UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
January 31,
2012
[ ] 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
|
N/A
|
(State or other jurisdiction of incorporation or
|
(I.R.S. Employer Identification No.)
|
organization)
|
|
|
|
7170 Glover Road
|
|
Milner, B.C., Canada V0X 1T0
|
604-888-0420
|
(Address of principal executive offices) (Zip Code)
|
(Registrants telephone number, including
area code)
|
Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was require
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 is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.
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 Exchange Act).
Yes [ ]
No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 14, 2012 the registrants outstanding common stock
consisted of 57,761,700 shares.
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited interim financial statements of Urban Barns Foods
Inc. (the Company, Urban Barns, we, our, us) follow. All currency
references in this report are to U.S. dollars unless otherwise noted.
3
Urban Barns Foods Inc.
|
(A Development Stage Company)
|
January 31, 2012
|
(Unaudited)
|
Financial Statement Index
F-1
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Consolidated Balance Sheets
|
(expressed in U.S. dollars)
|
|
|
January 31,
|
|
|
July 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
63,402
|
|
|
32,907
|
|
Prepaid expenses and deposits
|
|
6,980
|
|
|
13,606
|
|
Total current assets
|
|
70,382
|
|
|
46,513
|
|
Deferred finance charges (Note 5)
|
|
3,187
|
|
|
-
|
|
Property and equipment (Note 4)
|
|
62,542
|
|
|
66,351
|
|
Total assets
|
|
136,111
|
|
|
112,864
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
125,208
|
|
|
100,825
|
|
Convertible note (Note 5)
|
|
27,500
|
|
|
-
|
|
Due to
related parties (Note 6)
|
|
79,732
|
|
|
79,837
|
|
Total liabilities
|
|
232,440
|
|
|
180,662
|
|
Nature of Operations and Continuance of Business (Note 1)
|
|
|
|
|
|
|
Stockholders deficit
|
|
|
|
|
|
|
Preferred stock
Authorized:
100,000,000 common shares, with a par value of $0.001 per share
Issued and outstanding: nil shares
|
|
|
|
|
|
|
Common stock, Class A
Authorized: 500,000,000 common shares, with a
par value of $0.001 per share
Issued and
outstanding: 56,761,671 and 50,261,671 common shares, respectively
|
|
56,762
|
|
|
50,262
|
|
Common stock, Class B
Authorized: 25,000,000 common shares, with a par value of $0.001 per share
Issued and outstanding: nil
|
|
|
|
|
|
|
Additional paid-in capital
|
|
640,494
|
|
|
54,919
|
|
Share subscription received
|
|
(427,038
|
)
|
|
|
|
Accumulated deficit during the development stage
|
|
(366,547
|
)
|
|
(172,979
|
)
|
Total
stockholders deficit
|
|
(96,329
|
)
|
|
(67,798
|
)
|
Total liabilities and stockholders deficit
|
|
136,111
|
|
|
112,864
|
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-2
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Consolidated Statements of Operations
|
(expressed in U.S. dollars)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 10,
|
|
|
|
For the Three
|
|
|
For the Three
|
|
|
For the Six
|
|
|
For the Six
|
|
|
2010 (Date of
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Inception) to
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
January 31,
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
4,021
|
|
|
|
|
|
6,273
|
|
|
|
|
|
12,602
|
|
Foreign exchange loss (gain)
|
|
(7,937
|
)
|
|
|
|
|
(12,047
|
)
|
|
|
|
|
(29,088
|
)
|
General and administrative
|
|
35,588
|
|
|
18
|
|
|
109,406
|
|
|
36
|
|
|
139,577
|
|
Professional fees
|
|
27,353
|
|
|
|
|
|
87,373
|
|
|
|
|
|
105,718
|
|
Research and development
|
|
541
|
|
|
|
|
|
2,563
|
|
|
|
|
|
2,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
59,566
|
|
|
18
|
|
|
193,568
|
|
|
36
|
|
|
231,562
|
|
Net loss
|
|
(59,566
|
)
|
|
(18
|
)
|
|
(193,568
|
)
|
|
(36
|
)
|
|
(231,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
56,761,671
|
|
|
3,000,000
|
|
|
56,471,454
|
|
|
3,000,000
|
|
|
|
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-3
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Consolidated Statements of Cash Flows
|
(expressed in U.S. dollars)
|
(unaudited)
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
February 10,
|
|
|
|
For the Six
|
|
|
For the Six
|
|
|
2010 (Date of
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
Inception) to
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
(193,568
|
)
|
|
(36
|
)
|
|
(231,562
|
)
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
6,273
|
|
|
|
|
|
12,602
|
|
Shares issued for consulting
fees
|
|
28,000
|
|
|
|
|
|
28,000
|
|
Stock based compensation
|
|
11,575
|
|
|
|
|
|
11,575
|
|
Deferred financing cost
|
|
563
|
|
|
|
|
|
563
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and deposits
|
|
6,626
|
|
|
|
|
|
3,270
|
|
Accounts payable
|
|
24,383
|
|
|
|
|
|
31,968
|
|
Due to related parties
|
|
892
|
|
|
20
|
|
|
15,101
|
|
Net cash used in
operating activities
|
|
(115,256
|
)
|
|
(16
|
)
|
|
(128,483
|
)
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchase of property and
equipment
|
|
(2,464
|
)
|
|
|
|
|
(63,285
|
)
|
Cash
acquired on recapitalization
|
|
|
|
|
|
|
|
1,774
|
|
Net cash used in investing activities
|
|
(2,464
|
)
|
|
|
|
|
(61,511
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of a convertible
debenture
|
|
23,750
|
|
|
|
|
|
23,750
|
|
Proceeds from issuance of
common shares
|
|
125,462
|
|
|
|
|
|
230,643
|
|
Repayment to due to related parties
|
|
(997
|
)
|
|
|
|
|
(997
|
)
|
Net cash provided by financing activities
|
|
148,215
|
|
|
|
|
|
253,396
|
|
Increase (decrease) in cash
|
|
30,495
|
|
|
(16
|
)
|
|
63,402
|
|
Cash beginning of period
|
|
32,907
|
|
|
40
|
|
|
|
|
Cash end of
period
|
|
63,402
|
|
|
24
|
|
|
63,402
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
Conversion of Class B shares to Class A
shares
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
|
|
|
|
|
Income tax paid
|
|
|
|
|
|
|
|
|
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-4
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
1.
|
Nature of Operations and Continuance of
Business
|
|
|
|
Urban Barns Foods Inc. (the Company) was incorporated
under the laws of the State of Nevada on May 21, 2007 as HL Ventures
Inc.
|
|
|
|
On December 4, 2009, the Company closed a reverse
takeover transaction with Urban Barns Foods Inc., a privately-held company
incorporated on July 3, 2009 under the laws of the province of Alberta. In
accordance with the transaction, the Company issued 125,000 shares of
common stock to the shareholders of Urban Barns in exchange for 100% of
the issued and outstanding shares of common stock of Urban Barns. As part
of the acquisition, the Company also cancelled 102,500 shares of common
stock held by management.
|
|
|
|
On June 2, 2011, the Company closed a reverse takeover
transaction with Non Industrial Manufacture Inc. (Non Industrial), a
privately-held company incorporated on February 10, 2010, under the laws
of the province of Alberta. In accordance with the transaction, the
Company issued 2,500,000 shares of Class B common stock to the
shareholders of Non Industrial in exchange for 100% of the issued and
outstanding shares of common stock of Non Industrial.
|
|
|
|
The Company is a development stage company and 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.
|
|
|
|
These 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 January 31, 2012, the Company has not realized any
revenues, has a working capital deficit of $162,058 and has an accumulated
deficit of $366,547. The continued operations of the Company are dependent
on its ability to generate future cash flows from operations or obtain
additional financing. 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
|
|
|
|
|
(a)
|
Basis of Presentation and Principles of
Consolidation
|
|
|
|
|
|
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.
|
|
|
|
|
(b)
|
Use of Estimates
|
|
|
|
|
|
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 useful life and recoverability of long-lived
assets, stock-based compensation, 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.
|
F-5
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
2.
|
Significant Accounting Policies
(continued)
|
|
|
|
|
(c)
|
Cash and Cash Equivalents
|
|
|
|
|
|
The Company considers all highly liquid instruments with
a maturity of three months or less at the time of issuance to be cash
equivalents.
|
|
|
|
|
(d)
|
Property and Equipment
|
|
|
|
|
|
Property and equipment consists of production equipment
and is stated at cost and amortized straight-line over five
years.
|
|
|
|
|
(e)
|
Impairment of Long-Lived Assets
|
|
|
|
|
|
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.
|
|
|
|
|
(f)
|
Interim Financial Statements
|
|
|
|
|
|
These interim unaudited financial statements have been
prepared on the same basis as the annual financial statements and in the
opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Companys financial
position, results of operations and cash flows for the periods shown. The
results of operations for such periods are not necessarily indicative of
the results expected for a full year or for any future period.
|
|
|
|
|
(g)
|
Comprehensive Loss
|
|
|
|
|
|
ASC 220,
Comprehensive Income,
establishes
standards for the reporting and display of comprehensive loss and its
components in the financial statements. As at January 31, 2012 and July
31, 2011, the Company had no items that affected comprehensive
loss.
|
|
|
|
|
(h)
|
Foreign Currency Translation
|
|
|
|
|
|
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-6
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
2.
|
Significant Accounting Policies
(continued)
|
|
|
|
|
(i)
|
Loss Per Share
|
|
|
|
|
|
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.
|
|
|
|
|
(j)
|
Financial Instruments and Fair Value Measures
|
|
|
|
|
|
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:
|
Level 1
Level 1 applies to
assets or liabilities for which there are quoted prices in active markets for
identical assets or liabilities.
Level 2
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.
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 payable and accrued 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.
|
|
|
|
|
(k)
|
Stock-based Compensation
|
|
|
|
|
|
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.
|
F-7
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
2.
|
Significant Accounting Policies
(continued)
|
|
|
|
|
(l)
|
Recent Accounting Pronouncements
|
|
|
|
|
|
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.
|
|
|
|
3.
|
Acquisition of Non Industrial Manufacture Inc. and
Recapitalization
|
|
|
|
|
On June 2, 2011, the Company acquired 100% of the issued
and outstanding shares of common stock of Non Industrial Manufacture Inc.
(NIM) in exchange for 2,500,000 shares of Class B common stock. The
acquisition was a capital transaction in substance and therefore was
accounted for as a recapitalization of the business of NIM. Under
recapitalization accounting, NIM is considered the acquirer for accounting
and financial reporting purposes, and acquired the assets and assumed the
liabilities of the Company. These financial statements include the
accounts of the Company since the effective date of the recapitalization
being June 2, 2011, and the historical accounts of the business of NIM
since inception being February 10, 2010.
|
|
|
|
|
The assets acquired and liabilities assumed are as
follows:
|
|
|
|
$
|
|
|
Cash
|
|
1,774
|
|
|
Prepaid expenses
|
|
10,250
|
|
|
Property and equipment
|
|
11,859
|
|
|
Accounts payable
|
|
(89,718
|
)
|
|
Due to related parties
|
|
(69,150
|
)
|
|
Net liabilities
assumed
|
|
(134,985
|
)
|
4.
|
Property and Equipment
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
July 31,
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Net Carrying
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
|
Value
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Production equipment
|
|
79,216
|
|
|
16,674
|
|
|
62,542
|
|
|
66,351
|
|
5.
|
Convertible Note
|
|
|
|
On January 4, 2012, the Company entered into a
Convertible Promissory Note agreement for $27,500. Pursuant to the
agreement, the loan is convertible into shares of common stock at a
variable conversion price equal to the lower of 55% of the average of the
lowest three closing bid prices for the common stock during the 10 trading
days prior to the date of the conversion notice. The loan bears interest
at 8% per year and the principal amount and any interest thereon are due
on October 6, 2012.
|
|
|
|
Pursuant to ASC 815, Derivatives and Hedging, the
Company will recognize the fair value of the embedded conversion feature
as a derivative liability when the Note becomes convertible on October 6,
2012. The Company paid $3,750 of deferred finance costs relating to the
issuance of the Note. At January 31, 2012, the Company had recorded
amortization of $563 and the remaining $3,187 will be charged to operation
over the life of the note.
|
F-8
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
6.
|
Related Party Transactions
|
|
|
|
|
(a)
|
As at January 31, 2012, the Company owed $76,381 (2011 -
$76,320) to directors and officers of the Company. The amounts owing are
unsecured, non-interest bearing, and due on demand.
|
|
|
|
|
(b)
|
As at January 31, 2012, the Company owed $3,351 (2011 -
$3,517) to a company controlled by an officer of the Company. The amounts
owing are unsecured, non-interest bearing, and due on demand.
|
|
|
|
|
(c)
|
As at January 31, 2012, the Company had $14,400 (2011 -
$5,400) recorded in accounts payable for amounts owing to the spouse of
the President of the Company. The amounts owing are unsecured,
non-interest bearing, and due on demand.
|
|
|
|
|
(d)
|
As at January 31, 2012, the Company had $48,420 (2011 -
$37,604) recorded in accounts payable for amounts owing to companies
controlled by an officer of the Company. The amounts owing are unsecured,
non-interest bearing, and due on demand.
|
|
|
|
|
(e)
|
During the period ended January 31, 2012, the Company
incurred accounting fees of $10,800 (2011 - $nil) to the spouse of the
President of the Company.
|
|
|
|
|
(f)
|
During the period ended January 31, 2012, the Company
incurred travel expenses fees of $30,944 (2011 - $nil) to an officer of
the Company.
|
|
|
|
|
(g)
|
During the period ended January 31, 2012, the Company
incurred consulting fees of $19,020 (2011 - $nil) to officers of the
Company.
|
|
|
|
|
(h)
|
During the period ended January 31, 2012, the Company
incurred rental fees of $7,089 (2011 - $6,598) to a company controlled by
an officer of the Company.
|
|
|
|
7.
|
Common Stock
|
|
|
|
|
(a)
|
On August 8, 2011, the Company issued 3,400,000 shares of
Class A common stock pursuant to the exercise of 3,400,000 stock options
for proceeds of $510,000 of which $82,962 was received and $427,038 was
recorded in share subscription received as of January 31, 2012.
|
|
|
|
|
(b)
|
On August 8, 2011, the Company issued 1,700,000 shares of
Class A common stock pursuant to the exercise of 1,700,000 stock options
for proceeds of $42,500 that was received as of January 31,
2012.
|
|
|
|
|
(c)
|
On August 9, 2011, the Company entered into entered into
one-year consulting agreements with several officers and directors of the
Company for strategic business planning and management services. In
consideration, the Company agreed to issue an aggregate of 951,000 shares
of common stock for total value of $19,020 based on the fair value of the
share price of $0.02 on the issuance date.
|
|
|
|
|
(d)
|
On August 9, 2011, the Company entered into entered into
certain other consulting agreements with various consultants for business
planning and development services. In consideration, the Company agreed to
issue an aggregate of 449,000 shares of common stock for total value of
$8,980 based on the fair value of the share price of $0.02 on the issuance
date.
|
F-9
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
8.
|
Share Purchase Warrants
|
|
|
|
The following table summarizes the continuity of share
purchase warrants:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
|
|
|
Warrants
|
|
|
$
|
|
|
Balance, July 31, 2010
|
|
1,858
|
|
|
236
|
|
|
Expired
|
|
(358
|
)
|
|
300
|
|
|
Balance, July 31, 2011
|
|
1,500
|
|
|
222
|
|
|
Expired
|
|
(250
|
)
|
|
250
|
|
|
Balance, January 31, 2012
|
|
1,250
|
|
|
216
|
|
As at January 31, 2012, the following
share purchase warrants were outstanding:
|
Exercise
|
|
Number of
|
Price
|
|
Warrants
|
$
|
Expiry
Date
|
1,250
|
216
|
February 10, 2012
|
9.
|
Stock Options
|
|
|
|
On August 8, 2011, the Company granted 1,700,000 stock
options at an exercise price of $0.025 per share expiring on November 15,
2011 and granted 3,400,000 stock options at an exercise price of $0.15 per
share expiring on November 15, 2011. All 5,100,000 stock options were
vested immediately. The fair value for these stock options was estimated
at the date of grant using the Black-Scholes option-pricing model assuming
a weighted average expected life of 0.25 years, a risk- free rate of
0.03%, an expected volatility of 195%, and a 0% dividend yield. The
weighted average fair value of stock options granted was $0.11 per share.
During the six months ended January 31 2012, the Company recorded
stock-based compensation of $11,575 (2011 - $nil) as general and
administrative expense.
|
|
|
|
The following table summarizes the continuity of stock
options:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
|
|
|
options
|
|
|
$
|
|
|
Balance, July 31, 2010 and 2011
|
|
|
|
|
|
|
|
Granted
|
|
5,100,000
|
|
|
0.11
|
|
|
Exercised
|
|
(5,100,000
|
)
|
|
0.11
|
|
|
Balance, January
31, 2012
|
|
|
|
|
|
|
F-10
URBAN BARNS FOODS INC.
|
(A Development Stage Company)
|
Notes to the Consolidated Financial Statements
|
(expressed in U.S. dollars)
|
(unaudited)
|
10.
|
Subsequent Events
|
|
|
|
|
a)
|
On February 9, 2012, the Company entered into four
Convertible Promissory Note agreements for a total of $60,000. Pursuant to
the agreement, the loan is convertible into shares of common stock at a
variable conversion price equal to the lower of 55% of the average of the
lowest three closing bid prices for the common stock during the 10 trading
days prior to the date of the conversion notice. The loan bears interest
at 8% per year and the principal amount and any interest thereon are due
on November 9, 2012.
|
|
|
|
|
b)
|
On February 9, 2012, the Company entered into a
consulting agreement with a non-related party for a period of six months
through August 9, 2012. In consideration of the services, the Company
issued an aggregate of 1,000,000 shares of its common
stock.
|
F-11
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION.
|
Forward Looking Statements
This report on Form 10-Q contains certain forward-looking
statements. All statements other than statements of historical fact are
forward-looking statements for purposes of these provisions, including any
projections of earnings, revenues, or other financial items; any statements of
the plans, strategies, and objectives of management for future operation; any
statements concerning proposed new products, services, or developments; any
statements regarding future economic conditions or performance; statements of
belief; and any statement of assumptions underlying any of the foregoing. Such
forward-looking statements are subject to inherent risks and uncertainties, and
actual results could differ materially from those anticipated by the
forward-looking statements.
These forward-looking statements involve significant risks and
uncertainties, including, but not limited to, the following: competition,
promotional costs and the risk of declining revenues. Our actual results could
differ materially from those anticipated in such forward-looking statements as a
result of a number of factors. These forward-looking statements are made as of
the date of this filing, and we assume no obligation to update such
forward-looking statements. The following discusses our financial condition and
results of operations based upon our consolidated financial statements which
have been prepared in conformity with accounting principles generally accepted
in the United States. It should be read in conjunction with our financial
statements and the notes thereto included elsewhere herein.
Results of Operations
We are still in our development stage and have generated no
revenues to date.
We incurred operating expenses of $59,566 for the three months
ended January 31, 2012. These expenses consisted of $35,588 in general operating
expenses, $541 in research and development expenses, and $27,353 in professional
fees. For the same period ended January 31, 2011 we incurred operating expenses
of $18. These expenses are higher due to the fact that we had more operating
activity in the current period compared to the prior period.
Our net loss from inception (February 10, 2010) through January
31, 2012 was $231,562.
The following table provides selected financial data about our
company for the quarter ended January 31, 2012.
|
|
January 31,
|
|
|
July 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
Current Assets
|
|
70,382
|
|
|
46,513
|
|
Current Liabilities
|
|
232,440
|
|
|
180,662
|
|
Working Capital (Deficit)
|
|
(162,058
|
)
|
|
(134,149
|
)
|
Liquidity and Capital Resources
As of January 31, 2012, we had cash of $63,402, total current
assets of $70,382, total current liabilities of $232,440 and working capital
deficit of $162,058 compared to cash of $32,907, total current assets of
$46,513, total current liabilities of $180,662, and working capital deficit of
$134,149 as of July 31, 2011. The increase in liabilities is due primarily to as
increase in account payable and due to related parties due to a lack of
sufficient cashflows to pay our outstanding obligations.
During the period ended January 31, 2012, we received net cash
of $148,215 from financing activities, compared to net cash received of $nil
from financing activities during the period ended January 31, 2011. The increase
is due to proceeds received from the exercise of stock options.
During the period ended January 31, 2012, we used net cash of
$115,256 on operating activities, compared to $16 net cash used on operating
activities during the period ended January 31, 2011. The increase in cash used
was due to increase in operating activity during the current period.
During the period ended January 31, 2012, we incurred $2,464
for the purchase of property of equipment compared with no investing activities
for the period ended January 31, 2011.
4
Since February 10, 2010 (inception) to January 31, 2012, our
accumulated deficit was $366,547. We are dependent on the funds raised through
our equity or debt financing, investing activities, and revenue generated
through the sales of our products to fund our operations. We have not attained
profitable operations and are dependent upon obtaining financing to pursue any
extensive acquisitions and activities. For these reasons, our auditors stated in
their report on our audited financial statements that they have substantial
doubt that we will be able to continue as a going concern without further
financing.
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 produce and distribute our products and anticipate this will
continue until we accrue sufficient capital reserves to finance all of our
productions independently.
Plan of Operation
Our management has focused on acquiring or merging with one or
more operating businesses. Our efforts to identify a target business resulted in
the Share Exchange Agreement with Non Industrial Manufacture Inc. (NIM), a
private company. On June 2, 2011 the share exchange with NIM closed. We are now
an urban produce production company with patents pending that aims to be the
supplier of choice of fresh, locally grown, high-quality organic and
conventional fruits and vegetables for urban consumers.
We estimate that our expenses over the next 12 months will be
approximately $2,301,800 as summarized in the table below. These estimates may
change significantly depending on the nature of our future business activities
and our ability to raise capital from investors or other sources.
Description
|
Potential
Completion
Date
|
Estimated
Expenses
($)
|
Seedling purchases
|
12
months
|
96,000
|
Packaging
|
12 months
|
76,800
|
Direct cost of sales (including research and development)
|
12 months
|
979,200
|
Shipping
|
12 months
|
225,000
|
Payroll
|
12 months
|
350,000
|
Advertising and marketing
|
12 months
|
370,000
|
General and administrative expenses
|
12 months
|
204,800
|
Total
|
|
2,301,800
|
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. Our professional
fees will include legal, accounting and auditing fees related to our regulatory
filings throughout the year.
Based on our planned expenditures, we require additional funds
of $2,301,800 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 scale down
or perhaps even cease our operations.
5
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.
Off-Balance Sheet Arrangements
As of January 31, 2012 we had no off balance sheet transactions
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.
Critical Accounting Policies
Our financial statements are impacted by the accounting
policies used and the estimates and assumptions made by management during their
preparation. A complete summary of these policies are included in note 2 of the
Notes to our Financial Statements. We have identified below the accounting
policies that are of particular importance in the presentation of our financial
position, results of operations and cash flows, and which require the
application of significant judgment by our management.
The Companys financial statements are prepared using the
accrual method of accounting. The Company has elected a July 31 year-end.
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.
|
c.
|
Use of Estimates and
Assumptions
|
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 useful life
and recoverability of long-lived assets, fair value of convertible debt and
share-based payments, 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.
|
d.
|
Foreign Currency
Translation
|
Transactions in foreign currencies are translated into the
currency of measurement at the exchange rates in effect on the transaction date.
Monetary balance sheet items expressed in foreign currencies are translated into
U.S. dollars at the exchange rates in effect at the balance sheet date. The
resulting exchange gains and losses are recognized in income.
The Companys integrated foreign subsidiary is financially or
operationally dependent on the Company. The Company uses the temporal method to
translate the accounts of its integrated operations into U.S. dollars. Monetary
assets and liabilities are translated at the 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.
6
ITEM 4.
|
CONTROLS AND PROCEDURES.
|
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures, as defined in
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), that are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. We carried out an evaluation,
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures as of January
31, 2012. Based on the evaluation of these disclosure controls and procedures
the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective.
Changes in Internal Controls
During the quarter covered by this report there were no changes
in our internal control over financial reporting (as defined in Rule 13a-15(e)
and Rule 15d-15(e) under the Exchange Act) that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
The Company is not required by current SEC rules to include,
and does not include, an auditor's attestation report. The Company's registered
public accounting firm has not attested to Management's reports on the Company's
internal control over financial reporting.
7
PART II. OTHER INFORMATION
ITEM 1.
|
LEGAL PROCEEDINGS
|
None.
We are a smaller reporting company as defined by Rule 12b-2 of
the Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCCEDS
|
None.
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None.
ITEM 4.
|
REMOVED AND RESERVED
.
|
|
|
ITEM 5.
|
OTHER INFORMATION
|
None.
The following exhibits are included with this quarterly
filing:
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
March 14, 2012
|
Urban Barns Foods Inc.
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Jacob Benne
|
|
|
By: Jacob Benne
|
|
|
(Chief Executive Officer, President, &
Director)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Daniel Meikleham
|
|
|
By: Daniel Meikleham
|
|
|
(Chief Financial Officer, Principal Accounting
Officer & Director)
|
9
Urban Barns Foods (CE) (USOTC:URBF)
Historical Stock Chart
From Aug 2024 to Sep 2024
Urban Barns Foods (CE) (USOTC:URBF)
Historical Stock Chart
From Sep 2023 to Sep 2024