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, 2015
[ ] 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) |
|
|
|
Office 205 290 Lakeshore Road |
|
Pointe-Claire, Quebec, Canada H9S 4L3 |
514-907-4989 |
(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 17, 2015 the registrants outstanding common stock
consisted of 287,230,928 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.
URBAN BARNS FOODS INC.
Consolidated Financial Statements
For the Three and Six Months Ended January 31, 2015
(Expressed in U.S. dollars)
(unaudited)
Financial Statement Index
URBAN BARNS FOODS INC.
Consolidated Balance Sheets
(expressed in U.S. dollars)
|
|
January 31, |
|
|
July 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
21,007 |
|
|
75,969 |
|
Accounts receivable |
|
15,485 |
|
|
1,318 |
|
Amounts receivable |
|
89,337 |
|
|
57,976 |
|
Inventory |
|
26,031 |
|
|
13,444 |
|
Prepaid expenses and deposits |
|
33,806 |
|
|
52,469 |
|
Total current assets |
|
185,666 |
|
|
201,176 |
|
Property and equipment (Note 3) |
|
559,663 |
|
|
523,286 |
|
Intangible assets
(Note 4) |
|
97,542 |
|
|
105,281 |
|
Total assets |
|
842,871 |
|
|
829,743 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable and accrued
liabilities (Note 6) |
|
162,648 |
|
|
170,555 |
|
Due to related parties (Note 6) |
|
157,200 |
|
|
73,745 |
|
Note payable (Note 5) |
|
180,631 |
|
|
|
|
Total liabilities |
|
500,479 |
|
|
244,300 |
|
Nature of operations and continuance of
business (Note 1) |
|
|
|
|
|
|
Commitments (Note 10) |
|
|
|
|
|
|
Subsequent events (Note 11) |
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
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: 285,494,483 and 270,746,982 shares, respectively |
|
285,494 |
|
|
270,747 |
|
Common stock, Class B
Authorized: 25,000,000 common shares, value of $0.001
Issued and outstanding: nil shares |
|
|
|
|
|
|
Additional paid-in capital |
|
5,326,577 |
|
|
4,370,807 |
|
Common stock issuable (Note 7) |
|
|
|
|
117,553 |
|
Deferred compensation (Note 6) |
|
(20,548 |
) |
|
(37,352 |
) |
Accumulated deficit |
|
(5,249,131 |
) |
|
(4,136,312 |
) |
Total
stockholders equity |
|
342,392 |
|
|
585,443 |
|
Total liabilities and stockholders equity |
|
842,871 |
|
|
829,743 |
|
(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)
(unaudited)
|
|
Three Months |
|
|
Three Months |
|
|
Six Months |
|
|
Six Months |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
January 31, |
|
|
January 31, |
|
|
January 31, |
|
|
January 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
24,084 |
|
|
|
|
|
41,336 |
|
|
|
|
Cost of sales |
|
(6,984 |
) |
|
|
|
|
(12,892 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
17,100 |
|
|
|
|
|
28,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
25,293 |
|
|
13,513 |
|
|
52,603 |
|
|
28,095 |
|
Foreign exchange loss (gain) |
|
(1,881 |
) |
|
(21,236 |
) |
|
946 |
|
|
(23,035 |
) |
General and administrative
(Note 6) |
|
215,866 |
|
|
204,223 |
|
|
683,321 |
|
|
465,638 |
|
Professional fees (Note 6) |
|
16,861 |
|
|
46,914 |
|
|
81,771 |
|
|
84,103 |
|
Research and development |
|
107,475 |
|
|
75,021 |
|
|
322,622 |
|
|
79,239 |
|
Total operating
expenses |
|
363,614 |
|
|
318,435 |
|
|
1,141,263 |
|
|
634,040 |
|
Loss from operations |
|
(346,514 |
) |
|
(318,435 |
) |
|
(1,112,819 |
) |
|
(634,040 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discounts on
convertible debentures |
|
|
|
|
(44,281 |
) |
|
|
|
|
(44,281 |
) |
Amortization of deferred financing costs |
|
|
|
|
(1,693 |
) |
|
|
|
|
(2,864 |
) |
Loss on change in fair value
of derivative liabilities |
|
|
|
|
(147,635 |
) |
|
|
|
|
(151,870 |
) |
Interest expense |
|
|
|
|
(4,409 |
) |
|
|
|
|
(22,197 |
)
|
Total other income (expense) |
|
|
|
|
(198,018 |
) |
|
|
|
|
(221,212 |
) |
Net loss |
|
(346,514 |
) |
|
(516,453 |
) |
|
(1,112,819 |
) |
|
(855,252 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding |
|
281,417,146 |
|
|
222,844,719 |
|
|
279,946,918 |
|
|
191,867,693 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-3
URBAN BARNS FOODS INC.
Consolidated Statements of
Cash Flows
(expressed in U.S. dollars)
(unaudited)
|
|
For the Six |
|
|
For the Six |
|
|
|
Months Ended |
|
|
Months Ended |
|
|
|
January 31, |
|
|
January 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Operating Activities |
|
|
|
|
|
|
Net loss for the period |
|
(1,112,819 |
) |
|
(855,252 |
) |
Adjustments to reconcile net loss to net
cash used in operating activities: operating activities: |
|
|
|
|
|
|
Accretion of discount on convertible
debentures |
|
|
|
|
44,281 |
|
Amortization of deferred
financing costs |
|
|
|
|
2,864 |
|
Depreciation |
|
52,603 |
|
|
28,095 |
|
Deferred compensation |
|
16,804 |
|
|
175,205 |
|
Effects of foreign exchange |
|
15.127 |
|
|
|
|
Issuance of shares for
services |
|
32,464 |
|
|
|
|
Loss on change in fair value of derivative
liabilities |
|
|
|
|
151,870 |
|
Stock-based compensation |
|
280,000 |
|
|
60,811 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
(14,167 |
) |
|
85 |
|
Amounts receivable |
|
(31,361 |
) |
|
(6,483 |
) |
Inventory |
|
(12,587 |
) |
|
(1,734 |
) |
Prepaid expenses and deposits |
|
18,663 |
|
|
9,561 |
|
Accounts payable and accrued
liabilities |
|
(7,907 |
) |
|
25,336 |
|
Due
to related parties |
|
(10,913 |
) |
|
41,407 |
|
Net cash used in operating activities |
|
(774,093 |
) |
|
(323,954 |
) |
Investing Activities |
|
|
|
|
|
|
Purchase of intangible assets |
|
(7,388 |
) |
|
|
|
Purchase of property and equipment |
|
(88,980 |
) |
|
(208,093 |
) |
Net cash used in investing activities |
|
(96,368 |
) |
|
(208,093 |
) |
Financing Activities |
|
|
|
|
|
|
Proceeds from issuance of
convertible debentures |
|
|
|
|
32,500 |
|
Proceeds from issuance of common shares |
|
540,500 |
|
|
1,000,000 |
|
Proceeds from note payable |
|
180,631 |
|
|
|
|
Proceeds from related parties |
|
94,368 |
|
|
48,424 |
|
Finders fees paid |
|
|
|
|
(80,000 |
) |
Repayments to related parties |
|
|
|
|
(151,780 |
) |
Net cash provided by financing activities |
|
815,499 |
|
|
849,144 |
|
Increase (decrease) in cash |
|
(54,962 |
) |
|
317,097 |
|
Cash, beginning of year |
|
75,969 |
|
|
29,617 |
|
Cash, end of
period |
|
21,007 |
|
|
346,714 |
|
Non-cash investing and financing
activities: |
|
|
|
|
|
|
Shares issued upon conversion of debentures |
|
|
|
|
104,000 |
|
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.
Consolidated Statements of Stockholders Equity
(Expressed in U.S.
dollars)
(unaudited)
|
|
Common Stock |
|
|
Additional |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
Class
A |
|
|
Class
B |
|
|
Paid-In |
|
|
Stock |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Issuable |
|
|
Compensation |
|
|
Deficit |
|
|
Total |
|
|
|
# |
|
|
$ |
|
|
# |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance, July 31, 2014 |
|
270,746,982 |
|
|
270,747 |
|
|
|
|
|
|
|
|
4,370,807 |
|
|
117,553 |
|
|
(37,352 |
) |
|
(4,136,312 |
) |
|
585,443 |
|
Shares issued for cash |
|
13,935,865 |
|
|
13,936 |
|
|
|
|
|
|
|
|
644,117 |
|
|
(117,553 |
) |
|
|
|
|
|
|
|
540,500 |
|
Shares issued for services |
|
811,636 |
|
|
811 |
|
|
|
|
|
|
|
|
31,653 |
|
|
|
|
|
|
|
|
|
|
|
32,464 |
|
Fair value of stock options granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
280,000 |
|
|
|
|
|
|
|
|
|
|
|
280,000 |
|
Deferred compensation costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,804 |
|
|
|
|
|
16,804 |
|
Net
loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,112,819 |
) |
|
(1,112,819 |
) |
Balance, January 31, 2015 |
|
285,494,483 |
|
|
285,494 |
|
|
|
|
|
|
|
|
5,326,577 |
|
|
|
|
|
(20,548 |
) |
|
(5,249,131 |
) |
|
342,392 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-5
URBAN BARNS FOODS INC.
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.
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. |
|
|
|
|
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 January 31, 2015, the Company has not generated
significant revenues, has a working capital deficit of $314,813, and has
an accumulated deficit of $5,249,131. 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 |
|
|
|
|
(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 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 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. |
|
|
|
|
(c) |
Interim Financial Statements |
|
|
|
|
|
These interim unaudited consolidated financial statements
have been prepared on the same basis as the annual consolidated 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. |
|
|
|
|
(d) |
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. |
F-6
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. |
Significant Accounting Policies
(continued) |
|
|
|
|
(e) |
Accounts Receivable |
|
|
|
|
|
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 the 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 January 31, 2015 and July 31, 2014, the
Company had no allowances for doubtful accounts. |
|
|
|
|
(f) |
Inventory |
|
|
|
|
|
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. |
|
(g) |
Property and Equipment |
|
|
|
|
|
Property and equipment consists of production equipment
and is stated at cost and amortized straight-line over five
years. |
|
|
|
|
(h) |
Intangible Assets |
|
|
|
|
|
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. |
|
|
|
|
(i) |
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. |
|
|
|
|
(j) |
Revenue Recognition |
|
|
|
|
|
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. |
|
|
|
|
(k) |
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, 2015 and July
31, 2014, the Company had no items that affected comprehensive
loss. |
F-7
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. |
Significant Accounting Policies
(continued) |
|
|
|
|
(l) |
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. |
|
|
|
|
(m) |
Income Taxes |
|
|
|
|
|
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. |
|
|
|
|
|
As of January 31, 2015 and July 31, 2014, the Company did
not have any amounts recorded pertaining to uncertain tax
positions. |
|
|
|
|
(n) |
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. As at January 31, 2015, the Company had 29,537,027 (July
31, 2014 12,237,027) potentially dilutive shares outstanding. |
|
|
|
|
(o) |
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.
F-8
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. |
Significant Accounting Policies
(continued) |
|
(o) |
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, amounts due to related parties, and note payable.
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. |
|
|
|
|
(p) |
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. |
|
|
|
|
(q) |
Reclassification |
|
|
|
|
|
Certain financial statement captions have been
reclassified from the prior year to conform to the current year
presentation. |
|
|
|
|
(r) |
Recent Accounting Pronouncements |
|
|
|
|
|
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. |
|
|
|
|
|
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. |
Property and Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
January 31, |
|
|
July 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
Net Carrying |
|
|
Net Carrying |
|
|
|
|
Cost |
|
|
Depreciation |
|
|
Impairment |
|
|
Value |
|
|
Value |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production equipment |
|
735,476 |
|
|
175,813 |
|
|
|
|
|
559,663 |
|
|
523,286 |
|
F-9
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
January 31, 2015 |
|
|
July 31, |
|
|
|
|
|
|
|
|
|
|
Net Carrying |
|
|
2014 |
|
|
|
|
|
|
|
Accumulated |
|
|
Value |
|
|
Net Carrying |
|
|
|
|
Cost |
|
|
Depreciation |
|
|
$ |
|
|
Value |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
Patent development costs |
|
97,542 |
|
|
|
|
|
97,542 |
|
|
105,281 |
|
5. |
Note Payable |
|
|
|
|
(a) |
On October 29, 2014, the Company issued a promissory note
for $180,631 (CND$223,000) which is secured against the Companys assets,
bears interest at a rate of 12.68% per annum and due the earlier of: (i)
the Company raising CND$1,000,000 or more through issuance of equity or
debt; or (ii) October 29, 2015. |
6. |
Related Party Transactions |
|
|
|
|
(a) |
As at January 31, 2015, the Company owed $55,115 (July
31, 2014 - $61,813) to directors and officers of the Company. The amounts
owing are unsecured, non-interest bearing, and due on demand. |
|
|
|
|
(b) |
As at January 31, 2015, the Company owed $3,390 (July 31,
2014 $8,259) to the Vice President of the Company. The amount owing is
unsecured, non-interest bearing, and due on demand. |
|
|
|
|
(c) |
On December 18, 2014, the Company issued a promissory
note for $47,185 (CND$60,000) with a director of the Company, which is
secured against the Companys assets, bears interest at a rate of 12.68%
per annum and due on the earlier of i) the Company raising CND$1,000,000
or more through issuance of equity or debt or ii) December 18, 2015. As at
January 31, 2015, $707 (CND$900) is owed for accrued interest. |
|
|
|
|
(d) |
On January 7, 2015, the Company issued a promissory note
for $47,185 (CND$60,000) with a director of the Company, which is secured
against the Companys assets, bears interest at a rate of 12.68% per annum
and due on the earlier of i) the Company raising CND$1,000,000 or more
through issuance of equity or debt or ii) January 7, 2016. As at January
31, 2015, $472 (CND$600) is owed for accrued interest. |
|
|
|
|
(e) |
As at January 31, 2015, the Company owed $3,146 (July
2014 - $3,673) to a company controlled by the former President. The amount
owing is unsecured, non-interest bearing, and due on demand. |
|
|
|
|
(f) |
As at January 31, 2015, the Company had deferred
compensation of $20,548 (July 31, 2014 - $37,352) incurred to directors
and officers of the Company. |
|
|
|
|
(g) |
During the period ended January 31, 2015, the Company
incurred professional fees of $nil (2014 - $12,600) to the spouse of the
former President of the Company. |
|
|
|
|
(h) |
During the period ended January 31, 2015, the Company
incurred consulting fees of $88,472 (CDN$112,500) (2014 - $90,000) to
directors and officers of the Company. |
|
|
|
|
(i) |
During the period ended January 31, 2015, the Company
incurred consulting fees of $1,928 (CND$2,250) (2014 - $nil) to the
daughter of the President of the Company. |
|
|
|
|
(j) |
During the period ended January 31, 2015, the Company
incurred consulting fees of $35,994 (CND$42,000) (2014 - $nil) and cost of
living expenses of $7,713 (CND$9,000) (2014 - $nil) to the daughter of the
Vice President of the Company. |
|
|
|
|
(k) |
During the period ended January 31, 2015, the Company
incurred finders fees of $nil (2014 - $150,000) to a director of the
Company. |
|
|
|
|
(l) |
During the period ended January 31, 2015, the Company
granted 5,925,000 (2014 nil) stock options with a fair value of $237,000
(2014 - $nil) to directors and officers of the
Company. |
F-10
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
6. |
Related Party Transactions (continued) |
|
|
|
|
(m) |
During the period ended January 31, 2015, the Company
granted 200,000 (2014 nil) stock options with a fair value of $8,000
(2014 - $nil) to the spouse of the President of the Company. |
|
|
|
|
(n) |
During the period ended January 31, 2015, the Company
granted 150,000 (2014 nil) stock options with a fair value of $6,000
(2014 - $nil) to the daughter of the Vice President of the
Company. |
7. |
Common Stock |
|
|
|
|
(a) |
On August 21, 2014, the Company completed a private
placement of 10,010,000 units at $0.05 per unit for gross proceeds of
$500,500, of which $100,000 had been received as at July 31, 2014 and
recorded as common stock issuable. 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. |
|
|
|
|
(b) |
On October 31, 2014, the Company issued 425,865 shares of
Class A common stock pursuant to the conversion of $5,062 of a convertible
debenture and $3,601 of accrued interest during the year end July 31,
2014. As at July 31, 2014, this amount was recorded as common stock
issuable. |
|
|
|
|
(c) |
On January 13, 2015, the Company entered into a
consulting agreement pursuant to which the Company issued 811,636 common
shares with a fair value of $32,464 in consideration of consulting
services. |
|
|
|
|
(d) |
On January 26, 2015, the Company completed a private
placement of 3,500,000 common shares at $0.04 per share for gross proceeds
of $140,000. |
|
|
|
8. |
Share Purchase Warrants |
|
|
|
|
The following table summarizes the continuity of share
purchase warrants: |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
Number of |
|
|
Exercise Price |
|
|
|
|
Warrants |
|
|
$ |
|
|
Balance, July 31, 2014 |
|
2,027,027 |
|
|
0.070 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
10,010,000 |
|
|
0.075 |
|
|
Balance, January
31, 2015 |
|
12,037,027 |
|
|
0.074 |
|
As at January 31, 2015, the following
share purchase warrants were outstanding:
Number of |
|
Exercise |
|
warrants |
|
price |
|
outstanding |
|
$ |
Expiry
date |
2,027,027 |
|
0.070 |
October 31, 2016 |
10,010,000 |
|
0.075 |
August 20, 2017 |
|
|
|
|
12,037,027 |
|
|
|
9. |
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 10% of the Companys issued and
outstanding Class A stock at the time of the grant exercisable for the
period of up to ten years. The exercise price and the vesting terms of
each option is determined by the Board of Directors, or a committee
appointed by the Board of Directors. |
F-11
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
9. |
Stock Options (continued) |
|
|
|
The following table summarizes the continuity of the
Companys stock options: |
|
|
|
|
|
|
Weighted |
|
|
Aggregate |
|
|
|
|
|
|
|
Average |
|
|
Intrinsic |
|
|
|
|
Number |
|
|
Exercise Price |
|
|
Value |
|
|
|
|
of
Options |
|
|
$ |
|
|
$ |
|
|
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 |
|
|
|
|
|
Granted |
|
7,000,000 |
|
|
0.10
|
|
|
|
|
|
Outstanding, January 31, 2015 |
|
17,500,000 |
|
|
0.10 |
|
|
|
|
Additional information regarding stock
options as of January 31, 2015, 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 |
17,500,000 |
8.79 |
0.10 |
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:
|
January 31, |
July 31, |
|
2015 |
2014 |
|
|
|
Risk-free interest rate |
2.46% |
2.71% |
Expected life (in years) |
10.0 |
10.0 |
Expected volatility |
443% |
475%
|
|
The fair value of stock options vested during the period
ended January 31, 2015 was $280,000 (2014 $60,811) which was recorded as
stock-based compensation and charged to operations. The weighted average
fair value of stock options granted during the period ended January 31,
2015 was $0.04 (2014 $0.03) per option. |
|
|
|
10. |
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 per annum. |
|
|
|
|
(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 $100,000 annually are due on October 1,
2014 (paid), October 1, 2015, October 1, 2016, and October 1, 2017. The agreement expires on January 1,
2018. |
F-12
URBAN BARNS FOODS INC.
Notes to the Consolidated
Financial Statements
(expressed in U.S. dollars)
(unaudited)
10. |
Commitments (continued) |
|
|
|
|
(c) |
On March 19, 2014, the Company leased a warehouse located
in Quebec. The term of the lease commences on March 20, 2014, and expires
on May 31, 2019. The monthly lease rate is subject to an annual increase
of 2%. The minimum lease payments over the remaining term of the lease are
as follows: |
Year |
|
CND$ |
|
2015 |
|
117,275 |
|
2016 |
|
250,002 |
|
2017 |
|
255,002 |
|
2018 |
|
260,102 |
|
2019 |
|
265,304 |
|
|
|
1,147,685 |
|
|
(d) |
On July 17, 2014, the Company entered into a lease
agreement for a delivery van at a rate of CND$630 per month until July 17,
2019. The minimum lease payments over the remaining term of the lease are
as follows: |
Year |
|
CND$ |
|
2015 |
|
3,780 |
|
2016 |
|
7,560 |
|
2017 |
|
7,560 |
|
2018 |
|
7,560 |
|
2019 |
|
7,560 |
|
|
|
34,020 |
|
|
(e) |
On December 1, 2014, the Company entered into a lease agreement for a company vehicle at a rate of CND$952 per month until October 31, 2018. The minimum lease payments over the remaining term of the lease are as follows: |
Year |
|
CND$ |
|
2015 |
|
5,712 |
|
2016 |
|
11,424 |
|
2017 |
|
11,424 |
|
2018 |
|
9,520 |
|
|
|
38,080 |
|
11. |
Subsequent Event |
|
|
|
On February 10, 2015, the Company issued a promissory note for $166,000 to one investor. Under the terms of the note, the amount owing is unsecured, bears interest at 8% per annum, and due on February 12, 2016. The amount owing is convertible into shares of the Company’s Class A common stock after 180 days at 70% of the market value of such stock calculated as the weighted average of the three lowest trading prices during the twelve trading days prior to the investor submitting a notice of conversion.
|
F-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
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. The Company’s 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 the Company assumes no obligation to update such forward-looking statements. The following discusses the Company’s financial condition and results of operations based upon its 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 the Company’s financial statements and the notes thereto included elsewhere herein.
Results of Operations
During the three months ended January 31, 2015, following the
opening of the Companys first growing facility, revenues of $24,084 were
generated with a cost of sales of $6,984, resulting in a gross margin of
$17,100. During the three months ended January 31, 2014, the Company did not
generate any revenue.
The Company incurred operating expenses of $363,614 for the
three months ended January 31, 2015, compared with $318,435 during the three
months ended January 31, 2014. This increase was due to higher research and
development costs and general and administrative expense, resulting from the
opening of the Companys first growing facility.
The Company incurred a net loss of $346,514 for the three
months ended January 31, 2015, compared with a net loss of $516,453 during the
three months ended January 31, 2014. The decrease in the net loss was primarily
due to charges incurred for changes in fair value of derivative liabilities and
accretion of discounts on convertible debentures during the three months ended
January 31, 2014 that were not incurred during the same period of the current year.
During the six months ended January 31, 2015, following the
opening of the Companys first growing facility, revenues of $41,336 were
generated with a cost of sales of $12,892, resulting in a gross margin of
$28,444. During the six months ended January 31, 2014, the Company did not
generate any revenue.
The Company incurred operating expenses of $1,141,263 for the
six months ended January 31, 2015, compared with $634,040 during the six months
ended January 31, 2014. This increase was due to higher research and
development, and general and administrative expense, resulting from the opening
of the Companys first growing facility.
The Company incurred a net loss of $1,112,819 for the six
months ended January 31, 2015, compared with a net loss of $855,252 during the
six months ended January 31, 2014. The increase in the net loss was due to
increases in operating expenses as the Companys first growing facility was
opened during the six months ended January 31, 2015.
14
Liquidity and Capital Resources
The following table provides selected financial data about the
Company for the quarter ended January 31, 2015:
|
|
January 31, |
|
|
July 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
Cash |
|
21,007 |
|
|
75,969 |
|
Current Assets |
|
185,666 |
|
|
201,176 |
|
Total Assets |
|
842,871 |
|
|
829,743 |
|
Current Liabilities |
|
500,479 |
|
|
244,300 |
|
Shareholders Equity |
|
342,392 |
|
|
585,443 |
|
As of January 31, 2015, the Company had cash of $21,007, total current assets of $185,666, total current liabilities of $500,479 and a working capital deficit of $307,829, compared to cash of $75,969, total current assets of $201,176, total current liabilities of $244,300, and a working capital deficit of $43,124 as of July 31, 2014. The increase in the Company’s working capital deficit is primarily the result of the issuance of a promissory note in the amount of $180,631 to the Company’s majority shareholder and a promissory note in the amount of $94,368 to one of the Company’s directors, offset by a reduction in trade payables. The proceeds of the two promissory notes were used to support the operating costs of the Company’s recently opened first growing facility.
Cashflows from Operating Activities
During the six months ended January 31, 2015, the Company used $774,093 of cash for operating activities compared to $323,954 for the six months ended January 31, 2014. The increase in the use of cash for operating activities was attributed to operating costs that were incurred for the growing facility in the Montreal area during the fiscal year, as the Company commenced operations in this new facility.
Cashflows from Investing Activities
During the six months ended January 31, 2015, the Company used
cash of $96,368 for investing activities compared to $208,093 during the six
months ended January 31, 2014. The decrease in the cash used for investing
activities was attributed to a decrease in the amount of cash spent on property
and equipment, as the Company incurred costs to complete the development of the
growing facilities during the prior year.
Cashflows from Financing Activities
During the six months ended January 31, 2015, the Company received cash proceeds of $815,499 from financing activities compared to $849,144 during the six months ended January 31, 2014. During the current period, the Company received $94,368 from related parties, $540,500 from the issuance of common stock, $180,631 in exchange for the issuance of a note payable that is secured against the Company’s assets, bears interest at 12.68% per annum, and is due on the earlier of the Company raising CND$1,000,000 in financing or October 29, 2014. During the six months ended January 31, 2014, the Company received $1,000,000 in financing from the issuance of common stock net of finders’ fees of $80,000, and $32,500 from the issuance of convertible debentures offset by a net repayment of $103,356 to related parties.
As at January 31, 2015, the Company had an accumulated deficit
of $5,242,147. The Company is dependent on the funds raised through its equity
or debt financings, and revenue generated through the sales of the Companys
products to fund its operations.
The Company anticipates that it will meet its ongoing cash
requirements by generating revenues as well as through equity or debt financing.
It plans to cooperate with various individuals and institutions in order to
acquire the necessary financing required to produce and distribute the Companys
products and anticipates this will continue until it accrues sufficient capital
reserves to be able to finance all of its productions independently.
15
Plan of Operations
The Companys 2015 operating plan is focused on revenue
generation, product line development and machine design refinement. It recently
completed its first growing facility in the Montreal area and has begun
commercial scale operations and sales. The Company will continue research and
development activities in Montreal with McGill University.
The growing facility consists of 13 machines and, although small, has considerable production capacity. This new facility is fully operational and has permitted the Company to apply for and receive CanadaGAP Food Safety Certification as a Producer and Packer of Lettuce, Basil and MicroGreens, with the third-party auditor noting that Urban Barns’ quality control system goes above and beyond the requirements of the CanadaGAP Standard. The Company’s Montreal area growing facility has commenced shipping product to multiple 4 and 5-star restaurants and hotels, as well as large wholesale distributors.
In addition to the commercial barn operation the Company has been collaborating with McGill University’s McDonald campus to research the optimization of the variables of controlled environment agriculture (CEA) and apply those improvements within its growing facility. McGill has set up one of the Company’s growing machines on its campus and will conduct research in conjunction with its recent NSERC Collaborative Research & Development grant with industry support from Urban Barns.
The Company estimates that its expenses over the next 6 months will be approximately $1,540,000 as summarized in the table below. These estimates may change significantly depending on the nature of its future business activities and its ability to raise capital from investors or other sources.
Description |
Potential
Completion
Date |
Estimated
Expenses
($) |
Cost of sales |
6 months |
337,000 |
Sales & marketing expenses |
6 months |
125,000 |
General and administrative expenses |
6 months |
428,000 |
Additional growing machines & building improvements |
6 months |
650,000 |
Total |
|
1,540,000 |
The Companys 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 its website. The professional
fees will include legal, accounting and auditing fees related to its regulatory
filings throughout the year.
Based on its planned expenditures, the Company will require
additional funds of $1,540,000 to proceed with its business plan over the next 6
months. If it is not able to obtain additional financing on a timely basis, the
Company will be unable to conduct its operations as planned, and will not be
able to meet its obligations as they become due. In such event, the Company will
be forced to scale down or perhaps even cease its operations.
Inflation
The amounts presented in the Company’s financial statements do not
provide for the effect of inflation on its 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.
16
Off-Balance Sheet Arrangements
As of January 31, 2015 the Company had one off balance sheet
transaction that will have or is reasonably likely to have a current or future
effect on its financial condition, changes in its financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital
resources. In collaboration with McGill University researcher Dr. Mark Lefsrud
of the Faculty of Agricultural and Environmental Sciences, the Company will
further develop an indoor plant growth system aimed at expanding locally grown
food. With industrial support from the Company, McGill University was recently
awarded an NSERC Collaborative Research & Development (CRD) grant in the
amount of $240,000 in order to continue the development of this important
project. The grant will run for an initial period of two years with the aim of
optimizing light emitting diodes to assess photosynthetic efficiency of
horticultural plants. The project is focused on the refinement of the photo
synthetically active radiation efficiency (PAR curve) of plants using light
emitting diodes (LEDs), and the basic science research will be used to optimize
the lighting in the Company’s cubic farming system to maximize production and reduce
energy costs.
Critical Accounting Policies
The Companys 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 the Financial Statements. The Company has identified
below the accounting policies that are of particular importance in the
presentation of its financial position, results of operations and cash flows,
and which require the application of significant judgment by the Companys
management.
Inventory
Inventory is comprised of seeds, growing medium, fertilizers 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.
Intangible Assets
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.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
Not required.
17
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and
Procedures
The Company maintains 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 it in the reports that the Company files or submits 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 the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of our management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of January 31, 2015. Based on the evaluation of these disclosure controls and procedures the Chief Executive Officer and Chief Financial Officer concluded thatthe Company’s disclosure controls and procedures were effective. The Company’s independent auditors, Saturna Group Chartered Accountants LLP, were not required to carry out an evaluation of the Company’s internal controls and have not verified or confirmed the accuracy of management’s assertions over its effectiveness of internal controls over financial reporting.
Changes in Internal Controls
During the quarter covered by this report there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None that are material in nature.
ITEM 1A. RISK FACTORS.
Not required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCCEDS.
On January 13, 2015, the Company entered into a consulting agreement pursuant to which the Company issued 811,636 shares of Class A common stock with a fair value of $32,464 in consideration of consulting services.
On January 26, 2015, the Company completed a private placement of 3,500,000 shares of Class A common stock at $0.04 per share for gross proceeds of $140,000.
In both cases, the Company issued the shares in reliance on Regulation S promulgated under the United States Securities Act of 1933, as amended (the “Securities Act”). The Company’s reliance on Regulation S was based on the fact that the shares were sold in “offshore transactions” as defined in Regulation S. The Company did not engage in any directed selling efforts in the United States in connection with the sale of the shares, and the investors were not U.S. persons and did not acquire the shares for the account or benefit of any U.S. person.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The following exhibits are included with this quarterly filing:
18
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 17, 2015 |
Urban Barns Foods Inc. |
|
|
|
|
|
|
|
/s/
Richard Groome |
|
By: Richard Groome |
|
Chief Executive Officer, President &
Director |
19
Exhibit 31.1
CERTIFICATION
I, Richard Groome, certify that:
1. |
I have reviewed this report on Form 10-Q 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. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
a) |
Designed such disclosure controls and procedures or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c) |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
d) |
Disclosed in this report any change in the 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. |
The registrants other certifying officer(s) and I have
disclosed, based on our 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. |
Date: March 17, 2015
/s/ Richard Groome
Richard Groome
Chief Executive
Officer, President & Director
Exhibit 31.2
CERTIFICATION
I, Horst Hueniken, certify that:
1. |
I have reviewed this report on Form 10-Q 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. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
a) |
Designed such disclosure controls and procedures or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c) |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
d) |
Disclosed in this report any change in the 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. |
The registrants other certifying officer(s) and I have
disclosed, based on our 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. |
Date: March 17, 2015
/s/ Horst Hueniken
Horst Hueniken
Chief Financial
Officer, Principal Accounting Officer & 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 Quarterly Report of Urban Barns Foods
Inc. (the Company) on Form 10-Q for the period ending January 31, 2015 as
filed with the Securities and Exchange Commission on the date hereof (the
Report), I, Richard Groome, Chief Executive Officer of the Company, 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. |
IN WITNESS WHEREOF, the undersigned has executed this
certification as of the 17th day of March, 2015.
/s/ Richard Groome
Richard Groome
Chief
Executive Officer, President & 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 Quarterly Report of Urban Barns Foods
Inc. (the Company) on Form 10-Q for the period ending January 31, 2015 as
filed with the Securities and Exchange Commission on the date hereof (the
Report), I, Horst Hueniken, Chief Financial Officer of the Company, 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. |
IN WITNESS WHEREOF, the undersigned has executed this
certification as of the 17th day of March, 2015.
/s/ Horst Hueniken
Host Hueniken
Chief Financial
Officer, Principal Accounting Officer & Director
Urban Barns Foods (CE) (USOTC:URBF)
過去 株価チャート
から 5 2024 まで 6 2024
Urban Barns Foods (CE) (USOTC:URBF)
過去 株価チャート
から 6 2023 まで 6 2024