-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mnle+laTaUWqUjcbP0C2kyluNZmHuEc7Jt91HiTwdukZP17/qE3RGo2EyHn55cbi TkM1DSe5CMZ/8HBwZVdjiA== 0001144204-10-042489.txt : 20100810 0001144204-10-042489.hdr.sgml : 20100810 20100810141018 ACCESSION NUMBER: 0001144204-10-042489 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100630 FILED AS OF DATE: 20100810 DATE AS OF CHANGE: 20100810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Cullen Agricultural Holding Corp CENTRAL INDEX KEY: 0001471256 STANDARD INDUSTRIAL CLASSIFICATION: DAIRY PRODUCTS [2020] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53806 FILM NUMBER: 101004546 BUSINESS ADDRESS: STREET 1: 22 BARNETT SHOALS ROAD CITY: WATKINSVILLE STATE: GA ZIP: 30677 BUSINESS PHONE: 212-521-4398 MAIL ADDRESS: STREET 1: 22 BARNETT SHOALS ROAD CITY: WATKINSVILLE STATE: GA ZIP: 30677 10-Q 1 v193064_10q.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)

x
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2010

¨
Transition report under Section 13 or 15(d) of the Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File Number 000-53806

Cullen Agricultural Holding Corp.
(Exact Name of Issuer as Specified in Its Charter)

Delaware
27-0863248
(State or other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)

1431 N Jones Plantation Road, Millen, Georgia 30442
(Address of Principal Executive Office)

(706) 621-6737
(Issuer’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ¨  No ¨

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 x
Smaller reporting company ¨   
(Do not check if smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨  No x

As of August 10, 2010, 19,255,714 shares of common stock, par value $.0001 per share, were issued and outstanding.
 

 
Cullen Agricultural Holding Corp.
 
Form 10-Q
For The Quarter Ended June 30, 2010

Table of Contents

 
Page
Part I.  Financial Information
 
Item 1. Financial Statements
 
Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009
3
   
Condensed Consolidated Statement of Operations (Unaudited) for the three and six months ended June 30, 2010, for the period from June 3, 2009 (inception) through June 30, 2009 and for the period from June 3, 2009 (inception) through June 30, 2010
4
   
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the period from June 3, 2009 (inception) through June 30, 2010
5
   
Condensed Consolidated Statement of Cash Flows (Unaudited) for the six months ended June 30, 2010, for the period from June 3, 2009 (inception) through June 30, 2009 and for the period from June 3, 2009 (inception) through June 30, 2010
6
   
Notes to Unaudited Condensed Consolidated Financial Statements
7-15
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
16-18
   
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk
19
   
Item 4T. Controls and Procedures
19
   
Part II.  Other Information
 
   
Item 1. Legal Proceedings
20
   
Item 1A. Risk Factors
20
   
Item 5. Exhibits
20
   
Signatures
21
 
 
 

 

Forward-Looking Statements
 
This report, and the information incorporated by reference in it, include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “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 report may include, for example, statements about:

 
·
Our ability to protect our intellectual property;
 
 
·
Our ability to obtain necessary financing;
 
 
·
Competition;
 
 
·
Loss of key personnel;
 
 
·
Increases of costs of operations;
 
 
·
Continued compliance with government regulations; and
 
 
·
General economic conditions.
 
The forward-looking statements contained or incorporated by reference in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of such statement. 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, uncertainties (some of which are beyond our control) or 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 “Part II – Item 1A. Risk Factors” contained in this Quarterly Report.   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.

References in this report to “we,” “us” or “our company” refers to Cullen Agricultural Holding Corp.
 
 
ii

 

Part I: Financial Information
Item 1 – Financial Statements (Unaudited)
Cullen Agricultural Holding Corp. and Subsidiaries
(a development stage company)
Condensed Consolidated Balance Sheets

 
   
June 30, 2010
       
   
(unaudited)
   
December 31, 2009
 
ASSETS
           
             
CURRENT ASSETS
           
Cash
    511,681       1,292,204  
Rent receivable
          7,461  
Cattle held for sale
    223,134        
Inventory
    118,880        
Prepaid expenses and other current assets
    40,153       86,083  
Refundable taxes
    628       1,349,969  
Total Current Assets
    894,476       2,735,717  
PROPERTY, PLANT AND EQUIPMENT, Net
    7,917,765       9,119,612  
TOTAL ASSETS
  $ 8,812,241     $ 11,855,329  
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES
               
Accrued expenses
    191,368       508,380  
Due to affiliates
    4,126       28,055  
Deferred Income
    102,017        
Current portion of note payable
    10,030        
Mortgage payable, related party
    4,083,036        
Total Current Liabilities
    4,390,577       536,435  
Mortgage payable, related party
            5,867,575  
Note payable, net
    30,090        
TOTAL LIABILITIES
    4,420,667       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 ;160,000,000 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
    (1,722,271 )     (612,526 )
TOTAL STOCKHOLDERS' EQUITY
    4,391,574       5,451,319  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 8,812,241     $ 11,855,329  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 
3

 

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 Six
   
June 3, 2009
   
June 3, 2009
 
   
months ended
   
months ended
   
(inception) through
   
(inception) through
 
   
June 30, 2010
   
June 30, 2010
   
June 30, 2009
   
June 30, 2010
 
                         
Revenues
  $     $     $     $  
                                 
General and administrative expenses
    437,473       968,291             1,493,215  
                                 
LOSS FROM OPERATIONS
    (437,473 )     (968,291 )           (1,493,215 )
                                 
OTHER INCOME (EXPENSE)
                               
Interest expense - related party
    (98,044 )     (200,863 )           (312,222 )
Other income, net
    20,565       60,071             84,148  
                                 
TOTAL OTHER EXPENSE
    (77,479 )     (140,792 )           (228,074 )
                                 
LOSS BEFORE INCOME TAXES
    (514,952 )     (1,109,083 )           (1,721,289 )
                                 
INCOME TAXES
    315       662             982  
                                 
NET LOSS
  $ (515,267 )   $ (1,109,745 )   $     $ (1,722,271 )
Weighted average number of common shares outstanding – basic and diluted
    19,255,714       19,254,600       100          
Basic and diluted net loss per share
  $ (0.03 )   $ (0.06 )   $          

The accompanying notes are an integral part of these condensed consolidated financial statements.

 
4

 

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 June 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 six months ended June 30, 2010
                      (1,109,745 )     (1,109,745 )
                                         
BALANCE - June 30, 2010
  $ 19,255,714     $ 1,926     $ 6,111,919     $ (1,722,271 )   $ 4,341,574  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 
5

 

 
Cullen Agricultural Holding Corp. and Subsidiaries
(a development stage company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
         
For the period from
   
For the period from
 
   
For the Six
   
June 3, 2009
   
June 3, 2009
 
   
months ended
   
(inception) through
   
(inception) through
 
   
June 30, 2010
   
June 30, 2009
   
June 30, 2010
 
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss
  $ (1,109,745 )   $     $ (1,722,271 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Loss on sale of property and equipment
    44,467             44,467  
Depreciation and amortization
    24,679             27,318  
Changes in operating assets and liabilities:
                       
Rent receivable
    7,461              
Cattle held for sale
    (223,134 )           (223,134 )
Inventory
    (118,880 )             (118,880 )
Prepaid expenses and other current assets
    45,930             (40,153 )
Refundable taxes
    1,349,341             1,349,341  
Accrued expenses
    (90,303 )           376,255  
Deferred income
    102,017             102,017  
TOTAL ADJUSTMENTS
    1,141,578             1,517,231  
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    31,833             (205,040 )
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Purchases of property and equipment
    (185,656 )           (747,425 )
Proceeds from sale of property and equipment
    1,358,477             1,358,477  
NET CASH PROVIDED BY INVESTING ACTIVITIES
    1,172,821             611,052  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Repayment of mortgage payable to related party
    (1,961,248 )           (2,947,591 )
Repayment of advances from affiliates
    (23,929 )           (4,495 )
Cash acquired in reverse merger
                3,057,755  
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
    (1,985,177 )           105,669  
NET (DECREASE) INCREASE IN CASH
    (780,523 )           511,681  
CASH – Beginning
    1,292,204              
CASH – Ending
  $ 511,681     $     $ 511,681  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                       
Cash paid during the period for:
                       
Interest
  $ 38,752     $     $ 52,409  
Taxes
  $ 1,300     $     $ 1,300  
Non-cash investing and financing activities:
                       
Equipment purchased
  $ 40,120     $     $ 40,120  
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 affiliate
                (8,621 )
Additional paid in capital
          100        
Issuance of stock
                (1,925 )
Net non-cash recapitalization
  $     $ 100     $ 3,004,165  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
6

 

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 six month periods ended June 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 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.

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 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.

 
7

 

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

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 of June 30, 2010, the Company owned approximately 3,100 acres of agricultural land in the state of Georgia. Until such time where the Company can 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. Costs related to both of these activities have been capitalized on our balance sheet in accordance with GAAP under the headings “Cattle Held for Sale” and “Inventory” recorded at the lower of cost or market. Once these assets mature and are sold, the costs will be expensed and the revenue from the sale recognized on our Statement of Operations. The Company intends to continue to conduct these activities, as well as others, in the short term to efficiently utilize the land it owns.

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 Inc. 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 $1,722,271 for the period from June 3, 2009 (inception) through June 30, 2010, and has $511,681 of cash as of June 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 existing 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 June 30 2010, the amount outstanding of the note was $4,083,036.
 
 
8

 

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 lend money backed by such property.  As a result, the Company has been unable to obtain the necessary funding to support the implementation of its business plan at this time. Until such time where the Company can 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.  The Company has sold portions of its unused land, 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, including the possibility of disposing of or leasing additional portions of its land in order to continue to support its working capital needs or alternatively to retire certain of its outstanding debt to reduce its interest obligations.  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 strategic 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 strategic alternative is available to it.

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 $2,989 and $115,891, respectively, as of June 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


 
9

 

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
 
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 FASB 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 June 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.”

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 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.
 
 
10

 

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 six months ended June 30, 2010 and the period from June 3, 2009 (inception) through June 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 June 30, 2010 and December 31, 2009, property, plant and equipment consisted of the following:

     
June 30,
2010
   
December 31,
2009
Land
 
$
7,187,242
  $
8,445,606
Buildings
   
185,375
   
185,375
Machinery and equipment
   
95,758
   
6,170
Website
   
3,328
   
3,328
Land improvements
 
 
470,679
   
481,772
     
7,942,382
   
9,122,251
             
Less: Accumulated depreciation and amortization
   
24,617
   
2,639
             
Property, plant and equipment, net
  $
7,917,765
  $
9,119,612
 
Depreciation and amortization expense for the period from June 3, 2009 (inception) through June 30, 2010 was $24,617.
 
The Company accounts for its long-lived assets in accordance with Statement of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“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.  No impairment charges were recognized during the three and six month periods ended June 30, 2010 or from the period from  June 3, 2009 (inception) through June 30, 2010.
 
11

 

CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a development stage company)

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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 existing 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. For three months ended June 30, 2010 and for the period from June 3, 2009 (inception) through June 30, 2010 we had repaid Cullen Holdings $1,000,000 and $3,000,000 of the note, respectively, consisting of $983,949 of principal and $16,051 of interest and $2,947,591 of principal and $52,409 of interest, 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 the 3,100 acres of our property. During the three and six months ended June 30, 2010, Battle Lumber Co. removed a portion of the timber and the Company recorded income of $47,776 and $74,961, respectively. The Company has 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 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. 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 three and six months ended June 30, 2010.

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 sale price per acre was higher than the average price per acre at which the 3,600 acres 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. 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 three and six months ended June 30, 2010.

For the three and six months ended June 30, 2010, the Company recognized a gain on sale of equipment totaling $2,701.
 
 
12

 

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 six months ended June 30, 2010, Hart Acquisitions, LLC (“Hart”), an affiliate of Richard Watson, incurred costs related to the operations of Cullen Agritech and Natural Dairy of a combined total of $42,508 and $65,483, respectively.  These costs consisted of property related expenses $28,648 and $28,692, respectively and employee related expenses of $13,860 and $36,791, respectively. During the three and six months ended June 30, 2010, the Company, incurred costs related to the operations of Hart of a combined total of $38,382.  These costs consisted of $19,882 of property related expenses and $18,500 of lease related expense (See Note 7 – Commitments and Contingencies for additional related party transactions). During the three and six months ended June 30, 2010, $22,975 has been repaid to Hart, leaving $4,126 due to Hart at June 30, 2010.

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

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 six months ended June 30, 2010, the Company recorded $14,040 as rental income and $86,110 as deferred income related to this lease.
 
 
13

 

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 six months ended June 30, 2010, the Company recorded $2,593 as rental income. At June 30, 2010, there was $15,907 included in 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.

Note 8.   Subsequent Events

Contract for Sale of Property

On July 26, 2010, the Company entered into a Sales Contract (“Sales Agreement”) with Wilbert Roller (“Buyer”) pursuant to which the Company will sell to the Buyer approximately 1,070 acres of land for $2 million. The number of acres being sold represents approximately 35% of the acres of land owned by the Company. Cullen Holdings holds a mortgage on the land being sold and has agreed to release the Company from such mortgage upon consummation of the land sale, in order for the Company to consummate the sale. The Company intends to use substantially all of the proceeds from the sale of the land to repay a portion of the existing promissory note held by Cullen Holdings, which was approximately $4.1 million at June 30, 2010. The Sales Agreement is subject to certain closing conditions including the Buyer obtaining commercially reasonable financing within 45 days from the date of execution of the Sales Agreement. It is anticipated that the closing of the purchase will take place no later than 60 days after the Buyer obtains the necessary financing for the purchase.
 
 
14

 

CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
(a development stage company)

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 
Note 8.   Subsequent Events, 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.

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.

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.
 
 
15

 

ITEM2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Condensed Consolidated Interim Financial Statements and footnotes thereto contained in this report.

Overview
 
We are a development stage company. 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. However, 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 backed 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 similar types of farming operations in the Southeastern United States, as well as the general economic downturn, financial institutions have been unwilling to lend money backed by such property.  As a result, we have been unable to obtain the necessary funding to support the implementation of our business plan at this time.

In the case of dairy, 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 United States and supported by government subsidies, will help to maintain a floor to milk prices in the United States 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 NZ. 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.

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 United States, which at the retail levels can sell for a 50-100% premium over grain-fed beef.  We believe the existing supply-chain infrastructure will provide us with immediate access to sell into the grass-fed market. As a medium-term strategy, to fully capture the retail value, CAH intends to develop a premium, grass-fed beef brand.

Results of Operations
 
For six months ended June 30, 2010 we had a net loss of $1,109,745. We did not generate any revenues during this period and we are development stage company. Our expenses of $968,291 for six months ended June 30, 2010 consisted primarily of legal, accounting and consulting fees, payroll and employee related expenses, and other general corporate and administrative expenses of $246,573, $144,350, $408,481, and $168,887, respectively.

For three months ended June 30, 2010 and for the period from June 3, 2009 (inception) through June 30, 2010, we had a net loss of $515,267 and $1,722,271 respectively. We did not generate any revenues during these periods and we are development stage company. Our expenses of $437,473 for three months ended June 30, 2010 consisted primarily of legal, accounting and consulting fees, payroll and employee related expenses, and other general corporate and administrative expenses of $84,693, $45,751, $215,662, and $91,367, respectively. For the period from June 3, 2009 (inception) through June 30, 2010, the Company’s expenses of $1,493,215, consisted primarily of legal, accounting and consulting fees, payroll and employee related expenses, and other general corporate and administrative expenses of $440,400, $281,790, $538,330 and $232,695, 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.

 
16

 
 
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 new promissory note in the amount of $5,066,985 accrues interest at the rate of 8% per annum. For the three months ended June 30, 2010 and for the period from June 3, 2009 (inception) through June 30, 2010, we had interest expense of $97,951 and $312,129, respectively, related to this note. For the six months ended June 30, 2010, we had interest expense of $200,770, related to this note.
 
For the three months ended June 30, 2010, we had other income, net of $20,565 related to lease income, interest income, the sale of timber and loss from the sale of land and a $315 provision for income tax. For the six months ended June 30, 2010, we had other income, net of $60,071 related to lease income, interest income, rental of property, the sale of timber and gain from the sale of land and a $662 provision for income tax. For the period from June 3, 2009 (inception) through June 30, 2010, we had other income, net related to lease income, interest income, rental of property, the sale of timber and loss from the sale of land of $84,148 and a $982 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 June 30, 2010, we had $511,681 of available cash and during the period from June 3, 2009 (inception) through June 30, 2010, did not have any sources of revenue, other than lease , interest and timber sale income.
 
As reflected in the accompanying condensed consolidated financial statements, we had a net loss of $1,722,271 for the period from June 3, 2009 (inception) through June 30, 2010, and $511,681 of cash as of June 30, 2010. As of June 30, 2010, we had working capital deficiency of $3,496,101.

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 June 30, 2010 and for the period from June 3, 2009 (inception) through June 30, 2010 we had repaid Cullen Holdings $1,000,000 and $3,000,000 of the note, respectively, consisting of $983,949 of principal and $16,051 of interest and $2,947,591 of principal and $52,409 of interest, respectively. On March 30, 2010, Cullen Holdings issued a new note in replacement of the existing 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 June 30, 2010, the amount outstanding on the note was $4,083,036. 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 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 six months ended June 30, 2010.

 
17

 

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 an 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 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 six months ended June 30, 2010.
 
For the three and six months ended June 30, 2010, the Company recognized a gain on sale of equipment totaling $2,701.
 
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 lend money backed by such property.  As a result, we have been unable to obtain the necessary funding to support the implementation of our business plan at this time. Until such time where the Company can 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. 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 its outstanding debt to reduce its interest obligations.  There is no assurance, however, that we will be successful in 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.

18

 
Critical Accounting Policies
 
Our significant accounting policies are more fully described in Note 1 to the condensed consolidated 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. 

See Recently Issued and Adopted Accounting Pronouncements in Note 1 to the unaudited condensed consolidated interim financial statements in Item 1.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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.

ITEM4T.
CONTROLS AND PROCEDURES.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and treasurer (our principal executive and principal financial and accounting officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2010. Based upon his evaluation, he concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under The Exchange Act) were effective.

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
19

 

PART II

OTHER INFORMATION
 
ITEM 1.
LEGAL PROCEEDINGS

See Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this report.

ITEM 1A.
RISK FACTORS

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2009.

ITEM 5.
EXHIBITS

 
(a)
Exhibits:
 
 
31.1
Section 302 Certification by CEO and Treasurer
 
 
32
Section 906 Certification by CEO and Treasurer
 
 
20

 

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
CULLEN AGRICULTURAL HOLDING
CORP.
   
Dated: August 10, 2010
 
   
 
/s/ Eric J. Watson
 
Eric J. Watson
 
Chairman of the Board, Chief Executive Officer,
Secretary and Treasurer (Principal Executive Officer
and Principal Financial and Accounting Officer)
 
 
21

 
EX-31.1 2 v193064_ex31-1.htm
Exhibit 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Eric J. Watson, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Cullen Agricultural Holding Corp.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)            Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 10, 2010
 
/s/ Eric J. Watson
 
Name:
Eric J. Watson
 
Title:
Chairman of the Board, Chief Executive
   
Officer, Secretary and Treasurer (Principal
   
Executive Officer and Principal Financial
   
and Accounting Officer)
 
 
 

 
EX-32 3 v193064_ex32.htm
Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cullen Agricultural Holding Corp. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: August 10, 2010
/s/ Eric J. Watson
 
Name:
Eric J. Watson
 
Title:
Chairman of the Board, Chief Executive
   
Officer, Secretary and Treasurer (Principal
   
Executive Officer and Principal Accounting
   
and Financial Officer)


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