UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2014
| ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ______________to ______________
Commission File Number000-53806
CULLEN AGRICULTURAL HOLDING CORP.
(Exact Name of Issuer as Specified in Its Charter)
Delaware (State of Incorporation) | 27-0863248 (Issuer I.R.S. Employer I.D. Number) |
1193 Seven Oaks Rd. Waynseboro, Georgia (Address of principal executive offices) | 30830 (zip code) |
(706) 621-6737
(Issuer’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Nox
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes¨ Nox
Indicate by check mark whether the registrant (1) has 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 requirement for the past 90 days. Yesx 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). Yesx No¨
Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨
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 definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one).
| Large accelerated filer¨ | Accelerated filer¨ |
| Non-accelerated filer¨ | Smaller reporting companyx |
| (Do not check if a smaller reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yesx No¨
As of June 30, 2014 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $7,223,696.
As of March 4, 2015, there were 22,780,714 shares of Common Stock, $.0001 par value per share, outstanding.
Documents incorporated by reference: None.
CULLEN AGRICULTURAL HOLDING CORP.
FORM 10-K
TABLE OF CONTENTS
Forward Looking Statements
All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under Item 1 “Business” and Item 5 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward looking statements. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission. All subsequent written or oral forward looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
In assessing forward-looking statements contained herein, readers are urged to carefully read those statements. Among the factors that could cause actual results to differ materially are: inability to obtain necessary financing; competition; loss of key personnel; increases of costs of operations; continued compliance with government regulations; and general economic conditions.
PART I
Cullen Agricultural Holding Corp. (the “Company”) was incorporated in Delaware on August 27, 2009. References herein to “we,” “us” or “our” refer to the Company.We are seeking alternative strategic opportunities to maximize stockholder value.
Corporate History
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 us, Triplecrown, Merger Sub, Cullen Agritech and Cullen Inc. Holdings Ltd. (“Cullen Holdings”). Cullen Holdings is an entity controlled by Eric J. Watson, our former 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 of the closing of the Merger, 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.
Following the Merger, we conducted our operations through Cullen Agritech. Cullen Agritech had conducted its operations primarily through its wholly-owned subsidiary, Natural Dairy Inc. (“Natural Dairy”). Our business plan following the Merger was 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. Upon consummation of the Merger, we acquired the intellectual property that made up our proprietary farming system and was the basis for this business plan. The intellectual property included all constituent components of the proprietary farming system (including forage growth and yields, animal genetics and milking systems) that had been developed by adapting established grazing science, processes, technology, and genetics to liquid milk production in the Southeastern United States.
We had been in the process of attempting to obtain land development financing backed by the property we owned and operated to support our working capital needs and implement our business plan, but due to the performance of similar types of farming operations in the region, as well as the general economic downturn, financial institutions were unwilling to provide such financing. As a result, we were unable to obtain the necessary funding to support the implementation of our business plan. Accordingly, we began exploring all financing and strategic alternatives available to us.
During 2010 through May 2012, the Company disposed of approximately 3,635 acres of land, constituting all of the Company’s property which it had planned to use to deploy its pasture based dairy and beef business plan. We used the capital received from such sales to support our working capital needs and retire certain of our outstanding debt to reduce our interest obligations. During the year ended December 31, 2014, the Company sold its farm equipment related to the grazing-based farming system.
Current Activities
On December 31, 2014, we entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) by and among the Company, Long Island Iced Tea Corp., a Delaware corporation and a wholly owned subsidiary of the Company (“Holdco”), Cullen Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Holdco (“Parent Merger Sub”), LIBB Acquisition Sub, LLC, a New York limited liability company and a wholly owned subsidiary of Holdco (“LIBB Merger Sub” and together with Parent Merger Sub, the “Merger Subs”), Long Island Brand Beverages, LLC, a New York limited liability company (“LIBB”), Phil Thomas and Thomas Panza, each a member of LIBB. Pursuant to the Merger Agreement, among other things, (i) Parent Merger Sub will merge with and into the Company (the “Parent Merger”), with the Company surviving as a wholly owned subsidiary of Holdco and with the Company’s stockholders receiving newly issued shares of common stock, par value $0.0001 per share, of Holdco, and (ii) LIBB Merger Sub will merge with and into LIBB (the “Company Merger,” and together with the Parent Merger, the “Mergers”), with LIBB surviving as a wholly owned subsidiary of Holdco and with the members of LIBB receiving newly issued shares of Holdco common stock.
Upon the consummation of the Mergers, (i) Holdco will become a new publicly traded company, (ii) the Company and LIBB will become wholly-owned subsidiaries of Holdco and (iii) assuming that there are no adjustments to the merger consideration pursuant to the Merger Agreement, the former members of LIBB will own approximately 63% of the stock of Holdco and the former stockholders of the Company will own the remaining 37%.
LIBB operates in the ready-to-drink tea segment of the beverage industry. LIBB has developed non-alcoholic, premium iced tea bottled beverages made with quality ingredients that are offered at an affordable price. LIBB is currently organized around its flagship brand Long Island Iced Tea, a premium, ready-to-drink, proprietary recipe iced tea sold primarily on the East Coast of the United States through national and regional wholesale and supermarket chains and a network of distributors.
The Mergers are expected to be consummated in the first fiscal quarter of 2015, after the fulfillment of certain closing conditions set forth in the Merger Agreement.
We have advanced loans to LIBB in the amounts of $600,000 on November 19, 2013, $600,000 on December 5, 2013 and $300,000 on April 1, 2014. At December 31, 2014, the balance of notes receivable due from LIBB was $1,500,000 which is due and payable on March 15, 2016. In the event the Mergers are not consummated, LIBB would need to raise capital from third parties in order to repay the notes. In the event the Mergers are not consummated, our plan will be to seek, investigate, and if such investigation warrants, acquire one or more businesses desiring the perceived advantages of a publicly held corporation.
Competition
In the event that the Mergers are not consummated and we seek to acquire one or more operating businesses, we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors.
Employees
We do not currently have any employees. We have one executive officer.
Not applicable.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS. |
Not applicable.
We maintain our executive offices at 1193 Seven Oaks Rd., Waynesboro, Georgia 30380. The office space is provided to us at no charge from Hart Acquisitions LLC (“Hart”), an affiliate of Richard Watson, a former director of the Company and the brother of Eric Watson, our former Chief Executive Officer and our principal stockholder. We consider our current office space adequate for our current operations.
| ITEM 3. | LEGAL PROCEEDINGS. |
The Company is not party to any litigation.
On October 3, 2014, an action was filed entitled Madwell LLC (“Madwell”) v. Long Island Brand Beverages LLC, its Chief Executive Officer, and Paul Vassilakos, our Chief Executive Officer, Index No.: 509081/2014, in the Supreme Court of New York by Madwell. Madwell is seeking $940,000, which includes $440,000 for breach of contract and payment of services as well as punitive damages of $500,000. We have agreed to indemnify Mr. Vassilakos for any expenses he incurs in connection with such litigation. We currently do not believe that Mr. Vassilakos’ expenses in connection with such litigation will be material.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
Not Applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Market Information
Our common stock is quoted on the OTC Bulletin Board under the symbol CAGZ. The following table sets forth the range of high and low sales prices for the common stock for the periods indicated for the last two fiscal years:
| | | Common Stock | |
| | | High | | | Low | |
| | | | | | | |
| Fiscal 2014: | | | | | | | | |
| Fourth Quarter | | $ | 0.43 | | | $ | 0.14 | |
| Third Quarter | | $ | 0.70 | | | $ | 0.35 | |
| Second Quarter | | $ | 0.79 | | | $ | 0.08 | |
| First Quarter | | $ | 0.08 | | | $ | 0.08 | |
| | | | | | | | | |
| Fiscal 2013: | | | | | | | | |
| Fourth Quarter | | $ | 0.13 | | | $ | 0.08 | |
| Third Quarter | | $ | 0.15 | | | $ | 0.06 | |
| Second Quarter | | $ | 0.19 | | | $ | 0.14 | |
| First Quarter | | $ | 0.17 | | | $ | 0.12 | |
Our warrants were quoted on the OTC Bulletin Board under the symbol CAGZW until October 21, 2013 when all outstanding warrants expired.
Holders
As of March 2, 2015, there were 25 holders of record of our common stock.
Dividends
We have not paid any cash dividends on our common stock to date. The payment of cash dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of our board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
| ITEM 6. | SELECTED FINANCIAL DATA. |
Not applicable.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
The following discussion should be read in conjunction with our Consolidated Financial Statements and footnotes thereto contained in this report.
Overview and History
We conducted our operations through our wholly-owned subsidiary, Cullen Agricultural Technologies Inc. (“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 below.
We were incorporated in Delaware on August 27, 2009. We were formed in order to allow Triplecrown Acquisition Corp. (“Triplecrown”), a blank check company, to complete a business combination (the “Merger”) with Cullen Agritech, as contemplated by the Agreement and Plan of Reorganization, dated as of September 4, 2009, as amended, among us, Triplecrown, CAT Merger Sub, Inc. (“Merger Sub”), Cullen Agritech and Cullen Inc. Holdings Ltd. (“Cullen Holdings”). Prior to the Merger, we were a wholly owned subsidiary of Triplecrown, Merger Sub was our wholly owned subsidiary and Cullen Holdings was the sole stockholder 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 the Company’s wholly owned subsidiary. As a result of the Merger, the former security holders of Triplecrown and Cullen Agritech became our security holders and we became a public holding company, operating through Cullen Agritech.
Our previous focus had been 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 had 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. However, we were unable to obtain the necessary funding to support the implementation of our business plan. Accordingly, we began exploring all financing and strategic alternatives available to us. As discussed below, on December 31, 2014, we entered into an agreement to merge with an operating business.
Merger Agreement
On December 31, 2014, we entered into the Merger Agreement by and among the Company, Holdco, Parent Merger Sub, LIBB Merger Sub, LIBB, Phil Thomas and Thomas Panza, each a member of LIBB. Pursuant to the Merger Agreement, among other things, (i) Parent Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Holdco and with the Company’s stockholders receiving newly issued shares of common stock, par value $0.0001 per share, of Holdco, (ii) LIBB Merger Sub will merge with and into LIBB, with LIBB surviving as a wholly owned subsidiary of Holdco and (iii) the holders of the LIBB membership interests will receive 39,500,000 shares of common stock of Holdco, subject to adjustment based on LIBB’s and our net working capital (as defined in the Merger Agreement).
Upon the consummation of the Mergers, (i) Holdco will become a new publicly traded company, (ii) the Company and LIBB will become wholly-owned subsidiaries of Holdco and (iii) assuming that there are no adjustments to the merger consideration pursuant to the Merger Agreement, the former members of LIBB will own approximately 63% of the stock of Holdco and the former stockholders of the Company will own the remaining 37%.
For accounting purposes, the transactions will be treated as an acquisition of our company by LIBB and as a recapitalization of LIBB, as the former LIBB members will hold a large percent of the Holdco shares and will exercise significant influence over the operating and financial policies of the consolidated entity and we were a public shell company at the time of the transaction. Pursuant to Accounting Standards Codification (“ASC”) 805-10-55-11 through 55-15, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination.
The Mergers are expected to be consummated in the first fiscal quarter of 2015, after the fulfillment of certain closing conditions set forth in the Merger Agreement.
In the event the Mergers are not consummated, our plan will be to seek, investigate, and if such investigation warrants, acquire one or more operating businesses desiring the perceived advantages of a publicly held corporation. We will not restrict our search to any specific business, industry, or geographical location, and may participate in business ventures of virtually any kind or nature.
Results of Operations and Financial Condition
Since October 22, 2009, our activities have been primarily focused on raising capital to fund our former business plan and the sale of land to meet our working capital requirements and repay our outstanding debt. As of December 31, 2014, all of our outstanding debt has been repaid. Our current plan is to consummate the Mergers and become an operating company. 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. To date, we have not generated any revenue.
Results of Operations
For the year ended December 31, 2014, we had a net loss of $443,144. We did not generate any revenues during this period. Our expenses of $566,677 for the year ended December 31, 2014 consisted primarily of legal, accounting and consulting fees and other general corporate and administrative expenses of $110,902, $158,787, $9,530 and $287,458, respectively. For the year ended December 31, 2014 and 2013 the company incurred merger related expenses of $104,815 and $42,720, respectively.
For the year ended December 31, 2013, we had a net loss of $310,223. We did not generate any revenues during this period. Our operating expenses of $312,424 for the year ended December 31, 2013 consisted primarily of legal, accounting and consulting fees and other general corporate and administrative expenses of $56,960, $134,851, $36,492 and $84,121, respectively.
For the year ended December 31, 2014, we had other income, net of $124,804 consisting of $88,522 of interest income, and $36,465 of gain on one sale of equipment, offset by $184 of interest expense on notes payable related to interest income on notes receivable and gain from the sale of equipment offset by note payable interest expense.
For the year ended December 31, 2013, we had other income, net, of $3,461 related to interest income on notes receivable offset by note payable interest expense.
Liquidity and Capital Resources
As of December 31, 2014, we had $489,069 of cash and working capital of $694,297. The Company believes it has sufficient liquidity to meet its operating requirements for the next twelve months.
During the year ended December 31, 2014, the Company’s cash used in investing activities consisted of an investment in a note receivable. During the year ended December 31, 2014, the Company’s cash flows from investing activities consisted of proceeds of $430,000 from the sale of 2,150,000 shares of common stock.
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.
Critical Accounting Policies
Income Taxes
We account for income taxes in accordance with FASB 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 our assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. We evaluate 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.
We have identified our federal tax return and our state tax return in Georgia as "major" tax jurisdictions. Based on our evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. The evaluation was performed for tax years of 2010 through 2014 which are open for tax authority review. We believe that our income tax positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position or results of operations.
Our policy for recording interest and penalties associated with tax audits is to record such items as a component of income tax expense. There were no amounts accrued for penalties and interest for the years ended December 31, 2014 and December 31, 2013. We do not expect our 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.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not applicable.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
This information appears following Item 15 of this Report and is included herein by reference.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the board of directors.
Based on his evaluation as of December 31, 2014, our principal executive and principal financial and accounting officer has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles in the United States, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
An internal control system over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
The Company’s management, under the supervision of and with the participation of the principal executive and principal financial and accounting officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 based on criteria for effective control over financial reporting described in Internal Control —Integrated Framework (1992) created by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2014.
This annual report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as such report is not required for non-accelerated filers.
Changes in Internal Control Over Financial Reporting
For the fiscal quarter ended December 31, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. Our principal executive and principal financial and accounting officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.
| ITEM 9B. | OTHER INFORMATION. |
None.
PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Directors and Executive Officers
Our current directors and executive officers are as follows:
| Name | | Age | | Position |
| Paul N. Vassilakos | | 38 | | Chief Executive Officer and Director |
| Kerry Kennedy | | 55 | | Director |
| Richard Y. Roberts | | 63 | | Director |
| Edward Hanson | | 39 | | Director |
Paul N. Vassilakoshas served as our Chief Executive Officer and as a member of our board of directors since November 2013. We believe Mr. Vassilakos’s extensive public company and capital markets experience, as well as his professional contacts and other business experience, make him well suited to serve on our board of directors. Mr. Vassilakos has served as the assistant treasurer of Cullen since October 2009. Mr. Vassilakos founded Petrina Advisors, Inc., a privately held advisory firm providing investment banking services, and has served as its president since its formation in July 2007. Mr. Vassilakos also founded and, since December 2006, serves as the vice president of Petrina Properties Ltd., a privately held real estate holding company. From November 2011 through February 2012, Mr. Vassilakos served as Chief Executive Officer, Chief Financial Officer and director of Soton Holdings Group, Inc., a publicly held company now known as Rio Bravo Oil, Inc. Mr. Vassilakos also previously served as interim President and Chief Executive Officer of Red Mountain Resources, Inc. from February 2011 to March 2011. From February 2002 through June 2007, Mr. Vassilakos served as vice president of Elmsford Furniture Corp., a privately held furniture retailer in the New York area. Mr. Vassilakos also currently serves on the Board of Directors of Cross Border Resources, Inc. (since April 2012) and Red Mountain Resources, Inc. (since October 2011), oil and natural gas exploration public companies. Mr. Vassilakos received a BS in finance from the Leonard N. Stern Undergraduate School of Business in 1998 and was a licensed Registered Securities Representative (Series 7 and 63) from February 1996 through February 2002.
Kerry Kennedy has been a member of our board of directors since October 2009. We believe Ms. Kennedy’s contacts and philanthropic work make her well suited to serve as a member of our board. 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 Mr. Roberts’ contacts and past business experience, including at the Securities and Exchange Commission, make him well suited to serve as a member of our board. 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. We believe his experience at the Commission will provide us with necessary insight into the requirements and needs of an emerging public company like ours. 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. Mr. Roberts is a member of the board of directors of Red Mountain Resources, Inc., an independent, growth oriented energy company that intends to acquire and develop oil and gas properties. 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.
Edward Hanson has been a member of our board of directors since October 2009. We believe Mr. Hanson’s business experience and contacts and relationships make him well suited to serve as a member of our board. Mr. Hanson has served as a principal of Global Partners Fund, a private equity fund investing in asset backed businesses, since 2009. Prior to this, he was a director of Babcock & Brown (UK) Ltd. Babcock & Brown was a principal investment firm headquartered in Sydney and Mr. Hanson worked in the London office from 1997 to 2009. He focused on Private Equity and Real Estate. Mr Hanson received a Bachelor of Commerce from the University of Auckland in New Zealand.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and ten percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms they file.
During the fiscal year ended December 31, 2014, Kerry Kennedy, a member of our board of directors, failed to file a Form 4 on a timely basis. Ms. Kennedy acquired common stock of the Company on December 26, 2014. A Form 4 was filed for such acquisition on January 5, 2015, which was not within two business days of the transaction and therefore was not filed timely.
Based solely on copies of such forms received or written representations from certain reporting persons that no Form 5s were required for those persons, we believe that, during the fiscal year ended December 31, 2014, all other required filings were timely made by our officers, directors and greater than ten percent beneficial owners.
Code of Ethics
In October 2009, our board of directors adopted a code of ethics that applies to our directors, officers and employees as well any subsidiaries we may have in the future. Requests for copies of our code of ethics should be sent in writing to Cullen Agricultural Holding Corp., 1193 Seven Oaks Rd., Waynseboro, Georgia 30380.
| ITEM 11. | EXECUTIVE COMPENSATION. |
Our policies with respect to the compensation of our executive officers are administered by our board in consultation with the compensation committee. Our compensation policies are 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 are charged with recommending executive compensation packages to our board of directors.
Performance-based and equity-based compensation is 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.
Executive Compensation
Our principal executive and financial officers did not receive any compensation for the years ended December 31, 2014 or 2013. Paul N. Vassilakos, our current principal executive and financial officer, was appointed our Chief Executive Officer in November 2013.Prior to his appointment, an affiliate of Mr. Vassilakos received a $5,000 per month fee for acting as a consultant to us. Upon his appointment, we ceased paying this fee to Mr. Vassilakos’ affiliate.
Director Compensation
We currently do not have a formal compensation plan for our directors.
From inception and through the third quarter of 2014, none of the non-employee directors have received compensation or reimbursement of travel expenses in connection with their service on the Board of Directors or on its committees.
On December 26, 2014, we granted to each of our non-employee directors (Kerry Kennedy, Richard Roberts and Edward Hanson) and one of our former non-employee directors (Robert Hersov who resigned effective March 31, 2014) 250,000 shares of common stock, with each grant valued at $50,000. The shares granted were fully vested on the date of grant, and were to compensate the individuals for their service on the Board.
Name
(a) | | Stock awards
($)
(c) | | | Total
($)
(h) | |
| Kerry Kennedy | | $ | 50,000 | | | $ | 50,000 | |
| Richard Y. Roberts | | $ | 50,000 | | | $ | 50,000 | |
| Edward Hanson | | $ | 50,000 | | | $ | 50,000 | |
| Robert Hersov (resigned effective on March 31, 2014) | | $ | 50,000 | | | $ | 50,000 | |
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
The following table sets forth information regarding the beneficial ownership of our common stock as of March 2, 2015 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 during the period covered by this Form 10-K; and |
| | · | all of our current 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 | |
| | | | | | | | | |
| Directors and Executive Officers: | | | | | | | | |
| Paul N. Vassilakos | | | 325,000 | | | | 1.4 | % |
| Kerry Kennedy(2) | | | 310,000 | | | | 1.4 | % |
| Richard Y. Roberts(3) | | | 310,000 | | | | 1.4 | % |
| Edward Hanson(4) | | | 310,000 | | | | 1.4 | % |
| All current directors and executive officers as a group (4 individuals) | | | 1,255,000 | | | | 5.5 | % |
| Five Percent Holders: | | | | | | | | |
Eric J. Watson(5) | | | 11,206,148 | (6) | | | 49.2 | % |
| Bass Properties LLC(7) | | | 2,150,000 | | | | 9.4 | % |
| Jonathan J. Ledecky(8) | | | 2,000,000 | (9) | | | 8.8 | % |
| (1) | Unless otherwise indicated, the business address of each of the individuals is 1193 Seven Oaks Rd., Waynesboro, Georgia 30380. |
| (2) | Ms. Kennedy’s business address is c/o Robert F. Kennedy Center, 1367 Connecticut Avenue N.W., Suite 200, Washington, D.C. 20036. |
| (3) | Mr. Roberts’ business address is Roberts, Raheb & Gradler, LLC, 1200 New Hampshire Avenue NW, Suite 300, Washington, DC 20036. |
| (4) | Mr. Hanson’s business address is c/o Edward Hanson, Suite 926, 28 Brompton Road, London SW7 3SS, UK. |
| (5) | Mr. Watson’s business address is Level 9, 68 Shortland Street, P.O. Box 91269, Auckland, New Zealand. Mr. Watson resigned from his positions as an officer and director of the Company in November 2013. |
| (6) | Represents shares of common stock held by Cullen Holdings, an entity controlled by Mr. Watson. |
| (7) | Bass Properties, LLC’s business address is c/o 3175 Noela Street, Honolulu, HI 96816. |
| (8) | Mr. Ledecky’s business address is 970 West Broadway, PMB 402, Jackson, WY 83001. |
| | |
(9) | Includes 600,000 shares of common stock held by Hat Tricks LLC, an affiliate of Mr. Ledecky. |
Equity Compensation Plan Information
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans |
| Equity compensation plans approved by security holders | 0 | — | 2,405,914 |
| Total | 0 | — | 2,405,914 |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
The holders of the majority of our founders’ shares (that is, shares held by the shareholders of Triplecrown prior to its initial public offering that became our stockholders upon consummation of the Merger) are entitled to make up to two demands that we register such shares pursuant to a registration rights agreement entered into with Triplecrown in connection with Triplecrown’s initial public offering. The holders of the majority of the founders’ 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 December 31, 2014, the Company entered into a Sale and Purchase Agreement with Hart pursuant to which the Company sold to Hart certain assets and intellectual property related to the Company’s former agricultural business for an aggregate of $125,000. Additionally, in the event that Hart sells the intellectual property subject to the agreement or licenses such intellectual property to a third party at any time prior to January 31, 2020, the Company will be entitled to 20% of the amount received from such sale or license.
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 $120,000 in any calendar year, (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.
Independence of Directors
We adhere to the rules of the NYSE MKT 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 Mkt 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 each of Kerry Kennedy, Richard Y. Roberts and Edward Hanson will be our independent directors. Additionally, our board of directors has determined that Edward Hanson qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC.
PART IV
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
The firm of Marcum LLP acts as our independent registered public accounting firm. The following is a summary of fees paid to Marcum LLP for services rendered.
Audit Fees
During the fiscal year ended December 31, 2014 and 2013, audit fees for our independent registered public accounting firm were $59,990 and $42,500, respectively.
Audit-Related Fees
During the fiscal year ended December 31, 2014 and 2013, we incurred no audit related fees.
Tax Fees
For the years ended December 31, 2014 and 2013, the principal accountant billed $3,244 and $8,000, respectively, for tax compliance.
All Other Fees
During the fiscal year ended December 31, 2014 and 2013, there were no fees billed for services provided by our independent registered public accounting firm other than those set forth above.
Audit Committee Approval
Our audit committee pre-approved all the foregoing services. In accordance with Section 10A(i) of the Securities Exchange Act of 1934, before we engage our independent accountant to render audit or non-audit services on a going-forward basis, the engagement will be approved by our audit committee.
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
| | (a) | The following Exhibits are filed as part of this report. |
| 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) |
| | | |
| 2.2 | | Agreement and Plan of Reorganization, dated as of December 31, 2014, by and among, Cullen Agricultural Holding Corp., Long Island Iced Tea Corp., Cullen Merger Sub, Inc., LIBB Acquisition Sub, LLC, Long Island Brand Beverages LLC, Phil Thomas and Thomas Panza (8) |
| | | |
| 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 | | Specimen Common Stock Certificate of Cullen Agricultural Holding Corp.(3) |
| | | |
| 10.1 | | Form of Registration Rights Agreement among Triplecrown Acquisition Corp. and the Triplecrown Founders.(2) |
| | | |
| 10.2 | | Sales Contract with Wilbert Roller, Jr. (6) |
| | | |
| 10.3 | | Sales Contract with Patrick and Sherry Farrell (5) |
| | | |
| 10.4 | | Promissory Note dated November 18, 2013(7) |
| | | |
10.5 | | Sales Contract with Hart Acquisitions LLC* |
| | | |
| 14.1 | | Form of Code of Ethics of Cullen Agricultural Holding Corp.(3) |
| | | |
| 21.1 | | Subsidiaries of Cullen Agricultural Holding Corp. * |
| | | |
| 31 | | Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
| | | |
| 32 | | Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| | | |
| 99.3 | | Audit Committee Charter.(4) |
| | | |
| 99.4 | | Nominating Committee Charter.(4) |
| | | |
| 101 | | Financial statements from the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2014, formatted in XBRL: (i) Consolidated Financial Statements, (ii) Balance Sheets, (iii) Statements of Operations, (iv) Statement of Changes in Stockholders' Equity, (v) Statement of Cash Flows and (vi) Notes to Consolidated Financial Statements, as blocks of text and in detail.* |
| 101.INS | | XBRL Instance Document* |
| 101.SCH | | XBRL Taxonomy Extension Schema Document * |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document * |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document * |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document* |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document * |
*Filed or furnished herewith.
| | (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 Cullen Agricultural Holding Corp.’s Current Report on Form 8-K, filed October 22, 2009. |
| | (5) | Incorporated by reference to Cullen Agricultural Holding Corp.’s Quarterly Report on Form 10-Q, filed May 3, 2012. |
| | | |
| | (6) | Incorporated by reference to Cullen Agricultural Holding Corp.’s Annual Report on Form 10-K, filed March 14, 2013. |
| | | |
| | (7) | Incorporated by reference to Cullen Agricultural Holding Corp.’s Annual Report on Form 10-K, filed March 28, 2014. |
| | | |
| | (8) | Incorporated by reference to Cullen Agricultural Holding Corp.’s Form 8-K, filed January 6, 2015. |
SIGNATURES
Pursuant to the requirements of the Section 13 or 15 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 4th day of March 2015.
| | CULLEN AGRICULTURAL HOLDING CORP. |
| | | |
| | By: | /s/ Paul N. Vassilakos |
| | | Paul N. Vassilakos |
| | | Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | | Title | | Date |
| | | | | |
| /s/ Paul N. Vassilakos | | Director and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | | March 4, 2015 |
| Paul N. Vassilakos | | | |
| | | | | |
| /s/ Kerry Kennedy | | Director | | March 4, 2015 |
| Kerry Kennedy | | | | |
| | | | | |
| /s/ Richard Y. Roberts | | Director | | March 4, 2015 |
| Richard Y. Roberts | | | | |
| | | | | |
| /s/ Edward Hanson | | Director | | March 4, 2015 |
| Edward Hanson | | | | |
Cullen Agricultural Holding Corp. and Subsidiaries
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the
Board of Directors and Shareholders
of Cullen Agricultural Holding Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Cullen Agricultural Holding Corp. and Subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended. 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 audits 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 consolidated 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cullen Agricultural Holding Corp. and Subsidiaries, as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Marcum LLP
Marcum LLP
Melville, New York
March 4, 2015
| Cullen Agricultural Holding Corp. and Subsidiaries |
| |
| CONSOLIDATED BALANCE SHEETS |
| |
| ASSETS | | | |
| | | | | | | |
| | | December 31, 2014 | | | December 31, 2013 | |
| CURRENT ASSETS | | | | | | | | |
| Cash | | $ | 489,069 | | | $ | 678,082 | |
| Receivable from related party | | | 126,871 | | | | 1,871 | |
| Prepaid expenses and other current assets | | | 130,226 | | | | 69,512 | |
| Notes receivable | | | - | | | | 1,200,000 | |
| Total Current Assets | | | 746,166 | | | | 1,949,465 | |
| | | | | | | | | |
| OTHER ASSETS | | | | | | | | |
| Notes receivable | | | 1,500,000 | | | | - | |
| Property and equipment, net | | | 3,326 | | | | 91,861 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 2,249,492 | | | $ | 2,041,326 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accrued expenses | | $ | 51,869 | | | $ | 20,097 | |
| Current portion of note payable | | | - | | | | 10,462 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 51,869 | | | | 30,559 | |
| | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
| Preferred stock, par value $0.0001; authorized 1,000,000 shares; | | | | | | | | |
| no shares issued and outstanding | | | - | | | | - | |
| Common stock, par value $0.0001; 200,000,000 shares authorized; | | | | | | | | |
| 22,780,714 and 19,630,714 shares issued and outstanding | | | | | | | | |
| at December 31, 2014 and 2013, respectively. | | | 2,279 | | | | 1,964 | |
| Additional paid-in capital | | | 7,491,566 | | | | 6,861,881 | |
| Accumulated deficit | | | (5,296,222 | ) | | | (4,853,078 | ) |
| | | | | | | | | |
| TOTAL STOCKHOLDERS' EQUITY | | | 2,197,623 | | | | 2,010,767 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 2,249,492 | | | $ | 2,041,326 | |
The accompanying notes are an integral part of these consolidated financial statements
| Cullen Agricultural Holding Corp. and Subsidiaries |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| |
| | | For the year ended | | | For the year ended | |
| | | December 31, 2014 | | | December 31, 2013 | |
| | | | | | | |
| Revenues | | $ | -- | | | $ | -- | |
| | | | | | | | | |
| General and administrative expenses | | | 566,677 | | | | 312,424 | |
| | | | | | | | | |
| LOSS FROM OPERATIONS | | | (566,677 | ) | | | (312,424 | ) |
| | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | |
| Interest income - notes receivable | | | 88,522 | | | | 3,945 | |
| Interest expense - note payable | | | (184 | ) | | | (484 | ) |
| Gain on sale of equipment | | | 36,465 | | | | -- | |
| | | | | | | | | |
| TOTAL OTHER INCOME | | | 124,803 | | | | 3,461 | |
| | | | | | | | | |
| LOSS BEFORE TAXES | | | (441,874 | ) | | | (308,963 | ) |
| | | | | | | | | |
| INCOME TAXES | | | 1,270 | | | | 1,260 | |
| | | | | | | | | |
| NET LOSS | | | (443,144 | ) | | $ | (310,223 | ) |
| | | | | | | | | |
| Weighted average number of common shares outstanding – basic and diluted | | | 19,806,193 | | | | 19,630,714 | |
| | | | | | | | | |
| Basic and diluted net loss per share | | $ | (0.02 | ) | | $ | (0.02 | ) |
The accompanying notes are an integral part of these consolidated financial statements
| Cullen Agricultural Holding Corp. and Subsidiaries |
| |
| CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY |
| |
| For the Years Ended December 31, 2014 and 2013 |
| |
| | | Common Stock | | | Additional | | | Accumulated | | | | |
| | | Shares | | | Amount | | | Paid-in Capital | | | Deficit | | | Total | |
| | | | | | | | | | | | | | | | |
| BALANCE - January 1, 2013 | | | 19,630,714 | | | $ | 1,964 | | | $ | 6,861,881 | | | $ | (4,542,855 | ) | | $ | 2,320,990 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss for the year ended December 31, 2013 | | | -- | | | | -- | | | | -- | | | | (310,223 | ) | | | (310,223 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| BALANCE - December 31, 2013 | | | 19,630,714 | | | $ | 1,964 | | | $ | 6,861,881 | | | $ | (4,853,078 | ) | | $ | 2,010,767 | |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock on December 5, 2014 at | | | | | | | | | | | | | | | | | | | | |
| $0.20 per share | | | 2,150,000 | | | | 215 | | | | 429,785 | | | | - | | | | 430,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of shares to directors as compensation | | | 1,000,000 | | | | 100 | | | | 199,900 | | | | - | | | | 200,000 | |
| | | | | | | | | | | | | | | | | | | | - | |
| Net loss for the year ended December 31, 2014 | | | -- | | | | -- | | | | -- | | | | (443,144 | ) | | | (443,144 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| BALANCE - December 31, 2014 | | | 22,780,714 | | | $ | 2,279 | | | $ | 7,491,566 | | | $ | (5,296,222 | ) | | $ | 2,197,623 | |
The accompanying notes are an integral part of these consolidated financial statements
| Cullen Agricultural Holding Corp. and Subsidiaries |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |
| | | For the Year Ended December 31, 2014 | | | For the Year Ended December 31, 2013 | |
| | | | | | | |
| Cash Flows from Operating Activities | | | | | | | | |
| Net loss | | $ | (443,144 | ) | | $ | (310,223 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Gain on sale of equipment | | | (36,465 | ) | | | | |
| Stock-based compensation | | | 200,000 | | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Prepaid expenses and other current assets | | | (60,714 | ) | | | (37,276 | ) |
| Accrued expenses | | | 31,772 | | | | (3,868 | ) |
| NET CASH USED IN OPERATING ACTIVITIES | | | (308,551 | ) | | | (351,367 | ) |
| | | | | | | | | |
| Cash Flows used in Investing Activities | | | | | | | | |
| Issuance of notes receivable | | | (300,000 | ) | | | (1,200,000 | ) |
| NET CASH USED IN INVESTING ACTIVITIES | | | (300,000 | ) | | | (1,200,000 | ) |
| | | | | | | | | |
| Cash Flows from Financing Activities | | | | | | | | |
| Repayment of note payable | | | (10,462 | ) | | | (10,170 | ) |
| Proceeds from issuance of common stock | | | 430,000 | | | | - | |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | | | 419,538 | | | | (10,170 | ) |
| NET DECREASE IN CASH | | | (189,013 | ) | | | (1,561,537 | ) |
| | | | | | | | | |
| CASH - Beginning | | | 678,082 | | | | 2,239,619 | |
| CASH - Ending | | $ | 489,069 | | | $ | 678,082 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | $ | 184 | | | $ | 668 | |
| Taxes | | $ | 1,270 | | | $ | 1,260 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | |
| Equipment sold in exchange for note recievable from related party | | $ | 125,000 | | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization, Business Operations and Significant Accounting Policies
Basis of Presentation, Management’s Plans and History
Cullen Agricultural Holding Corp. (the “Company”, “we”, “us” or “our”) was incorporated in Delaware on August 27, 2009. To date, the Company has not generated any revenue.
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 former 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.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On December 31, 2014, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) by and among the Company, Long Island Iced Tea Corp., a Delaware corporation and a wholly owned subsidiary of the Company (“Holdco”), Cullen Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Holdco (“Parent Merger Sub”), LIBB Acquisition Sub, LLC, a New York limited liability company and a wholly owned subsidiary of Holdco (“LIBB Merger Sub” and together with Parent Merger Sub, the “Merger Subs”), Long Island Brand Beverages, LLC, a New York limited liability company (“LIBB”), Phillip Thomas and Thomas Panza, each a member of LIBB. Pursuant to the Merger Agreement, among other things, (i) Parent Merger Sub will merge with and into the Company (the “Parent Merger”), with the Company surviving as a wholly owned subsidiary of Holdco and with the Company’s stockholders receiving newly issued shares of common stock, par value $0.0001 per share, of Holdco, (ii) LIBB Merger Sub will merge with and into LIBB (the “Company Merger,” and together with the Parent Merger, the “Mergers”), with LIBB surviving as a wholly owned subsidiary of Holdco and (iii) the members of LIBB will receive an aggregate of 39,500,000 newly issued shares of Holdco common stock, subject to adjustment as described below.
If LIBB’s estimated net working capital at the closing is less than its net working capital target, the number of shares of Holdco common stock to be received by the LIBB members at the closing will be reduced by a number of shares, allocated among the LIBB members pro rata, equal to such deficiency divided by $0.20. If LIBB’s estimated net working capital at the closing is more than its net working capital target, the number of shares of Holdco common stock to be received by the LIBB members at the closing will be increased by a number of shares, allocated among the LIBB members pro rata, equal to such excess divided by $0.20. LIBB’s net working capital target is $70,069, except that if the closing occurs after February 15, 2015, the target will be reduced by $3,333.33 for each day after such date through and including the closing date.
If the Company’s estimated net working capital at the closing is more than its net working capital target, the number of shares of Holdco common stock to be received by the LIBB members at the closing will be reduced by a number of shares, allocated among the LIBB members pro rata, equal to such excess divided by $0.20. If the Company’s estimated net working capital at the closing is less than its net working capital target, the number of shares of Holdco common stock to be received by the LIBB members at the closing will be increased by a number of shares, allocated among the LIBB members pro rata, equal to such deficiency divided by $0.20. the Company’s net working capital target is $786,985, except that if the closing occurs after February 15, 2015, the target will be reduced by $666.67 for each day after such date through and including the closing date.
LIBB operates in the ready-to-drink tea segment of the beverage industry. LIBB has developed non-alcoholic, premium iced tea bottled beverages made with quality ingredients that are offered at an affordable price. LIBB is currently organized around its flagship brand Long Island Iced Tea, a ready-to-drink, proprietary recipe iced tea sold primarily on the East Coast of the United States through national and regional wholesale and supermarket chains and a network of distributors.
For accounting purposes, the transactions will be treated as an acquisition of the Company by LIBB and as a recapitalization of LIBB, as the former LIBB members will hold a large percent of the Holdco shares and will exercise significant influence over the operating and financial policies of the consolidated entity and the Company was a public shell company at the time of the transaction. Pursuant to Accounting Standards Codification (“ASC”) 805-10-55-11 through 55-15, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination.
Upon the consummation of the Merger, the combined entity will become a new publicly traded company. Through December 31, 2014, the Company has provided loans aggregating $1,500,000 to LIBB. The Merger Agreement between the Company and LIBB has not occurred and there is no assurance that such a merger will occur. The Company’s activities are subject to significant risks and uncertainties, including the risk that the Company will not be able to merge with a suitable operating business or that such operating business, once acquired, will not perform as expected.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -Organization, Business Operations and Significant Accounting Policies, continued
Principles of Consolidation
The 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.
Cash
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.
Property, Plant and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. The Company charges repairs and maintenance items to expense, 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 |
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“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.
Long-Lived Assets
The Company accounts for its long-lived assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards 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.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -Organization, Business Operations and Significant Accounting Policies, continued
Income (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.
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.”
Equity-Based Compensation
The Company accounts for equity instruments issued to employees and directors in accordance with accounting guidance that requires that awards are recorded at their fair value on the date of grant and are amortized over the vesting period of the award. We recognize compensation costs over the requisite service period of the award.
Income Taxes
The Company accounts for income taxes in accordance with FASB 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. The evaluation was performed for tax years of 2011 through 2014 which are open for tax authority review. 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 or results of operations.
The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of income tax expense. There were no amounts accrued for penalties and interest for years ended December 31, 2014 and December 31, 2013. 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.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -Organization, Business Operations and Significant Accounting Policies, continued
Recently Issued and Adopted Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation." This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company elected to early adopt this ASU effective with the Quarterly Report on Form 10-Q for the period ended June 30, 2014 and its adoption resulted in the removal of previously required development stage disclosures. The adoption of ASU No. 2014-10 did not have a material effect on the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09) "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This standard is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under U.S. GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, U.S. GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Property and Equipment
At December 31, 2014 and December 31, 2013, property and equipment consisted of the following:
| | | December 31, 2014 | | | December 31, 2013 | |
| Machinery and equipment | | $ | - | | | $ | 154,231 | |
| Website | | | 3,326 | | | | 3,326 | |
| | | | 3,326 | | | | 157,557 | |
| Less: Accumulated depreciation and amortization | | | - | | | | 65,696 | |
| Property and equipment, net | | $ | 3,326 | | | $ | 91,861 | |
Depreciation and amortization expense was $0 and $0 for the years ended December 31, 2014 and 2013, respectively.
On December 31, 2014, the Company entered into a Sale and Purchase Agreement with Hart Acquisition, LLC (“Hart”) an affiliate of the Company’s largest shareholder, pursuant to which the Company sold to Hart certain assets and intellectual property related to the Company’s former agricultural business for an aggregate purchase price of $125,000 (“Hart Purchase Agreement”). Pursuant to the Hart Purchase Agreement, the $125,000 proceeds was received on January 29, 2015. The equipment had a net book value of $88,535, resulting in the recognized gain of $36,465 during the year ended December 31, 2014.
All assets were taken out of service on December 31, 2012 and as a result since December 31, 2012, the Company has not recorded depreciation expense related to these assets.
Note 3 –Receivable from Related Party
As of December 31, 2014, $126,871 (consisting of $125,000 from the sale of equipment) was due from Hart (See Note 2). As of December 31, 2013, $1,871 was due from Hart.
Note 4 -Notes Receivable
On November 19, 2013, the Company provided a loan in the amount of $600,000 to LIBB. On December 5, 2013, the Company provided a second loan to the LIBB in the amount of $600,000. On April 1, 2014, the Company provided a third loan in the amount of $300,000 to LIBB. Pursuant to the terms of the respective promissory notes, the loans bear interest at a rate of 6% per annum. On November 7, 2014, the Company and LIBB entered into an amendment to the promissory notes evidencing the loans described above to extend the maturity date of the promissory notes to March 15, 2015. On March 3, 2015, the Company and LIBB entered into an amendment of the promissory notes evidencing the loans described above to extend the maturity of the promissory notes to March 15, 2016. During the years ended December 31, 2014 and 2013, the Company recorded interest income of $88,522 and $3,945, respectively, related to these notes. As of December 31, 2014, accrued interest related to these loans was $92,466 which is included in prepaid expenses and other current assets, on the accompanying consolidated balance sheets. LIBB has granted the Company a security interest in certain of LIBB’s accounts receivable and inventory.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 5 -Note Payable
On May 15, 2010 the Company entered into a note payable to a financial institution due May 15, 2014, payable in annual installments of $10,768, which included interest of 2.9% per annum. At December 31, 2014 and December 31, 2013, the outstanding principal balance of the notes payable was $0 and $10,462.
Note 6 - Commitments and Contingencies
On October 3, 2014, an action was filed entitled Madwell LLC (“Madwell”) v. Long Island Brand Beverages LLC, its Chief Executive Officer, and Paul Vassilakos, the Company’s Chief Executive Officer, Index No.: 509081/2014, in the Supreme Court of New York by Madwell. Madwell is seeking $940,000, which includes $440,000 for breach of contract and payment of services as well as punitive damages of $500,000. The Company has agreed to indemnify Mr. Vassilakos for any expenses he incurs in connection with such litigation. The Company does not believe that Mr. Vassilakos’ expenses in connection with such litigation will be material.
Note 7 - Stockholders’ Equity
On December 5, 2014, the Company received proceeds of $430,000 in connection with the issuance of 2,150,000 shares to an investor at $0.20 per share.
On December 26, 2014, the Company issued a total of 1,000,000 shares of common stock to its independent directors. The shares, valued in the aggregate at $200,000, were fully vested upon issuance and were recorded as compensation expense and included within general and administrative expense for the year ended December 31, 2014. These shares were not issued under a plan.
Note 8 - 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. 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 awards are awarded at the discretion of the Plan’s committee. During the years December 31, 2014 and 2013, there were no awards granted under this Plan.
Note 9 – Income Taxes
The components of the income tax provision are as follows:
| | | For the year ended
December 31, 2014 | | | For the year ended
December 31, 2013 | |
| Current | | | | | | | | |
| Federal | | $ | - | | | $ | - | |
| State | | | 1,270 | | | | 1,260 | |
| Total current | | | 1,270 | | | | 1,260 | |
| | | | | | | | | |
| Deferred | | | | | | | | |
| Federal | | | (144,087 | ) | | | (114,855 | ) |
| State | | | (16,780 | ) | | | (13,376 | ) |
| | | | (160,867 | ) | | | (128,231 | ) |
| Changes in valuation allowance | | | 160,867 | | | | 128,231 | |
| Total deferred | | | - | | | | - | |
| Income tax expense | | $ | 1,270 | | | $ | 1,260 | |
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.
CULLEN AGRICULTURAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 9 – Income Taxes, continued
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
| | | For the year ended
December 31, 2014 | | | For the year ended
December 31, 2013 | |
| Deferred tax assets: | | | | | | | | |
| Net operating loss carry forwards | | $ | 2,005,882 | | | $ | 1,845,015 | |
| Total deferred tax assets | | | 2,005,882 | | | | 1,845,015 | |
| Valuation allowance | | | (2,005,882 | ) | | | (1,845,015 | ) |
| Net deferred tax asset | | $ | - | | | $ | - | |
As of December 31, 2014 the Company has an estimated net operating loss carry forward (“NOLs”) of $5,284,205 which begins to expire starting in 2029. The Company has determined that the 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.
For the years ended December 31, 2014 and 2013, the valuation allowance has increased by $160,867 and $128,231, respectively.
A reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax to income from operations before provision for income taxes is as follows:
| | | For the year Ended
December 31, 2014 | | | For the year Ended
December 31, 2013 | |
| Tax provision at statutory | | | (34 | %) | | | (34 | %) |
| State and local taxes (net of federal benefit) | | | 4 | % | | | 4 | % |
| Change in valuation allowance and non-deductible items | | | 38 | % | | | 38 | % |
| Effective tax rate | | | 0 | % | | | 0 | % |
Note 10 -Subsequent Events
The Company evaluates events that occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, other than as disclosed in Note 4, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
