Attached files
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 October 31, 2010
o 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: 333-145897
URBAN BARNS FOODS INC.
(Exact name of registrant as specified in its charter)
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Nevada
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N/A
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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7170 Glover Road
Milner, B.C., Canada V0X 1T0
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604-888-0420
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(Address of principal executive offices) (Zip Code)
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(Registrant’s telephone number, including area code)
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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 o
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 o Accelerated filer o Non-accelerated filer o Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o 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. o Yes o No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of December 14, 2010 the registrant’s outstanding common stock consisted of 49,804,758 shares.
Table of Contents
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1
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.
(A Development Stage Company)
October 31, 2010
(Unaudited)
Financial Statement Index
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Balance Sheets
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F-1
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Statements of Expenses
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F-2
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Statements of Cash Flows
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F-3
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Notes to the Financial Statements
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F-4
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2
Urban Barns Foods Inc.
(formerly HL Ventures Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
(expressed in U.S. dollars)
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October 31,
2010
$
(unaudited)
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July 31,
2010
$
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ASSETS
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Current Assets
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Cash
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2,790 | 5,642 | ||||||
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Prepaid Expenses
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5,076 | 23,410 | ||||||
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Total Current Assets
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7,866 | 29,052 | ||||||
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Deferred Financing Charges
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250,000 | 250,000 | ||||||
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Property and Equipment (Note 3)
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13,072 | 13,686 | ||||||
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Total Assets
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270,938 | 292,738 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current Liabilities
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Accounts Payable
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47,162 | 20,685 | ||||||
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Due to a Related Party (Note 4)
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13,202 | 4,423 | ||||||
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Total Liabilities
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60,364 | 25,108 | ||||||
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Stockholders’ Equity
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Common Stock
Authorized: 100,000,000 common shares, with a par value of $0.001 per share
Issued and outstanding: 49,804,768 common shares
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49,805 | 49,805 | ||||||
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Additional Paid-In Capital
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569,176 | 569,176 | ||||||
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Accumulated Deficit During the Development Stage
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(408,407 | ) | (351,351 | ) | ||||
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Total Stockholders’ Equity
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210,574 | 267,630 | ||||||
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Total Liabilities and Stockholders’ Equity
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270,938 | 292,738 | ||||||
Nature of Operations and Continuance of Business (Note 1)
(The accompanying notes are an integral part of these financial statements)
F-1
Urban Barns Foods Inc.
(formerly HL Ventures Inc.)
(A Development Stage Company)
Consolidated Statements of Operations
(expressed in U.S. dollars)
(unaudited)
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For the Three
Months Ended
October 31,
2010
$
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For the Three
Months Ended
October 31,
2009
$
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Accumulated from
July 3, 2009 (Date of Inception)
to October 31,
2010
$
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Revenue
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– | – | – | |||||||||
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Expenses
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Depreciation (Note 3)
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614 | – | 2,859 | |||||||||
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Foreign exchange loss
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1,347 | (64 | ) | 8,134 | ||||||||
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Impairment of website development costs
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– | – | 6,553 | |||||||||
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General and administrative
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20,911 | 6,629 | 106,875 | |||||||||
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Professional fees
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33,597 | 5,046 | 160,659 | |||||||||
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Research and development
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587 | 389 | 25,361 | |||||||||
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Total Expenses
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57,056 | 12,000 | 310,441 | |||||||||
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Operating Loss
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(57,056 | ) | (12,000 | ) | (310,441 | ) | ||||||
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Other expenses
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Interest and accretion expense
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– | – | (63,578 | ) | ||||||||
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Net Loss
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(57,056 | ) | (12,000 | ) | (374,019 | ) | ||||||
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Loss Per Share – Basic and Diluted
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– | (0.03 | ) | |||||||||
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Weighted Average Shares Outstanding
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49,804,768 | 400,000 | ||||||||||
(The accompanying notes are an integral part of these financial statements)
F-2
Urban Barns Foods Inc.
(formerly HL Ventures Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)
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For the Three
MonthsEnded
October 31,
2010
$
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For the Three
Months Ended
October 31,
2009
$
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Accumulated from
July 3, 2009
(Date of
Inception)
to October 31,
2010
$
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Operating Activities
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Net loss for the period
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(57,056 | ) | (12,000 | ) | (374,019 | ) | ||||||
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Adjustments to reconcile net loss to net cash
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provided by (used in) operating activities:
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Accretion of discounts on convertible debentures
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– | – | 47,433 | |||||||||
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Depreciation
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614 | – | 2,859 | |||||||||
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Impairment of website development costs
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– | – | 6,553 | |||||||||
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Changes in operating assets and liabilities:
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Prepaid expense
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18,334 | – | (4,901 | ) | ||||||||
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Accounts payable
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26,477 | 8,577 | 31,914 | |||||||||
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Due to related parties
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8,779 | – | 13,202 | |||||||||
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Net Cash Used In Operating Activities
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(2,852 | ) | (3,423 | ) | (274,107 | ) | ||||||
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Investing Activities
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Purchase of property and equipment
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– | – | (3,242 | ) | ||||||||
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Cash acquired on recapitalization
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– | – | 86,401 | |||||||||
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Net Cash Used In Investing Activities
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– | – | 83,159 | |||||||||
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Financing Activities
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Proceeds from issuance of common shares
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– | 2,748 | 204,536 | |||||||||
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Repayment of loan payable
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– | – | (7,946 | ) | ||||||||
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Net Cash Provided By Financing Activities
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– | 2,748 | 196,590 | |||||||||
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Increase (Decrease) in Cash
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(2,852 | ) | (675 | ) | 5,642 | |||||||
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Cash – Beginning of Period
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5,642 | 1,050 | – | |||||||||
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Cash – End of Period
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2,790 | 375 | 5,642 | |||||||||
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Supplemental Disclosures
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Interest paid
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– | – | – | |||||||||
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Income tax paid
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– | – | – | |||||||||
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Non-cash investing and financing activities:
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Shares issued for settlement of loan payable
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– | – | 42,500 | |||||||||
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Shares issued for settlement of convertible debt
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– | – | 74,511 | |||||||||
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Shares issued for deposit for financing fee
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– | – | 250,000 | |||||||||
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Loans payable acquired from recapitalization
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– | – | 50,446 | |||||||||
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Convertible debentures acquired from recapitalization
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– | – | 58,367 | |||||||||
(The accompanying notes are an integral part of these financial statements)
F-3
Urban Barns Foods Inc.
(formerly HL Ventures 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
The accompanying consolidated financial statements of Mantra Venture Group Ltd. (the “Company”) should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2010. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at August 31, 2010, the Company has a working capital deficit of $1,099,418 and has accumulated losses of $5,199,246 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Recent Accounting Pronouncements
In March 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this update. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.
In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.
In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
F-4
Urban Barns Foods Inc.
(formerly HL Ventures Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)
3. Capital Assets
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Cost
$
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Accumulated
Amortization
$
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October 31, 2010
Net Carrying Value
$
(unaudited)
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July 31, 2010
Net Carrying Value
$
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Production equipment
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15,529 | 2,457 | 13,072 | 13,686 | ||||||||||||
| 15,529 | 2,457 | 13,072 | 13,686 | |||||||||||||
4. Related Party Transactions
As at October 31, 2010, the Company owed $13,202 (July 31, 2020 - $4,423) to the Chief Financial Officer and Director of the Company for expenditures incurred on behalf of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
5. Share Purchase Warrants
The following table summarizes the continuity of share purchase warrants:
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Number of
Warrants
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Weighted Average
Exercise Price
$
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Balance, July 3, 2009 (Date of Inception) and July 31, 2009
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– | – | ||||||
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Issued
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371,500 | 1.18 | ||||||
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Balance, July 31, 2010 and October 31, 2010 (unaudited)
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371,500 | 1.18 | ||||||
As at October 31, 2010, the following share purchase warrants were outstanding:
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Number of Warrants
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Exercise Price
$
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Expiry Date
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49,000
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1.50
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March 25, 2011
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10,000
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1.50
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March 30, 2011
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12,500
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1.50
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April 30, 2011
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50,000
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1.25
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December 17, 2011
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250,000
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1.08
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February 10, 2012
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371,500
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6. Stock Options
On March 5, 2010, the Company adopted the Company’s 2010 Stock Option Plan (the “2010 Plan”). Under the 2010 Plan, a maximum of 4,000,000 common shares are issuable with a maximum of 5% issuable to any one individual. As at October 31, 2010, the Company has not granted any stock options.
F-5
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.
We are still in our development stage and have generated no revenues to date.
We incurred operating expenses of $57,056 for the three months ended October 31, 2010. These expenses consisted of $20,911 in general operating expenses, $587in research and development expenses, and $33,597 in professional fees. For the same period ended October 31, 2009 we incurred operating expenses of $22,592. These expenses consisted of $1,519 in general operating expenses, $5,730 in consulting fees and $15,343 in professional fees.
Our net loss from inception (July 3, 2009) through October 31, 2010 was $57,056.
The following table provides selected financial data about our company for the quarter ended October 31, 2010.
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10/31/10
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Cash
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$ | 2,790 | ||
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Fixed assets
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$ | 13,072 | ||
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Total assets
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$ | 270,938 | ||
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Total liabilities
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$ | 60,364 | ||
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Shareholders' equity
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$ | 210,574 | ||
Liquidity and Capital Resources
As of October 31, 2010 we had cash of $2,790, total current assets of $7,866, total current liabilities of $60,364 and working capital deficit of $52,498 compared to working capital of $3,944 as of July 31, 2010. The increase in liabilities is due primarily to as increase in account payable due to lack of sufficient cashflows to pay our outstanding obligations.
During the quarter ended October 31, 2010, we received net cash of $nil from financing activities, compared to net cash received of $2,748 from financing activities during the period ended October 31, 2009 as the Company received proceeds from common shares in fiscal 2009.
During the period ended October 31, 2010, we used net cash of $2,852 on operating activities, compared to $3,423 net cash used on operating activities during the period ended October 31, 2009.
During the period ended October 31, 2010 and 2009, we did not have any investing activities.
Since July 3, 2009 (inception) to October 31, 2010, our accumulated deficit was $408,407. 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 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.
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Recently, our management decided to focus on acquiring or merging with one or more operating businesses. Our efforts to identify a target business resulted in the Share Exchange Agreement with Urban Barns Foods Inc., a private company. On December 4, 2009 the share exchange with Urban Barns closed, and we accordingly adopted the business of Urban Barns. We are now an urban produce production company that aims to be the supplier of choice of fresh, locally grown, high-quality organic and conventional fruits and vegetables for urban consumers.
We estimate that our expenses over the next 12 months (beginning December 2010) will be approximately $2,301,800 as summarized in the table below. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from investors or other sources.
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Description
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Potential Completion Date
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Estimated Expenses
($)
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Seedling purchases
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12 months
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96,000
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Packaging
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12 months
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76,800
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Direct cost of sales (including research and development)
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12 months
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979,200
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Shipping
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12 months
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225,000
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Payroll
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12 months
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350,000
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Advertising and marketing
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12 months
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370,000
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General and administrative expenses
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12 months
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204,800
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Total
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2,301,800
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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.
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.
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Off-Balance Sheet Arrangements
As of October 31, 2010 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.
a. Basis of Accounting
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a July 31 year-end.
b. Basic Earnings per Share
In February 1997, the FASB issued SFAS No. 128, “Earnings Per Share”, which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. SFAS No. 128 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of SFAS No. 128 effective May 21, 2007 (inception).
Basic net loss per share amounts is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.
c. Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In accordance with FASB 16 all adjustments are normal and recurring.
d. Revenue
The Company records revenue on the accrual basis when all goods and services have been performed and delivered, the amounts are readily determinable, and collection is reasonably assured. The Company has not generated any revenue since its inception.
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 October 31, 2010. 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.
5
PART II - OTHER INFORMATION
None.
None.
None.
None.
ITEM 6. EXHIBITS
The following exhibits are included with this quarterly filing:
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Exhibit No.
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Description
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6
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.
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December 15, 2010
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Urban Barns Foods Inc.
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By:
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/s/ Jacob Benne
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Jacob Benne
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(Chief Executive Officer, President, & Director)
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By:
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/s/ Daniel Meikleham
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Daniel Meikleham
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(Chief Financial Officer, Principal Accounting Officer & Director)
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7