unaudited condensed consolidated financial statements, in the
opinion of management, include all adjustments necessary for a fair
presentation. All such adjustments are of a normal recurring
nature.
We are a
development stage company and to date have not generated any revenue. These
unadjusted condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes there
to for the fiscal year ended December 31, 2009 filed on March 31, 2010. The
accounting policies used in preparing these unaudited condensed consolidated
financial statements are consistent with those described in the December 31,
2009 audited financial statements.
Organization
and Nature of Operations
The
Company was incorporated in Delaware on August 27, 2009. We were
formed as a wholly-owned subsidiary of Triplecrown Acquisition Corp.
(“Triplecrown”), a blank check company. CAT Merger Sub, Inc. (“Merger
Sub”), a Georgia corporation, was incorporated as our wholly-owned subsidiary on
August 31, 2009. We were formed in order to allow Triplecrown to
complete a business combination (the “Merger”) with Cullen Agricultural
Technologies, Inc. (“Cullen Agritech”), as contemplated by the Agreement and
Plan of Reorganization (the “Merger Agreement”), dated as of September 4, 2009,
as amended, among Triplecrown, the Company, Merger Sub, Cullen Agritech and
Cullen Inc. Holdings Ltd. (“Cullen Holdings”). Cullen Agritech was
formed on June 3, 2009. Cullen Agritech’s primary operations are
conducted through Natural Dairy Inc. (“Natural Dairy”), a wholly owned
subsidiary of Cullen Agritech. Cullen Holdings is an entity
controlled by Eric J. Watson, our Chief Executive Officer, Secretary, Chairman
of the Board and Treasurer and, prior to the Merger, was the holder of all of
the outstanding common stock of Cullen Agritech.
Pursuant
to the Merger, (i) Triplecrown merged with and into the Company with the Company
surviving as the new publicly-traded corporation and (ii) Merger Sub merged with
and into Cullen Agritech with Cullen Agritech surviving as a wholly owned
subsidiary of the Company. As a result of the Merger, the former
security holders of Triplecrown and Cullen Agritech became the security holders
of the Company. Thus, the Company became a holding company, operating
through its wholly-owned subsidiary, Cullen Agritech. The Merger was
consummated on October 22, 2009.
We are a
development stage company. Our principal focus is to use our
intellectual property in forage and animal sciences to improve agricultural
yields. Our business model is focused on deploying sustainable, low cost,
forage-based production methods to beef and milk production in the South East
(“SE”) United States. The relatively low cost of land combined with an efficient
cost structure and premium pricing enables us to potentially deliver attractive
return on assets (“ROA”) from an established operation. We believe the ROA we
can generate is superior to the more traditional uses of land in the area (e.g.
corn, cotton and peanuts). Our model is based on the proven production model
underpinning New Zealand’s (“NZ”) agricultural industry that has been
specifically tailored to the environment in the SE United States. This system is
based on forage production of 10-12 tons of dry matter per acre and access to
NZ-based livestock genetics that will efficiently utilize forage. Through
reducing dependence on grain-based feed, we believe our production model will
enable us to become a cost-leader in beef and dairy
production.
F-25
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
1. Interim Financial Information, Organization, Business
Operations, Significant Accounting Policies and Going Concern Consideration,
continued
The
Company has been in the process of attempting to obtain land development
financing backed by the property it owns and operates to support its working
capital needs and implement its business plan. However, due to the recent
performance of similar types of farming operations in the region, as well as the
general economic downturn, financial institutions have been unwilling to provide
such financing. As a result, the Company has been unable to obtain the necessary
funding to support the implementation of its business plan at this time.
Accordingly, the Company is in the process of exploring all financing and
strategic alternatives available to it, including the possibility of disposing
of or leasing additional portions of its land in order to continue to support
its working capital needs and to retire certain of its outstanding debt to
reduce its interest obligations. The Company has sold portions of its unused
land (See Note 4 to the Company’s condensed consolidated financial statements),
reduced salaries paid to its employees and curtailed operations in order to
raise capital and reduce operating expenses. The Company will also
look to explore alternative opportunities available to it unrelated to forage
and animal sciences and farming systems which makes up its current business plan
in an effort to maximize shareholder value, although the Company has not yet
attempted to identify any such opportunities. There is no assurance,
however, that the Company will be successful in such efforts. If the Company is
unable to secure additional financing or find another alternative, the Company
will not have sufficient capital to implement its business plan and may be
forced to suspend all operations until such time as capital or another
alternative is available to it.
Principles
of Consolidation
The
condensed consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Cullen Agritech, including its wholly owned
subsidiary, Natural Dairy. All intercompany accounts and transactions have been
eliminated in consolidation.
Going
Concern Consideration
The
accompanying condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. As
reflected in the accompanying condensed consolidated financial statements, the
Company is a development stage company and has incurred a net loss of
$3,024,769 for the period from June 3, 2009 (inception) through September 30,
2010, and has $56,188 of cash as of September 30, 2010. Additionally, upon the
consummation of the Merger, the Company issued to Cullen Holdings a promissory
note in the amount of $6,853,918, representing part of the purchase price of a
certain piece of land to be used by the Company following the Closing (see Note
3 to the Company’s condensed consolidated financial statements). This amount was
to be repaid to Cullen Holdings at the consummation of the Merger but sufficient
funds were not available. On March 30, 2010, the Company issued a
new note in replacement of the original note which was past due. The new
promissory note is in the amount of $5,066,985 and accrues interest at 8% per
annum and is due on January 20, 2011. At September 30 2010, the amount
outstanding of the note was $3,938,668.
F-26
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
1. Interim Financial Information, Organization, Business
Operations, Significant Accounting Policies and Going Concern Consideration,
continued
To date,
we have not generated any revenue and will not do so until we have sufficient
funds to implement our business plan. We have been in the process of attempting
to obtain land development financing backed by the property we own and operate
to support our working capital needs and implement our business
plan. However, due to the recent performance of similar types of
farming operations in the SE United States, as well as the general economic
downturn, financial institutions have been unwilling to provide such
financing. As a result, the Company has been unable to obtain the
necessary funding to support the implementation of its business plan at this
time. In order to continue to support its working capital needs and retire
certain of its outstanding debt, during October 2010, the Company completed the
sale of 1,354 acres with unrelated parties, which represented 45% of the land it
owned at September 30, 2010. In October 2010, the Company also granted an
unrelated party the right to purchase approximately 500 acres by September 1,
2011. The Company continues to explore the disposition of the remaining 1,146
acres it owns which is not under contract. However, there is no assurance that
the Company will be successful in such efforts. The Company has also reduced
salaries paid to its employees and curtailed operations in order to raise
capital and reduce operating expenses.
Additionally,
the Company is in the process of exploring all financing and strategic
alternatives available to it, and will look to explore opportunities available
to it unrelated to forage and animal sciences and farming systems which makes up
its current business plan, in an effort to maximize shareholder
value. There is no assurance, however, that the Company will be
successful in any of such efforts. If the Company is unable to secure
additional financing or find another alternative, the Company will not have
sufficient capital to implement its business plan and may be forced to suspend
all operations until such time as capital or another alternative is available to
it. Until such time where the Company can dispose of the remaining
land it currently owns or raise adequate financing to deploy its pasture based
dairy and beef business plan, it has begun to utilize its pasture and general
farming expertise to conduct various farming activities on the property. These
activities include, but are not limited to, the growing of pasture to raise
calves, the growing of corn for use as feed and sale to third parties and the
grazing of beef cattle on pasture.
These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. The condensed consolidated financial statements do not include
any adjustments that might be necessary if it is unable to continue as a going
concern.
Inventory
Inventory
consists of feed inventory and investment in crops that are stated at lower of
cost or market. The Company capitalizes all direct and indirect costs
until growing crops are harvested. Harvested crops are reclassified
to feed inventory until such crops are sold or used. The related
inventoried costs are recognized as cost of sale to provide an appropriate
matching of expenses with the related revenue earned when the crops are
sold. Crops used to develop the Company’s animals are capitalized as
part of the carrying value of such animal and are recognized as cost of sale
when the animals are sold. Feed inventory and investment in crops
amounted to $70,492 and $15,708, respectively, as of September 30,
2010.
Property,
Plant and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. The Company
charges to expense repairs and maintenance items, while major improvements and
betterments are capitalized.
Depreciation
and amortization is provided on the straight-line method over the following
estimated useful lives of the assets:
Buildings
|
15
years
|
Machinery
and equipment
|
5 –
10 years
|
Transportation
equipment
|
5
years
|
Land
improvements
|
15
years
|
F-27
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
1. Interim Financial Information, Organization, Business
Operations, Significant Accounting Policies and Going Concern Consideration,
continued
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the reporting period. Actual results could
differ from those estimates.
Loss
Per Share
The
Company follows the provisions of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 260, “Earnings Per Share” (“ASC 260”).
In accordance with ASC 260, earnings per common share amounts (“Basic EPS”) are
computed by dividing earnings by the weighted average number of common shares
outstanding for the period. Earnings per common share amounts, assuming dilution
(“Diluted EPS”), gives effect to dilutive options, warrants, and other potential
common stock outstanding during the period. ASC 260 requires the presentation of
both Basic EPS and Diluted EPS on the face of the statements of operations. The
effect of the Merger has been given retroactive application in the EPS
calculation. At September 30, 2010, there were 74,000,000 warrants outstanding
that were not included in the calculation of basic and diluted EPS because the
effects of these securities would have been anti-dilutive.
Basic
earnings per share is calculated using the average number of common shares
outstanding and diluted earnings per share is computed on the basis of the
average number of common shares outstanding plus the effect of outstanding
warrants using the “treasury stock method.”
The
Company accounts for income taxes in accordance with ASC 740, "Income Taxes"
("ASC 740"). ASC 740 requires an asset and liability approach for financial
accounting and reporting for income taxes and establishes for all entities a
minimum threshold for financial statement recognition of the benefit of tax
positions, and requires certain expanded disclosures. The provision for income
taxes is based upon income or loss after adjustment for those permanent items
that are not considered in the determination of taxable income. Deferred income
taxes represent the tax effects of differences between the financial reporting
and tax basis of the Company's assets and liabilities at the enacted tax rates
in effect for the years in which the differences are expected to reverse. The
Company evaluates the recoverability of deferred tax assets and establishes a
valuation allowance when it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Management makes judgments as to
the interpretation of the tax laws that might be challenged upon an audit and
cause changes to previous estimates of tax liability. In management's opinion,
adequate provisions for income taxes have been made. If actual taxable income by
tax jurisdiction varies from estimates, additional allowances or reversals of
reserves may be necessary. The Company has identified its federal tax return and
its state tax return in Georgia as "major" tax jurisdictions. Based on the
Company's evaluation, it has been concluded that there are no significant
uncertain tax positions requiring recognition in the Company's consolidated
financial statements. Since the Company was incorporated on June 3, 2009, the
evaluation was performed for the 2009 tax year - the only period subject to
examination. The Company believes that its income tax positions and deductions
will be sustained on audit and does not anticipate any adjustments that will
result in a material change to its financial position.
F-28
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
1. Interim Financial Information, Organization, Business
Operations, Significant Accounting Policies and Going Concern Consideration,
continued
The
Company’s policy for recording interest and penalties associated with audits is
to record such items as a component of income tax expense. There were
no amounts accrued for penalties and interest as of or during the three and nine
months ended September 30, 2010 and the period from June 3, 2009 (inception)
through September 30, 2010. The Company does not expect its uncertain
tax position to change during the next twelve months. Management is
currently unaware of any issues under review that could result in significant
payments, accruals or material deviations from its
position.
Recently
Issued and Adopted Accounting Pronouncements
In
December 2009, FASB issued ASU 2009-17,Consolidations (Topic 810) Improvements
to Financial Reporting by Enterprises Involved with Variable Interest Entities ,
which replaces the quantitative-based risks and rewards calculation for
determining which enterprise, if any, has a controlling financial interest in a
variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity's economic performance and (1) the
obligation to absorb losses of the entity or (2) the right to receive benefits
from the entity. ASU 2009-17 also requires additional disclosures about an
enterprise's involvement in variable interest entities. ASU 2009-17 is effective
as of the beginning of each reporting entity's first annual reporting period
that begins after November 15, 2009. The adoption of ASU 2009-17 did not have a
material impact on its condensed consolidated financial statements.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
condensed consolidated financial statements.
Note
2 – Property, Plant and Equipment
At
September 30, 2010 and December 31, 2009, property, plant and equipment
consisted of the following:
September 30, 2010
|
December 31, 2009
|
|||||||
Land
|
$ | 6,152,038 | $ | 8,445,606 | ||||
Buildings
|
164,032 | 185,375 | ||||||
Machinery
and equipment
|
115,140 | 6,170 | ||||||
Website
|
3,328 | 3,328 | ||||||
Land
improvements
|
$ | 434,814 | $ | 481,772 | ||||
6,869,352 | 9,122,251 | |||||||
Less:
Accumulated depreciation and amortization
|
45,777 | 2,639 | ||||||
Property,
plant and equipment, net
|
6,823,575 | $ | 9,119,612 |
Depreciation
and amortization expense for the period from June 3, 2009 (inception) through
September 30, 2010 was $48,478. For three and nine months ended September 30,
2010 depreciation and amortization expense was $21,160 and $45,839,
respectively.
F-29
The
Company accounts for its long-lived assets in accordance with FASB ASC 360,
“Plant, Property and Equipment,” for purposes of determining and measuring
impairment of its long-lived assets other than goodwill. The Company’s policy is
to review the value assigned to its long lived assets to determine if they have
been permanently impaired by adverse conditions which may affect the Company
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If the Company identifies a permanent
impairment such that the carrying amount of the Company’s long lived assets is
not recoverable using the sum of an undiscounted cash flow projection, the
impaired asset is adjusted to its estimated fair value, based on an estimate of
future discounted cash flows which becomes the new cost basis for the impaired
asset. Considerable management judgment is necessary to estimate
undiscounted future operating cash flows and fair values and, accordingly,
actual results could vary significantly from such estimates.
As of
September 30, 2010, the Company assessed the recoverability of the carrying
value of its property, plant and equipment. The assessment resulted
in an impairment charge of $963,172 for the three and nine months ended
September 30, 2010. This charge reflects the amounts by which the carrying
values of these assets exceed their estimated fair values determined using
estimated future discounted cash flows.
Note
3.
|
Mortgage
Payable – Related Party
|
In
connection with the Merger, Triplecrown and Natural Dairy entered into a
contract to purchase a certain piece of land to be used by us following
consummation of the Merger. The total purchase price of the land was $8,662,500.
Triplecrown paid an initial deposit of $866,250 on the land. On August 10, 2009,
Triplecrown, Natural Dairy and the seller of the land extended the closing date
for the land purchase and Triplecrown paid an additional deposit on the land of
$833,750, interest of $48,070 and a leasing fee to use the land of $3,518 for a
total additional deposit of $885,338. Natural Dairy closed on this
contract and purchased the land on October 16, 2009. The balance of
the purchase price for such land was paid by Natural Dairy, which such funds
were advanced to it by Cullen Holdings. Upon the Closing, we issued
to Cullen Holdings a promissory note in the amount of $6,853,918, representing
the part of the purchase price that was advanced by Cullen Holdings. This amount
was to be repaid to Cullen Holdings at the Closing but sufficient funds were not
available. On March 30, 2010, the Company issued a new note in
replacement of the original note which was past due. The new promissory note is
in the amount of $5,066,985 and accrues interest at 8% per annum and is due on
January 20, 2011. In consideration of this extension, the Company granted to
Cullen Holdings a mortgage on the land that is the subject of the promissory
note. At September 30, 2010 and December 31, 2009 mortgage payable to a related
party consisted of $3,938,668 and $5,867,575, respectively.
Note
4.
|
Other
Income
|
During
January 2010, the Company signed an Agreement with Battle Lumber Co., Inc. for
the sale and removal of merchantable timber located on part of our property.
During the three and nine months ended September 30, 2010, Battle Lumber Co.
removed a portion of the timber and the Company recorded income of $0 and
$79,961, respectively. The Company concluded the removal of timber during June
2010.
In
January 2010, the Company entered into an agreement to sell 340 non irrigated
acres of our property. The sale of the parcel of land closed on February 6, 2010
for an aggregate sales price of $613,170 or approximately $1,800 per acre.
The Company estimates the original purchase price for this land to be $594,794
and has recorded a gain from the sale of this property of $6,321 which is
included in other income, net during the nine months ended September 30,
2010.
F-30
In
June 2010, the Company entered into an agreement to sell 240 acres of land, of
which 200 acres were irrigated and 40 acres were non irrigated. The sale of the
parcel of land closed on June 25, 2010 for an aggregate sales price of $776,688
or approximately $3,236 per acre. The Company estimates the original purchase
price for this land to be $807,239 and has recorded a loss from the sale of this
property of $53,489 which is included in other income, net during the nine
months ended September 30, 2010.
In
September 2010, the Company entered into an agreement to sell 95 acres of non
irrigated land. The sale of the parcel of land closed on September 23, 2010 for
an aggregate sales price of $170,244, or approximately $1,800 per acre. The
Company estimates the original purchase price for this land to be $ 165,192 and
has recorded a loss from the sale of this property of $3,641 which is included
in other income, net during the three and nine months ended September 30,
2010.
For the
three and nine months ended September 30, 2010, the Company recognized a gain on
sale of equipment totaling $2,701.
During
the three months ended September 30, 2010, the Company sold a large portion of
the corn it produced to Hart Acquisitions, LLC (“Hart”), an affiliate of Dr.
Richard Hart Watson, a member of the Company’s Board of
Directors, for approximately $143,000. The cost to produce that corn was
approximately $115,000.
F-31
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
5.
|
Stock
Transactions
|
On
January 25, 2010, the Company issued 8,403 shares of Common Stock to Ladenburg
Thalmann & Co. Inc. as compensation for services performed related to
the Merger.
Note
6.
|
Related
Parties
|
During
the three and nine months ended September 30, 2010, Hart incurred costs related
to the operations of Cullen Agritech and Natural Dairy of a combined total of
$39,584 and $105,068, respectively. These costs consisted of property
related expenses $2,996 and $31,688, respectively and employee related expenses
of $36,588 and $73,380, respectively. During the three and nine months ended
September 30, 2010, the Company incurred costs related to the operations of Hart
of $185,027 and $223,409, respectively. During the three and nine
months ended September 30, 2010, these costs consisted of $185,027 and $204,909
of property related expenses and $0 and $18,500 of lease related expense (See
Note 7 – Commitments and Contingencies for additional related party
transactions). During the three months ended September 30, 2010, $4,126 has been
repaid to Hart, leaving $145,443 due from Hart at September 30, 2010.
Additionally, at September 30, 2010 the Company had $1,732 of other amounts it
owed to other affiliates.
On
February 2, 2010, the Company signed an Escrow Agreement (“Escrow Agreement”)
related to the procurement and purchase of 350 cows, for which the Company had
paid a deposit. During June 2010, Hart assumed all rights and obligations
related to this contract and in return repaid the Company for all deposits and
costs, including interest, related to this contract.
Note
7.
|
Commitments
and Contingencies
|
Litigation
The
Company is not party to any litigation. However, on December 9, 2009,
a second amended class action complaint, styled Goodman v. Watson, et al., was
filed in the Court of Chancery of the State of Delaware against the former
directors of Triplecrown. The complaint alleges that the defendants
breached their fiduciary duties and their duty of disclosure in connection with
the Merger. The plaintiff seeks, as alternative remedies, damages in
the amount of approximately $9.74 per share, to have Triplecrown’s trust account
restored and distributed pro rata to members of the putative class, a
quasi-appraisal remedy for members of the putative class, and an opportunity for
members of the putative class to exercise conversion rights in connection with
the Merger. The defendants filed an answer on December 23, 2009. The
former directors intend to defend this action vigorously but can provide no
assurance as to the manner or timing of its resolution. Adjustments, if any,
that might result from the resolution of this matter have not been reflected in
the condensed consolidated financial statements.
Leases
On June
1, 2010, the Company entered into an agreement with an unrelated third party for
the lease of 753 acres of the Company’s property, from June 1, 2010 through
December 31, 2010. This area of land consists of 500 irrigated acres and 253 non
irrigated acres. The agreement calls for the unrelated third party to pay, in
advance, $175 per acre of irrigated land and $50 per acre of non irrigated land.
The Company received $100,150 for the lease of this land during June 2010.
During the three and nine months ended September 30, 2010, the Company recorded
$43,055 and $57,095 as rental income. At September 30, 2010, there was $43,055
recorded as deferred income related to this lease.
F-32
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
7.
|
Commitments
and Contingencies, continued
|
On June
1, 2010, the Company entered into an agreement with Hart for the lease of 120
acres of the Company’s property, from June 1, 2010 through December 31, 2010.
This area of land consists of 100 irrigated acres and 20 non irrigated acres.
The agreement calls for Hart to pay, in advance, $175 per acre of irrigated land
and $50 per acre of non irrigated land. The Company has received $18,500 for the
lease of this land during June 2010. During the three and nine months ended
September 30, 2010, the Company recorded $7,953 and $10,547 as rental income. At
September 30, 2010, there was $7,953 recorded as deferred income related to this
lease.
Employment
Agreements
Effective
September 1, 2009, Dr. Richard Hart Watson became an employee of Natural Dairy
pursuant to an employment agreement entered into on August 31,
2009. The agreement called for a base salary of $100,000 and a bonus
of up to 50% of the base salary subject to the sole discretion of Natural
Dairy’s board of directors. During June 2010, the Company and Dr. Watson amended
his employment agreement so that as of June 1, 2010, Dr. Watson will receive a
base salary of $35,000 in cash. Dr. Watson will also receive $65,000 in stock at
the end of May of each year based on the last 60 days average trading price.
This stock will be restricted for one year from the date of
issuance.
Effective
January 2010, the Company entered into a one year employment agreement with Dr.
Todd White, pursuant to which he receives a base salary of $90,000 and is
entitled to receive a bonus of between 15% to 30% of the base salary subject to
the sole discretion of the board of directors. As of June 18, 2010, the Company
notified Dr. White of the termination of his employment agreement as provided
for in the agreement. Dr. White is no longer an employee of the
Company.
F-33
CULLEN
AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a
development stage company)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL
STATEMENTS
Note
7.
|
Commitments
and Contingencies, continued
|
Beef
Grazing Agreement
On August
2, 2010, the Company entered into a Beef Grazing Agreement (“Grazing Agreement”)
with FPL Foods LLC (“FPL”) pursuant to which the Company will graze at least 750
of FPL’s cattle on land leased by the Company from August 1, 2010 through
January 15, 2011. The Company will graze FPL’s cattle and be
compensated based on weight gain at the end of the grazing period. FPL is
obligated to deliver at least 750 cattle to the Company by October 1,
2010. As of September 30, 2010 FPL has delivered approximately 1,400
cattle to the Company.
Lease
related to Grazing Agreement
On July
30, 2010, the Company entered into an agreement with an unrelated third party
for the lease of 240 acres for the period from August 1, 2010 through December
31, 2010. This area of land consists of 200 irrigated acres and 40 non irrigated
acres. The agreement calls for the Company to pay, in advance, an aggregate of
approximately $13,400, representing $63 per acre of irrigated land and $21 per
acre of non irrigated land. The Company intends to use this land to provide
pasture related to the Grazing Agreement mentioned above.
Note
8.
|
Subsequent
Events
|
On
September 28, 2010, the Company entered into a Sales Contract with Benny Mims
pursuant to which the Company agreed to sell to the buyer approximately 500
acres of land for approximately $1.6 million, which approximates the carry value
of the land as of September 30, 2010. The sale closed on October 28,
2010.
On
October 15, 2010, the Company entered into a Sales Contract with Landee Acres,
LLC (“Landee”) pursuant to
which the Company would sell to Landee approximately 700 acres of land for an
aggregate of $1.45 million, which approximates the carry value of the land as of
September 30, 2010. This sale of 700 acres closed on October 26, 2010. The Sales
Contract also provided for the Company to grant Landee an option to purchase an
additional approximate 500 acres of land for approximately $1.49 million, which
approximates the carry value of the land as of September 30, 2010, which option
must be exercised and such sale must occur by September 1, 2011; provided
however that if the option is exercised and the sale is consummated on or before
March 31, 2011, the purchase price for this land would be reduced by
$50,000.
On
October 22, 2010, the Company entered into a sales contract with Don and Alisa
Burke pursuant to which the Company would sell to the buyer approximately 154
acres of land for approximately $289,000, which approximates the carry value of
the land as of September 30, 2010. This sale closed on October 27,
2010.
Cullen
Holdings held a mortgage on the 1,354 acres of land sold during October 2010 and
released the Company from such mortgage in order for the Company to consummate
the sales. The Company used approximately $3.1 million of the proceeds from the
sales of the land to repay remaining amounts outstanding under the existing
promissory note held by Cullen Holdings. As of October 31, 2010, the outstanding
amount under the note was currently approximately $600,000.
In
October 2010, the Company issued 300,000 shares of Common Stock for an aggregate
purchase price of $600,000 (or $2.00 per share) to an investor in a private
placement.
The
Company evaluates events that occurred after the balance sheet date but before
the condensed consolidated unaudited financial statements are issued. Based upon
the evaluation, the Company did not identify any recognized or non recognized
subsequent events, except as noted above, that would have required
adjustment or disclosure in the condensed consolidated unaudited financial
statements.
F-34
CULLEN
AGRICULTURAL HOLDINGS CORP.
37,401,148
Shares of Common Stock
and
18,800,000
Warrants
,
2011
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
14.
|
Other
Expenses of Issuance and
Distribution.
|
Expenses
payable in connection with the registration and distribution of the securities
being registered hereunder, all of which will be borne by the Registrant, are as
follows. All amounts are estimates, except the SEC registration
fee.
Securities
and Exchange Commission registration fee
|
700 | |||
Printer
expenses
|
5,000 | |||
Legal
fees and expenses
|
20,000 | |||
Accounting
fees and expenses
|
25,000 | |||
Total
|
50,700 |
Item
15.
|
Indemnification
of Directors and Officers.
|
The
Registrant’s Amended and Restated Certificate of Incorporation provides that all
directors, officers, employees and agents of the Registrant shall be entitled to
be indemnified by the Company to the fullest extent permitted by Section 145 of
the Delaware General Corporation Law.
Section
145 of the Delaware General Corporation Law concerning indemnification of
officers, directors, employees and agents is set forth below.
“Section
145. Indemnification of officers, directors, employees and agents;
insurance.
“(a) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person’s conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person’s conduct was unlawful.
“(b) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
II-1
“(c) To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys’ fees) actually and reasonably incurred by such
person in connection therewith.
“(d) Any
indemnification under subsections (a) and (b) of this section (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
“(e)
Expenses (including attorneys’ fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys’ fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
“(f) The
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person’s official capacity and
as to action in another capacity while holding such office.
“(g) A
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person’s status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
“(h) For
purposes of this section, references to “the corporation” shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
II-2
“(i) For
purposes of this section, references to “other enterprises” shall include
employee benefit plans; references to “fines” shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to “serving at the request of the corporation” shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner “not opposed to the best interests of the
corporation” as referred to in this section.
“(j) The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
“(k) The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation’s obligation to advance expenses (including attorneys’
fees).”
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to the Company’s directors, officers, and controlling persons pursuant
to the foregoing provisions, or otherwise, the Company has been advised that, in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment of expenses incurred or paid by a director, officer or controlling
person in a successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to the court of
appropriate jurisdiction the question whether such indemnification by the
Company is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
Paragraph
B of Article Seventh of the Registrant’s certificate of incorporation
provides:
“The
Corporation, to the full extent permitted by Section 145 of the GCL, as amended
from time to time, shall indemnify all persons whom it may indemnify pursuant
thereto. Expenses (including attorneys’ fees) incurred by an officer or director
in defending any civil, criminal, administrative, or investigative action, suit
or proceeding for which such officer or director may be entitled to
indemnification hereunder shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized hereby.”
The
Registrant’s bylaws further provide that any indemnification shall be made by
the Registrant only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such section. Such determination shall be made: (i) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding; (ii) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by stockholders.
II-3
Pursuant
to the Registrant’s bylaws, the Registrant also maintains a directors’ and
officers’ insurance policy which insures the directors and officers of the
Registrant against liability asserted against such persons in such capacity
whether or not such directors or officers have the right to indemnification
pursuant to the bylaws or otherwise.
Additionally,
we have entered into indemnification agreements with all of our directors and
executive officers whereby we have agreed to indemnify, and advance expenses to,
each indemnitee to the fullest extent permitted by applicable law. The
indemnification agreements will continue until and terminate upon the later of
(i) ten years after the date that the indemnitee has ceased to serve as a
director or officer for us or (ii) the final termination of all pending
proceedings in respect of which the indemnitee is granted rights of
indemnification or advancement of expenses or any proceeding commenced by the
indemnitee.
Item
15.
|
Recent
Sales of Unregistered Securities.
|
On August
28, 2009, we issued 10 shares of common stock to Triplecrown Acquisition Corp.
in connection with our organization pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act. The shares of common stock
were sold for an aggregate purchase price of $0.001 (or $0.0001 per
share).
On
January 25, 2010, we issued 8,403 shares of common stock to Ladenburg Thalmann
& Co. Inc. as compensation for $50,000 worth of services performed by
Ladenburg related to our Merger on October 22, 2009 pursuant to the exemption
from registration contained in Section 4(2) of the Securities
Act.
On
October 1, 2010, we issued 300,000 shares of common stock to Moonlight
Investments Ltd. in a private placement pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act. The
shares of common stock were sold for $2.00 per share (or $600,000).
On November 16, 2010, we issued 75,000 shares of common stock
to Luton Verwaltungs GMBH in a private placement pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act. The
shares of common stock were sold for $2.00 per share (or $150,000).
No
underwriting discounts or commissions were paid with respect to such
sales.
Item
16.
|
Exhibits.
|
The
exhibits filed herewith or incorporated by reference herein are listed in the
Exhibit Index below.
Item
17.
|
Undertakings.
|
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
II-4
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective Registration Statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(5) That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness; provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to the
date of first use.
(h)
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, that registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that
it has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Millen, Georgia on the 14th day of
January, 2011.
CULLEN
AGRICULTURAL
HOLDINGS
CORP.
|
||
By:
|
/s/ Eric J. Watson
|
|
Eric
J. Watson
|
||
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Name
|
Title
|
Date
|
||
/s/
Eric J. Watson
|
Chief
Executive Officer, Secretary and
|
January
14, 2011
|
||
Eric
J. Watson
|
Treasurer and a Director (Principal executive officer and principal accounting and financial officer) | |||
*
|
Chief
Scientific Officer of Natural
|
January
14, 2011
|
||
Richard
Watson
|
Dairy, Inc. and a Director | |||
Director
|
||||
Edward
J. Mathias
|
||||
*
|
Director
|
January
14, 2011
|
||
Robert
B. Hersov
|
||||
Director
|
||||
Kerry
Kennedy
|
||||
Director
|
|
|||
Richard
Y. Roberts
|
II-6
Name
|
Title
|
Date
|
||
*
|
Director
|
January
14, 2011
|
||
Edward
Hanson
|
*
By
|
Eric
J. Watson,
|
Power
of Attorney
|
II-7
EXHIBIT
INDEX
Exhibit No.
|
Description
|
|
2.1.
|
Agreement
and Plan of Reorganization, dated as of September 4, 2009, by and among
Triplecrown Acquisition Corp., Cullen Agricultural Holding Corp., Cullen
Agricultural Technologies Inc., Triplecrown Merger Sub and Cullen Inc.
Holdings Ltd.(1)
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of Cullen Agricultural Holding
Corp.(1)
|
|
3.2
|
Bylaws
of Cullen Agricultural Holding Corp.(1)
|
|
4.1
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and Triplecrown Acquisition Corp.(2)
|
|
4.2
|
Specimen
Common Stock Certificate of Cullen Agricultural Holding
Corp.(3)
|
|
4.3
|
Specimen
Warrant Certificate of Cullen Agricultural Holding
Corp.(3)
|
|
4.4
|
Amendment
No. 1 to Warrant Agreement between Continental Stock Transfer & Trust
Company, Triplecrown Acquisition Corp. and Cullen Agricultural Holding
Corp.(1)
|
|
5.1
|
Opinion
of Graubard Miller.*
|
|
10.1
|
Form
of Securities Escrow Agreement between Triplecrown Acquisition Corp.,
Continental Stock Transfer & Trust Company and the Triplecrown
Founders.(2)
|
|
10.2
|
Form
of Lockup.(1)
|
|
10.3
|
Employment
Agreement between Natural Dairy, Inc. and Dr. Richard
Watson.(1)
|
|
10.4
|
Deed
of Acknowledgement relating to Intellectual
Property.(3)
|
|
10.5
|
Strategic
Cooperation Agreement between Cullen Agricultural Technologies, Inc. and
New Zealand Agritech, Inc.(3)
|
|
10.6
|
Form
of Registration Rights Agreement among Triplecrown Acquisition Corp. and
the Triplecrown Founders.(2)
|
|
10.7
|
Contract
for Sale and Purchase of Grimsley Farm.(4).
|
|
10.8
|
Closing
Date Extension Agreement for Contract for Sale and Purchase of Grimsley
Farm.(4)
|
|
10.9
|
Second
Closing Date Extension Agreement for Contract for Sale and Purchase of
Grimsley Farm.(4)
|
|
10.10
|
Escrow
Agreement by and among Cullen Agricultural Holding Corp., Cullen Inc.
Holdings Ltd. and Continental Stock Transfer & Trust
Company.(1)
|
|
10.11
|
Form
of Promissory Note issued to Cullen Inc. Holdings
Ltd.**
|
II-8
10.12
|
Sales
Contract with Landee Acres, LLC**
|
|
10.13
|
Sales
Contract with Benny Mims.**
|
|
10.14
|
Sales
Contract with Don and Alisa Burke.**
|
|
14.1
|
Form
of Code of Ethics of Cullen Agricultural Holding
Corp.(3)
|
|
21.1
|
Subsidiaries
of Cullen Agricultural Holding Corp.**
|
|
23.1
|
Consent
of Marcum LLP*
|
|
23.2
|
Consent
of Graubard Miller (included in Exhibit 5.1)*
|
|
24
|
Power
of Attorney**
|
|
99.3
|
Audit
Committee Charter.(5)
|
|
99.4
|
|
Nominating
Committee Charter.(5)
|
*
|
Filed
herewith.
|
** | Previously filed. |
(1)
|
Incorporated
by reference to the Cullen Agricultural Holding Corp.’s Registration
Statement on Form S-4 (File No. 333-161773) filed on September 8,
2009.
|
(2)
|
Incorporated
by reference to Amendment No. 2 to Triplecrown’s Registration Statement on
Form S-1 (File Nos. 333-144523 and 333-146850) filed on September 24,
2007.
|
(3)
|
Incorporated
by reference to Amendment No. 1 to Cullen Agricultural Holding Corp.’s
Registration Statement on Form S-4 (File No. 333-161773) filed on
September 10, 2009.
|
(4)
|
Incorporated
by reference to Amendment No. 3 to Cullen Agricultural Holding Corp.’s
Registration Statement on Form S-4 (File No. 333-161773) filed on
September 10, 2009.
|
(5)
|
Incorporated
by reference to Cullen Agricultural Holding Corp.’s Current Report on Form
8-K, filed October 22, 2009.
|
II-9