URBAN AG. CORP - FORM 10-Q - August 20, 2013

Attached files

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EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - URBAN AG. CORP	ex31-2.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - URBAN AG. CORP	ex31-1.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICER - URBAN AG. CORP	ex32-1.htm
EXCEL - IDEA: XBRL DOCUMENT - URBAN AG. CORP	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 June 30, 2013

o Transitional Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

000-52327

[Missing Graphic Reference]

(Commission file number)

URBAN AG. CORP

[Missing Graphic Reference]

(Exact name of registrant as specified in its charter)

Delaware		80-0664054
[Missing Graphic Reference]		[Missing Graphic Reference]
(State of incorporation)		(IRS Employer Identification Number)

800 Turnpike Street, Suite 103

North Andover, Massachusetts 01845

[Missing Graphic Reference]

(Address of principal executive offices)

(800) 692-1357

[Missing Graphic Reference]

(Registrant's telephone number)

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 required 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 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 (or for such shorter period that the registrant was required to submit and post such files). Not Applicable.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date was:

Class A Common Stock, $0.0001 par value

Series A Preferred Stock, $0.0001 par value

48,069,761 shares outstanding on August 20, 2013

11,182,460 shares outstanding on August 20, 2013

DOCUMENTS INCORPORATED BY REFERENCE:

None

FORWARD-LOOKING STATEMENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. The forward-looking statements in this quarterly report are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. These forward-looking statements include, but are not limited to, statements concerning our plans to continue the marketing, commercialization and sale of our services and planned future products and product candidates; address certain markets; and evaluate additional product candidates for subsequent sales. In some cases, these statements may be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue," or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, the outcome of an ongoing contractual dispute in connection with our accounts receivable factoring arrangement, levels of business activity, performance, or achievements. These statements involve known and unknown risks and uncertainties that may cause our or our industry's results, levels of activity, performance or achievements to be materially different from those expressed or implied by forward-looking statements.

Management's Discussion and Analysis ("MD&A") should be read together with our financial statements and related notes included elsewhere in this quarterly report. This quarterly report, including the MD&A, contains trend analysis and other forward-looking statements. Any statements in this quarterly report that are not statements of historical facts are forward-looking statements. These forward-looking statements made herein are based on our current expectations, involve a number of risks and uncertainties and should not be considered as guarantees of future performance.

The most pressing factors that could cause actual results to differ from those in our forward looking statements materially and adversely are our lack of working capital and our need to raise approximately $1.6 million of additional capital to payoff arrearages in excess of $1.2 million of payroll taxes as of June 30, 2013; and the need to establish a new accounts receivable or other financing arrangement.

Other factors that could cause actual results to differ materially include without limitation:

·	our limited ability to repay our debt and our payroll tax and union costs arrearages and the potential adverse consequences thereof;

·	the outcome of our ongoing dispute with our accounts receivable factor and the outcome of any future legal proceedings that may arise out of that dispute;

·	our ability to continue to finance our business;

·	an inability to arrange debt or equity financing;

·	the outcome of potential disputes that could arise with labor unions;

·	the impact of new technologies on our services and our competition;

·	adverse changes in laws or rules or regulations of governmental agencies;

·	interruptions or cancellation of existing contracts;

·	impact of competitive services and pricing;

·	continued availability of adequately skilled labor at the current prices;

·	the ability of management to execute plans and motivate personnel in the execution of those plans;

·	the presence of competitors with greater financial resources;

·	our ability to maintain our current pricing model and/or decrease our cost of sales;

·	the adoption of new, or changes in, accounting principles;

·	the costs inherent with complying with new statutes and regulations applicable to public reportingcompanies, such as the Sarbanes-Oxley Act of 2002

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in the forward-looking statements in this quarterly report. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements in this quarterly report are made only as of the date of this quarterly report, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. See also Item 1A, "RISK FACTORS"

URBAN AG. CORP

FORM 10-Q

June 30, 2013

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION	F-1

Item 1 – Condensed Consolidated Financial Statements	F-1

Condensed Consolidated Balance Sheets	F-2

Condensed Consolidated Statements of Operations	F-3

Condensed Consolidated Statements of Cash Flows	F-4

Notes to Condensed Consolidated Financial Statements	F-5 - F-10

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3 - Quantitative and Qualitative Disclosures about Market Risk	10

Item 4 - Controls and Procedures	10

PART II - OTHER INFORMATION	11

ITEM 1 – LEGAL PROCEEDINGS	11

ITEM 1A – RISK FACTORS	11

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	12

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES	14

ITEM 4 – (REMOVED AND RESERVED)	14

ITEM 5 – OTHER INFORMATION	14

ITEM 6 – EXHIBITS	14

Unless the context requires otherwise, references in this quarterly report to "Urban AG.," “Urban AG,” “Urban,” "the Company," "we," "our" and "us" refer to Urban AG. Corp. This quarterly report contains trademarks and trade names of other parties.

PART I - FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements

URBAN AG. CORP

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30, 2013 (unaudited)			December 31, 2012 (audited)
Assets
Current assets:
Cash	$	29,271		$	412
Accounts receivable, less allowances for doubtful accounts and provision for contract adjustments of $-0- and $ -0- at June 30, 2013 and December 31, 2012, respectively		128,861			—
Other current assets		80,132			—
Total current assets		238,264			412


Intangible Assets		2,984,861			—
Other assets:
Notes Receivable Due from related parties		146,064			—

Total assets	$	3,369,189		$	412

Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable and other current liabilities	$	3,659,285		$	3,150,847
Accrued expenses		3,348,088			2,568,734
Line of credit		41,363			—
Mass CDFC loan		327,039			327,039
Discontinued operations		191,538			191,538
Current portion of long-term debt		2,336,119			—
Short term notes payable		813,919			510,250
Notes due to Shareholder		1,855,000			1,891,000
Total current liabilities		12,572,351			8,639,408

Long term debt		—			—
Net liabilities of discontinued operations		—			—
Total liabilities	$	12,572,351		$	8,639,408
Stockholders' deficiency
Preferred stock, $.0001 par value; authorized 50,000,000; 11,182,460 and 10,000,000 issued and outstanding at June 30, 2013 and December 31, 2012 respectively.		1,118			1,000
Common stock, $.0001 par value; authorized 200,000,00; 30,055,702 and 15,429,599 shares issued and outstanding at June 30, 2013 and December 31, 2012 respectively. Note (3)		3,006			1,543

Additional paid-in capital		2,437,243			2,230,041
Retained (deficit)		(11,644,529	)		(10,871,580	)

Total stockholders' (deficit)		(9,203,162	)		(8,638,996	)

Total liabilities and stockholders’ deficiency	$	3,369,189		$	412

See accompanying notes to condensed consolidated financial statements.

F-1

URBAN AG. CORP. (formerly AQUAMER MEDICAL CORP.)

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months ended						Six Months ended
	June 30			June 30			June 30			June 30
	2013			2012			2013			2012

Revenue	$	163,936		$	1,724,229		$	385,023		$	3,542,689
Costs of goods sold		291,186			1,841,063			387,243			3,055,564
Gross profit (loss)		(127,250	)		(116,834	)		(2,220	)		487,125

Costs and expenses:
General and administrative		191,238			722,052			499,912			1,873,850
Depreciation		—			31,070			—			60,437

Total costs and expenses		191,238			753,122			499,912			1,934,287

(Loss) from continuing operations before other (income) and expense		(318,488	)		(869,956	)		(502,132	)		(1,447,162	)

Interest expense, net of interest income		129,526			119,640			270,817			168,599
Other (income) expense		—			—			—			(607,149	)

Total other (income) and expense		129,526			119,640			270,817			(438,550	)

(Loss) from continuing operations before income taxes		(448,014	)		(989,956	)		(772,949	)		(1,008,604	)

Income taxes		—			—			—			—


(Loss) from continuing operations		(448,014	)		(989,956	)		(772,949	)		(1,008,604	)

Net (loss)	$	(448,014	)	$	(989,956	)	$	(772,949	)	$	(1,008,604	)

Basic and diluted (loss) per share from continuing operations	$	(.02	)	$	(.05	)	$	(.04	)	$	(.05	)

Weighted average basic and diluted common shares outstanding		18,764,290			20,308,164			18,764,290			20,308,164

See accompanying notes to condensed consolidated financial statements.

F-2

URBAN AG. CORP

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months			Six Months
	Ended			Ended
	6/30/2013			6/30/2012

Cash flows from operating activities:
Net (loss)	$	(772,949	)	$	(1,008,604	)
Adjustments to reconcile net loss items not requiring the use of cash:
Depreciation		—			60,437
Change in operating assets and liabilities:
(Increase) in accounts receivable, net of allowances		(128,861	)		(141,132	)
(Increase) in prepaid expenses and other current assets		(80,132	)		(907	)
Increase in accounts payable and other current liabilities		508,438			470,807
Increase in current portion of long term debt		2,336,119			6,021
Increase in accrued expenses		779,354			745,436

Net cash used in operating activities		2,641,969			132,058

Cash flows from investing activities:
Net Investment in plant, property and equipment		—			(73,199	)
Net Investment in Intangible Assets		(2,984,861	)		—

Net cash used in investing activities		(2,984,861	)		(73,199	)
Cash flows from financing activities:

Increase/ (decrease) in short term notes payable		303,668			(204,505	)
(Increase) in Notes Receivable		(146,064	)
Net increase/ (decrease) in line of credit		41,363			(618,420	)
		—			—
(Increase) in due from related parties		(36,000	)		103,443
Increase/ (decrease) in long term debt		—			96,305
Increase in capital stock and additional paid in capital		208,784			680,628

Net cash generated by financing activities		371,751			57,451
Change in cash from continuing operations		28,859			116,310
Change in cash from discontinued operations		—			(80,310	)
Cash at beginning of period		412			25
Cash at end of period	$	29,271		$	36,025

See accompanying notes to condensed consolidated financial statements.

F-3

URBAN AG. CORP

Notes to Condensed Consolidated Financial Statements

June 30, 2013

(unaudited)

1.	Interim Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnote disclosure required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the financial statements and related notes of Urban AG. Corp (the "Company") as reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The results of operations for the six months ended June 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013, or any other period.

Organization

Urban Ag. (the “registrant”, “Company,” “we”, “us”, “our”, or “Urban Ag”) is the successor entity to Aquamer, Inc. (“AQUM”), a Delaware corporation, which was established in February 2000 to commercialize proprietary medical devices. In 2005 Aquamer became a wholly owned subsidiary of Bellacasa Productions, Inc. (“Bellacasa”) a publicly traded company, which in 2007 distributed 100% of its AQUM shares to its shareholders, thus creating a public entity that traded as AQUM. The Company is a calendar year corporation.

From 2007 to 2010 AQUM tried unsuccessfully to commercialize its medical device business and our Board of Directors closed those operations and acquired Urban Agricultural Corporation, a Delaware corporation (“UAC”). UAC holds the exclusive rights under a license from TerraSphere, Inc. (“TerraSphere”) to use their patented farming technology in Massachusetts, and the right of first refusal to purchase exclusive licenses for New Jersey, Pennsylvania and California. Under the TerraSphere license the Company receives certain vertical farming intellectual property and know-how from TerraSphere. The license was purchased by UAC in May, 2010 for $1,000,000 with $250,000 paid at acquisition and payments totaling $750,000 due by May 1, 2011. Urban Ag was unable to make payments due under the TerraSphere License. TerraSphere extended the payment terms under the TerraSphere License through December 31, 2011.

Effective March 31, 2012 (“Effective Date”) the Company entered into a Stock Purchase Agreement (the "UAC Agreement”) with Distressed Asset Acquisitions, Inc. (“DAAI”) to divest itself of all ownership of its wholly owned subsidiary, Urban Agricultural Corporation (“UAC”). The UAC Agreement provides that DAAI will pay $100 and assume all liabilities as of the Effective Date for 100% of the stock in UAC. The Company recorded a gain of approximately $143,000 on the transaction.

Subsequent to closing down the medical device business, the Company became focused on a long-term strategy of pursuing the consolidation of the fragmented industry that provides outsourced services to General Contractors, Facility Managers/Owners, Architects and Engineers. This industry is focused on providing construction path services including pre-construction services, site selection and preparation, hazardous material abatement and environment remediation, electrical/data communication system integration, electrical cabling installation and design, restoration/remediation services and post occupancy services.

F-4

In pursuit of this strategy, on November 7, 2011 Urban Ag. Corp. (the “Registrant,” “Urban Ag,” or the “Company”) entered into a Stock Purchase Agreement (the "Agreement"), with CCS Environmental World Wide, Inc., a Delaware corporation (“CCS World Wide,” “CCS,” or the “Seller”) and the shareholders of CCS (“Shareholders”). Pursuant to the terms of the Agreement, Urban Ag acquired 100% of the outstanding shares of CCS. In exchange, the Company issued to the CCS Shareholders an aggregate of 7,900,000 shares of the Company's common stock, $.0001 par value and five million warrants to purchase one share of common stock of the Company per Warrant. The warrants are exercisable for a period of five years at a price of $3.00 per share. The Warrants become exercisable once CCS achieves $50,000,000 in revenue in a single year. The shares purchased represented 78.8% of the outstanding common stock of the Company after the closing. Pursuant to the Agreement, CCS became the Company's wholly-owned subsidiary. This transaction was recorded as a reverse merger

CCS Worldwide is a hazardous material abatement and environmental remediation company based North Andover, Massachusetts. The Company currently acts as a Holding Company that has as its one operating subsidiary CCS Worldwide. The Office was relocated to North Andover, Massachusetts in October of 2012. CCS Worldwide generates revenue within a single operating segment which provides hazardous material abatement and environment remediation services through its four wholly owned subsidiaries - Commonwealth Contracting Services LLC; CCS Special Projects LLC; CCS Environmental, Inc.; and CCS Environmental Services, Inc

The results of operations from CCS Worldwide are included in the financial statements for all periods included in this quarterly report, although CCS had no operations during 2013.

The Company is continuing to pursue the long-term strategy of consolidation of the fragmented industry that provides outsourced services to General Contractors, Facility Managers/Owners, Architects and Engineers. This industry is focused on providing construction path services including pre-construction services, site selection and preparation, hazardous material abatement and environment remediation, electrical/data communication system integration, electrical cabling installation and design, restoration/remediation services and post occupancy services. The Company has been successful in acquiring a Group of Companies through the Green Wire Enterprise, Inc. acquisition. On February 1, 2013, Urban Ag. Corp. (the “Company”) completed the acquisition of 100% of Green Wire Enterprises, Inc.(“Green Wire”) an Oklahoma corporation engaged in the business of infrastructure deployment, integration and maintenance for telecommunications systems providers. Green Wire also owns 100% of Terra Asset Management, Inc. and B & R Telephone LLC. and 49% of Green Wire, Inc, these companies are also engaged in providing a variety of services to the telecommunications industry.

Green Wire, Inc. is a certified, minority-owned small business offering Telecommunication Solutions and Equipment, Structural Cabling, Wireless Solutions, Microwave Tower, Fiber and Antenna Installation, and Alternative Energy Solutions complemented by name brands and superior products and devices. The business model of this subsidiary is centered on providing cost saving solutions and resources for city, county, school and state governments and associated agencies providing communication and data systems that create a competitive advantage by delivering efficiency, productivity, and cost savings with seamless equipment installations and secure operations incorporating internet, IT & data integration, GPS and monitoring. The San Antonio operations also resell Fiber to counties, municipalities and corporations/businesses.

Terra Asset Management Inc.’s operations located in Broken Arrow Oklahoma is an established network asset management company with the capacity to build out state of the art networks using existing workforces and subcontractors, and the expertise to provide diverse services to subscriber companies. They design and build network infrastructure for the largest tech and wireless companies, such as Alcatel-Lucent, Motorola, Sprint, AT&T, Verizon, Starbucks, Southeast Financial, and Bank Plus. This operation represents half of the expected revenues of GWE.

F-5

B & R Telephone located in Corpus Christi, TX provides asset management such as human resources for specialized labor force. They also provide sales, service, and installation of telephone and paging equipment, network services, fiber optics, tower and antenna installations, as well as camera surveillance for the Corpus Christi area. Among the subsidiary’s extensive client base are 6 out of the 7 largest General Contractors in the US. Through these clients the Corpus Christi operations provide phone/ data and equipment installation, maintenance and technical services to customers such as Wal-Mart, CVS, Firestone, Radio Shack and others.

Basis of Presentation

The accompanying condensed consolidated financial statements include the consolidated accounts of the Company and its wholly-owned subsidiaries, with all significant intercompany balances and transactions eliminated in consolidation. As a result of reverse merger accounting treatment of the CCS Worldwide acquisition, the Company’s financial statements for the three and six month periods ended June 30, 2012 include the results of operations and financial position of CCS Worldwide as well as the results of operation of Green Wire Enterprises, Inc. for the five month period beginning on February 28, 2013 through June 30, 2013 effective with the date of the acquisition. The Company’s financial statements for the year ended December 31, 2012 reflect the consolidation of CCS Worldwide with the Company effective with the date of the Agreement.

2.	Summary of Significant Accounting Policies

Going Concern

The accompanying condensed consolidated financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. This assumption, that the Company continues to operate as a going concern, is presently in question and contingent upon the Company's ability to raise additional funds. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has experienced substantial losses, has a working capital deficiency of approximately $12.3 million, a stockholders’ deficit of approximately $9.2 million and is in default on several financial obligations at June 30, 2013, which raises substantial doubt about the Company's ability to continue as a going concern

Additionally, the Company’s accounts receivable financing arrangement has been terminated by the lender. Also, as of June 30, 2013, the Company has delinquent payroll taxes of approximately $1.2 million.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

F-6

Cash and Cash Equivalents

For financial statement presentation purposes, those short-term, highly liquid investments with original maturities of three months or less are considered to be cash or cash equivalents.

Accounts Receivable

The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining allowances for potential credit losses which, when realized, have been within management's expectations. The allowance method is used to account for uncollectible amounts. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Allowance for doubtful accounts and provision for contract adjustments was $ -0- at June 30, 2013 and $-0- at December 31, 2012.

Revenue Recognition

For financial reporting, profits on construction contracts are recognized by the Company on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimate total construction costs for each contract. This method is used because contracts in process include all materials, direct labor and subcontractor costs and those indirect costs related to contract performance, such as depreciation, motor vehicles, payroll taxes, employee benefits, small tools, insurance, etc. Selling and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. An amount equal to contract costs attributable to claims is included in revenues when realization is probable and the amount can be reasonably estimated. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the Company’s estimates of costs and revenues will change.

Valuation of Intangibles and Other Long Lived Assets

The recoverability of long-lived assets, including equipment and intangible assets, is reviewed when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

Stock Based Compensation

Stock based awards are accounted for according to the provisions of FASB ASC 718. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate. All stock based compensation has been terminated as all stock option holders have resigned.

F-7

Income Taxes

Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax laws. Allowances are recorded if recovery is uncertain.

Earnings per Common Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Basic and diluted earnings per share are the same as outstanding options are anti-dilutive. Dilutive common equivalent shares consist of options to purchase common stock (only if those options are exercisable and at prices below the average share price for the period) and shares issuable upon the conversion of the Company's securities.

Impairment

Intangible assets with estimable lives and other long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of intangible assets with estimable lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted pretax cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future pretax operating cash flows or appraised values, depending on the nature of the asset. Judgment is required to estimate future operating cash flows.

3.	Events of Material Impact Subsequent to Year End

Asher Convertible Security January 2013

On January 16, 2013 the Company sold and issued a Convertible Promissory Note (the "Note") to Asher Enterprises, Inc. ("Asher") in the principal amount of $63,000 pursuant to the terms of a Securities Purchase Agreement (the " Purchase Agreement") of even date therewith. Asher is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended. The Company has issued 5,749,234 share of its common stock upon the conversion of $11,500 under the Note. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lender to convert debt that is more that is more than six months old.

Advanced Recovery Settlement Agreement January 28, 2013

On January 28, 2013 the Company entered into a Security Settlement Agreement with Advanced Recovery Solutions, Inc. that consolidated the debt instruments that had been acquired by Advanced during the year ended 12/31/12 in the principal amounts recorded on the Company’s Balance sheet from Marshall Sterman $54,123.00, the balance of the James Shanahan $4,990.00, Frank Magliochetti $45,000.00, the LaFlamme Note $400,250.00 and in January of 2013 Herb Rubin and Joel Glovsky debt totaling $75,000.00.

F-8

Green Wire Enterprises, Inc. acquisition February 1, 2013

On February 1, 2013, Urban Ag. Corp. (the “Company”) completed the acquisition of 100% of Green Wire Enterprises, Inc.(“Greenwire”) an Oklahoma corporation engaged in the business of infrastructure deployment, integration and maintenance for telecommunications systems providers. Green Wire also owns 100% of Terra Asset Management, Inc. and B & R Telephone LLC. and 49% of Green Wire, Inc, these companies are also engaged in the telecommunications industry.

Conversion of Cimarron Debt February 6, 2013

On February 6, 2013 the Company issued an aggregate of 1,885,637 shares of its Common Stock to 2 unaffiliated entities upon the conversion of $47,140 of outstanding indebtedness. The original lender loaned the Company the monies in March 2012. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

Master Service Agreement with Goodman Networks March 22, 2013

On March 22, 2013 Terra Asset Management entered into a Master Service Agreement with Goodman Networks for the construction of cell tower and microwave sites primarily in the mid-west region of the United States.

Increase in authorized and approval of two reverse splits.

Effective in the first quarter of 2013, the Board of Directors and a majority of the Company’s shareholders authorized the increased of the Company's authority to issue all classes stock to 900,000,000 shares of Common Stock, $.0001 par value (“Common Stock”). On August 14, 2013, the Company amended its Certificate of Incorporation to increase its authorized common stock from 200,000,000 shares to 900,000,000. In addition a majority of the shareholders authorized the Board to initiate up to two future reverse splits of the Company’ Common Stock at a ratio not to exceed 20:1 over the next two years.

Asher Convertible Security April 4, 2013

On April 4, 2013 the Company sold and issued a Convertible Promissory Note (the "Note") to Asher Enterprises, Inc. ("Asher") in the principal amount of $32,500 pursuant to the terms of a Securities Purchase Agreement (the " Purchase Agreement") of even date therewith. Asher is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.

Asher Convertible Security May 28, 2013

On May 28, 2013 the Company sold and issued a Convertible Promissory Note (the "Note") to Asher Enterprises, Inc. ("Asher") in the principal amount of $27,500 pursuant to the terms of a Securities Purchase Agreement (the " Purchase Agreement") of even date therewith. Asher is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.

F-9

Conversion of Advanced Recovery Solutions Debt Sold to Unaffiliated Third Parties in 2013

The Company has issued an aggregate of 16,890,291 shares of its Common Stock to two unaffiliated entities upon the conversion of $48,500 of outstanding indebtedness from June 14, 2013 through August 20, 2013. The original lenders loaned the Company the monies prior to June 2012 and Advanced Recovery Solutions, Inc. entered into a Security Settlement Agreement on January 28, 2013 as described above. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

Subscription Agreement

On May 28 and August 1, 2013 the Company entered into Subscription agreements on a best efforts basis in the amounts of $1,500,000.00 and $1,000,000.00 respectively with an entity located in Davie, Florida. An initial payment of $50,000.00 was received by the Escrow Agent on June 4, 2013. No additional payments have been received and the $50,000.00 is recorded as a short term loan on the balance sheet. Several issues have arisen regarding the subscription agreements that are currently being vetted by management and the directors. Under all outcomes the subscription agreements will not be fulfilled. The disposition of the funds received has yet to be determined.

F-10

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Organization and Background

Urban Ag. Corp. (the “registrant”, “Company,” “we”, “us”, “our”, or “Urban Ag”) is the successor entity to Aquamer, Inc. (“AQUM”), a Delaware corporation, which was established in February 2000 to commercialize proprietary medical devices. In 2005 Aquamer became a wholly owned subsidiary of Bellacasa Productions, Inc. (“Bellacasa”) a publicly traded company, which in 2007 distributed 100% of its AQUM shares to its shareholders, thus creating a public entity that traded as AQUM. The Company is a calendar year corporation.

Business Overview

Subsequent to closing down the medical device business, in 2011 the Company became focused on a long-term strategy of pursuing the consolidation of the fragmented industry that provides outsourced services to General Contractors, Facility Managers/Owners, Architects and Engineers. This industry is focused on providing construction path services including pre-construction services, site selection and preparation, hazardous material abatement and environment remediation, electrical/data communication system integration, electrical cabling installation and design, restoration/remediation services and post occupancy services.

The results of operations from CCS Worldwide are included in the financial statements for all periods included in this quarterly report, although CCS had no operations during 2013.

THREE MONTHS ENDED JUNE 30, 2013 COMPARED TO THREE MONTHS ENDED JUNE 30, 2012

NET REVENUES - Net revenues for the three months ended June 30, 2013 decreased by $1,557,293 or approximately 90.31% to $163,936 from $1,724,229 in the comparable period in 2012.

The Company’s decreased revenue in 2013 over the comparable three month period in 2012 consisted of decreased sales in our core asbestos business and related services of approximately $1,724,229 offset by an increase in Telecommunication Construction Service revenue of approximately $163,936.

COST OF SALES - Cost of sales for the three months ended June 30, 2013 decreased by $1,549,876 or approximately 84.18% to $291,187 from $1,841,063 in the comparable period in 2012.

Cost of sales for the three months ended June 30, 2013 (increased/decreased) to approximately 177.62% of sales causing a gross loss of $127,250 from 106.78% of sales, or a $116,834 gross loss, for the comparable three month period in 2012. Our cost of sales percentages have historically fluctuated greatly depending on the composition of union and non-union work and on the cost of waste disposal charges. Union work generally has much tighter margins and is generally less profitable to the Company. In addition, the Company is transitioning away from its historical sources of revenue in the Asbestos Abatement Industry and is building a revenue base in the telecommunication industry where the gross margins are impacted by level of revenue. Also during the 3 month period ended June 30, 2013 Green Wire Enterprises, Inc. experienced an increase in warranty and replacement work due to an equipment supplier going out of business

The reduction in the union cost overruns and charges for union labor that represented the bulk of the adverse changes in the three months ended June 30, 2012 were eliminated in the three month period ended June 30, 2013 as a result in the transition away from the Asbestos Abatement Industry into the Telecommunication Construction Services industry. Labor costs decreased from approximately 59% of sales for the three months ended June 30, 2012 to approximately 58% of sales for the three months ended June 20, 2013. Union benefit charges decreased from approximately 33% of sales to approximately 0 % of sale for the same periods.

GENERAL AND ADMINISTRATIVE - General and administrative costs for the three months ended June 30, 2013 decreased by approximately $530,814 or 73.51 % to $191,238 from $722,052 in the comparable period in 2012.

The decrease in general and administrative costs consisted primarily of decreased costs of overhead incurred in the Asbestos Abatement division of approximately $722,052. The balance of the change was comprised of increases in the overhead cost incurred in the Telecommunication operations of approximately $191,238.

DEPRECIATION - Depreciation for the three months ended June 30, 2012 decreased by $31,070 or approximately 100% to $-0- from $31,070 in the comparable period in 2012.

The change is a result of all the fixed Assets of the Company being seized as part of the Midland foreclosure in the fourth quarter of 2012. Currently the Company is using equipment rental services and subcontractors until it can rebuild it work force and equipment inventory.

INTEREST, NET OF INTEREST INCOME - Interest expense for the three months ended June 30, 2012 increased by $9,886 or approximately 8.26% to $129,526 from $119.640 in the comparable period in 2012.

The change in interest expense was attributed to various refinancing activities carrying different terms and rates in the 2013 period compared to the comparable period in 2012.

SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011

NET REVENUES - Net revenues for the six months ended June 30, 2013 decreased by $3,157,666 or approximately 89.13% to $385,023 from $3,542,689 in the comparable period in 2012.

The Company’s decreased revenue in 2013 over the comparable three month period in 2012 consisted of decreased sales in our core asbestos business of approximately $3,542,689 offset by an increase in the Telecommunication Construction services revenue of $385,023.

COST OF SALES - Cost of sales for the six months ended June 30, 2013 decreased by $2,668,321 or approximately 87.32% to $387,243 from $3,055,564 in the comparable period in 2012.

Cost of sales increased to approximately 100.57% of sales from 86% of sales for the comparable period in 2012. Our cost of sales percentages have historically fluctuated greatly depending on the composition of union and non-union work and on the cost of waste disposal charges. Union work generally has much tighter margins and is generally less profitable to the Company. In addition, the Company is transitioning away from its historical sources of revenue in the Asbestos Abatement Industry and is building a revenue base in the telecommunication industry where our gross margins are impacted by the Company’s level of revenue. Also during the 6 month period ended June 30, 2013 Green Wire Enterprises, Inc. experienced an increase in warranty and replacement work due to an equipment supplier going out of business

The reduction in the union cost overruns and charges for union labor that represented the bulk of the adverse changes in the six months ended June 30, 2012 were eliminated in the six month period ended June 30, 2013 as a result in the transition away from the Asbestos Abatement Industry into the Telecommunication Construction Services industry.

GENERAL AND ADMINISTRATIVE - General and administrative costs for the six months ended June 30, 2013 decreased by approximately $1,373,937 or 73.32% to $499,913 from $1,873,850 in the comparable period in 2012.

The decrease in general and administrative costs consisted primarily of decreased costs of overhead incurred in the Asbestos Abatement division of approximately $1,873,850. The balance of the change was comprised of increases in the overhead cost incurred in the Telecommunication operations of approximately $499,913.

DEPRECIATION - Depreciation decreased for the six months ended June 30, 2012 increased by $60,437 or approximately 100% to $-0- from $60,437 in the comparable period in 2012.

INTEREST, NET OF INTEREST INCOME - Interest expense for the six months ended June 30, 2012 increased by $102,225 or approximately 60.64% to $270,817 from $168,591 in the comparable period in 2012.

The change in interest expense was attributed to various refinancing activities carrying different terms and rates in the 2013 period compared to the comparable period in 2012.

OTHER INCOME – Other income for the six months ended June 30, 2012 was $607,149. There was no other income for the comparable period in 2013. The other income of $607,149 related to a one time gain on the re-financing and discount recognized on the payoff of the Company’s line of credit.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2013, we had approximately $29,271 in cash and total current assets of $238,264 as of the same date we had approximately $12,572,351 of current liabilities and a working capital deficit of approximately $12.3 million. Our financial condition has been materially and adversely affected by certain negative actions taken by our accounts receivable factor.

Our ability to continue our business activities as a going concern including continuation of our existing business service lines and funding our strategic growth plans will depend upon, among other things, raising capital from third parties or receiving net cash flows from our existing business operations.

The Company plans to meet its financial obligations and commitments for the next 12 months by raising additional capital in the form of debt or equity instruments. In furtherance of that goal, the Company is currently engaged in ongoing discussions with potential investors, however presentations to and discussions with those potential investors in an attempt to provide important funds to the Company have been unsuccessful to date. We are uncertain whether we will be able to obtain any financing, or if we are able to obtain financing that it will be on commercially favorable terms. There can be no assurance that we will be able to obtain financing on any terms. Without these funds, we will be unable to repay our outstanding debt and other current and long-term liabilities.

To the extent we are able, if we are able, to obtain additional financing, the proceeds will be applied to pay our current liabilities and for working capital purposes.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, dilution of the interests of existing shareholders may occur. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our assets prove to be adequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders.

On January 16, 2013, the Company sold and issued a Convertible Promissory Note (the "Note") to Asher Enterprises, Inc. ("Asher") in the principal amount of $63,000 pursuant to the terms of a Securities Purchase Agreement (the " Purchase Agreement") of even date therewith. Asher is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.

The Note, together with accrued interest at the annual rate of eight percent (8%), is due on January 9, 2014 (the "Maturity Date"). The Note is convertible into the Company’s common stock commencing one hundred eighty (180) days from the date of issuance at a conversion price equal to 60% of the Market Price of the Company’s common stock on the date of conversion. “Market Price” is defined in the Note as the average of the lowest three (3) trading prices for the Company’s common stock during the ten (10) trading days prior to the conversion date. The Company has the right to prepay the Note at any time from the date of issuance until the 180th day the Note was issued at an amount equal to 135% of (i) the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date.

On January 28, 2013 the Company entered into a Security Settlement Agreement with Advanced Recovery Solutions, Inc. that consolidated the debt instruments that had been acquired by Advanced during the year ended December 31, 2012 in the principal amounts recorded on the Company’s Balance sheet from Marshall Sterman $54,123.00, the balance of the James Shanahan $4,990.00, Frank Magliochetti $45,000.00, the LaFlamme Note $400,250.00 and in January of 2013 Herb Rubin and Joel Glovsky debt totaling $75,000.00.

On April 21, 2013, the Company sold and issued a Convertible Promissory Note (the "Note") to Asher Enterprises, Inc. ("Asher") in the principal amount of $32,500 pursuant to the terms of a Securities Purchase Agreement (the " Purchase Agreement") of even date therewith. Asher is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.

The Note, together with accrued interest at the annual rate of eight percent (8%), is due on April 21 , 2014 (the "Maturity Date"). The Note is convertible into the Company’s common stock commencing one hundred eighty (180) days from the date of issuance at a conversion price equal to 60% of the Market Price of the Company’s common stock on the date of conversion. “Market Price” is defined in the Note as the average of the lowest three (3) trading prices for the Company’s common stock during the ten (10) trading days prior to the conversion date. The Company has the right to prepay the Note at any time from the date of issuance until the 180th day the Note was issued at an amount equal to 135% of (i) the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date.

On May 20, 2013 the Company entered into a Promissory Note Agreement with Advance Recovery Solutions, Inc. in the amount of $50,000.00. The Note, together with accrued interest at the rate of seven percent (7%) is due on May 20, 2014 (the “Maturity Date”).

The Note, together with accrued interest at the annual rate of eight percent (8%), is due on May 28 , 2014 (the "Maturity Date"). The Note is convertible into the Company’s common stock commencing one hundred eighty (180) days from the date of issuance at a conversion price equal to 60% of the Market Price of the Company’s common stock on the date of conversion. “Market Price” is defined in the Note as the average of the lowest three (3) trading prices for the Company’s common stock during the ten (10) trading days prior to the conversion date. The Company has the right to prepay the Note at any time from the date of issuance until the 180th day the Note was issued at an amount equal to 135% of (i) the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date.

On June 27, 2013 the Company entered into a Promissory Note Agreement with Advance Recovery Solutions, Inc. in the amount of $35,000.00. The Note, together with accrued interest at the rate of seven percent (7%) is due on June 27, 2014 (the “Maturity Date”).

On July 29, 2013 the Company entered into a Promissory Note Agreement with Advance Recovery Solutions, Inc. in the amount of $35,000.00. The Note, together with accrued interest at the rate of seven percent (7%) is due on July 29, 2014 (the “Maturity Date”).

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, our Chief Executive Officer and Chief Financial Officer (the "Certifying Officer") conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, (the “1934 Act”), the term "disclosure controls and procedures" means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including the Certifying Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officer has concluded that our disclosure controls and procedures are not effective to ensure that all material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the 1934 Act, and the rules and regulations promulgated there-under.

Based upon this evaluation the Certifying Officer has concluded that the following material weaknesses in our disclosure controls and procedures existed as of the end of the period covered by this quarterly report:

·	Lack of reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions.

·	Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the 1934 Act. The Company's internal control over financial reporting is designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of published financial statements and the reliability of financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. Based on our assessment, we believe that, as of June 30, 2013, the Company's internal control over financial reporting is not effective based on those criteria. This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this quarterly report. Further, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the ordinary course of business, we may from time to time be involved in various threatened or actual legal proceedings which the company will vigorously defend. The litigation process is inherently uncertain and it is possible that the outcome of such matters may result in a material adverse effect on the financial condition and/or results of operations of the Company. In the opinion of the management, matters currently pending or threatened against the Company are not expected to result in a material adverse effect on our financial position or result of operations.

ITEM 1A – RISK FACTORS

There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

Aside from those risks discussed below, there have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

RISKS RELATED TO OUR BUSINESS

If our attempts to secure additional financing are not successful, we will be required to cease or curtail our operations, or obtain funds on unfavorable terms. These factors create a substantial doubt about our ability to continue as a going concern.

Our available resources are not sufficient to fund our operations, without additional sources of financing we would not be able to continue our business, and we expect to incur operating losses for the foreseeable future. Consequently, in order to maintain our operations, which we have already curtailed substantially, we will need to access additional equity or debt capital. Securing financing is proving even more difficult than anticipated. These factors create a substantial doubt about our ability to continue as a going concern. In light of our negative stockholders’ equity, there can be no assurance that we will be able to obtain the necessary additional capital on a timely basis or on acceptable terms, if at all, to continue our operations and, to the extent available, to fund the development of our business. In any of such events, the continuation of our operations would be materially and adversely affected and we may have to cease conducting business.

As noted above, Urban Ag is in the process of attempting to secure sufficient financing to continue operations. We have been working to obtain financing from outside investors for more than12 months, but have not yet been successful. In the interim, short-term debt financing provided primarily by a corporate investor has secured all of the company’s assets, and is being utilized to support governance and compliance activities. Additionally, non-payment of professional and other service providers and reduced general spending have been instituted until such time as financing is secured, if ever. If we are unable to obtain financing, we will be required to further curtail our operations or cease conducting business. Given our current level of debt, we do not expect that our stockholders would receive any proceeds if we declare bankruptcy or seek to liquidate the Company.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 19, 2013 the Company issued Mr. Richard Greene 500,000 shares of the Company’s common stock as consideration for services performed and to be performed on behalf of the Company pursuant to the Marketing Services Agreement dated May 31, 2013 between the Company and Richard Greene. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance of securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction

On June 19, 2013 the Company issued TTT Holding, Inc. 2,000,000 shares of the Company’s common stock as a conversion of the $12,000 of indebtedness due by Terra Asset Management, the Company’s wholly owned subsidiary to TTT Holdings, Inc. and evidenced by a Promissory Note dated January 1, 2012. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

On July 31, 2013 the Company issued Enviro Staffing 750,000 shares of the Company’s common stock in exchange of the extinguishment of $75,000 of indebtedness due by CCS Special Projects, Inc., the Company’s wholly owned subsidiary to Enviro Staffing. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance of securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

On July 31, 2013 the Company issued an aggregate of 600,000 shares of the Company’s common stock to four individuals, of which 450,000 shares were issued in exchange of services rendered to the Company and 150,000 shares in exchange of the extinguishment of $15,000 of indebtedness due by the Company. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance of securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

Between May 31, 2013 and July 22, 2013, the Company issued to DPIT2, LLC an aggregate of 7,181,818 shares of the Company’s common stock upon the conversion of an aggregate of $23,500 of indebtedness due by the Company and evidenced by a Promissory Note issued more than one year ago. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

Between May 29, 2013 and July 18, 2013, the Company issued to Southridge Partners II, LP an aggregate of 9,708,473 shares of the Company’s common stock upon the conversion of an aggregate of $23,370 of indebtedness due by the Company and evidenced by a Promissory Note issued more than one year ago. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

On August 12, 2013, the Company issued to Moro, Inc. 1,590,000 shares of the Company’s common stock upon the conversion of an aggregate of $5,000 of indebtedness due by the Company and evidenced by a Promissory Note issued more than one year ago. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

On July 9, 2013, the Company issued to Redwood Management, LLC 2,000,000 shares of the Company’s common stock upon the conversion of an aggregate of $12,000 of indebtedness due by the Company and evidenced by a Promissory Note issued more than one year ago. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

On July 29, 2013, the Company issued to Asher Enterprises, Inc. ("Asher") 1,925,926 shares of the Company’s common stock upon the conversion of an aggregate of $5,200 of indebtedness due by the Company and evidenced by a Convertible Promissory Note issued on January 16, 2013. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

On August 6, 2013, the Company issued to Asher 1,894,737 shares of the Company’s common stock upon the conversion of an aggregate of $3,600 of indebtedness due by the Company and evidenced by a Convertible Promissory Note issued on January 16, 2013. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

On August 12, 2013, the Company issued to Asher 1,928,571 shares of the Company’s common stock upon the conversion of an aggregate of $2,700 of indebtedness due by the Company and evidenced by a Convertible Promissory Note issued on January 16, 2013. The certificates evidencing the above mentioned shares were issued without legend in that Rule 144 permits the lenders or their assignees to tack back to the date of the debt which was more than six months prior to issuance.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – (REMOVED AND RESERVED)

ITEM 5 – OTHER INFORMATION

None.

ITEM 6 – EXHIBITS

Exhibit 31.1			Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2			Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1			Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Urban Ag. Corp.
		(Registrant)

By:		/s/ Billy V. Ray, Jr.
		Billy V. Ray, Jr. Chief Financial Officer

Date: August 20, 2013

URBAN AG. CORP - FORM 10-Q - August 20, 2013

Attached files

URBAN AG. CORP Reports