AGR TOOLS, INC. - FORM 10-Q - May 12, 2011

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EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - AGR TOOLS, INC.ex32-1.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - AGR TOOLS, INC.ex31-2.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - AGR TOOLS, INC.ex32-2.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - AGR TOOLS, INC.ex31-1.htm
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 March 31, 2011

or

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: 000-52043

AGR Tools, Inc.
(Exact name of registrant as specified in its charter)

Nevada
  
98-0480810
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)

100 Lido Circle, Suite C-1
Lakeway, TX 78724
(Address of principal executive offices)

936-539-5744
(Registrant’s telephone number, including area code)

_____________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (of for such shorter period that the registrant was required to submit and post such files).  Yes þ   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 þ

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 Exchange Act subsequent to the distribution of securities under a plan confirmed by a court.   Yes o   No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 12, 2011 the registrant’s outstanding common stock consisted of 84,598,176 shares.
 
 
 
 
 
Table of Contents
 
 
1
 
 

 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
Consolidated Balance Sheets (unaudited)
F-1
Consolidated Statements of Operations (unaudited)
F-2
Consolidated Statements of Stockholders’ Deficit (unaudited)
F-3
Consolidated Statements of Cash Flows (unaudited)
F-4
Notes to the Consolidated Financial Statements (unaudited)
F-5
 
 
2
 

AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Consolidated Balance Sheets
 
   
March 31,
2011
$
    
June 30,
2010
$
  
 
  
(unaudited)
        
ASSETS
            
             
Current assets
            
             
             
Cash
     8,138       11,396  
Accounts receivable
     2,421       2,492  
Inventory
     260,969       300,698  
Prepaid expenses and deposits
     12,518       9,866  
                 
Total current assets
     284,046       324,542  
                 
Property and equipment, net
     11,203       40,466  
Advances receivable, net
     4,371       10,568  
                 
Total assets
     299,620       375,486  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                
                 
Current liabilities
                
                 
Bank indebtedness
     21,305       19,532  
Accounts payable
     184,080       196,852  
Accounts payable – related parties
     551       22,421  
Accrued liabilities
     52,708       3,843  
Customer deposits
     116,362       144,029  
Due to related party
     -       426,882  
Convertible debt, net of discount
     43,696       -  
Current portion of loans payable to related party
     9,000       -  
Current portion of loans payable
     -       9,406  
                 
Total current liabilities
     427,702       822,965  
                 
Loans payable, long-term
     -       18,025  
Loans payable to related party, long term
     -       70,000  
                 
Total liabilities
     427,702       910,990  
                 
Stockholders’ deficit
                
                 
  Common stock
Authorized: 200,000,000 shares, par value  $0.001 per share
Issued and outstanding: 84,598,176 shares (June 30, 2010 – 106,186,516 shares)
         84,599       106,187  
                 
Additional paid in capital
     1,133,169       494,063  
Accumulated deficit
     (1,345,850 )     (1,135,754 )
                 
Total stockholders’ deficit
     (128,082 )     (535,504 )
                 
Total liabilities and stockholders’ deficit
     299,620       375,486  
 
(The accompanying notes are an integral part of these consolidated financial statements)
 
 
F-1
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Consolidated Statements of Operations
Unaudited
 
   
Three months ended
    
Nine months ended
  
   
March 31,
    
March 31,
  
   
2011
    
2010
    
2011
    
2010
  
   
$
    
$
  
Revenue
     59,192       158,138       375,353       357,742  
Cost of goods sold
     32,604       68,590       216,381       207,403  
                                 
Gross profit
     26,588       89,548       156,972       150,339  
                                 
Operating expenses
                                
                                 
Advertising and promotion
     865       7,067       18,796       29,761  
Automotive
     1,427       2,430       4,053       7,374  
Bad debts
     6,596       1,870       (8,904 )     (4,280 )
Consulting fees
     -       735       6,537       12,969  
Depreciation
     686       3,609       5,411       9,116  
Insurance
     804       2,429       6,552       8,176  
Office and miscellaneous
     4,579       15,738       12,988       20,525  
Professional fees
     19,775       21,964       61,579       5,369  
Rent and utilities
     8,281       14,966       66,120       72,805  
Telephone and internet
     1,632       5,271       7,230       15,445  
Travel
     200       1,772       677       4,468  
Wages and benefits
     39,395       100,980       137,564       127,158  
                                 
Total operating expenses
     84,240       195,359       318,603       308,886  
                                 
Loss from operations
     (57,652 )     (105,811 )     (159,631 )     (158,547 )
                                 
Other income(expenses)
                                
   Interest income
     676       612       2,493       -  
   Interest and bank charges
     (34,074 )     (8,864 )     (55,829 )     (20,286 )
Gain on disposal of property and equipment
     -       -       2,871       -  
                                 
Total other expenses
     (33,398 )     (8,252 )     (50,465 )     (20,286 )
                                 
Loss before income taxes
     (91,050 )     (114,063 )     (210,096 )     (178,833 )
                                 
Income taxes (recovery)
     -       -       -       -  
                                 
Net loss for the year
     (91,050 )     (114,063 )     (210,096 )     (178,833 )
                                 
Net loss per share, basic and diluted
     (0.00 )     (0.00 )     (0.00 )     (0.00 )
                                 
Weighted average number of shares outstanding
     85,039,073       46,844,016       89,905,642       46,881,516  
 
(The accompanying notes are an integral part of these consolidated financial statements)
 
 
F-2
 


AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Consolidated Statements of Stockholders’ Deficit
For the nine months ended March 31, 2011
 
               
Additional
          
Total
  
   
Common stock
    
Paid in
    
Accumulated
    
stockholders’
  
   
Number
#
    
Amount
$
    
Capital
$
    
deficit
$
    
deficit
$
  
                               
Balance, June 30, 2010
     106,186,516       106,187       494,063       (1,135,754 )     (535,504 )
                                         
Shares cancelled from former director
     (27,088,460 )     (27,088 )     27,088               -  
Extinguishment of related party debt
     5,200,120       5,200       514,812       -       520,012  
Discount on debt
     -       -       82,506       -       82,506  
Share issued for consulting fees
     300,000       300       14,700               15,000  
Net loss for the period (unaudited)
     -       -       -       (210,096 )     (210,096 )
                                         
Balance, March 31, 2011 (unaudited)
     84,598,176       84,599       1,133,169       (1,345,850 )     (128,082 )
 
(The accompanying notes are an integral part of these consolidated financial statements)
 
 
F-3
 
 
AGR TOOLS, INC.
(formally known as Laburnum Ventures, Inc.)
Consolidated Statements of Cash Flows
Unaudited
 
   
Nine months ended
  
   
March 31,
  
   
2011
    
2010
  
Operating activities
            
    Net loss for the period
     (210,096 )     (178,833 )
Adjustments to reconcile net loss to net cash
used in operating activities:
                
    Depreciation
     5,411       9,116  
    Bad debt expense
     (8,904 )     (4,280 )
    Debt discount amortization
     36,202       3,570  
    Shares issued for consulting fees
     15,000       -  
    Gain on disposal of property and equipment
     (2,871 )     -  
Changes in operating assets and liabilities:
                
    Accounts receivable
     13,401       7,281  
    Advances receivable
     1,772       2,393  
    Inventory
     39,729       7,687  
    Prepaid expenses and deposits
     (2,652 )     (3,652 )
    Accounts payable
     (35,901 )     (21,615 )
    Accrued liabilities
     48,865       55,713  
    Due to related parties
     (34,319 )     -  
    Customer deposits
     (27,667 )     75,883  
    Corporate taxes
     -       18,044  
                 
Net cash used in operating activities
     (162,030 )     (28,693 )
Investing activities
                
     Purchase of property and equipment
     -       (4,679 )
                 
Net cash used in investing activities
     -       (4,679 )
Financing activities
                
    Bank indebtedness, net
     1,772       181  
    Loans payable, net
     -       (6,664 )
    Loans provided by related parties, net
     67,000       4,200  
    Convertible debt, net
     90,000       40,000  
                 
Net cash provided by financing activities
     158,772       37,717  
                 
Change in cash
     (3,258 )     4,345  
Cash, beginning of year
     11,396       3,683  
Cash, end of year
     8,138       8,028  
                 
Non-cash investing and financing activities:
                
Debt exchanged for shares
     520,012       -  
Beneficial conversion feature of short term debt
     82,506       -  
Cancellation of shares
     27,088       -  
Supplemental disclosures:   Interest paid
     10,336       20,286  
Income taxes paid
     -       -  
 
(The accompanying notes are an integral part of these consolidated financial statements)
 
 
F-4
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
1.  Interim Financial Statements
 
While the information presented in the accompanying three and nine months to March 31, 2011 interim consolidated financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with the accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these financial statements be read in conjunction with the Company’s financial statements for the year ended June 30, 2010. Operating results for the three and nine months ended March 31, 2011 are not necessarily indicative of the results that can be expected for the year ending June 30, 2011.

2.  Nature of Operations and Continuance of Business
 
Laburnum Ventures Inc. (the “Company”) was incorporated in the State of Nevada on March 11, 2004. On June 22, 2004, the Company acquired a 100% interest in five mineral claims located in the Similkameen Mining Division in British Columbia, Canada. In 2007, the Company abandoned these mineral claims. On September 10, 2009, the Company changed its name to AGR Tools, Inc. The Company is an exploration stage company, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”.
 
AGR Stone & Tools USA, Inc. (“AGR USA”) was incorporated in the State of Texas on December 23, 2004, and is a manufacturer of diamond tooling and related products. It specializes in producing consumable tools for the natural stone, engineered stone, concrete and masonry industries.
 
Effective May 27, 2010, the Company closed a share exchange agreement with AGR USA, whereby the Company acquired all of the issued and outstanding shares of AGR USA. For financial statement reporting purposes, the share exchange was treated as a reverse acquisition with AGR USA deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with ASC 805-10-40, “Business Combinations – Reverse Acquisitions”. The reverse merger is deemed a recapitalization and the consolidated financial statements represent the continuation of the financial statements of AGR USA (the accounting acquirer/legal subsidiary) except for its capital structure, and the consolidated financial statements reflect the assets and liabilities of AGR USA recognized and measured at their carrying value before the combination and the assets and liabilities of the Company (the accounting acquiree/legal parent). The equity structure reflects the equity structure of the Company, the legal parent, and the equity structure of AGR USA, the accounting acquirer, as restated using the exchange ratios established in the share exchange agreement to reflect the numbers of shares of the legal parent.
 
3.  Going Concern
 
These 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 continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As at March 31, 2011, the Company had a working capital deficit of $123,656 and an accumulated deficit of $1,341,424 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.
 
 
F-5
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
4.  Summary of Significant Accounting Policies
 
a)  Basis of Presentation
 
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America.
 
b)  Use of Estimates
 
The preparation of financial statements in conformity with U.S. 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. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, inventory valuation, the useful lives and recoverability of long-lived assets, stock-based compensation and deferred income tax asset 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 Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
 
c)  Reclassification in prior period
 
Certain reclassifications to the financial statements have been made to prior period amounts to conform to the presentation of the current period.
 
d)  Cash and Cash Equivalents
 
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. There were no cash equivalents at March 31, 2011 and June 30, 2010.
 
e)  Accounts Receivable
 
The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company considers at risk. The allowance for doubtful accounts was $2,176 and $0 at March 31, 2011, and June 30, 2010, respectively.
 
f)  Advances Receivable
 
The Company advanced amounts to two independent contractors who earn commissions for sales generated. On October 31, 2009, the Company placed these independent contractors on the payroll and ceased all advances. The Company obtained two promissory notes, each in the amount of $61,300, from these independent contractors for the amounts owed. The notes carry an interest rate of 3% and are reduced by semi-monthly payroll deductions of $129.17, which are composed of principal and interest. The term of the notes is 5 years and a balloon payment is due at the end of the term of the loan for any unpaid principal and interest. The payments under these notes are deducted from the employees’ paychecks on a semi-monthly basis. The Company has recorded an allowance for doubtful accounts in the amount of $110,975 and $110,975 as of March 31, 2011 and June 30, 2010, respectively. The amount reserved is equal to the balloon payment due on the notes. An additional reserve was recorded as of March 31, 2011 in the amount of $4,426.
 
 
 
F-6
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
4.  Summary of Significant Accounting Policies (continued)
 
g)  Inventory
 
Inventory consists of diamond tools and is carried at the lower of cost or market value. The Company uses the FIFO inventory costing method.
 
h)  Property and Equipment
 
Property and equipment are stated at cost. The Company depreciates the cost of property and equipment straight-line over their estimated useful lives:
 
Automotive
3 years
Computer equipment
3 years
Furniture and equipment
5 years
 
The depreciation expense for the three and nine months ended March 31, 2011 was $686 and $5,411 (March 31, 2010: $2,754 and $5,507) respectively.
 
i)  Corporate Taxes Receivable
 
Corporate taxes receivable pertain to refundable amounts owed to the Company for corporate taxes from the United States Treasury. These amounts are recorded at the value anticipated to be received based on tax returns filed.
 
j)  Long-lived Assets
 
In accordance with ASC 360, “Impairment or Disposal of Long-Lived Assets”, 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.  There was no impairment of long-lived assets for periods ended March 31, 2011, and June 30, 2010.
 
k)  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 carryforwards. 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.
 
The Company files federal, state and local income tax returns in the U.S., as applicable. The open taxation years range from 2007 to 2009. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three and six year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of the U.S. have not audited any of the Company’s income tax returns for the open taxation years noted above.
 
The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the three and nine months ended March 31, 2011, and June 30, 2010, there were no charges for interest or penalties.
 
 
F-7
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010

4.  Summary of Significant Accounting Policies (continued)
 
l)  Revenue Recognition
 
The Company earns revenue from the sale of diamond tooling and related products. The Company recognizes revenue in accordance with ASC 605, “Revenue Recognition”. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the goods have been delivered, and collectability is reasonably assured. Sales returns are recognized as incurred. The amount of returns is not significant and the Company evaluates the need to record an allowance for each reporting period.
 
Payment is collected in advance of shipment. All goods are shipped FOB from the Company’s warehouse in Conroe, TX. Title passes when the goods leave the Company’s dock. The sale is recognized when shipment occurs. Prices are set by a definitive dealer price list and are agreed upon before payment occurs or the goods are shipped.
 
Generally, the Company has no special arrangements with dealers. All sales are paid in advance and the Company generally does not allow returns for merchandise purchased by dealers. The Company will, however, allow returns pertaining to the initial order placed by new dealers with a 20% restocking charge for those items that prove to be slow moving for their customer base. No warranty is offered. The amount of these returns is not significant and the Company evaluates the need to record an allowance each reporting period.
 
m) Financial Instruments and Fair Value Measures
 
ASC 820, “Fair Value Measurements and Disclosures”, and ASC 825, “Financial Instruments”, require an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
 
Level 1
 
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. 
 
Level 2
 
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. 
 
Level 3
 
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. 
 
The Company’s financial instruments consist principally of cash, accounts receivable, advances receivable, bank demand loan, accounts payable, accrued liabilities, corporate taxes payable/receivable, loans payable, and amount due to a related party. 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.
 
 
 
F-8
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
4.  Summary of Significant Accounting Policies (continued)
 
n)  Concentrations
 
As at March 31, 2011, 93% (June 30, 2010 – 89%) of accounts receivable were comprised of three customers (June 30, 2010 – four customers). As at March 31, 2011, the specific concentrations of each customer included in this total were 48%, 26%, and 19%.  As at June 30, 2010, the specific concentrations of each customer included in this total were 40%, 17%, 16% and 16%. During the nine month period ended March 31, 2011, the Company had three customers that totaled 44% of its revenue. The specific concentrations of each customer included in this total were 23%, 12% and 10%.
 
o)  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.
 
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
 
p)  Earnings (Loss) Per Share
 
The Company computes earnings per share (“EPS’) in accordance with ASC 260, “Earnings Per Share”. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g. convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. All potentially dilutive shares as of March 31, 2011 were anti-dilutive. There were no potentially dilutive shares as of June 30, 2010.
 
q)  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 March 31, 2011 and June 30, 2010, the Company had no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
 
 
F-9
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
4.  Summary of Significant Accounting Policies (continued)
 
r)  Recent Accounting Pronouncements
 
In December 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2010-29, “Business Combinations (Topic 805): Disclosure of supplementary pro forma information for business combinations”. This update changes the disclosure of pro forma information for business combinations. These changes clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. Also, the existing supplemental pro forma disclosures were expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. These changes become effective for the Company beginning January 1, 2011. The Company’s adoption of this update did not have an impact on the Company’s financial condition or results of operations.

In December 2010, the FASB issued ASU 2010-28, “Intangible – Goodwill and Other (Topic 350): When to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts”. This update requires an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not (more than 50%) that a goodwill impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s goodwill is not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. These changes become effective for the Company beginning January 1, 2011. The adoption of this ASU did not have a material impact on the Company’s financial statements.

In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in this ASU are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s financial statements.

In April 2010, the FASB issued ASU 2010-13, “Compensation—Stock Compensation (Topic 718) – Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades (A consensus of the FASB Emerging Issues Task Force)” (“ASU 2010-13”). ASU 2010-13 clarifies that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, such an award should not be classified as a liability if it otherwise qualifies as equity. This clarification of existing practice is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010, with early application permitted. The Company’s adoption of this update did not have an impact on the Company’s financial condition or results of operations.

In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements. Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated. This ASU is effective upon the issuance of this ASU. The adoption of this ASU did not have a material impact on the Company’s financial statements.

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU; however, it does not expect the adoption of this ASU to have a material impact on its financial statements.
 
 
F-10
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
5.  Property and Equipment
 
   
March 31,
2011
Net carrying
value
$
    
June 30,
2010
Net carrying
value
$
  
             
Automotive
     -       27,066  
Computer equipment
     3,829       4,922  
Furniture and equipment
     7,374       8,478  
                 
      11,203       40,466  

During the nine months ended March 31, 2011, there was a disposal of automobiles resulting in a gain of $2,871.

6.  Bank Indebtedness
 
The Company has a revolving bank credit line with a limit of $24,300 which bears interest at 9.75% per annum and is secured by a personal guarantee of the Vice-President of the Company.  The balance in this account at March 31, 2011 was $21,306 (June 30, 2010 - $19,532).
 
7.  Acquisition
 
During the year ended June 30, 2010, the Company entered into a share exchange agreement with AGR USA, the legal subsidiary of the parent company.
 
On May 27, 2010, the closing date, and the deemed date of the acquisition of AGR USA, the Company acquired 100% of the issued and outstanding stock of AGR USA in a reverse merger in consideration for the issuance of 46,186,516 shares of the Company’s common stock. The management and board of directors of AGR USA replaced the management and board of directors of the Company. The management of AGR USA retained control of the Company after the acquisition. The acquisition was closed pursuant to the New Share Exchange Agreement, as amended by an Amendment to the New Share Exchange Agreement, also dated May 27, 2010.
 
This transaction has been accounted for, using the purchase method of accounting, as a reverse acquisition because the acquiring entity has been identified, in accordance with ASC 805- 10-40, as AGR USA. The Company is the legal parent and is deemed to be a continuation of the business of the legal subsidiary, AGR USA. The post-acquisition entity is accounted for as a recapitalization of AGR USA.
 
8.  Convertible Notes
 
During the nine months ended March 31, 2011, the Company issued convertible notes for a total principal of $90,000. These convertible notes of $45,000 each are convertible at the greater of a fixed conversion price of $0.00009 or 55% of the lowest average 3 trading price over 10 days preceding the day of the note. In addition, there is a cap on the conversion of the notes to prevent a derivative and these subordinated convertible debentures may have conversion prices that at issuance could be lower than the fair market value of the underlying stock. 
 
In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible debts by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible debt. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt. This beneficial conversion feature is amortized as a non-cash interest expense from the issuance date of the debenture through the earlier of the stated redemption date, which is nine months from issuance, or conversion into common stock. The amortization was calculated on a quarterly basis. The offset was a credit to the discount. The notes were discounted $82,506 at issuance for a carrying value of $7,494.  During the period ending March 31, 2011, the notes were accreted $36,202 and had a balance as of March 31, 2011 of $43,696.
 
 
F-11
 
 
AGR TOOLS, INC.
(formerly known as Laburnum Ventures, Inc.)
Notes to the Consolidated Financial Statements
For the three and nine months ended March 31, 2011 and 2010
 
9.  Related Party Transactions
 
a) 
During the three and nine months ended March 31, 2011, the Company incurred consulting fees of $Nil (2010: $8,515 and $259) and rent of $3,000 and $2,250 (2010: $4,000 and $2,250) to the President of the Company. As at March 31, 2011, the Company owed $9,000 to the President of the Company, which is in the form of a promissory note. This promissory note bears interest at a rate of 4%, is unsecured and due on June 30, 2011.
 
b) 
During the three and nine months ended March 31, 2011, the Company incurred consulting fees of $Nil (2009 - $Nil) and rent of $3,000 and $2,250 (20109: $4,000 and $2,250) to the Secretary and Treasurer of the Company. As of March 31, 2011, the Company owed $551 to the Secretary and Treasurer of the Company.
 
c) 
During the nine months ended March 31, 2011, the Company cancelled 25,000,000 shares from the former President of the Company.
 
d) 
As at March 31, 2011, the Company owed a total of $Nil (June 30, 2010 - $59,370) to the Secretary/Treasurer of the Company which bears 4% interest, is unsecured and due on July 1, 2015. $80,844 of debt was exchanged for 808,440 shares on October 6, 2010.
 
e) 
On October 6, 2010, the Company exchanged a $25,000 promissory note and accrued interest, totaling $30,395, for 620,306 shares. This per share valuation exceeded the market value on the date of grant, and the resulting gain was recorded as a contribution to additional paid-in capital.
 
f) 
On October 6, 2010, the Company exchanged $208,846 in related party debt for 2,088,460 shares to a shareholder of the Company. This per share valuation exceeded the market value on the date of grant, and the resulting gain was recorded as a contribution to additional paid-in capital.
 
g) 
On January 9, 2011, the Company cancelled 2,088,460 shares from an individual.
 
10.  Common Stock
 
Stock transactions during the nine months ended March 31, 2011:
 
a) 
On September 1, 2010, the Company cancelled 25,000,000 shares from the former President of the Company.
 
b) 
On October 16, 2010, the Company issued 5,200,120 shares to related parties to extinguish $520,012 in debt at $0.10 per share. This per share valuation exceeded the market value on the date of grant, and the resulting gain was recorded as a contribution to additional paid-in capital.
 
c) 
On December 31, 2010, the Company issued 300,000 shares at $0.05 per share for payment of consulting fees. These shares were valued based on the market price of the stock on the date of grant.
 
d) 
On January 9, 2011, the Company cancelled 2,088,460 shares from an individual.
 
11.  Litigation
 
The company is not aware of any pending or threatened litigation through the date of these financial statements.
 
12.  Subsequent events
 
There are no subsequent events to disclose through the date of this filing.
 
 
F-12
 


As used in this quarterly report, the terms "we", "us" and "our" mean AGR Tools, Inc., unless otherwise indicated. All currency references in this report are to U.S. dollars unless otherwise noted.

Forward Looking Statements

This quarterly report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.

Business Overview

We were incorporated under the name “Laburnum Ventures Inc.” on March 11, 2004, under the laws of the State of Nevada. Until recently, we were a pre-exploration stage company engaged in the acquisition and exploration of mineral properties. We formerly owned a 100% undivided interest in a mineral property located in the Province of British Columbia, Canada known as the Sum Mineral Claim, but we decided not to pursue this claim.

On July 21, 2009, we entered into a share exchange agreement (the “Original Share Exchange Agreement”) with AGR Stone & Tools USA, Inc., a private Texas company (“AGR USA”). Pursuant to the terms of the Original Share Exchange Agreement, we agreed to acquire all of the outstanding shares of AGR USA from its shareholders in exchange for our shares on a one-for-one basis which, if completed, would result in AGR USA becoming our wholly owned subsidiary.  

On September 15, 2009, in contemplation of the completion of the share exchange with AGR USA, we completed a name change from Laburnum Ventures Inc. to AGR Tools, Inc. in accordance with Nevada law.

On October 29, 2009, pursuant to the terms of the Original Share Exchange Agreement, we agreed to terminate the Original Share Exchange Agreement with AGR USA and enter into a new share exchange agreement (the “New Share Exchange Agreement”). Under the New Share Exchange Agreement, we agreed to carry out the exchange of shares with the shareholders of AGR USA through a statutory process pursuant to Part 5 of the Texas Business Corporation Act in order to effect the transaction in a more efficient manner.

The closing of the transactions contemplated by the New Share Exchange Agreement occurred on May 27, 2010, at which time AGR USA became our wholly-owned operating subsidiary and we adopted the business of AGR USA. In connection with the closing, we issued 46,186,516 shares of our common stock to the shareholders of AGR USA and our former sole officer and director, Thomas Brown, cancelled 25,000,000 shares of our common stock held in his name.

We are now a Texas-based company in the business of manufacturing and selling tooling and accessories to the construction, building, maintenance and demolition industries in the United States and Canada. Tooling is the consumable disposal portion of a tool that makes the tool work. It wears out as the tool is operated, and as a result, demand for our products is driven by the need for original and replacement tool parts, not the tools themselves. We currently sell more than 700 products through our stocking dealer network, which consists of 29 dealers in 23 U.S. states and territories, and three dealers in two Canadian provinces. Our products include diamond-based blades, diamond drill bits, diamond cup wheels, resin polyesters, glues, inks, resin-based waterproof grinding stones and diamond polishing pads, all of which are manufactured in a number of different sizes.

Our products are manufactured in China on a contract basis, and we subject them to strict manufacturing standards. We field test these products by using them in construction, building and demolition projects, and also test them alongside the products of our competitors both in the field and in our testing facility. All of our products are accompanied by a warranty against defects in workmanship.

We currently focus on sales through our stocking dealers. We also sell a number of our products through our website, which are delivered to customers either through our storage centers or our stocking dealers. Our stocking dealers act as face-to-face contacts for our customers and provide support to one another by sharing order fulfillment with our storage centers. We train and provide training manuals to our stocking dealers and require each one to be familiar with at least 200 of our products during their initial training. We currently do not have brokers or commission sales representatives involved in the distribution of our products.

 
3
 
 
Results of Operations

For the Three Months Ended March 31, 2011

During the three months ended March 31, 2011 we generated revenue of $59,192, compared to revenue of $158,138 during the three months ended March 31, 2010. The increase in revenue between the two periods was primarily due to an increase in our product sales during the current fiscal year, as the price of our products remained relatively stable. During the same periods our cost of goods sold decreased to $32,604 from $68,590. Consequently, we yielded gross profit of $26,588 during the three months ended March 31, 2011, compared to gross profit of $89,548 during the same period in 2010.

During the three months ended March 31, 2011 our total operating expenses were $84,240, compared to total operating expenses of $195,359 during the three months ended March 31, 2010. The decrease in our operating expenses between the two periods was primarily due to a decrease in our wages and benefits from $100,980 to $39,395, and a decrease in our office and miscellaneous expenses from $15,738 to $4,579. These decreases were accompanied by decreases in nearly every other operating expense category, notably our rent and utilities and advertising and promotion expenses.

We incurred a loss from operations of $57,652 during the three months ended March 31, 2011, compared to a loss from operations of $105,811 during the three months ended March 31, 2010. Our total other expenses during the same periods were $33,398 and $8,252, respectively, the vast majority of which consisted of interest and bank charges.

During the three months ended March 31, 2011, we incurred a net loss of $91,050, whereas we incurred a net loss of $114,063 during the three months ended March 31, 2010. We did not experience any net loss per share during either of these periods.

For the Nine Months Ended March 31, 2011

During the nine months ended March 31, 2011 we generated revenue of $375,353, compared to revenue of $357,742 during the nine months ended March 31, 2010. The increase in revenue between the two periods was primarily due to an increase in our product sales as described above. During the same periods our cost of goods sold increased to $216,831 from $207,243. Consequently, we yielded gross profit of $156,972 during the nine months ended March 31, 2011, compared to gross profit of $150,339 during the same period in 2010.

During the nine months ended March 31, 2011 our total operating expenses were $318,603, compared to total operating expenses of $308,886 during the nine months ended March 31, 2010. The increase in our operating expenses between the two periods was primarily due to an increase in our professional fees from $5,639 to $61,579 and an increase in our wages and benefits from $127,158 to $137,564. These increases were offset to a large extent by decreases in every other operating expense category, notably our office and miscellaneous and advertising and promotion expenses. The significant increase in our professional fees (which include legal, accounting and auditing fees) occurred as a result of AGR USA’s transition from being a private company to our wholly-owned subsidiary.

We incurred a loss from operations of $159,631 during the nine months ended March 31, 2011, compared to a loss from operations of $158,547 during the nine months ended March 31, 2010. Our total other expenses during the same periods were $50,465 and $20,286, respectively, the vast majority of which also consisted of interest and bank charges.

During the nine months ended March 31, 2011 we incurred a net loss of $210,096, whereas we incurred a net loss of $178,883 during the nine months ended March 31, 2010. We did not experience any net loss per share during either of these periods.

 
4
 
 
Liquidity and Capital Resources

As of March 31, 2011 we had $8,138 in cash, $299,620 in total assets, $427,702 in total liabilities and a working capital deficit of $143,656. As of March 31, 2011, we had an accumulated deficit of $1,345,850.

During the nine months ended March 31, 2011 we spent $162,030 on operating activities, compared to spending of $28,693 on operating activities during the nine months ended March 31, 2010. The increase in our expenditures on operating activities between the two periods was primarily due to increases in our spending on customer deposits and amounts due to related parties, as well as an increase in our net loss for the period as described above. We spent $27,667 on customer deposits during the nine months ended March 31, 2011, whereas we received $75,883 from such deposits during the same period in our prior fiscal year. We also spent $34,319 on amounts due to related parties and $35,901 on accounts payable during our current fiscal year, compared to $0 and $21,615, respectively, during the nine months ended March 31, 2010. This spending was counterbalanced by our receipt of $39,729 in cash from the sale of inventory during the current period, compared to $7,687 from the same source during the nine months ended March 31, 2010.

We did not spend any cash on investing activities during the nine months ended March 31, 2011, whereas we spent $4,679 on investing activities during the nine months ended March 31, 2010. Our only investing activities during the prior period involved the purchase of property and equipment.

During the nine months ended March 31, 2011, we received $158,772 from financing activities, including $67,000 in the form of loans from related parties and $90,000 in the form of convertible debt. During the nine months ended March 31, 2010, we received $37,717 from financing activities, including $40,000 in the form of loans from related party loans which was offset by the $6,664 we spent on loans payable during the period.

Our plan of operations over the next 12 months is to (i) expand our stocking dealer network throughout the Unites States and Canada, (ii) monitor the quality of our products and accessories, (iii) further develop our website and online sales volume, and (iv) increase our exposure to participants in the construction, building, maintenance and demolition industries. We expect we will require approximately $3.5 million to pursue our plan of operations over this period, which will include, among others, advertising and promotion expenses, wage and benefit expenses, professional fees related to our regulatory filings throughout the year and general and administrative expenses.

We intend to raise the additional funds we require from the sale of our equity securities or loans from related parties, as we do not believe we will be able to raise a material amount of capital from debt financing at this time. There is no assurance that we will be able to secure the necessary financing from the sale of our securities or loans from related parties. If we are unable to raise sufficient funds to finance our operations our business may fail. In addition, if we are unable to raise the funds required to expand our operations, we may be forced to proceed with a scaled back business plan based on our available financial resources.

Going Concern

Our financial statements for the three and nine months ended March 31, 2011 have been prepared on a going concern basis and contain an additional explanatory paragraph in Note 3 which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

As of May 12, 2011 we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

 
5
 
 

Not applicable.


Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-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 rules and forms of the SEC, 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.

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our management concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information was not accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control

During the three months ended March 31, 2011 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.

 
6
 
 


We are not aware of any legal proceedings to which we are a party. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened against us.


None.


None.



None.


 
 
 
7
 
 
SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
AGR Tools, Inc.
 
(Registrant)
   
 Date: May 12, 2011
/s/ Rock Rutherford
 
Rock Rutherford
 
President, Chief Executive Officer, Director

8

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