UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 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 number 000-53942
URBAN BARNS FOODS
INC.
(Exact name of registrant as specified in its
charter)
Nevada |
20-0215404 |
(State or Other Jurisdiction of Incorporation of |
(I.R.S. Employer Identification No.) |
Organization) |
|
Office 205 290 Lakeshore Road |
514-907-4989 |
Pointe-Claire, Quebec, Canada H9S 4L3 |
|
(Address of principal executive offices) (ZIP Code) |
(Registrants telephone number, including
area code) |
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section12 (g) of the
Act: Common Stock, $0.001 par value
Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
[ ] No [X]
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
[ ] No [X]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that the
registrant as 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 Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants
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, or a non-accelerated filer. 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 company [X]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act)
Yes [ ] No
[X]
State the aggregate market value of voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and ask price of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter.
The aggregate market value of Common Stock held by
non-affiliates of the Registrant on October 28, 2014 was $3,524,645.18 based on
a $0.035 closing price for the Common Stock on October 28, 2014. For purposes of
this computation, all executive officers and directors have been deemed to be
affiliates. Such determination should not be deemed to be an admission that such
executive officers and directors are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the
registrants classes of common stock as of the latest practicable date.
281,182,847 shares of common stock issued & outstanding
as of October 28, 2014
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
3
PART I
Forward-looking Statements
This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause our or our
industry's actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable laws, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements so as to conform these
statements to actual results.
As used in this annual report, the terms "we", "us", "our",
our company, and "Urban Barns" mean Urban Barns Foods Inc. and of our
consolidated subsidiaries, unless otherwise indicated.
All dollar amounts refer to US dollars unless otherwise
indicated.
Overview
We were incorporated as HL Ventures Inc. on May 21, 2007 under
the laws of the State of Nevada, and changed our company name to Urban Barns
Foods Inc on July 22, 2009. Urban Barns Foods Canada Inc. was incorporated under
the laws of the province of Alberta on July 3, 2009 and continued as a federal
Canadian corporation on November 12, 2012. On December 4, 2009, we acquired all
of the issued and outstanding common shares of Urban Barns Foods (Canada) Inc
pursuant to a share exchange agreement dated October 9, 2009. As a result, Urban
Barns Foods (Canada) Inc is now our wholly owned subsidiary. Non Industrial
Manufacture Inc. was incorporated on February 10, 2010 under the laws of the
Province of Alberta. On June 2, 2011 we acquired all of the issued and
outstanding common shares of Non Industrial Manufacture Inc. pursuant to a share
exchange agreement dated May 2, 2011. As a result, Non Industrial Manufacture
Inc. is now also our wholly owned subsidiary. Our principal executive office is
located at 205 290 Lakeshore Road, Pointe-Claire, Quebec, Canada H9S 4L3. Our
telephone number is 514-907-4989. Our fiscal year end is July 31.
Current Business
We are an urban produce production company that aims to be the
supplier of choice of fresh, locally grown, high-quality organic and
conventional fruits and vegetables for urban consumers.
We have identified a revenue opportunity in the produce
industry which we believe is currently underutilized. This consists primarily of
producing select fruits and vegetables in a secure, indoor environment in close
proximity to urban centers, where the population of potential consumers exceeds
that of rural locales, regardless of regional climate or outdoor growing season
constraints. Our business plan therefore seeks to eliminate two of the most
important logistical problems facing both producers and consumers of organic and
conventional fruits and vegetables today:
|
costs and delays related to shipping fresh
produce from where it is grown to where it can be sold; and |
|
|
|
variations in climate that prevents certain
produce from being grown in certain markets. |
Our strategy is to develop a series of urban barns that we
use to grow our fruits and vegetables in a number of urban centers, beginning
with Montreal, Canada. To do this, we plan to lease and retrofit a series of
warehouse-type facilities in high density strategic locations and purchase and
install proprietary growing machines to grow our organic and conventional
produce. We hope that this will provide consumers with a desirable degree of
food security in addition to the other benefits associated with cubic farming,
such as a reduced ecological footprint. As of the date of this annual report, we
have completed our first growing facility at one such location, in Mirabel,
Quebec, a suburb of Montreal, and have begun commercial-scale sales and
operations. We have not yet secured any additional locations at which we are
able to grow fruit and vegetables in commercially viable quantities.
4
Our mission is to become the first company to create brand-name
awareness for its produce by providing locally-grown fruits and vegetables to
local retailers and businesses at prices that compete with those at which
conventional and organic produce is typically offered. We believe that this will
permit consumers to substitute fresh, healthy, high-quality local equivalents
into their diet in place of fruits and vegetables grown in distant regions at a
similar or more competitive price point.
Currently, geography and logistics make local grown organic
fruit and vegetables specialty or seasonal produce in areas with harsh winters
such as the northeast and mid-west of the USA and all of Canada. The most common
method of tapping into this market is with greenhouses. Unfortunately, this is a
solution with high fixed costs and high variable costs. Due to the harsh winters
and the encroachment on prime agricultural land, there is no realistic way for
greenhouse growers to rapidly scale their operations to service all major urban
markets. The main suppliers in the sector are large commercial enterprises in
South California, or foreign enterprises in Mexico, Chile and Holland. According
to figures generated by our management, shipping currently constitutes about 70%
of the produce supply chain cost. As such, we believe that an opportunity exists
for us to do two things: lower shipping costs without raising the fixed costs,
and differentiate our product from other available produce.
Technology
The technology that we use to cultivate our fruits and
vegetables consists of a proprietary cubic farming apparatus used to grow
produce indoors which takes up a limited amount of space and subjects plants to
a variety of light spectrums over the course of their growing cycles. In
addition to the land-use benefits it provides, we believe that the growing
apparatus makes efficient use of light, energy, water, temperature, production
cycle, transportation and labor, and is capable of producing safe, healthy,
fresh, high-quality produce in controlled indoor environments. Our strategy of
using this technology strategically located in densely populated urban areas
will allow us to reduce the cost of production, water usage, carbon emissions
and herbicide and pesticide use as compared to traditional methods of farming.
Our technology was developed by us and although the machine is
not yet protected by patent, we have filed Patent Corporation Treaty (which
covers approximately 145 member countries), USA and Kingdom of Saudi Arabia
patent applications to protect this proprietary technology. Currently, we rely
on business secrets and know-how to protect our proprietary technology.
Our management believes that each of our growing machines,
which occupy approximately 150 square feet of floor space each (and can be
stacked on top of each other), will be able to yield as much output as 1500
square feet of greenhouse space, and allow a single greenhouse to produce up to
five times the crop yield that it would using standard greenhouse cultivation
practices.
Products
We have decided to initially offer the following fruits and
vegetables for sale, as we have found that they are relatively easy to propagate
and can be grown to maturity in short production cycles: multiple varieties of
lettuce, spinach, basil, various herbs, and strawberries. We identified these
items due to their high demand and profit potential, but this list is by no
means exhaustive.
We have identified major urban centers in the United States and
Canada, where the population is dense and many people live in areas serviced by
a relatively small number of distant large food growers situated in South
California, Mexico and Chile. We envision a network of urban barns delivering
hundreds of tons of food daily to retailers servicing these urban centers, and
millions of people gaining access to our locally grown, fresh, high-quality
produce instead of being shipped from Mexico, California or Chile. We believe
that this will effectively increase quality of the produce as well as reduce
shipping times and the costs of bringing fresh produce to market.
Market
Currently, geography and logistics make produce farming a
specialty or seasonal enterprise. We are dedicated to changing this perception
by growing fresh, safe, healthy organic and conventional fruits and vegetables
in urban facilities regardless of climate on a year-round basis in a more
environmentally-sustainable manner than traditional or greenhouse cultivation
would permit. Through the use of our specialized growing machines and the
selection of strategic locations for our urban barns, we believe that we can
both service and expand the ever-increasing market for locally-grown produce in
a cost-effective and competitive manner.
The value of the 2008 US vegetable crop was estimated at $10.4
billion, up 4 percent from 2007. In terms of production, the three largest crops
were onions, head lettuce and watermelons, which combined to account for 37% of
the total production. Tomatoes, head lettuce and onions claimed the highest
values, accounting for 32% of the total value when combined. California
continued to be the leader in fresh vegetable and melon production, accounting for 49% of annual
fresh vegetable and melon output. (Vegetables Annual Summary, NASS, USDA, 2009.)
5
There are strong indications that consumers are now, more than
ever, interested in purchasing safe, locally-grown produce that is subject to a
standard of quality such as organic certification. The recent growth of farmers
markets and the expansion of supermarket chains such as Whole Foods Market and
Trader Joes demonstrates that demand for such produce exists, as does public
concern over herbicide and pesticide use, country-of-origin labeling and
greenhouse gas emissions associated with shipping produce hundreds, and even
thousands, of miles from farm to retail outlet. The eat locally movement has
also regularly been touted in the mainstream U.S. media as a method of reducing
ones carbon footprint.
Organic products account for less than 2% of Canadas food
supply and occupy less than 1% of its dedicated cropland. Nevertheless, over the
past decade the market for such products has grown by approximately 20% and it
is projected to continue to grow for the foreseeable future.
We plan to capitalize on the opportunity presented by this
shift in consumer attitudes by offering them fresh; locally-grown organic and
conventional produce alternatives that are competitively-priced and capable of
instilling a measure of brand recognition. To achieve the latter, we plan to
employ shop-floor selling techniques (i.e. taste-before-you-buy campaigns) at
the retail level, engage in targeted print advertising and leverage existing
social networks on the Internet. We also plan to target additional markets that
require bulk produce on a continuous basis, such as produce processors, hotels
and restaurants, and we believe that our ability to provide a constant supply of
select high volume fruits and vegetables regardless of the local climate will
differentiate our produce from that of our competitors.
Distribution Methods
We plan to become a leading supplier of produce to large retail
chains by differentiating our fruits and vegetables from other available produce
and substantially lowering the shipping costs required to transport most produce
from its point of origin to point of sale. To accomplish this, we plan to
acquire and retrofit a network of buildings in high density urban locations and
equip them with proprietary growing machines to cultivate a variety of fruits
and vegetables. The technology will allow us to grow produce with high yields
using a fast growing cycle in any location regardless of the local climate.
Once we have grown our produce, we plan to leverage the
infrastructure established by Robyn Jackson, one of our directors, to distribute
our fruits and vegetables on a cost-effective basis. We anticipate entering into
agreements with a variety of regional distributors in the locations in which we
plan to operate once we have established the validity of our business model. Mr.
Jackson will be in charge of establishing logistics solutions for the
distribution of our produce as well as developing relationships with local
distributors and major retailers.
Locations
We recently established our first production urban barn in
Mirabel, Quebec, Canada, a suburb of Montreal. We targeted Montreal based on the
presence of a large potential customer base of approximately 4 million people,
and a thriving tourism industry whose hotels and restaurants require a
year-round supply of fresh, high-quality produce.
Next, we anticipate investigating other potential locations in
corridor that runs between Quebec City and Windsor, Ontario, which is home to
18.5 million urban residents. Our first commercial facility near Montreal as
well as many of the potential locations between that city and Windsor, Ontario
offer strategic locations for expansion into the United States.
Competition
We compete with a number of unrelated seasonal operators of
greenhouses spread across our target market areas. This common method of growing
high-quality produce is limited in terms of cost and scale. Operators must incur
both high fixed and variable costs to build and maintain specialized structures
for this purpose, which makes it difficult for them to scale their operations to
optimal size in multiple locations.
We plan to establish a network of controlled indoor
environments in multiple urban locations for the purpose of growing fresh fruit
and vegetables and supplying this produce to major food retailers on a
year-round basis. Since we plan to acquire and retrofit existing vacant
buildings and use proprietary technology to grow our fruits and vegetables, we
will not have to incur a significant capital outlay to establish our urban
barns, and the only limitations we will face in terms of scale will be related
to the cost of acquiring and renovating similar facilities in close proximity to
multiple urban centers.
6
We also face competition from producers of organic fruits and
vegetables that are grown and shipped from such locations as California, Mexico
and Chile. In many cases, these producers are able to grow produce year-round,
but they face uncertainty related to shipping costs and delays and variations in
climate, as well as environmental risks related to runoff exposure and the
presence of airborne agents from surrounding farms.
Intellectual Property
We own the copyright of our logo and all of the contents of our
website, www.urbanbarnsfoods.com, and on October 9, 2014 we received an approval
notice from the Canadian Intellectual Property Office in respect of our
trademark. We do not currently own any other intellectual property rights;
however, we have filed for patent protection for our growing technology and
growing methods in Canada, USA and internationally. The technology and growing
methods that we use to cultivate our fruits and vegetables consists of a
proprietary cubic farming apparatus used to grow produce indoors which takes up
a limited amount of space and subjects plants to a variety of light spectrums
over the course of their growing cycles. In addition to the land-use benefits it
provides, we believe that the growing apparatus makes efficient use of light,
energy, water, temperature, production cycle, transportation and labor, and is
capable of producing safe, healthy, fresh, high-quality produce in controlled
indoor environments.
Research and Development
We have spent $205,795 on research and development activities,
$70,417 researching, developing and designing our technology for our patent
protection filings, and $21,266 on R&D growing machines, lighting and
environmental control systems during the fiscal year ended July 31, 2014.
Reports to Security Holders
We are currently subject to the reporting and other
requirements of the Exchange Act, and we are therefore required to furnish our
shareholders with annual reports containing financial statements audited by our
independent auditors and to make available quarterly reports containing
unaudited financial statements for each of the first three quarters of our
fiscal year.
The public may read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site at www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC.
Government Regulation
We are generally required to obtain the necessary government
licenses, authorizations and labor permits to legally manage our facilities in
the locations in which we operate or plan to operate. Many of our facilities and
products will be subject to various laws and regulations administered by the
United States Department of Agriculture, the Food and Drug Administration, the
Occupational Safety and Health Administration, and other federal, state, local,
and foreign governmental agencies relating to the quality and safety of
products, sanitation, safety and health matters, and environmental control. We
believe that we comply with such laws and regulations in all material respects,
and that continued compliance with such regulations will not have a material
effect upon capital expenditures, earnings, or our competitive position.
While our business activities do not currently violate any
laws, any regulatory changes that impose restrictions or requirements on us or
on our customers could adversely affect us by increasing our operating costs,
which could have a material adverse effect on our results of operations. We do
not currently incur any significant expenses related to compliance with
environmental regulations, and do not believe that this will be a significant
expense once we establish our Urban Barns.
Employees
As of October 28, 2014 we had four employees, all of whom
engage in administrative tasks connected to our first urban barn facility near
Montreal, Quebec, Canada. Our directors and officers provide us with services on
a consulting basis. Once we have entered into definitive agreements to
distribute our produce, we anticipate hiring additional employees to operate our
current facility and engaging one or more consultants to provide marketing
services to us.
7
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 1B. |
Unresolved Staff Comments
|
As a smaller reporting company, we are not required to
provide the information required by this Item.
Our executive office is located at Suite 205 290 Lakeshore
Road, Pointe-Claire, Quebec, Canada, H9S 4L3. Our growing facility is located at
13000 Chemin Belanger, Mirabel, Quebec, Canada J7J 2N8.
Item 3. |
Legal Proceedings |
We are not aware of any pending or threatened legal proceedings
which involve us or any of our products or services.
Item 4. |
Mine Safety Disclosures
|
Not Applicable.
8
PART II
Item 5. |
Market for Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
|
Market Information
Our common stock is not traded on any exchange. Our common
stock is quoted on OTCQB under the trading symbol URBF. We cannot assure you
that there will be a market in the future for our common stock.
OTCQB securities are not listed and traded on the floor of an
organized national or regional stock exchange. Instead, OTCQB securities
transactions are conducted through a telephone and computer network connecting
dealers. OTCQB issuers are traditionally smaller companies that do not meet the
financial and other listing requirements of a national or regional stock
exchange.
The following table reflects the high and low bid information
for our common stock and reflects inter-dealer prices, without retail mark-up,
markdown or commission, and may not necessarily represent actual transactions.
The high and low bid prices of our common stock for the periods
indicated below are as follows:
FINRA OTC Bulletin Board |
Quarter Ended |
High |
Low |
July 31, 2014 |
$0.055 |
$0.0401 |
April 30, 2014 |
$0.048 |
$0.018 |
January 31, 2014 |
$0.05 |
$0.0151 |
October 31, 2013 |
$0.033 |
$0.01 |
Holders
As of October 28, 2014 there were 100 holders of record of our
common stock.
Dividends
To date, we have not paid dividends on shares of our common
stock and we do not expect to declare or pay dividends on shares of our common
stock in the foreseeable future. The payment of any dividends will depend upon
our future earnings, if any, our financial condition, and other factors deemed
relevant by our Board of Directors.
Equity Compensation Plans
On September 5, 2014 our board of directors approved the
establishment of the 2014 Stock Option Plan which provides for the issuance of
up to a maximum of 10% of our common stock or options to acquire our common
stock to our directors, officers, employees and consultants. As of October 28,
2014, options to purchase 17,500,000 shares had been granted.
Recent Sales of Unregistered Securities
We did not complete any previously unreported sales of
unregistered securities during the year ended July 31, 2014.
Recent Purchases of Equity Securities by us and our
Affiliated Purchases
As of October 28, 2014, we had not repurchased any shares of
our common stock and we do not have any publicly announced repurchase plans or
programs.
Item 6. |
Selected Financial Data
|
As a smaller reporting company, we are not required to
provide the information required by this Item.
1
Item 7. |
Management's Discussion and Analysis of
Financial Condition and Results of Operations
|
We are a development stage company with limited operations and
revenues from our business operations. Our auditors have issued a going concern
opinion. This means that our auditors believe there is substantial doubt that we
can continue as an on-going business for the next 12 months unless we obtain
additional financing to fund our operations. Our only source of cash at this
time is investments by others in our company.
Liquidity and Capital Resources
As of July 31, 2014, we had cash of $75,969 and total assets of
$829,743 compared to cash of $29,617 and total assets of $341,388 as of July 31,
2013. The increase in cash is attributed to the fact that we had additional
invested equity capital funds during the year. Our non-cash assets increased
during the year due to additional purchases of property and equipment.
Our working capital deficit at July 31, 2014 was $43,124
compared with a working capital deficit of $588,107 at July 31, 2013. The
increase in the working capital deficit was due to the fact that we financed our
operating costs with the issuance of convertible debentures and shares of our
common stock.
As at July 31, 2014, our accumulated deficit was $4,136,312. We
are dependent on funds raised through equity or debt financing, investing
activities, and revenue generated through the sales of our produce to fund our
operations.
We anticipate that we will meet our ongoing cash requirements
by retaining income as well as through equity or debt financing. We plan to
cooperate with various individuals and institutions to acquire the financing
required to grow and sell our produce and anticipate this will continue until we
accrue sufficient capital reserves to finance production independently.
Cashflow from Operating Activities
During the year ended July 31, 2014, we used cash of $1,043,982
for operating activities compared with use of $444,430 during the year ended
July 31, 2013. The increase in cash used for operating activities was
attributable to the fact that we had more operating activity as we opened our
first commercial growing facility during the current year and raised more
proceeds from equity financing compared to the prior year.
Cashflow from Investing Activities
During the year ended July 31, 2014, we used cash of $463,469
for investing activities compared with the use of $121,704 during the year ended
July 31, 2013. The increase in cash used for investing activities was due to the
purchase of property and equipment for our first commercial growing facility.
Cashflow from Financing Activities
During the year ended July 31, 2014, we received cash of
$1,553,803 from financing activities compared with the receipt of $571,700 from
financing activities during the year ended July 31, 2013. The increase in cash
provided from financing activities was due to $1,500,000 in proceeds from the
issuance of our common stock and $100,000 from share subscriptions received,
less finders fees paid of $80,000, and $32,500 from the issuance of a
convertible debenture that was fully converted in April of the current year.
Plan of Operation
We are an urban produce production company that aims to be the
supplier of choice of fresh, locally grown, high-quality organic and
conventional fruits and vegetables located close to urban consumers.
We estimate that our expenses over the next 12 months will be
approximately $3,079,613 as summarized in the table below. These estimates may
change significantly depending on the nature of our future business activities
and our ability to raise capital from investors or other sources.
2
|
Potential |
Estimated |
Description |
Completion Date |
Expenses |
|
|
($) |
Cost of Sales |
12 months |
674,239 |
Sales &
Marketing |
12
months |
248,212 |
General & Administration |
12 months |
857,162 |
Additional Growing
Machines & Building Improvements |
12
months |
1,300,000 |
Total |
|
3,079,613 |
Our general and administrative expenses for the year will
consist of professional fees, office maintenance, communication expenses
(cellular, internet, fax and telephone), bank charges, courier and postage
costs, office supply costs and fees related to our website. We plan to build 7
new large capacity growing machines for installation into currently available
space within our Mirabel, Quebec growing facility.
Based on our planned expenditures, we require additional funds
of $3,000,000 to proceed with our business plan over the next 12 months. If we
are not able to obtain additional financing on a timely basis, we will be unable
to conduct our operations as planned, and we will not be able to meet our
obligations as they become due. In such event, we will be forced to delay our
growing capacity expansion, scale down or perhaps even cease our operations.
Results of Operations for the Years Ended July 31, 2014
and 2013
The following summary of our results of operations should be
read in conjunction with our audited consolidated financial statements for the
years ended July 31, 2014 and 2013.
Our operating results for the years ended July 31, 2014 and
2013 are summarized as follows:
|
|
Year Ended
|
|
|
|
July 31
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Revenue |
$ |
992 |
|
$ |
5,691 |
|
|
|
|
|
|
|
|
Depreciation |
|
55,884 |
|
$ |
24,098 |
|
Foreign exchange (gain) loss |
|
11,659 |
|
$ |
(2,674 |
) |
General and administrative
|
|
1,118,153 |
|
$ |
1,051,677
|
|
Professional fees |
|
150,207 |
|
$ |
165,035 |
|
Research and development |
|
205,795 |
|
$ |
43,720 |
|
Revenues
During the year ended July 31, 2014, we earned revenues of $992
from the sale of produce compared to revenues of $5,691 during the year ended
July 31, 2013.
Expenses
For the year ended July 31, 2014, we had total operating
expenses of $1,603,196 compared to total operating expenses of $1,281,856 for
the year ended July 31, 2013. The increase in operating expenses was
attributable to the fact that we engaged in more operating activity due to the
commencement of production at our first commercial growing facility during the
year, which was supported by the fact that we received more proceeds from
financing activities.
Net Loss
Our net loss for the year ended July 31, 2014 was $1,911,274
compared to $1,698,739 for the year ended July 31, 2013. In addition to
operating expenses during the year, we also incurred accretion expense of
$76,781 relating to the beneficial conversion feature of convertible debentures,
$29,115 of interest expense for interest incurred on the convertible debentures,
and a loss of $138,113 for the change in the fair value of the derivative liabilities relating
to the floating conversion price of our convertible debentures.
3
During the fiscal year ended July 31, 2014, we incurred net a
loss of $1,911,274. Our net loss per share was $0.01 for the year ended July 31,
2014 and $0.01 for the year ended July 31, 2013.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in our financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our stockholders.
Inflation
The amounts presented in the financial statements do not
provide for the effect of inflation on our operations or financial position. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation adjustments.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes
have been prepared in conformity with accounting principles generally accepted
in the United States of America for financial statements. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, and expenses. These estimates
and assumptions are affected by managements application of accounting policies.
We believe that understanding the basis and nature of the estimates and
assumptions involved with the following aspects of our financial statements is
critical to an understanding of our financial position.
Use of Estimates
The preparation of our consolidated financial statements in
conformity with generally accepted accounting principles in the United States
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 revenues and expenses during the reporting period. We
regularly evaluate estimates and assumptions related to the useful life and
recoverability of long-lived assets, fair value of convertible debt and
share-based payments, and deferred income tax valuation allowances. We base our
estimates and assumptions on current facts, historical experience and various
other factors that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities and the accrual of costs and expenses that are not
readily apparent from other sources. The actual results experienced by us may
differ materially and adversely from our estimates. To the extent there are
material differences between the estimates and the actual results, future
results of operations will be affected.
Stock-Based Compensation
We record stock-based compensation using the fair value method
in accordance with ASC 718, Compensation Stock Compensation. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable.
We use the Black-Scholes option pricing model to calculate the
fair value of stock-based awards. This model is affected by our stock price as
well as assumptions regarding a number of subjective variables. These subjective
variables include, but are not limited to our expected stock price volatility
over the term of the awards, and actual and projected employee stock option
exercise behaviors. The value of the portion of the award that is ultimately
expected to vest is recognized as an expense in the consolidated statement of
operations over the requisite service period.
4
Foreign Currency Translation
Our functional and reporting currency is the U.S. dollar.
Monetary assets and liabilities of integrated operations and other monetary
assets and liabilities denominated in foreign currencies are translated to U.S.
dollars at exchange rates in effect at the balance sheet date. Non-monetary
assets and liabilities are translated at historical rates. Revenues and expenses
are translated at average rates for the period, except for amortization, which
is translated on the same basis as the related asset. The resulting exchange
gains or losses are recognized in income.
Inventory
Inventory is comprised of seeds for growing agricultural
products and is recorded at the lower of cost or net realizable value on a
first-in first-out basis. We establish inventory reserves for estimated obsolete
or unsaleable inventory equal to the difference between the cost of inventory
and the estimated realizable value based upon assumptions about future and
market conditions.
Item 7A |
Qualitative and Qualitative Disclosures
about Market Risk |
As a smaller reporting company, we are not required to
provide the information required by this Item.
5
Item 8. |
Financial Statements and Supplementary
Data |
URBAN BARNS FOODS INC.
Consolidated Financial Statements
July 31, 2014 and 2013
(Expressed in U.S. dollars)
Financial Statement Index
6
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Urban Barns
Foods Inc.
We have audited the accompanying consolidated balance sheets of
Urban Barns Foods Inc. as of July 31, 2014 and 2013, and the related
consolidated statements of operations, stockholders equity (deficit), 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 audits.
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.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. An audit includes 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 internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as of July 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.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has a working
capital deficit and has incurred operating losses since inception. These factors
raise substantial doubt about the Companys ability to continue as a going
concern. Managements plans in regard to these matters are also discussed in
Note 1 to the consolidated financial statements. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Saturna Group Chartered Accountants LLP
Vancouver, Canada
October 28, 2014
F-1
URBAN BARNS FOODS INC. |
Consolidated Balance Sheets |
(expressed in U.S. dollars) |
|
|
July 31, |
|
|
July 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
75,969 |
|
|
29,617 |
|
Accounts receivable |
|
1,318 |
|
|
1,143 |
|
Amounts
receivable |
|
57,976 |
|
|
8,615 |
|
Inventory |
|
13,444 |
|
|
1,049 |
|
Prepaid expenses and deposits |
|
52,469 |
|
|
15,621 |
|
Total current assets |
|
201,176 |
|
|
56,045 |
|
Deferred financing costs |
|
|
|
|
2,863 |
|
Property and equipment (Note 3) |
|
523,286 |
|
|
247,616 |
|
Intangible assets (Note 4) |
|
105,281 |
|
|
34,864 |
|
Total assets |
|
829,743 |
|
|
341,388 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIT) |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable and accrued
liabilities (Note 7) |
|
170,555 |
|
|
216,297 |
|
Convertible debentures,
net of unamortized discount of $nil (Note 5) |
|
|
|
|
105,062 |
|
Derivative liabilities (Note 6) |
|
|
|
|
8,286 |
|
Due to related parties (Note 7) |
|
73,745 |
|
|
314,507 |
|
Total liabilities |
|
244,300 |
|
|
644,152 |
|
Nature of operations and
continuance of business (Note 1) |
|
|
|
|
|
|
Commitments (Note 11) |
|
|
|
|
|
|
Subsequent events (Note 13)
|
|
|
|
|
|
|
Stockholders equity (deficit) |
|
|
|
|
|
|
Preferred
stock Authorized: 100,000,000 preferred shares,
par value $0.001 Issued and outstanding: nil
shares |
|
|
|
|
|
|
Common stock, Class
A Authorized: 500,000,000 common shares, par
value $0.001 Issued and outstanding:
270,746,982 and 153,546,367 shares, respectively |
|
270,747 |
|
|
153,546 |
|
Common
stock, Class B Authorized: 25,000,000 common
shares, value of $0.001 Issued and outstanding:
nil |
|
|
|
|
|
|
Additional paid-in capital |
|
4,370,807 |
|
|
2,024,755 |
|
Common stock
issuable (Note 8) |
|
117,553 |
|
|
|
|
Deferred compensation (Note 7)
|
|
(37,352 |
) |
|
(256,027 |
) |
Deficit |
|
(4,136,312 |
) |
|
(2,225,038 |
) |
Total stockholders equity (deficit) |
|
585,443 |
|
|
(302,764 |
) |
Total liabilities and stockholders equity (deficit) |
|
829,743 |
|
|
341,388 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-2
URBAN BARNS FOODS INC. |
Consolidated Statements of Operations |
(expressed in U.S. dollars) |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
Revenue |
|
992 |
|
|
5,691 |
|
Cost
of sales |
|
34 |
|
|
1,132 |
|
|
|
|
|
|
|
|
Gross margin |
|
958 |
|
|
4,559 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
Depreciation |
|
55,884 |
|
|
24,098 |
|
Foreign exchange loss (gain) |
|
11,659 |
|
|
(2,674 |
) |
General and
administrative (Note 7) |
|
1,118,153 |
|
|
1,051,677 |
|
Professional fees (Note 7) |
|
150,207 |
|
|
165,035 |
|
Research and
development |
|
205,795 |
|
|
43,720 |
|
Write-down of property and equipment |
|
61,498 |
|
|
|
|
Total operating expenses |
|
1,603,196 |
|
|
1,281,856 |
|
Loss
from operations |
|
(1,602,238 |
) |
|
(1,277,297 |
) |
Other expenses |
|
|
|
|
|
|
Accretion of discounts on
convertible debentures (Note 5) |
|
(76,781 |
) |
|
(132,798 |
) |
Amortization of
deferred financing costs |
|
(2,863 |
) |
|
(5,075 |
) |
Interest expense |
|
(29,115 |
) |
|
(7,715 |
) |
Loss on change
in fair value of derivative liabilities (Note 6) |
|
(138,113 |
) |
|
(273,897 |
) |
Loss on settlement of accounts payable (Note 8)
|
|
(62,164 |
) |
|
(1,957 |
) |
Total other expenses |
|
(309,036 |
) |
|
(421,442 |
) |
Net
loss |
|
(1,911,274 |
) |
|
(1,698,739 |
) |
|
|
|
|
|
|
|
Net
loss per share, basic and diluted |
|
(0.01 |
) |
|
(0.01 |
) |
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
223,303,185 |
|
|
135,472,634 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-3
URBAN BARNS FOODS INC. |
Consolidated Statements of Stockholders Equity (Deficit)
|
(Expressed in U.S. dollars) |
|
|
Common Stock
|
|
|
Additional |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
Paid-In |
|
|
Stock |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Issuable |
|
|
Compensation |
|
|
Deficit |
|
|
Total |
|
|
|
# |
|
|
$ |
|
|
# |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance, July 31, 2012 |
|
58,823,618 |
|
|
58,824 |
|
|
|
|
|
|
|
|
258,394 |
|
|
4,200 |
|
|
|
|
|
(526,299 |
) |
|
(204,881 |
) |
Shares issued for conversion of debenture and
accrued interest |
|
28,877,518 |
|
|
28,877 |
|
|
|
|
|
|
|
|
100,161 |
|
|
|
|
|
|
|
|
|
|
|
129,038 |
|
Shares issued for cash |
|
31,475,000 |
|
|
31,475 |
|
|
|
|
|
|
|
|
452,275 |
|
|
|
|
|
|
|
|
|
|
|
483,750 |
|
Shares issued for consulting services |
|
33,971,815 |
|
|
33,972 |
|
|
|
|
|
|
|
|
405,631 |
|
|
(4,200 |
) |
|
(256,027 |
) |
|
|
|
|
179,376 |
|
Shares issued to settle debt
|
|
398,416 |
|
|
398 |
|
|
|
|
|
|
|
|
22,223 |
|
|
|
|
|
|
|
|
|
|
|
22,621 |
|
Share issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,500 |
) |
|
|
|
|
|
|
|
|
|
|
(16,500 |
) |
Derivative liabilities
relating to debentures converted to shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
404,360 |
|
|
|
|
|
|
|
|
|
|
|
404,360 |
|
Fair value of stock options granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
398,211 |
|
|
|
|
|
|
|
|
|
|
|
398,211 |
|
Net loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,698,739 |
) |
|
(1,698,739 |
) |
Balance, July 31, 2013 |
|
153,546,367 |
|
|
153,546 |
|
|
|
|
|
|
|
|
2,024,755 |
|
|
|
|
|
(256,027 |
) |
|
(2,225,038 |
) |
|
(302,764 |
) |
Shares issued for cash |
|
88,935,089 |
|
|
88,935 |
|
|
|
|
|
|
|
|
1,411,065 |
|
|
|
|
|
|
|
|
|
|
|
1,500,000 |
|
Share issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
(140,811 |
) |
|
|
|
|
|
|
|
|
|
|
(140,811 |
) |
Shares issued for conversion
of debentures and accrued interest |
|
10,841,414 |
|
|
10,842 |
|
|
|
|
|
|
|
|
126,958 |
|
|
17,553 |
|
|
|
|
|
|
|
|
155,353 |
|
Shares issued for settlement of debt |
|
17,424,112 |
|
|
17,424 |
|
|
|
|
|
|
|
|
461,738 |
|
|
|
|
|
|
|
|
|
|
|
479,162 |
|
Share subscriptions received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
100,000 |
|
Derivative liabilities relating to debentures
converted to shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
214,291 |
|
|
|
|
|
|
|
|
|
|
|
214,291 |
|
Fair value of stock options
granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
212,000 |
|
|
|
|
|
|
|
|
|
|
|
212,000 |
|
Fair value of brokers warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
60,811 |
|
|
|
|
|
|
|
|
|
|
|
60,811 |
|
Deferred compensation costs
charged to operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
218,675 |
|
|
|
|
|
218,675 |
|
Net
loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,911,274 |
) |
|
(1,911,274 |
) |
Balance, July 31, 2014 |
|
270,746,982 |
|
|
270,747 |
|
|
|
|
|
|
|
|
4,370,807 |
|
|
117,553 |
|
|
(37,352 |
) |
|
(4,136,312 |
) |
|
585,443 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-4
URBAN BARNS FOODS INC. |
Consolidated Statements of Cash Flows |
(expressed in U.S. dollars) |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
$ |
|
Operating Activities |
|
|
|
|
|
|
Net loss for the year |
|
(1,911,274 |
) |
|
(1,698,739 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: operating activities: |
|
|
|
|
|
|
Accretion of discounts on
convertible debentures |
|
76,781 |
|
|
132,798 |
|
Amortization of
deferred financing costs |
|
2,863 |
|
|
5,075 |
|
Depreciation |
|
55,884 |
|
|
24,098 |
|
Loss on change
in fair value of derivative liabilities |
|
138,113 |
|
|
273,897 |
|
Loss on settlement of accounts
payable |
|
62,164 |
|
|
1,957 |
|
Shares issued
for consulting fees |
|
218,675 |
|
|
179,376 |
|
Stock-based compensation |
|
212,000 |
|
|
398,211 |
|
Write-down of
property and equipment |
|
61,498 |
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable |
|
(175 |
)
|
|
(1,143 |
)
|
Amounts receivable |
|
(49,361 |
) |
|
(8,615 |
) |
Inventory |
|
(12,395 |
)
|
|
(1,049 |
)
|
Prepaid expenses and deposits
|
|
(36,848 |
) |
|
(3,413 |
) |
Accounts payable
and accrued liabilities |
|
271,074 |
|
|
27,920 |
|
Due to related parties |
|
(132,981 |
) |
|
225,197 |
|
Net cash used in operating activities |
|
(1,043,982 |
) |
|
(444,430 |
) |
Investing Activities |
|
|
|
|
|
|
Purchase of
intangible assets |
|
(70,417 |
)
|
|
|
|
Purchase of property and equipment |
|
(393,052 |
) |
|
(121,704 |
) |
Net cash used in investing activities |
|
(463,469 |
) |
|
(121,704 |
) |
Financing Activities |
|
|
|
|
|
|
Proceeds from
issuance of convertible debentures |
|
32,500 |
|
|
96,500 |
|
Proceeds from issuance of common
shares |
|
1,600,000 |
|
|
483,750 |
|
Proceeds from
related parties |
|
48,424 |
|
|
|
|
Repayment to related parties |
|
(47,121 |
) |
|
|
|
Share issuance costs |
|
(80,000 |
) |
|
(8,550 |
) |
Net
cash provided by financing activities |
|
1,553,803 |
|
|
571,700 |
|
Increase in cash |
|
46,352 |
|
|
5,566 |
|
Cash, beginning of year |
|
29,617 |
|
|
24,051 |
|
Cash, end of year |
|
75,969 |
|
|
29,617 |
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
Fair value of
broker warrants issued |
|
60,811 |
|
|
|
|
Shares issued for settlement of
debt |
|
479,162 |
|
|
|
|
Shares issued
for conversion of convertible debentures and accrued interest |
|
155,353 |
|
|
129,038 |
|
Derivative liabilities
recorded as additional paid-in capital upon conversion of debentures |
|
214,291 |
|
|
404,306 |
|
Shares issued for deferred compensation |
|
|
|
|
256,027 |
|
Supplemental disclosures: |
|
|
|
|
|
|
Interest paid
|
|
|
|
|
|
|
Income tax paid |
|
|
|
|
|
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-5
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
1. |
Nature of Operations and Continuance of
Business |
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Urban Barns Foods Inc. (the Company) was incorporated
under the laws of the State of Nevada on May 21, 2007 as HL Ventures Inc.
The Company is an urban produce production company that aims to be the
supplier of choice for fresh and high-quality organic and conventional
fruits and vegetables for urban consumers. |
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These consolidated financial statements have been
prepared on the going concern basis, which assumes that the Company will
be able to realize its assets and discharge its liabilities in the normal
course of business. As at July 31, 2014, the Company has not generated
significant revenues, has a working capital deficit of $43,124, and has an
accumulated deficit of $4,136,312. The continued operations of the Company
are dependent on its ability to generate future cash flows from operations
or obtain additional financing. Management is obtaining working capital
through debt or equity financing until such time that the Companys
operations generate positive operating cash flow. These factors raise
substantial doubt about the Companys ability to continue as a going
concern. These consolidated financial statements do not include any
adjustments to the recorded assets or liabilities that might be necessary
should the Company be unable to continue as a going
concern. |
2. |
Significant Accounting Policies |
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(a) |
Basis of Presentation and Principles of
Consolidation |
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The consolidated financial statements and the related
notes of the Company are prepared in accordance with generally accepted
accounting principles in the United States and are expressed in United
States dollars. The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries, Urban Barns Foods
(Alberta) Inc., and Non-Industrial Manufacture Inc. All inter-company
accounts and transactions have been eliminated. The Companys fiscal
year-end is July 31. |
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(b) |
Use of Estimates |
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The preparation of these consolidated financial
statements in conformity with generally accepted accounting principles in
the United States 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 revenues and expenses
during the reporting period. The Company regularly evaluates estimates and
assumptions related to the collectability of accounts and amounts
receivable, valuation of inventory, useful life and recoverability of
long-lived assets, valuation of convertible debentures, assumptions used
to determine the fair value of stock-based compensation and derivative
liabilities, and deferred income tax valuation allowances. The Company
bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by the Company may differ
materially and adversely from the Companys estimates. To the extent there
are material differences between the estimates and the actual results,
future results of operations will be affected. |
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(c) |
Cash and Cash Equivalents |
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The Company considers all highly liquid instruments with
a maturity of three months or less at the time of issuance to be cash
equivalents. |
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(d) |
Accounts Receivable |
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Accounts receivable represents invoiced amounts to
customers for the sale of agricultural products. Amounts are presented net
of the allowance for doubtful accounts, which represents the Companys
best estimate of the amount of probable credit losses in the existing
accounts receivable balance. The Company determines allowance for doubtful
accounts based upon historical experience and current economic conditions.
The Company reviews the adequacy of its allowance for doubtful accounts on
a regular basis. As of July 31, 2014 and 2013, the Company had no
allowances for doubtful accounts. |
F-6
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
2. |
Significant Accounting Policies
(continued) |
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(e) |
Inventory |
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Inventory is comprised of seeds for growing agricultural
products and packaging materials, and is recorded at the lower of cost or
net realizable value on a first-in first-out basis. The Company
establishes inventory reserves for estimated obsolete or unsaleable
inventory equal to the difference between the cost of inventory and the
estimated realizable value based upon assumptions about future and market
conditions. |
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(f) |
Property and Equipment |
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Property and equipment consists of production equipment
and is stated at cost and amortized straight- line over five
years. |
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(g) |
Intangible Assets |
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Intangible assets consist of patent development costs.
Intangible assets acquired are initially recognized and measured at cost
and amortized over its expected useful life once the patents are in use.
Impairment tests are conducted annually or more frequently if events or
changes in circumstances indicate that the asset may be impaired. The
impairment test compares the carrying amount of the intangible asset with
its fair value, and an impairment loss is recognized in income for the
excess, if any. The amortization methods and estimated useful lives of
intangible assets are reviewed annually. |
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(h) |
Long-Lived Assets |
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In accordance with ASC 360, Property, Plant and
Equipment, the Company tests long-lived assets or asset groups for
recoverability when events or changes in circumstances indicate that their
carrying amount may not be recoverable. Circumstances which could trigger
a review include, but are not limited to: significant decreases in the
market price of the asset; significant adverse changes in the business
climate or legal factors; accumulation of costs significantly in excess of
the amount originally expected for the acquisition or construction of the
asset; current period cash flow or operating losses combined with a
history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely
than not be sold or disposed significantly before the end of its estimated
useful life. Recoverability is assessed based on the carrying amount of
the asset and its fair value which is generally determined based on the
sum of the undiscounted cash flows expected to result from the use and the
eventual disposal of the asset, as well as specific appraisal in certain
instances. An impairment loss is recognized when the carrying amount is
not recoverable and exceeds fair value. |
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(i) |
Revenue Recognition |
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The Company derives revenue from the sale of agricultural
products. In accordance with ASC 605, Revenue Recognition, revenue
is recognized when persuasive evidence of an arrangement exists, delivery
has occurred, the amount is fixed and determinable, and collectability is
reasonably assured. |
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(j) |
Comprehensive Loss |
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ASC 220, Comprehensive Income, establishes
standards for the reporting and display of comprehensive loss and its
components in the financial statements. As at July 31, 2014 and 2013, the
Company had no items that affected comprehensive loss. |
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(k) |
Foreign Currency Translation |
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The Companys functional and reporting currency is the
U.S. dollar. Monetary assets and liabilities of integrated operations and
other monetary assets and liabilities denominated in foreign currencies
are translated to U.S. dollars at exchange rates in effect at the balance
sheet date. Non-monetary assets and liabilities are translated at
historical rates. Revenues and expenses are translated at average rates
for the period, except for amortization, which is translated on the same
basis as the related asset. The resulting exchange gains or losses are
recognized in income. |
F-7
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
2. |
Significant Accounting Policies
(continued) |
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(l) |
Income Taxes |
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The Company accounts for income taxes using the asset and
liability method in accordance with ASC 740, Accounting for Income
Taxes. The asset and liability method provides that deferred tax
assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial reporting and
tax bases of assets and liabilities, and for operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using the
currently enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company records a valuation
allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized. |
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As of July 31, 2014 and 2013, the Company did not have
any amounts recorded pertaining to uncertain tax positions. |
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The Company files federal and provincial income tax
returns in Canada and federal, state and local income tax returns in the
U.S., as applicable. The Company may be subject to a reassessment of
federal and provincial income taxes by Canadian tax authorities for a
period of three years from the date of the original notice of assessment
in respect of any particular taxation year. In certain circumstances, the
U.S. federal statute of limitations can reach beyond the standard three
year period. U. S. state statutes of limitations for income tax assessment
vary from state to state. Tax authorities of Canada and U.S. have not
audited any of the Companys, or its wholly-owned subsidiaries income tax
returns for the years ended July 31, 2014 and 2013. |
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The Company recognizes interest and penalties related to
uncertain tax positions in tax expense. During the years ended July 31,
2014 and 2013, there were no charges for interest or penalties. |
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(m) |
Loss Per Share |
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The Company computes net loss per share in accordance
with ASC 260, Earnings Per Share, which requires presentation of
both basic and diluted earnings per share (EPS) on the face of the
income statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average
number of shares outstanding (denominator) during the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible preferred stock
using the if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed
to be purchased from the exercise of stock options or warrants. Diluted
EPS excludes all dilutive potential shares if their effect is
anti-dilutive. As at July 31, 2014, the Company had 12,237,027 (2013
16,959,908) potentially dilutive shares outstanding. |
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(n) |
Financial Instruments and Fair Value Measures |
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ASC 820, Fair Value Measurements and Disclosures
requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. ASC 820
establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A
financial instruments categorization within the fair value hierarchy is
based upon the lowest level of input that is significant to the fair value
measurement. ASC 820 prioritizes the inputs into three levels that may be
used to measure fair value: |
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Level 1 |
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Level 1 applies to assets or liabilities for which there
are quoted prices in active markets for identical assets or
liabilities. |
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Level 2 |
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Level 2 applies to assets or liabilities for which there
are inputs other than quoted prices that are observable for the asset or
liability such as quoted prices for similar assets or liabilities in
active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by,
observable market data. |
F-8
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
2. |
Significant Accounting Policies
(continued) |
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(n) |
Financial Instruments and Fair Value Measures
(continued) |
Level 3
Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or
liabilities.
The Companys financial instruments
consist principally of cash, accounts receivable, amounts receivable, accounts
payable and accrued liabilities, convertible debentures, derivative liabilities,
and amounts due to related parties. Pursuant to ASC 820, the fair value of cash
is determined based on Level 1 inputs, which consist of quoted prices in
active markets for identical assets. The recorded values of all other financial
instruments approximate their current fair values because of their nature and
respective maturity dates or durations, with the exception of derivative
liabilities which is a Level 2 input.
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(o) |
Stock-based Compensation |
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The Company records stock-based compensation in
accordance with ASC 718, Compensation Stock Compensation, using
the fair value method. All transactions in which goods or services are the
consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. Equity instruments issued to employees and the cost of the
services received as consideration are measured and recognized based on
the fair value of the equity instruments issued. |
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(p) |
Reclassification |
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Certain financial statement captions have been
reclassified from the prior year to conform to the current year
presentation. |
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(q) |
Recent Accounting Pronouncements |
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In June 2014, the Financial Accounting Standards Board
issued Accounting Standards Update No. 2014-10, which eliminated certain
financial reporting requirements of companies previously identified as
Development Stage Entities (Topic 915). The amendments in this ASU
simplify accounting guidance by removing all incremental financial
reporting requirements for development stage entities. The amendments also
reduce data maintenance and, for those entities subject to audit, audit
costs by eliminating the requirement for development stage entities to
present inception-to-date information in the statements of income, cash
flows, and shareholder equity. Early application of each of the amendments
is permitted for any annual reporting period or interim period for which
the entitys financial statements have not yet been issued (public
business entities) or made available for issuance (other entities). Upon
adoption, entities will no longer present or disclose any information
required by Topic 915. The Company has adopted this standard and will not
report inception to date financial information. |
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The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any
material impact on the consolidated financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a material
impact on its financial position or results of
operations. |
F-9
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
3. |
Property and Equipment |
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July 31, |
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July 31, |
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2014 |
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2013 |
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Accumulated |
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Net Carrying |
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Net Carrying |
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Cost |
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Depreciation |
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Impairment |
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Value |
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Value |
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$ |
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$ |
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$ |
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$ |
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$ |
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Production equipment |
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707,994 |
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123,209 |
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61,498 |
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523,287 |
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247,616 |
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July 31, |
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July 31, |
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2014 |
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2013 |
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Accumulated |
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Net Carrying |
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Net Carrying |
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Cost |
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Depreciation |
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Value |
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Value |
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$ |
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$ |
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$ |
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$ |
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Patent development costs |
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105,281 |
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105,281 |
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34,864 |
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5. |
Convertible Debentures |
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(a) |
On January 4, 2012, the Company entered into a
convertible promissory note agreement for $27,500, less deferred financing
charges of $3,750 and common shares with a fair value of $1,250. Pursuant
to the agreement, the loan is unsecured, bears interest at 8% per annum,
and is due on October 6, 2012. The note is also convertible into common
shares at a conversion price equal to 45% of the average of the three
lowest closing prices for the Companys common shares in the ten trading
days prior to conversion, at the option of the note holder, commencing on
July 2, 2012. |
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In accordance with ASC 470-20, Debt with Conversion and
Other Options, the Company recognized the fair value of the embedded
beneficial conversion feature of $27,500. On July 16, 2012, the Company
issued 1,061,947 common shares pursuant to the conversion of $12,000. On
October 16, 2012, the Company issued 2,804,878 common shares pursuant to
the conversion of $11,500. On November 8, 2012, the Company issued 554,348
common shares pursuant to the conversion of the remaining $4,000 and
accrued interest of $1,100. During the year ended July 31, 2014, the
Company recorded accretion expense of $nil (2013 - $15,298). |
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(b) |
On February 9, 2012, the Company entered into six
convertible promissory note agreements with non- related parties for
$85,000. Pursuant to the agreement, the loans are unsecured, bear interest
at 8% per annum, and are due on November 9, 2012. The loans are
convertible into common shares at a conversion price equal to 45% of the
average of the three lowest closing prices for the Companys common shares
in the ten trading days prior to conversion, at the option of the note
holders, commencing on August 5, 2012. |
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In accordance with ASC 470-20, Debt with Conversion and
Other Options, the Company recognized the fair value of the embedded
beneficial conversion feature of $85,000. On August 28, 2012, the Company
issued 18,826,134 common shares pursuant to the conversion of $85,000.
During the year ended July 31, 2014, the Company recorded accretion
expense of $nil (2013 - $85,000). |
F-10
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
5. |
Convertible Debentures (continued) |
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(c) |
On March 30, 2012, the Company entered into a convertible
promissory note agreement for $32,500, less deferred financing charges of
$5,750. Pursuant to the agreement, the loan is unsecured, bears interest
at 8% per annum, and is due on January 4, 2013. The loan is convertible
into common shares at a conversion price equal to 45% of the average of
the three lowest closing prices for the Companys common shares in the ten
trading days prior to conversion, at the option of the note holder,
commencing on September 26, 2012. |
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In accordance with ASC 470-20, Debt with Conversion and
Other Options, the Company recognized the fair value of the embedded
beneficial conversion feature of $32,500. On October 16, 2012, the Company
issued 6,692,158 common shares pursuant to the conversion of $27,438. On
June 11, 2014, the Company agreed to issue 425,865 common shares pursuant
to the conversion of $5,062 plus accrued interest of $3,601. During the
year ended July 31, 2014, the Company recorded accretion expense of $nil
(2013 - $32,500). As at July 31, 2014, the carrying value of the
convertible note was $nil (2013 - $5,062). |
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(d) |
On June 12, 2013, the Company entered into a convertible
promissory note agreement for $100,000, less deferred financing charges of
$3,500. Pursuant to the agreement, the note is unsecured, bear interest at
8% per annum, and are due on March 14, 2014. The loans are convertible
into common shares at a conversion price equal to 61% of the average of
the three lowest closing prices for the Companys common shares in the
thirty-five trading days prior to conversion, at the option of the note
holder, commencing on December 9, 2013. |
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In accordance with ASC 470-20, Debt with Conversion and
Other Options, the Company recognized the fair value of the embedded
beneficial conversion feature of $44,281. On December 26, 2013, the
Company issued 1,438,849 common shares pursuant to the conversion of
$20,000. On January 6, 2014, the Company issued 2,158,273 common shares
pursuant to the conversion of $30,000. On January 14, 2014, the Company
issued 1,937,984 common shares pursuant to the conversion of $25,000. On
January 23, 2014, the Company issued 2,566,372 common shares pursuant to
the conversion of the remaining principal of $25,000 plus accrued interest
of $4,000. During the year ended July 31, 2014, the Company recorded
accretion expense of $44,281 (2013 - $nil). As at July 31, 2014, the
carrying value of the convertible note was $nil (2013 -
$100,000). |
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(e) |
On September 17, 2013, the Company entered into a
convertible promissory note agreement for $32,500, less deferred financing
charges of $2,500. Pursuant to the agreement, the note is unsecured, bears
interest at 8% per annum, and is due on June 19, 2014. The note is
convertible into common shares at a conversion price equal to 61% of the
average of the three lowest closing prices for the Companys common shares
in the thirty-five trading days prior to conversion, at the option of the
note holder, commencing on March 16, 2014. |
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In accordance with ASC 470-20, Debt with Conversion and
Other Options, the Company recognized the fair value of the embedded
beneficial conversion feature of $32,500. On March 21, 2014, the Company
issued 1,271,186 common shares pursuant to the conversion of $15,000. On
April 2, 2014, the Company issued 1,468,750 common shares pursuant to the
conversion of the remaining principal of $17,500 plus accrued interest of
$1,300. During the year ended July 31, 2014, the Company recorded
accretion expense of $32,500 (2013 - $nil). |
F-11
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
6. |
Derivative Liabilities |
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The conversion options of the convertible notes payable,
as disclosed in Note 5, are required to be recorded as derivatives at
their estimated fair values on each balance sheet date with changes in
fair value reflected in the statements of operations. |
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The fair value of the derivative liabilities for the
March 30, 2012, June 12, 2013, and September 17, 2013 convertible notes
were $44,844, $44,281, and $52,946 on vesting, respectively. The fair
values as at July 31, 2014 and 2013 are as
follows: |
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July 31, |
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July 31, |
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2014 |
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2013 |
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$ |
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$ |
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|
March 2012 convertible debenture |
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8,286 |
|
During the year ended July 31, 2014,
the Company recorded a loss on the change in fair value of the derivative
liabilities of $138,113 (2013 $273,897).
The fair value of the derivative
financial liabilities was determined using the Black-Scholes option pricing
model using the following assumptions:
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Risk-free |
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Expected |
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Expected |
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Expected |
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Interest |
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Dividend |
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Life (in |
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Volatility |
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Rate |
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Yield |
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years) |
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At the issuance date: |
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March 2012 convertible debenture
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178% |
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0.11% |
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0% |
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0.30 |
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June 2013
convertible debenture |
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361% |
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|
0.07% |
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0% |
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|
0.26 |
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September 2013 convertible debenture |
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251% |
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|
0.06% |
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0% |
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|
0.26 |
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7. |
Related Party Transactions |
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(a) |
As at July 31, 2014, the Company owed $61,813 (2013 -
$120,079) to directors and officers of the Company. The amounts owing are
unsecured, non-interest bearing, and due on demand. |
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(b) |
As at July 31, 2014, the Company owed $nil (2013 -
$48,605) to the former President of Company. The amount owing is
unsecured, bears interest at 8% per annum, and due on demand. During the
year ended July 31, 2014, the Company incurred interest expense of $1,755
(2013 - $2,623), which has been recorded in accounts payable and accrued
liabilities. |
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(c) |
As at July 31, 2014, the Company owed $nil (2013 -
$101,649) to a company controlled by the former President of the Company.
The amount owing is unsecured, bears interest at 8% per annum, and due on
demand. During the year ended July 31, 2014, the Company incurred interest
expense of $5,663 (2013 - $6,145), which has been recorded in accounts
payable and accrued liabilities. |
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(d) |
As at July 31, 2014, the Company owed $nil (2013 -
$45,900) to the spouse of the former President of the Company. The amount
owing is unsecured, non-interest bearing, and due on demand. |
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(e) |
As at July 31, 2014, the Company owed $8,259 (2013 was
owed $1,726) to the Vice President of the Company. The amount owing is
unsecured, non-interest bearing, and due on demand. |
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(f) |
As at July 31, 2014, the Company owed $nil (2013 -
$77,255) to a company controlled by a director and officer of the Company,
which has been recorded in accounts payable and accrued liabilities. The
amount owing is unsecured, non-interest bearing, and due on
demand. |
|
|
|
|
(g) |
As at July 31, 2014, the Company had deferred
compensation of $37,352 (2013 - $256,027) incurred to directors and
officers of the Company. |
F-12
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
7. |
Related Party Transactions (continued) |
|
|
|
|
(h) |
During the year ended July 31, 2014, the Company incurred
professional fees of $12,600 (2013 - $22,500) to the spouse of the former
President of the Company. |
|
|
|
|
(i) |
During the year ended July 31, 2014, the Company incurred
consulting fees of $362,389 (2013 - $186,549) to directors and officers of
the Company. |
|
|
|
|
(j) |
As at July 31, 2014, the Company owed $3,673 (2013 -
$nil) to a company controlled by the former President. The amount owing is
unsecured, non-interest bearing, and due on demand. During the year ended
July 31, 2014, the Company incurred rent of $44,081 (2013 - $45,641) to
companies controlled by the former President of the Company. |
|
|
|
|
(k) |
During the year ended July 31, 2014, the Company incurred
finders fees of $nil (2013 - $7,950) to the Chief Financial Officer of
the Company. |
|
|
|
|
(l) |
During the year ended July 31, 2014, the Company incurred
finders fees of $nil (2013 - $7,550) to a company controlled by a
director of the Company. |
|
|
|
|
(m) |
During the year ended July 31, 2014, the Company granted
3,000,000 (2013 15,000,000) stock options with a fair value of $120,000
(2013 - $373,053) to directors and officers of the
Company. |
8. |
Common Stock |
|
|
|
|
Share transactions for the year ended July 31,
2014: |
|
|
|
|
(a) |
On October 21, 2013, the Company issued 67,567,568 shares
of Class A common stock at $0.015 per share for proceeds of $1,000,000.
The Company incurred a finders fee of $80,000 and issued 2,027,027
agents warrants with a fair value of $60,811 in conjunction with the
private placement. Refer to Note 9. |
|
|
|
|
(b) |
On December 26, 2013, the Company issued 1,438,849 shares
of Class A common stock pursuant to the conversion of $20,000 of the
convertible debenture, as described in Note 5(d). |
|
|
|
|
(c) |
On January 6, 2014, the Company issued 2,158,273 shares
of Class A common stock pursuant to the conversion of $30,000 of the
convertible debenture, as described in Note 5(d). |
|
|
|
|
(d) |
On January 14, 2014, the Company issued 1,937,984 shares
of Class A common stock pursuant to the conversion of $25,000 of the
convertible debenture, as described in Note 5(d). |
|
|
|
|
(e) |
On January 23, 2014, the Company issued 2,566,372 shares
of Class A common stock pursuant to the conversion of $25,000 of the
convertible debenture and $4,000 of accrued interest, as described in Note
5(d). |
|
|
|
|
(f) |
On March 21, 2014, the Company issued 1,271,186 shares of
Class A common stock pursuant to the conversion of $15,000 of the
convertible debenture, as described in Note 5(e). |
|
|
|
|
(g) |
On April 2, 2014, the Company issued 1,468,750 shares of
Class A common stock pursuant to the conversion of $17,500 of the
convertible debenture and $1,300 of accrued interest, as described in Note
5(e). |
|
|
|
|
(h) |
On April 8, 2014, the Company issued 21,367,521 shares of
Class A common stock at $0.023 per share for proceeds of
$500,000. |
|
|
|
|
(i) |
On April 11, 2014, the Company issued 17,424,112 shares
of Class A common stock with a fair value of $479,162 to settle amounts
outstanding amounts owing of $416,998, resulting in a loss on settlement
of debt of $62,164. |
|
|
|
|
(j) |
On June 11, 2014, the Company agreed to issue 425,865
shares of Class A common stock pursuant to the conversion of $5,062 of the
convertible debenture and $3,601 of accrued interest, as described in Note
5(c). As at July 31, 2014, the common shares have not been
issued. |
F-13
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
8. |
Common Stock (continued) |
|
|
|
|
Share transactions for the year ended July 31, 2014
(continued): |
|
|
|
|
(k) |
As at July 31, 2014, the Company received share
subscription proceeds of $100,000 related to a private placement closed on
August 21, 2014. Refer to Note 13(b). |
|
|
|
|
(l) |
During the year ended July 31, 2014, the Company recorded
additional paid-in capital of $214,291 related to the fair value of
derivative liabilities recorded in equity upon conversion of the
convertible debentures. |
|
|
|
|
Share transactions for the year ended July 31,
2013: |
|
|
|
|
(m) |
On August 6, 2012, the Company issued 120,000 shares of
Class A common stock for consulting services with a fair value of $4,200,
which was recorded in common stock issuable as of July 31, 2012. |
|
|
|
|
(n) |
On August 28, 2012, the Company issued 18,826,134 shares
of Class A common stock pursuant to the conversion of $85,000 of
convertible debentures, as described in Note 5(b). |
|
|
|
|
(o) |
On September 13, 2012, the Company issued 30,000,000
shares of Class A common stock for consulting services with a fair value
of $300,000 to officers and directors of the Company. As of July 31, 2013,
$256,027 of the amount was recorded in deferred compensation and will be
expensed as consulting fees pro-rata over a period of three years from the
date of the issuance. The fair value of the shares issued was determined
basd on the closing price of the Companys common stock on the date the
Company was obligated to issue the shares. |
|
|
|
|
(p) |
On October 16, 2012, the Company issued 2,804,878 shares
of Class A common stock pursuant to the conversion of $11,500 of the
convertible debenture, as described in Note 5(a). |
|
|
|
|
(q) |
On October 16, 2012, the Company issued 6,692,158 shares
of Class A common stock pursuant to the conversion of $27,438 of the
convertible debenture, as described in Note 5(c). |
|
|
|
|
(r) |
On October 22, 2012, the Company issued 26,000,000 shares
of Class A common stock at $0.01 per share for proceeds of $260,000. The
Company paid a finders fee of $13,000 in conjunction with the private
placement. |
|
|
|
|
(s) |
On October 23, 2012, the Company issued 2,000,000 shares
of Class A common stock at $0.025 per share for proceeds of $50,000. The
Company incurred a finders fee of $2,500 in conjunction with the private
placement. |
|
|
|
|
(t) |
On November 8, 2012, the Company issued 554,348 shares of
Class A common stock pursuant to the conversion of $4,000 of the
convertible debenture and $1,100 of accrued interest, as described in Note
5(a). |
|
|
|
|
(u) |
On November 21, 2012, the Company issued of 3,000,000
shares of Class A common stock with a fair value of $120,000 for
consulting services. |
|
|
|
|
(v) |
On March 6, 2013, the Company issued 128,500 shares of
Class A common stock to settle accounts payable of $6,425. |
|
|
|
|
(w) |
On March 20, 2013, the Company issued 851,815 shares of
Class A common stock with a fair value of $15,403 for consulting
services. |
|
|
|
|
(x) |
On March 25, 2013, the Company issued 269,916 shares of
Class A common stock with a fair value of $16,195 to settle accounts
payable of $14,238 which resulted in a loss on settlement of debt of
$1,957. |
|
|
|
|
(y) |
On May 17, 2013, the Company issued 3,475,000 shares of
Class A common stock at $0.05 per share for proceeds of $173,750. The
Company incurred a finders fee of $1,000 in conjunction with the private
placement. |
|
|
|
|
(z) |
During the year ended July 31, 2013, the Company recorded
additional paid-in capital of $404,360 related to the fair value of
derivative liabilities recorded in equity upon conversion of the
convertible debentures. |
F-14
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
9. |
Share Purchase Warrants |
|
|
|
On November 1, 2013, the Company issued 2,027,027 share
purchase warrants pursuant to a financing agreement. The warrants have an
exercise price of $0,07 per Class A common stock and expire on October 31,
2016. The fair value of the stock options were valued at $60,811 using the
Black-Scholes option pricing model assuming a risk free rate of 0.61%, an
expected life of 3 years, volatility of 539%, and no expected
dividends. |
|
|
|
The following table summarizes the continuity of share
purchase warrants: |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
Number of |
|
|
Exercise Price |
|
|
|
|
Warrants |
|
|
$ |
|
|
Balance, July 31, 2012 and
2013 |
|
|
|
|
|
|
|
Granted |
|
2,027,027 |
|
|
0.07 |
|
|
Balance, July 31, 2014 |
|
2,027,027 |
|
|
0.07 |
|
10. |
Stock Options |
|
|
|
The Company has adopted a stock option plan pursuant to
which options may be granted to directors, officers, employees and
consultants of the Company to a maximum of 25,000,000 shares issued and
outstanding at the time of the grant. The exercise price and the vesting
terms of each option is equal to the market price on the date of the
grant. |
|
|
|
The following table summarizes the continuity of the
Companys stock options: |
|
|
|
|
|
|
Weighted |
|
|
Aggregate |
|
|
|
|
|
|
|
Average |
|
|
Intrinsic |
|
|
|
|
Number |
|
|
Exercise Price |
|
|
Value |
|
|
|
|
of Options |
|
|
$ |
|
|
$ |
|
|
Outstanding, July 31, 2012
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
15,850,000 |
|
|
0.10 |
|
|
|
|
|
Expired |
|
(50,000 |
) |
|
0.10 |
|
|
|
|
|
Outstanding, July 31, 2013 |
|
15,800,000 |
|
|
0.10 |
|
|
|
|
|
Granted |
|
5,300,000 |
|
|
0.10 |
|
|
|
|
|
Expired |
|
(600,000 |
) |
|
0.10 |
|
|
|
|
|
Forfeited |
|
(10,000,000 |
) |
|
0.10 |
|
|
|
|
|
Outstanding, July 31, 2014 |
|
10,500,000 |
|
|
0.10 |
|
|
|
|
Additional information regarding stock
options as of July 31, 2014, is as follows:
|
|
Outstanding and exercisable |
|
|
|
Weighted |
|
|
|
|
Average |
Weighted |
|
Range of |
|
Remaining |
Average |
|
Exercise Prices |
Number of |
Contractual Life |
Exercise Price |
|
$ |
Options |
(years) |
$ |
|
0.10 |
10,500,000 |
8.8 |
0.10 |
F-15
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
10. |
Stock Options (continued) |
|
|
|
The fair values for stock options granted have been
estimated using the Black-Scholes option pricing model assuming no
expected dividends and the following weighted average
assumptions: |
|
|
|
2014 |
|
|
2013 |
|
|
Risk-free interest rate |
|
2.71% |
|
|
1.70% |
|
|
Expected life (in years) |
|
10.0 |
|
|
9.5 |
|
|
Expected volatility |
|
475% |
|
|
218% |
|
The fair value of stock options vested
during the year ended July 31, 2014 was $212,000 (2013 $398,211) which was
recorded as stock-based compensation and charged to operations. The weighted
average fair value of stock options granted during the year ended July 31, 2014
was $0.04 (2013 $0.02) per option.
11. |
Commitments |
|
|
|
|
(a) |
On November 1, 2012, the Company entered into three
consulting agreements with directors and officers of the Company. Each
agreement pays each director and officer a consulting fee of $5,000 per
month until November 1, 2017. On August 19, 2014, the Company agreed to
amend the annual consulting fees due to the President of the Company to
$125,000. |
|
|
|
|
(b) |
On December 1, 2012, the Company entered into a research
agreement with McGill University (McGill), where McGill will perform
testing, research and development towards improvements and efficiency
gains on the Companys patent-pending growing machines. Under the terms of
the agreement, the Company will pay $500,000, where $25,000 is due upon
the signing of the agreement (paid), $75,000 is due when the Company
either completes financing or four growing machines, and $100,000 annually
on January 1, 2014, 2015, 2016, and 2017. Pursuant to the amendment dated
October 30, 2013, payments of $100,000 annually are due on October 1,
2014, 2015, 2016, and 2017. The agreement expires on January 1,
2018. |
|
|
|
|
(c) |
On March 19, 2014, the Company leased a warehouse located
in Quebec. The term of the lease commences on March 20, 2014, and expires
on May 31, 2019. The monthly lease rate is subject to an annual increase
of 2%. The minimum lease payments over the remaining term of the lease are
as follows: |
Year |
|
$ |
|
2015 |
|
190,585 |
|
2016 |
|
194,396 |
|
2017 |
|
197,826 |
|
2018 |
|
202,250 |
|
2019 |
|
170,774 |
|
|
|
955,831 |
|
|
(d) |
On July 17, 2014, the Company entered into a lease
agreement for a delivery van at a rate of $630 per month until July 17,
2019. The minimum lease payments over the remaining term of the lease are
as follows: |
Year |
|
$ |
|
2015 |
|
7,560 |
|
2016 |
|
7,560 |
|
2017 |
|
7,560 |
|
2018 |
|
7,560 |
|
2019 |
|
7,560 |
|
|
|
37,800 |
|
F-16
URBAN BARNS FOODS INC. |
Notes to the Consolidated Financial Statements |
July 31, 2014 |
(expressed in U.S. dollars) |
12. |
Income Taxes |
|
|
|
The Company has net operating losses carried forward of
$3,444,543 available to offset taxable income in future years which
expires in beginning in fiscal 2030. |
|
|
|
The Company is subject to United States federal and state
income taxes and Canadian federal and provincial taxes. The reconciliation
of the provision for income taxes compared to the Companys income tax
expense as reported is as follows: |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Income tax recovery at
statutory rate |
|
(557,521 |
)
|
|
(530,912 |
)
|
|
Permanent differences and other |
|
128,492 |
|
|
269,512 |
|
|
Change in enacted tax rates
|
|
10,937 |
|
|
(9,873 |
)
|
|
Valuation allowance change |
|
418,092 |
|
|
271,273 |
|
|
Provision for income taxes |
|
|
|
|
|
|
The significant components of deferred
income taxes assets and liabilities as at July 31, 2014 and 2013 are as follows:
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Net operating losses carried
forward |
|
967,408 |
|
|
553,355 |
|
|
Property and equipment |
|
(6,359 |
) |
|
(10,398 |
) |
|
Valuation allowance |
|
(961,049 |
) |
|
(542,957 |
) |
|
Net
deferred income tax asset |
|
|
|
|
|
|
As at July 31, 2014, the Company is in
arrears on filing its statutory corporate income tax returns and the amounts
presented above are based on estimates. The actual losses available could differ
from these estimates.
13. |
Subsequent Events |
|
|
|
|
(a) |
On August 30, 2014, the Company granted 7,000,000 stock
options to officers, directors, employees and consultants. The stock
options vest immediately, have an exercise price of $0.10 per Class A
common stock, and expire on August 29, 2024. |
|
|
|
|
(b) |
On August 21, 2014, the Company completed a private
placement for 10,010,000 units for gross proceeds of $500,500, of which
$100,000 had been received as at July 31, 2014. Each unit consists of one
share of Class A common stock and one share purchase warrant exercisable
into one additional share of Class A common stock at a price of $0.075 per
share until August 20, 2017. Refer to Note 8(k). |
|
|
|
|
(c) |
On September 5, 2014, the Company adopted the 2014 Stock
Option Plan, which allows for the issuance of up to 10% of the Companys
issued and outstanding common shares. As of the date of filing, the
Company has not issued any stock options under the 2014 Stock Option
Plan. |
F-17
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
Under the supervision and with the participation of our
management, including our principal executive officer and the principal
financial officer, we conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
amended (the Exchange Act), as of the end of the period covered by this
report. Based on this evaluation, our principal executive officer and principal
financial officer concluded as of the evaluation date that our disclosure
controls and procedures were effective such that the material information
required to be included in our SEC reports is accumulated and communicated to
our management, including our principal executive and financial officer,
recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms relating to our company, particularly during the
period when this report was being prepared.
Management's Annual 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
Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the company.
Internal control over financial reporting includes those
policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of its
management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in
the effectiveness of any system of internal control, and accordingly, even
effective internal control can provide only reasonable assurance with respect to
financial statement preparation and may not prevent or detect material
misstatements. In addition, effective internal control at a point in time may
become ineffective in future periods because of changes in conditions or due to
deterioration in the degree of compliance with our established policies and
procedures.
A material weakness is a significant deficiency, or combination
of significant deficiencies, that results in there being a more than remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected.
Under the supervision and with the participation of our
president, management conducted an evaluation of the effectiveness of our
internal control over financial reporting, as of July 31, 2014, based on the
framework set forth in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on its evaluation under this framework, management concluded that our internal
control over financial reporting was effective as of the evaluation date.
This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the our
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this annual report.
7
Changes in Internal Controls Over Financial
Reporting
There were no changes in our internal control over financial
reporting that occurred during the last quarter of our fiscal year ended July
31, 2014 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. |
Other Information |
None.
PART III
Item 10. |
Directors, Executive Officers and Corporate
Governance |
The following table sets forth the
name, age, and position of our executive officers and directors of as of October
28, 2014.
Name |
Age |
Position |
Richard T. Groome |
56 |
President, Chief Executive
Officer, Director |
Horst Hueniken |
56 |
Chief Financial Officer, Principal Accounting
Officer, Secretary, Treasurer and Director |
Robyn Jackson |
68 |
Director |
Jeremy Kendall |
74 |
Director |
Our directors will serve in that capacity until our next annual
shareholder meeting or until their successors are elected and qualified.
Officers hold their positions at the will of our Board of Directors. There are
no arrangements, agreements or understandings between non-management security
holders and management under which non-management security holders may directly
or indirectly participate in or influence the management of our affairs.
Richard T. Groome, President, Chief Executive Officer,
Director
Richard Groome has been our President and Chief Executive
Officer since December 11, 2013, and our directors since June 25, 2012. He is
the Managing Partner of Notre-Dame Capital Inc. (NDC). His expertise stems
from financing small and mid-size emerging growth companies. Prior to NDC, Mr.
Groome started Groome Capital and created one of Canadas leading underwriter of
IPOs, private placements and secondary offerings on the Internet. The firm was
sold to Desjardins in Securities in 2001, when Mr. Groome joined a new and
vibrant executive team with a very aggressive plan to grow Desjardins Securities
into the top 10 securities firms in the country. In 2005, this was accomplished
and he left Desjardins (Canadas seventh largest financial institution) to
establish NDC.
Mr. Groome has been in the financial industry for more than 20
years at such firms as Groome Capital, Marleau Lemire Securities, Sprott
Securities and Levesque Beaubien Geoffrion. He has actively managed or
participated in over 400 small cap financings, representing some $4 billion. Mr.
Groome was a director of the CDNX Exchange, the predecessor of the TSX Venture
exchange for several years and currently sits on the boards of directors of
several private and public companies. He is currently the Chairman of Oriana
Technologies and Bitumen Capital Inc., the interim CEO of Oriana Technologies,
the President of Bitumen Capital Inc., and a non-executive director of Hitlab
Inc Mr. Groome holds a BA in Economics from McGill University and is very active
in numerous philanthropic projects, most notably involving underprivileged
children in Montreal and Peru, and the World Wildlife Fund.
Horst Hueniken, Chief Financial Officer, Secretary,
Treasurer, Director
Horst Hueniken has been our Chief Financial Officer, Secretary
and Treasurer since December 11, 2013, and our director since October 29, 2013.
For the past 25 years, he has served as Managing Director, Research Analyst and Portfolio Manager of a number of
corporations on the buy- and sell-sides of the investment management and
investment dealer businesses. Since January 2009, he has focused on investments
in the agriculture and aquaculture sectors, globally, and since July 2012 he has
been a Vice President and Portfolio Manager at Goodman & Company, Investment
Counsel Inc., where he is responsible for investing the firms capital in
private and public firms across the entire agricultural and aquaculture value
chains. Prior to that, from October 2011 through May 2012, Mr. Hueniken was a
self-employed Portfolio Manager, where he spearheaded the launch of Hybrid
Global Agriculture, a fund for accredited investors seeking agricultural sector
exposure.
8
From September 2002 through to September 2011, Mr. Hueniken was
a Managing Director and Research Analyst with Stifel, Nicolaus & Company,
Inc. as well as two of its predecessor firms. Mr. Hueniken earned a Masters of
Business Administration in 1987 at Richard Ivey School of Business, London,
Ontario, and earned a Bachelor of Applied Science in Mechanical Engineering in
1982 from the University of Waterloo, Ontario. Mr. Hueniken earned the
designation of Chartered Financial Analyst in 1992, and he is currently
registered with the Ontario Securities Commission as portfolio manager. Mr.
Hueniken is also the Chairman of AgriMarine Holdings Inc., and a non-executive
director of Blue Goose Capital Corp., Xylitol Canada Inc. and Liberty Resources
Limited.
Robyn Jackson, Director
Mr. Jackson has been our director since December 4, 2009.
Mr. Jackson founded Robyns Transportation & Distribution
Services Ltd. (formerly Robyns Trucking) in Alberta, Canada in 1976, served as
its President and Chief Executive Officer for 33 years and built the company
into a niche refrigerated shipper of food and propagated plants, with annual
revenues of more than CAD$17,000,000. Mr. Jacksons former company owned five
refrigerated distribution facilities across Western Canada, employed more than
60 professional drivers and shipped food products and plants to all Wal-Mart,
Sobeys and Canadian Tire stores in Canada located west of Thunder Bay, Ontario.
It also delivered goods to Canadian Superstore and Safeway warehouses across
Western Canada.
Jeremy Kendall, Director
Mr. Jackson has been our director since February 7, 2014.
Mr. Kendall is currently Chairman of SunOpta Inc (TSX:SOY) and
Opta Minerals Inc. (TSX:OPM). In addition, Mr. Kendall serves on the board of
directors of Mascoma Corporation, a renewable fuels company in which SunOpta has
a 18.65% ownership position. Mr. Kendall also serves as a director of Asia
Bio-Chem Group Corp. (TSX: ABC), a major starch manufacturer in China, and is
the Chairman of Jemtec Inc., listed on the TSXV. He is also a director of a
number of private and charitable organizations and was Chairman of the College
of Naturopathic Medicine for five years from 1993 to 1997.
Mr. Kendall has a BA in Economics (1962) and an MBA (1964) from
the University of Western Ontario.
Board of Directors and Director Nominees
Since our Board of Directors does not include a majority of
independent directors, its decisions regarding director nominees are made by
persons who have an interest in the outcome of the determination. The Board will
consider candidates for directors proposed by security holders, although no
formal procedures for submitting candidates have been adopted. Unless otherwise
determined, at any time not less than 90 days prior to the next annual Board
meeting at which the slate of director nominees is adopted, the Board will
accept written submissions from proposed nominees that include the name, address
and telephone number of the proposed nominee; a brief statement of the nominees
qualifications to serve as a director; and a statement as to why the security
holder submitting the proposed nominee believes that the nomination would be in
the best interests of our security holders. If the proposed nominee is not the
same person as the security holder submitting the name of the nominee, a letter
from the nominee agreeing to the submission of his or her name for consideration
should be provided at the time of submission. The letter should be accompanied
by a rsum supporting the nominee's qualifications to serve on the Board, as well
as a list of references.
9
The Board identifies director nominees through a combination of
referrals from different people, including management, existing Board members
and security holders. Once a candidate has been identified, the Board reviews
the individual's experience and background and may discuss the proposed nominee
with the source of the recommendation. If the Board believes it to be
appropriate, Board members may meet with the proposed nominee before making a
final determination whether to include the proposed nominee as a member of the
slate of director nominees submitted to security holders for election to the
Board. Some of the factors which the Board considers when evaluating proposed
nominees include their knowledge of and experience in business matters, finance,
capital markets and mergers and acquisitions. The Board may request additional
information from each candidate prior to reaching a determination. The Board is
under no obligation to formally respond to all recommendations, although as a
matter of practice, it will endeavor to do so.
Conflicts of Interest
Except for Richard T. Groome and Robyn Jackson, our directors
are not obligated to commit their full time and attention to our business and,
accordingly, they may encounter a conflict of interest in allocating their time
between our operations and those of other businesses. In the course of their
other business activities, they may become aware of investment and business
opportunities which may be appropriate for presentation to us as well as other
entities to which they owe a fiduciary duty. As a result, they may have
conflicts of interest in determining to which entity a particular business
opportunity should be presented. They may also in the future become affiliated
with entities, engaged in business activities similar to those we conduct.
In general, officers and directors of a corporation are
required to present business opportunities to a corporation if:
|
the corporation could financially undertake the
opportunity; |
|
the opportunity is within the corporations
line of business; and |
|
it would be unfair to the corporation and its
stockholders not to bring the opportunity to the attention of the
corporation. |
We have a code of ethics manual that obligates our directors,
officers and employees to disclose potential conflicts of interest and prohibits
those persons from engaging in such transactions without our consent.
Significant Employees
Other than as described above, we do not expect any other
individuals to make a significant contribution to our business.
Legal Proceedings
None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past 10
years:
1. |
A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two
years before the time of such filing; |
|
|
2. |
Such person was convicted in a criminal proceeding or is
a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses); |
|
|
3. |
Such person was the subject of any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities: |
|
i. |
Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with such activity; |
10
|
ii. |
Engaging in any type of business practice; or |
|
|
|
|
iii. |
Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any violation
of Federal or state securities laws or Federal commodities
laws; |
4. |
Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any Federal or
state authority barring, suspending or otherwise limiting for more than 60
days the right of such person to engage in any activity described in
paragraph (f)(3)(i) of this section, or to be associated with persons
engaged in any such activity; |
|
|
5. |
Such person was found by a court of competent
jurisdiction in a civil action or by the SEC to have violated any Federal
or state securities law, and the judgment in such civil action or finding
by the SEC has not been subsequently reversed, suspended, or
vacated; |
|
|
6. |
Such person was found by a court of competent
jurisdiction in a civil action or by the Commodity Futures Trading
Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated; |
|
|
7. |
Such person was the subject of, or a party to, any
Federal or state judicial or administrative order, judgment, decree, or
finding, not subsequently reversed, suspended or vacated, relating to an
alleged violation of: |
|
i. |
Any Federal or state securities or commodities law or
regulation; or |
|
|
|
|
ii. |
Any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or |
|
|
|
|
iii. |
Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity;
or |
8. |
Such person was the subject of, or a party to, any
sanction or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or
any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member. |
Director Independence
Our securities are quoted on the OTCQB which does not have any
director independence requirements. However, we plan to develop a definition of
independence in the near future and scrutinize our Board of Directors with
regard to this definition.
Audit Committee
On February 5, 2010, we established an audit committee, the
current members of which are Richard T. Groome, Horst Hueniken, Robyn Jackson
and Jeremy Kendall. Neither Mr. Groome nor Mr. Hueniken are independent members
of the committee pursuant to NASDAQ Listing Rule 5605(a)(2) and National
Instrument 52-110 of the Canadian Securities Administrators (“NI 52-110”), since
they are our executive officers. The Board of Directors adopted a charter
for the audit committee on February 5, 2010.
The audit committee is responsible for reviewing both our
interim and annual consolidated financial statements. For the purposes of
performing their duties, the members of the audit committee have the right, at
all times, to inspect all our books and financial records and discuss with
management and our independent auditors any accounts, records and matters
relating to our financial statements. The audit committee is required to meet at
least four times per year and at least quarterly with our independent auditors.
Our Board of Directors has determined that we do not have an
audit committee financial expert on our Board of Directors carrying out the
duties of the audit committee. The Board of Directors has determined that the
cost of hiring a financial expert to act as a director of us and to be a member
of the audit committee or otherwise perform audit committee functions outweighs
the benefits of having a financial expert on the Board.
Significant Employees
Other than the directors and officers described above, we do
not expect any other individuals to make a significant contribution to our
business.
11
Family Relationships
There are no family relationships among our officers or
directors.
Section 16(a) Beneficial Ownership Compliance Reporting
Section 16(a) of the Exchange Act requires our executive
officers and directors, and persons who own more than 10% of our common stock,
to file reports regarding ownership of, and transactions in, our securities with
the SEC and to provide us with copies of those filings. Based solely on our
review of the copies of such forms received by us, or written representations
from certain reporting persons, we believe that during the year ended July 31,
2014, all filing requirements applicable to our officers, directors and greater
than 10% beneficial owners were complied with.
Code of Ethics
Our Board of Directors adopted a Code of Business Conduct and
Ethics that applies to, among other persons, members of our Board of Directors,
our officers including our president, Chief Executive Officer and Chief
Financial Officer, employees, consultants and advisors. As adopted, our Code of
Business Conduct and Ethics sets forth written standards that are designed to
deter wrongdoing and to promote:
1. |
honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships; |
|
|
2. |
full, fair, accurate, timely, and understandable
disclosure in reports and documents that we file with, or submit to, the
SEC and in other public communications made by us; |
|
|
3. |
compliance with applicable governmental laws, rules and
regulations; |
|
|
4. |
the prompt internal reporting of violations of the Code
of Business Conduct and Ethics to an appropriate person or persons
identified in the Code of Business Conduct and Ethics; and |
|
|
5. |
accountability for adherence to the Code of Business
Conduct and Ethics. |
Our Code of Business Conduct and Ethics requires, among other
things, that all of our senior officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.
In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly senior officers, have a responsibility for
maintaining financial integrity within our company, consistent with generally
accepted accounting principles, and federal and state securities laws. Any
senior officer who becomes aware of any incidents involving financial or
accounting manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to us. Any failure to report such
inappropriate or irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
Code of Business Conduct and Ethics by another.
Our Code of Business Conduct and Ethics was included as Exhibit
14.1 to our Registration Statement on Form S-1 filed with the SEC on June 3,
2010. We will provide a copy of the Code of Business Conduct and Ethics to any
person without charge, upon request. Requests can be sent to: Urban Barns Foods
Inc., 205 290 Lakeshore Road, Pointe-Claire, Quebec, H9S 4L3, Canada.
12
Item 11. |
Executive Compensation
|
The following summary compensation table sets forth the total
annual compensation paid or accrued by us to or for the account of certain of
our directors and executive officers. None of our other executive officers
received compensation in excess of $100,000 during the fiscal year ended July
31, 2014.
Summary Compensation
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Equity |
Non-qualified
|
|
|
|
|
|
|
|
|
Incentive |
Deferred |
|
|
|
|
|
|
Stock |
Option |
Plan |
Compensation
|
All Other |
|
Name and Principal |
|
Salary |
Bonus |
Awards |
Awards |
Compensation |
Earnings |
Compensation |
Total |
Position |
Year |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
Richard T. Groome, |
|
|
|
|
|
|
|
|
|
President, CEO, and |
2014 |
60,000 |
0 |
0 |
0 |
0 |
0 |
0 |
60,000 |
Director(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
45,000 |
0 |
200,000 |
124,350 |
0 |
0 |
0 |
369,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
60,000 |
0 |
0 |
40,000 |
0 |
0 |
0 |
100,000 |
Robyn Jackson, |
|
|
|
|
|
|
|
|
|
Director(2) |
|
|
|
|
|
|
|
|
|
|
2013 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
0 |
0 |
0 |
40,000 |
0 |
0 |
0 |
40,000 |
Horst
Hueniken, |
|
|
|
|
|
|
|
|
|
Chairman, CFO, and |
|
|
|
|
|
|
|
|
|
Director(3) |
2013 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
0 |
0 |
0 |
40,000 |
0 |
0 |
0 |
40,000 |
Jeremy Kendall, |
|
|
|
|
|
|
|
|
|
Director(4) |
|
|
|
|
|
|
|
|
|
|
2013 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Meikleham, |
2014 |
25,000 |
0 |
0 |
0 |
0 |
0 |
0 |
25,000 |
Former President, |
|
|
|
|
|
|
|
|
|
CEO, CFO, and |
|
|
|
|
|
|
|
|
|
Director(5) |
2013 |
60,000 |
0 |
0 |
124,350 |
0 |
0 |
0 |
184,350 |
|
|
|
|
|
|
|
|
|
|
(1) |
Richard Groome has been our President and CEO
since December 11, 2013 and our director since June 25, 2012. |
(2) |
Robyn Jackson has been our director since
December 4, 2009. |
(3) |
Horst Hueniken has been our director since
October 29, 2013 and our CFO, Secretary, Treasurer since December 11,
2013. |
(4) |
Jeremy Kendall has been our director since
February 7, 2014. |
(5) |
Daniel Meikleham was our President, CEO, CFO
and director from December 4 2009 to December 10, 2013.
|
13
We pay compensation of $5,000 per month to Richard T. Groome
and to Robyn Jackson for services as our directors. On August 19, 2014, we
amended our consulting agreement with Richard T. Groome to increase fees to
$125,000 per annum.
Except for options granted to Richard T. Groome, Robyn Jackson,
Horst Hueniken and Jeremy Kendall, as provided below, our executive officers and
directors did not receive any other compensation or benefits for serving as
directors or officers.
Option Grants
We granted 8,000,000 options to purchase common stock at an
exercise price of $0.10 to our executive officers and directors from our
inception to July 31, 2014.
Management Agreements
On September 13, 2012, we entered into an executive service
agreement with Richard T. Groome as our director. In accordance with the terms
and provisions of the agreements, we issued 5,000,000 shares of Class A common
stock to Mr. Groome. Furthermore, we issued an additional 15,000,000 share of
Class A common stock to Mr. Groome for directly or indirectly introducing us to
a third party who invested a minimum of $1,000,000 in our securities.
On November 1, 2012, we entered into a consulting agreement
with Mr. Groome as our officer pursuant to which we are obligated to pay Mr.
Groome a consulting fee of $5,000 per month until November 1, 2017. On August
19, 2014, we amended the terms of our consulting agreement with Mr. Groome to
$125,000 per annum.
Compensation of Directors
Our directors received at total of $250,000, 36,150,000 shares
of our Class A common stock, and 8,000,000 options to purchase shares of our
Class A common stock as compensation for their services as directors from our
inception to July 31, 2014. We will compensate our directors for their services
in the future, and such directors are expected in the future to receive cash,
shares of our common stock and/or options to purchase additional shares of our
common stock as awarded by our Board of Directors or by any compensation
committee that may be established.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits to our directors or executive officers. We have
no material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the Board of Directors or
a committee thereof.
Compensation Committee
We do not currently have a compensation committee of the Board
of Directors or a committee performing similar functions. The Board of Directors
as a whole participates in the consideration of executive officer and director
compensation.
Change of Control
As of October 28, 2014, we had no pension plans or compensatory
plans or other arrangements which provide compensation on the event of
termination of employment or change in control of us.
Item 12. |
Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
|
The following table sets forth certain information concerning
the number of shares of our common stock owned beneficially as of October 28,
2014 by: (i) each of our directors, (ii) each of our named executive officers
and (iii) owners of 5% or more of our common stock. There was no other person or
group known by us to beneficially own more than 5% of our outstanding shares of
common stock. Unless otherwise indicated, the shareholders listed below possess
sole voting and investment power with respect to the shares they own. All
persons named have sole voting and investment power with respect to the shares, except as otherwise noted. The number of shares described below
includes shares which the beneficial owner described has the right to acquire
within 60 days of the date of this annual report.
14
|
|
Amount and |
|
|
Name and Address of |
Nature of |
Percent of |
Title of Class |
Beneficial Owner |
Beneficial |
Class |
|
|
Ownership |
(1) |
|
|
|
|
|
Richard T. Groome (2) |
|
|
Class A |
Suite 205 290 Lakeshore Road |
|
|
Common |
Pointe-Claire, Quebec |
32,557,595 (3) |
10.95 |
Stock |
Canada
H9S 4L3 |
|
|
|
Robyn Jackson (4) |
|
|
Class A |
72 Prestwick Estate Way SE |
|
|
Common |
Calgary, Alberta |
8,425,000 (5) |
2.83 |
Stock |
Canada
T2Z 3Y9 |
|
|
|
Jeremy Kendall (6) |
|
|
Class A |
17121 Mississauga Road |
|
|
Common |
Belfountain, Ontario |
7,273,504 (7) |
2.43 |
Stock |
Canada
L7K 0G1 |
|
|
|
Horst Hueniken (8)
|
|
|
Class A |
17121 Mississauga Road |
|
|
Common |
Belfountain, Ontario |
2,000,000 (9) |
0.67 |
Stock |
Canada L7K 0G1 |
|
|
|
All
Officers and Directors as a Group |
50,256,099 |
16.79 |
|
Jacob Benne (10) |
|
|
Class A |
7170 Glover Drive |
|
|
Common |
Milner, British Columbia |
33,936,015 (11) |
11.34 |
Stock |
Canada
V0X 1T0 |
|
|
|
Dundee Agricultural Corporation |
|
|
Class A |
1 Adelaide Street East, Suite 2100 |
|
|
Common |
Toronto, Ontario |
114,411,585 (12) |
38.23 |
Stock |
Canada
M5C 2V9 |
|
|
(1) |
Based on 299,307,847 shares and options/warrants issued directors and beneficial owners – which includes 281,182,847 shares of our Class A common stock issued and outstanding, 13,125,000 options to purchase one share each and 5,000,000 warrants to purchase one share each as of October 28, 2014. |
(2) |
Richard T. Groome is our President, CEO and director. |
(3) |
Includes 20,000,000 shares held by Notre-Dame Capital Inc., a company over which Mr. Groome has sole voting and investment power, 1,500,000 shares held by Roxy & Bear Investments, a company over which Mr. Groome has shared voting and investment power with his wife, 50,000 shares held by Alexandra Groome, Mr. Groome’s daughter, 50,000 shares held by Ryan Groome, Mr. Groome’s son and 7,850,000 options to purchase one share each. |
(4) |
Robyn Jackson is our Director. |
(5) |
Includes 6,150,000 shares and 2,275,000 options
to purchase one share each. |
(6) |
Jeremy Kendall is our director. |
(7) |
Includes 5,273,504 shares, 1,000,000 options to purchase one share each and 1,000,000 warrants to purchase one share each. |
(8) |
Horst Hueniken is our director. |
(9) |
Includes 2,000,000 options to purchase one share each. |
(10) |
Jacob Benne is our former President, former Chief Executive Officer and former director (retired October 2, 2013). |
(11) |
Includes 21,775,000 shares held by the Benne Family Trust, a trust over which Mr. Benne has sole voting and investment power. |
(12) |
Includes 110,411,585 shares, and 4,000,000 warrants to purchase one share each. |
15
Item 13. |
Certain Relationships and Related
Transactions, and Director Independence |
Our research and development is conducted by McGill University
at their university facilities and at our growing facility in Mirabel, Quebec,
Canada. Under this program, we have spent $252,802 classified as research and
development, $105,281 for patent protection filings and $247,616 for R&D
growing machines and systems as of July 31, 2014.
As at July 31, 2014, we owed $70,072 (2013 - $168,684) to our
directors and officers, $nil (2013 - $46,900) to the spouse of Daniel Meikleham,
our former President, CEO, CFO and director, and $3,673 (2012 - $178,904) to
companies controlled by our officers and directors.
NI 52-110
We are a reporting issuer in the Provinces of British Columbia,
Alberta and Quebec. NI 52-110 requires us, as a venture issuer, to disclose in
our annual report certain information concerning the constitution of our audit
committee and our relationship with our independent auditor. As defined in NI
52-110, Richard T. Groome and Host Hueniken are not independent directors. A
description of the education and experience of our directors that is relevant to
the performance of their responsibilities as audit committee members is included
in Item 10 of this annual report.
The only member of our audit committee that is “financially
literate” as defined in NI 52-110 is Horst Hueniken.
Since the commencement of our most recently completed financial
year, our Board of Directors has not failed to adopt a recommendation of the
audit committee to nominate or compensate an external auditor.
Since the commencement of our most recently completed financial
year, we have not relied on the exemptions contained in sections 2.4 or 8 of NI
52-110. Section 2.4 (De Minimis Non-audit Services) provides an exemption from
the requirement that the audit committee must pre-approve all non-audit services
to be provided by the auditor, where the total amount of fees related to the
non-audit services are not expected to exceed 5% of the total fees payable to
the auditor in the fiscal year in which the non-audit services were provided.
Section 8 (Exemptions) permits us to apply to a securities regulatory authority
for an exemption from the requirements of NI 52-110 in whole or in part.
Our audit committee has adopted specific policies and
procedures for the engagement of non-audit services as set out in our audit
committee charter.
National Instrument 58-101
As a reporting issuer in the Provinces of British Columbia,
Alberta and Quebec, National Instrument 58-101 of the Canadian Securities
Administrators requires us, as a venture issuer, to disclose in our annual
report certain information concerning corporate governance disclosure.
Board of Directors
Our Board of Directors currently consists of four directors. We
have determined that only Robyn Jackson and Jeremy Kendall are independent as
that term is defined in NI 52-110 due to the fact that our other directors are
also our executive officers.
Directorships
Other than as described above, our directors are not currently
directors of any other reporting issuers (or the equivalent in a foreign jurisdiction).
16
Orientation and Continuing Education
We have an informal process to orient and educate new recruits
to our Board of Directors regarding their role on the Board and our committees,
as well as the nature and operations of our business. This process provides for
an orientation with key members of management, and further provides access to
materials necessary to inform them of the information required to carry out
their responsibilities as a member of our Board of Directors. This information
includes our most recent budget approved by the Board of Directors, our most
recent annual report, our audited financial statements and copies of our interim
financial statements.
The Board does not provide continuing education for our
directors. Each director is responsible for maintaining the skills and knowledge
necessary to meet their obligations as a director.
Ethical Business Conduct
Other than as set out in our Code of Business Conduct and
Ethics, our Board of Directors does not take any formal steps to encourage and
promote a culture of ethical business conduct as it has found that the fiduciary
duties placed on individual directors by our governing corporate legislation and
the common law have been sufficient to ensure that the Board operates
independently of management and in our best interests.
Nomination of Directors
See “Board of Directors and Director Nominees” in Item 10 of
this annual report.
Compensation
See “Compensation of Directors” in Item 11 of this annual
report.
Assessments
Our Board of Directors intends for individual director
assessments to be conducted by other directors, taking into account each
director’s contributions at Board meetings, service on committees, experience
base, and their general ability to contribute to one or more of our major needs.
However, due to our stage of development and our need to deal with other urgent
priorities, the Board has not yet implemented such a process of assessment.
Item 14. |
Principal Accounting Fees and Services.
|
Audit and Non-Audit Fees
The aggregate fees billed for our most recently completed
fiscal year ended July 31, 2014 and for our fiscal year ended July 31, 2013 for
professional services rendered by our independent auditors for the audit of our
annual financial statements and review of the financial statements included in
our quarterly reports on Form 10-Q as well as services that are normally
provided by our independent auditors in connection with statutory and regulatory
filings or engagements for these fiscal periods were as follows:
|
Year Ended
July 31 |
2014
($) |
2013
($) |
Audit Fees |
24,800 |
26,400 |
Audit Related Fees |
Nil |
Nil |
Tax Fees |
Nil |
Nil |
All Other Fees |
Nil |
Nil |
Total |
24,800 |
26,400 |
Our Board of Directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the Board of Directors either before or after the respective
services were rendered.
Our Board of Directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors independence.
PART IV
Item 15. |
Exhibits, Financial Statement Schedules
|
(a) (1) Financial Statements
See Index to Consolidated Financial Statements set forth on
page F-1.
(a) (2) Financial Statement Schedules
None. The financial statement schedules are omitted because
they are inapplicable or the requested information is shown in our financial
statements or related notes thereto.
17
Exhibits
Exhibit |
Exhibit |
Number |
Description |
|
|
2.1 |
Share Exchange Agreement with
Non Industrial Manufacture Inc. dated May 2, 2011 (Incorporated by
reference from our Current Report on Form 8-K/A filed on June 2, 2011)
|
|
|
3.1 |
Articles of Incorporation of
Urban Barns Foods Inc. (formerly HL Ventures Inc.) (Incorporated by
reference from our Registration Statement on Form SB-2 filed on September
6, 2007) |
|
|
3.2 |
Certificate of Amendment filed
with the Nevada Secretary of State on June 28, 2011 (Incorporated by
reference from our Current Report on Form 8-K filed on July 25, 2011)
|
|
|
3.3 |
Bylaws (Incorporated by
reference from our Registration Statement on Form SB-2 filed on September
6, 2007) 2014 Stock Option Plan (Incorporated by reference from our
Current Report on Form 8-K |
|
|
10.1 |
filed on September 11, 2014)
Code of Business Conduct and Ethics (Incorporated by reference from our
Registration |
|
|
14.1 |
Statement filed on Form S-1
June 3, 2010) List of Subsidiaries: Urban Barns Foods Inc., a Canadian
Company, Non-Industrial |
|
|
21 |
Manufacture, an Alberta, Canada
company. |
|
|
31.1*
|
Section
302 Certification of Principal Executive Officer |
|
|
31.1*
|
Section
302 Certification of Principal Financial Officer |
|
|
32.1*
|
Section
906 Certification of Principal Executive Officer |
|
|
32.1*
|
Section 906
Certification Principal Financial Officer |
*filed herewith.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
URBAN BARNS FOODS INC.
|
|
|
|
Date: October 28, 2014 |
By: |
/s/
Richard T. Groome |
|
|
Richard T. Groome |
|
|
President, Chief Executive Officer, and
Director |
|
|
|
|
|
|
|
|
|
|
|
|
Date: October 28, 2014 |
|
/s/
Horst Hueniken |
|
|
Horst Hueniken |
|
|
Chairman, Chief Financial Officer, Principal
|
|
|
Accounting Officer, Secretary, Treasurer and
|
|
|
Director |
Pursuant to the requirements of the Exchange Act this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURES
|
|
TITLE |
|
DATE |
|
|
|
|
|
|
|
|
|
|
/s/ Richard
T.Groome |
|
|
|
October 28, 2014 |
Richard T.Groome |
|
President, Chief Executive Officer, |
|
|
|
|
and Director |
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Horst
Hueniken |
|
|
|
October 28, 2014 |
Horst Hueniken |
|
Chairman, Chief Financial Officer, |
|
|
|
|
Principal Accounting Officer, |
|
|
|
|
Secretary, Treasurer and Director |
|
|
|
|
|
|
|
/s/ Robyn
Jackson |
|
|
|
October 28, 2014 |
Robyn Jackson |
|
Director |
|
|
|
|
|
|
|
/s/ Jeremy
Kendall |
|
|
|
October 28, 2014 |
Jeremy Kendall |
|
Director |
|
|
19
Exhibit 31.1 |
CERTIFICATION |
I, Richard T. Groome, certify that:
1. |
I have reviewed this report on Form 10-K of Urban Barns
Foods Inc. |
|
|
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. |
I am 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 my
supervision, to ensure that material information relating to the
registrant is made known to me 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 my 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 registrants
disclosure controls and procedures and presented in this report my
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 registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
I have disclosed, based on my most recent evaluation of
internal control over financial reporting, to the registrants auditors
and the audit committee of registrants 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 registrants 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
registrants internal control over financial
reporting. |
6. |
The registrant's other certifying officer(s) and I have
indicated in this report whether or not there were significant changes in
internal controls or on other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses. |
Date: October 28, 2014
/s/ Richard T. Groome
Richard T. Groome
President, Chief Executive Officer, and Director
Exhibit 31.2 |
CERTIFICATION |
I, Horst Hueniken, certify that:
1. |
I have reviewed this report on Form 10-K of Urban Barns
Foods Inc. |
|
|
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. |
I am 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 my
supervision, to ensure that material information relating to the
registrant is made known to me 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 my 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 registrants
disclosure controls and procedures and presented in this report my
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 registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
I have disclosed, based on my most recent evaluation of
internal control over financial reporting, to the registrants auditors
and the audit committee of registrants 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 registrants 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
registrants internal control over financial
reporting. |
6. |
The registrant's other certifying officer(s) and I have
indicated in this report whether or not there were significant changes in
internal controls or on other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses. |
Date: October 28, 2014
/s/ Horst Hueniken
Horst Hueniken
Chairman, Chief Financial Officer, Principal Accounting Officer, Secretary,
Treasurer and Director
Exhibit 32.1
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
In connection with the annual report of Urban Barns Foods Inc.
(the Company) on Form 10-K for the period ending July 31, 2014 as filed with
the Securities and Exchange Commission on the date hereof (the Report), I,
Richard T. Groome, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
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 result of operations
of the Company. |
Date: October 28, 2014
/s/ Richard T. Groome
__________________________
President, Chief Executive Officer and Director
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
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 annual report of Urban Barns Foods Inc.
(the Company) on Form 10-K for the period ending July 31, 2014 as filed with
the Securities and Exchange Commission on the date hereof (the Report), I,
Horst Hueniken, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 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 result of operations
of the Company. |
Date: October 28, 2014
/s/ Horst Hueniken
__________________________
Chairman, Chief Financial Officer, Principal Accounting
Officer, Secretary, Treasurer and Director
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