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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

[ x ] ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2011

[   ] 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 000-53480

URBAN BARNS FOODS
INC.(Exact name of registrant as specified in its charter)

|Nevada                                              | 20-0215404                                                
|--------------------------------------------------- | ----------------------------------------------------------
|(State or Other Jurisdiction of Incorporation of    | (I.R.S. Employer Identification No.)                      
|Organization)                                       |                                                           
|                                                    |                                                           
|7170 Glover Road                                    |                                                           
|Milner BC V0Z 1T0                                   | 604-888-0420                                              
|(Address of principal executive offices) (ZIP Code) | (Registrants telephone number, including
      area code)

Securities registered pursuant to Section 12(b) of the Act:
NoneSecurities registered pursuant to Section12 (g) of the
Act: Common Stock, $0.001 par value

Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. 
Yes [   ] No[
x ]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. 
Yes [   ] No[ x
]

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 shorter period that the
registrant as required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[ x ] No [   ]

Indicate by check mark whether the registration has submitted
electronically and posted on its corporate Website, 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 he registrant was required to submit and post such files).

Yes [   ] No[   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [   ] | Smaller reporting company[ x ]
|----------------------------- | ----------------------- | --------------------------- | ------------------------------

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

State the aggregate market value of voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and ask price of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter.

---

The aggregate market value of Common Stock held by
non-affiliates of the Registrant on October 31, 2011 was $3,588,632 based on a
$0.60 closing price for the Common Stock on October 31, 2011. For purposes of
this computation, all executive officers and directors have been deemed to be
affiliates. Such determination should not be deemed to be an admission that such
executive officers and directors are, in fact, affiliates of the Registrant.

Indicate the number of shares outstanding of each of the
registrants classes of common stock as of the latest practicable date.

56,786,671 shares of common stock issued & outstanding as of
Oct 31, 2011

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

|PART
      I   |                | 17                                                                                                         
|-------------- | -------------- | -----------------------------------------------------------------------------------------------------------
|               | Item
      1.  | Business                                                                                                   
|               | Item
      1A. | Risk
      Factors                                                                                         
|               | Item
      1B. | Unresolved
      Staff Comments                                                                            
|               | Item
      2.  | Properties                                                                                                 
|               | Item3.         | Legal
      Proceedings                                                                                    
|               | Item
      4.  | [Removed
      and Reserved]                                                                               
|PART
      II  |                | 23                                                                                                         
|               | Item
      5.  | Market
      for Common Equity, Related Stockholder Matters and Issuer Purchases of
      Equity Securities
|               | Item
      6.  | Selected
      Financial Data                                                                              
|               | Item
      7.  | Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations          
|               | Item
      8.  | Financial
      Statements and Supplementary Data                                                          
|               | Item
      9.  | Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure           
|               | Item
      9A. | Controls
      and Procedures                                                                              
|               | Item
      9B. | Other
      Information                                                                                    
|PART
      III |                | 31                                                                                                         
|               | Item10.        | Directors,
      Executive Officers and Corporate Governance                                               
|               | Item
      11. | Executive
      Compensation                                                                               
|               | Item
      12. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters 
|               | Item
      13. | Certain
      Relationships and Related Transactions, and Director Independence                            
|               | Item
      14. | Principal
      Accountant Fees and Services.                                                              
|PART
      IV  |                | 41                                                                                                         
|               | Item
      15. | Exhibits,
      Financial Statement Schedules                                                              
|SIGNATURES     | 43            

3

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PART I

|Item 1. | Business
|------- | --------

Forward-looking Statements

This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause our or our
industry's actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable laws, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements so as to conform these
statements to actual results.

As used in this annual report, the terms "we", "us", "our",
our company, and "Urban Barns" mean Urban Barns Foods Inc. and of our
subsidiary, unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise
indicated.

Overview

We were incorporated as HL Ventures Inc. on May 21, 2007 under
the laws of the State of Nevada. Non Industrial Manufacture Inc. was
incorporated on February 10, 2010 under the laws of the Province of Alberta. On
June 2, 2011 we acquired all of the issued and outstanding common shares of Non
Industrial Manufacture Inc. pursuant to a share exchange agreement dated May 2,
2011. As a result, Non Industrial Manufacture Inc. is now our wholly owned
subsidiary. Our principal executive office is located at 7170 Glover Drive,
Milner, British Columbia, Canada V0X 1T0. Our telephone number is 604.888.0420.
Our fiscal year end is July 31.

Current Business

We are an urban produce production company that aims to be the
supplier of choice of fresh, locally grown, high-quality organic and
conventional fruits and vegetables for urban consumers.

We have identified a revenue opportunity in the produce
industry which we believe is currently underutilized. This consists primarily of
producing select fruits and vegetables in a secure, indoor environment in close
proximity to urban centers, where the population of potential consumers exceeds
that of rural locales, regardless of regional climate or outdoor growing season
constraints. Our business plan therefore seeks to eliminate two of the most
important logistical problems facing both producers and consumers of organic and
conventional fruits and vegetables today:

17

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- costs and delays related to shipping fresh produce from where it is grown
  to where it can be sold; and
- variations in climate that prevents certain produce from being grown in
  certain markets.

Our strategy is to develop a series of Urban Barns that we
use to grow our fruits and vegetables in a number of urban centers, beginning
with Vancouver, Canada and San Juan, Puerto Rico. To do this, we plan to lease
and retrofit a series of warehouse-type facilities in high density strategic
locations and purchase and install proprietary growing machines to grow our
organic and conventional produce. We hope that this will provide consumers with
a desirable degree of food security in addition to the other benefits associated
with vertical farming, such as a reduced ecological footprint. As of the date of
this Prospectus, we have not secured any such locations and have not begun
growing fruit and vegetables in commercially viable quantities.

Our mission is to become the first company to create brand-name
awareness for its produce by providing locally-grown fruits and vegetables to
local retailers and businesses at prices that compete with those at which
conventional and organic produce is typically offered. We believe that this will
permit consumers to substitute fresh, healthy, high-quality local equivalents
into their diet in place of fruits and vegetables grown in distant regions at a
similar or more competitive price point.

Currently, geography and logistics make local grown organic
fruit and vegetables specialty or seasonal produce in areas with harsh winters
such as the Northeast and Mid-West of the USA and all of Canada. The most common
method of tapping into this market is with greenhouses. Unfortunately, this is a
solution with high fixed costs and high variable costs. Due to the harsh winters
and the encroachment on prime agricultural land, there is no realistic way for
greenhouse growers to rapidly scale their operations to service all major urban
markets. The main suppliers in the sector are large commercial enterprises in
South California, or foreign enterprises in Mexico, Chile and Holland. According
to figures generated by our management, shipping currently constitutes about
seventy percent of the produce supply chain cost. As such, we believe there is
an opportunity for Urban Barns to do two things: lower shipping costs without
raising the fixed costs, and differentiate its product from other
available produce.

Technology

The technology that we plan to use to cultivate our fruits and
vegetables consists of a proprietary vertical farming apparatus used to grow
produce indoors which takes up a limited amount of space and subjects plants to
a variety of light spectrums over the course of their growing cycles. In
addition to the land-use benefits it provides, we believe that the growing
apparatus makes efficient use of light, energy, water, temperature, production
cycle, transportation and labor, and is capable of producing safe, healthy,
fresh, high-quality produce in controlled indoor environments. Our strategy of
using this technology strategically located in densely populated urban areas
will allow us to reduce the cost of production, water usage, carbon emissions
and herbicide and pesticide use as compared to traditional methods of
farming.

Our technology was developed by us and although the machine is
not yet protected by patent, we anticipate that we will file a Canadian patent
application in the next 12 months to protect this proprietary technology.
Currently, we rely on business secrets and know-how to protect our proprietary
technology.

18

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In addition to our proprietary technology, we are also actively
seeking to acquire the rights to patented growing equipment developed by third
parties. Our management believes that our growing machines, which are set to
occupy approximately 150 square feet of floor space, will be able to yield as
much output as 1500 square feet of greenhouse space, and allow a single plant to
produce up to five times the crop yield that it would using standard greenhouse
cultivation practices.

Products and Services

We plan to initially offer the following fruits and vegetables
for sale, as we have found that they are relatively easy to propagate and can be
grown to maturity in short production cycles: lettuce, spinach, basil,
strawberries, cucumbers, eggplant, peppers and tomatoes. We have identified
these items due to their high demand and profit potential, but this list is by
no means exhaustive.

Our President, Chief Executive Officer and Director, Jacob
Benne is also the founder of Bevo Agro Inc., a premier propagator of plants in
North America. As of the date of this Prospectus, Bevo Agro has been awarded
Organic Crop Improvement Association (OCIA) International certification for
cucumbers, eggplant, peppers and tomatoes (including the campari variety), and
we anticipate cultivating organic varieties of these along with conventional
varieties of lettuce, spinach, basil and strawberries.

We have identified major urban centers in the United States and
Canada, where the population is dense and many people live in areas serviced by
a relatively small number of distant large food growers situated in South
California, Mexico and Chile. We envision a network of Urban Barns delivering
hundreds of tons of food daily to retailers servicing these urban centers, and
millions of people gaining access to our locally grown, fresh, high-quality
produce instead of being shipped from Mexico, California or Chile. We believe
that this will effectively increase quality of the produce as well as reduce
shipping times and costs to bring fresh produce to market.

Market

Currently, geography and logistics make produce farming a
specialty or seasonal enterprise. We are dedicated to changing this perception
by growing fresh, safe, healthy organic and conventional fruits and vegetables
in urban facilities regardless of climate on a year-round basis in a more
environmentally-sustainable manner than traditional or greenhouse cultivation
would permit. Through the use of our specialized growing machines and the
selection of strategic locations for our Urban Barns, we believe that we can
both service and expand the ever-increasing market for locally-grown produce in
a cost-effective and competitive manner.

The value of the 2008 US vegetable crop was estimated at $10.4
billion, up 4 percent from 2007. In terms of production, the three largest crops
were onions, head lettuce and watermelons, which combined to account for 37
percent of the total production. Tomatoes, head lettuce and onions claimed the
highest values, accounting for 32 percent of the total value when combined.
California continued to be the leader in fresh vegetable and melon production,
accounting for 49 percent of annual fresh vegetable and melon output.
(Vegetables Annual Summary, NASS, USDA, 2009.)

There are strong indications that consumers are now, more than
ever, interested in purchasing safe, locally-grown produce that is subject to a
standard of quality such as organic certification. The recent growth of farmers markets and the
expansion of supermarket chains such as Whole Foods demonstrates that demand for
such produce exists, as do public concern over herbicide and pesticide use,
country-of-origin labeling and greenhouse gas emissions associated with shipping
produce hundreds, and even thousands, of miles from farm to retail outlet. The
eat locally movement has even been touted in the mainstream U.S. media as a
method of reducing ones carbon footprint.

19

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Organic products account for less than 2% of Canadas food
supply and occupy less than 1% of its dedicated cropland. Nevertheless, over the
past decade the market for such products has grown by approximately 20% and it
is projected to continue to grow for the foreseeable future.

We plan to capitalize on the opportunity presented by this
shift in consumer attitudes by offering them fresh; locally-grown organic and
conventional produce alternatives that are competitively-priced and capable of
instilling a measure of brand recognition. To achieve the latter, we plan to
employ shop-floor selling techniques (i.e. taste-before-you-buy campaigns) at
the retail level, engage in targeted print advertising and leverage existing
social networks on the Internet. We also plan to target additional markets that
require bulk produce on a continuous basis, such as produce processors, hotels
and restaurants, and we believe that our ability to provide a constant supply of
select high volume fruits and vegetables regardless of the local climate will
differentiate our produce from that of our competitors.

Distribution Methods

We plan to become a leading supplier of produce to large retail
chains by differentiating our fruits and vegetables from other available produce
and substantially lowering the shipping costs required to transport most produce
from its point of origin to point of sale. To accomplish this, we plan to
acquire and retrofit a network of buildings in high density urban locations and
equip them with proprietary growing machines to cultivate a variety of fruits
and vegetables. The technology will allow us to grow produce with high yields
using a fast growing cycle in any location regardless of the local climate.

Once we have grown our produce, we plan to leverage the
infrastructure established by Robyn Jackson, our Vice President, Logistics and
Director, to distribute our fruits and vegetables on a cost-effective basis
throughout western Canada. We anticipate entering into agreements with a variety
of regional distributors in any other locations in which we plan to operate once
we have established the validity of our business model. Robyn Jackson is
currently the President and CEO or Robyns Trucking, one of Western Canadas
largest food distributors and Mr. Jackson will be in charge for establishing
logistics solutions for Urban Barns fruit and produce as well as development of
relationships with local distributors and major retailers.

Locations

We plan to establish our first two Urban Barns in Vancouver,
Canada and San Juan, Puerto Rico. We have entered into negotiations with Jacob
Benne, our President, Chief Executive Officer and Director, to supply space for
our first commercial facility in Vancouver and we have also met with the
Secretary of Agriculture of the Commonwealth of Puerto Rico, who has indicated
an interest in donating government property to attract us to establish a
facility in San Juan. We targeted Puerto Rico for our second location based on
tax incentives, the presence of a large potential customer base, and a thriving
tourism industry whose hotels, cruise ships and restaurants require a supply of
fresh, high-quality produce year-round. Mr. Cesar Montilla is our Director of
Business Development. Mr. Montilla is a resident of Puerto Rico and will be our
local representative in this region.

20

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Following the set-up of our first two urban barns, we
anticipate investigating other potential locations in North America and
evaluating such attributes as local production costs, our existing and
prospective distributor relationships, typical local produce prices and local
competition before we commit to establishing a facility in any urban center.

Competition

We will compete with a number of unrelated seasonal operators
of greenhouses spread across our target market areas. This common method of
growing high-quality produce is limited in terms of cost and scale. Operators
must incur both high fixed and variable costs to build and maintain specialized
structures for this purpose, which makes it difficult for them to scale their
operations to optimal size in multiple locations.

We plan to establish a network of controlled indoor
environments in multiple urban locations for the purpose of growing fresh fruit
and vegetables and supplying this produce to major food retailers on a
year-round basis. Since we plan to acquire and retrofit existing vacant run-down
buildings and use proprietary technology to grow our fruits and vegetables, we
will not have to incur a significant capital outlay to establish our urban
barns, and the only limitations we will face in terms of scale will be related
to the cost of acquiring and renovating similar facilities in close proximity to
multiple urban centers.

We also face competition from producers of organic fruits and
vegetables that are grown and shipped from such locations as California, Mexico
and Chile. In many cases, these producers are able to grow produce year-round,
but they face uncertainty related to shipping costs and delays and variations in
climate, as well as environmental risks related to runoff exposure and the
presence of airborne agents from surrounding farms.

Intellectual Property

We own the copyright of our logo and all of the contents of our
website, www.urbanbarnsfoods.com. We have not filed for any protection of our
trademark and we do not currently own any other intellectual property
rights.

Research and Development

We have spent $190on research and development activities
from our inception on February 10, 2010 to July 31, 2011.

Reports to Security Holders

Although we are not currently subject to the reporting and
other requirements of the Exchange Act, we intend to furnish our shareholders
with annual reports containing financial statements audited by our independent
auditors and to make available quarterly reports containing unaudited financial
statements for each of the first three quarters of our fiscal year.

The public may read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site at www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC.

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Government Regulation

We do not currently require any government approvals for our
current business activities. However, once we have established our planned
urban barns locations, we anticipate that we will have to obtain the necessary
government licenses, authorizations and labor permits to legally manage our
facilities in the locations in which we plan to operate. Many of our facilities
and products will be subject to various laws and regulations administered by the
United States Department of Agriculture, the Federal Food and Drug
Administration, the Occupational Safety and Health Administration, and other
federal, state, local, and foreign governmental agencies relating to the quality
and safety of products, sanitation, safety and health matters, and environmental
control. We believe that we comply with such laws and regulations in all
material respects, and that continued compliance with such regulations will not
have a material effect upon capital expenditures, earnings, or our competitive
position.

While our intended business activities do not currently violate
any laws, any regulatory changes that impose restrictions or requirements on us
or on our potential customers could adversely affect us by increasing our
operating costs, which could have a material adverse effect on our results of
operations.

We do not currently incur any significant expenses related to
compliance with environmental regulations, and do not believe that this will be
a significant expense once we establish our Urban Barns.

Employees

As of November 11, 2011 we did not have any employees. Our
directors and officers provide us with services on a consulting basis. We plan
to hire a number of full-time employees in the near future to engage in
administrative tasks and the development of our first two urban barn
facilities in Vancouver, Canada and San Juan, Puerto Rico. Once we have entered
into definitive agreements to distribute our produce, we anticipate hiring
additional employees to operate these facilities and engaging various
consultants to provide legal, accounting, marketing and software development
services to us.

|Item 1A. | Risk Factors
|-------- | ------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

|Item 2. | Properties
|------- | ----------

Our executive office is located at 7170 Glover Drive, Milner,
British Columbia, Canada V0X 1T0. We have not entered into any agreement
regarding this office, which is provided to us at no charge by Jacob Benne, our
President, Chief Executive Officer and Director.

22

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|Item 3. | Legal Proceedings
|------- | -----------------

We are not aware of any pending or threatened legal proceedings
which involve us or any of our products or services.

|Item 4. | [Removed and Reserved]
|------- | ----------------------

PART II

|Item 5. | Market for Common Equity, Related
      Stockholder Matters and Issuer Purchases of Equity Securities
|------- | -----------------------------------------------------------------------------------------------------

Market Information

Our common stock is not traded on any exchange. Our common
stock is quoted on OTC Bulletin Board under the trading symbol URBF.OB. We
cannot assure you that there will be a market in the future for our common
stock.

OTC Bulletin Board securities are not listed and traded on the
floor of an organized national or regional stock exchange. Instead, OTC Bulletin
Board securities transactions are conducted through a telephone and computer
network connecting dealers. OTC Bulletin Board issuers are traditionally smaller
companies that do not meet the financial and other listing requirements of a
national or regional stock exchange.

The following table reflects the high and low bid information
for our common stock obtained from Stockwatch and reflects inter-dealer prices,
without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.

The high and low bid prices of our common stock for the periods
indicated below are as follows:

FINRA OTC Bulletin BoardQuarter Ended
    High
    LowJuly 31, 2011
    $0.04
    $0.02April 30, 2011
    $0.12
    $0.04January 31, 2011
    $0.08
    $0.04October 31, 2010
    $0.14
    $0.07


Holders

As of November 11, 2011 there were 81 holders of record of our
common stock.

Dividends

To date, we have not paid dividends on shares of our common
stock and we do not expect to declare or pay dividends on shares of our common
stock in the foreseeable future. The payment of any dividends will depend upon
our future earnings, if any, our financial condition, and other factors deemed
relevant by our Board of Directors.

23

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Equity Compensation Plans

On July 25, 2011 our board of directors approved the
establishment of the 2011 Employee Stock and Option Plan which provides for the
issuance of 7,000,000 shares or options to acquire our common stock to our
directors, officers, employees and consultants. As of November 14, 2011,
1,500,000 shares and 5,100,000 options had been issued.

Recent Sales of Unregistered Securities

We have not made any previously unreported sales to July 31,
2011.

Recent Purchases of Equity Securities by us and our
Affiliated Purchases

We have not repurchased any of our common stock and have no
publicly announced repurchase plans or programs as of November 11, 2011.

|Item 6. | Selected Financial Data
|------- | -----------------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

|Item 7. | Management's Discussion and Analysis of
      Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------------

We are a development stage company with limited operations and
revenues from our business operations. Our auditors have issued a going concern
opinion. This means that our auditors believe there is substantial doubt that we
can continue as an on-going business for the next twelve months unless we obtain
additional financing to fund our operations. Our only source of cash at this
time is investments by others in our company.

Forward-Looking Statements

This 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 Annual Report.

Liquidity and Capital Resources

As of July 31, 2011 we had cash of $32,907, total current
assets of $46,513, total current liabilities of $180,662 and working capital
deficit of $134,149 compared to working capital deficit of $3,480 as of July 31, 2010.

24

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During the year ended July 31, 2011, we received net cash of
$104,867 from financing activities, compared to net cash received of $314 from
financing activities during the period from February 10, 2010 (inception) to
July 31, 2010. The increase in cash from financing activities was due to the
issuance of common stock.

During the year ended July 31, 2011, we used net cash of
$12,955 on operating activities, compared to $272 net cash used on operating
activities during the period from February 10, 2010 (inception) to July 31,
2010. The increase in cash used on operating activities was due to the increase
of activities after our reverse merger with Non Industrial Manufacture Inc.

During the year ended July 31, 2011, we used net cash of
$59,047 from investing activities compared to $0 provided from investing
activities during the period from February 10, 2010 (inception) to July 31,
2010. The reason for the decrease in cash was due to the
recapitalization of our company in the reverse merger with Non Industrial
Manufacture Inc.

Since February 10, 2010 (inception) to July 31, 2011, our
accumulated deficit was $172,979. We are dependent on the funds raised through
our equity or debt financing, investing activities, and revenue generated
through the sales of our products to fund our operations.

We anticipate that we will meet our ongoing cash requirements
by retaining income as well as through equity or debt financing. We plan to
cooperate with various individuals and institutions to acquire the financing
required to produce and distribute our products and anticipate this will
continue until we accrue sufficient capital reserves to finance all of our
productions independently.

Plan of Operation

We are an urban produce production company that aims to be the
supplier of choice of fresh, locally grown, high-quality organic and
conventional fruits and vegetables located close to urban consumers.

We estimate that our expenses over the next 12 months will be
approximately $2,301,800 as summarized in the table below. These estimates may
change significantly depending on the nature of our future business activities
and our ability to raise capital from investors or other sources.

Description
    PotentialCompletion Date
    EstimatedExpenses($)Seedling purchases
    12
      months
    96,000Packaging
    12 months
    76,800Direct cost of sales (including research and development)
    12 months
    979,200Shipping
    12 months
    225,000Payroll
    12 months
    350,000Advertising and marketing
    12 months
    370,000General and administrative expenses
    12 months
    204,800Total
    
    2,301,800


25

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Based on our planned expenditures, we require additional funds
of $2,301,800 to proceed with our business plan over the next 12 months. If we
are not able to obtain additional financing on a timely basis, we will be unable
to conduct our operations as planned, and we will not be able to meet our
obligations as they become due. In such event, we will be forced to scale down
or perhaps even cease our operations.

Results of Operations for the Years Ended July 31, 2011
and 2010

The following summary of our results of operations should be
read in conjunction with our audited financial statements for the years ended
July 31, 2011 and 2010.

Our operating results for the years ended July 31, 2011 and
2010 are summarized as follows:

|                             |   | Year Ended |  
|---------------------------- | - | ---------- | -
|                             |   | July 31    |  
|                             |   | 2011       |  
|                             |   |            |  
|Revenue                      | $ | Nil        |  
|Depreciation                 |   | 6,329      |  
|Foreign exchange (gain) loss |   | (17,041    | )
|General and administrative   |   | 26,377     |  
|Professional fees            |   | 18,345     |  
|Research and development     |   | 190        |  

Revenues

We have not earned any revenues since inception.

Expenses

For the year ended July 31, 2011, we have total operating
expenses of $34,200compared to total operating expenses of $3,794 for the
period from February 10, 2010 (inception) to July 31, 2010.

Our operating expenses increased in connection with our merger
of the business with Non Industrial Manufacture. Additionally, the period ended
July 31, 2010 was shorter than the year ended July 31, 2011.

Net Loss

Since our inception on February 10, 2010 to July 31, 2011, we
incurred net a loss of $37,994. For the year ended July 31, 2011, we incurred
net loss of $34,200 compared to $3,794 for the period from February 10, 2010
(inception) to July 31, 2010. Our net loss per share was $0.00 for the year ended July 31, 2011 and $0.00 for the period from
February 10, 2010 (inception) to July 31, 2010.

26

---

Off-Balance Sheet Arrangements

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.

Inflation

The amounts presented in the financial statements do not
provide for the effect of inflation on our operations or financial position. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation adjustments.

Critical Accounting Policies

Our financial statements and accompanying notes have been
prepared in conformity with accounting principles generally accepted in the
United States of America for financial statements. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, and expenses. These estimates
and assumptions are affected by managements application of accounting policies.
We believe that understanding the basis and nature of the estimates and
assumptions involved with the following aspects of our financial statements is
critical to an understanding of our financials.

Use of Estimates

The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. We
regularly evaluate estimates and assumptions related to the useful life and
recoverability of long-lived assets, fair value of convertible debt and
share-based payments, and deferred income tax valuation allowances. We base our
estimates and assumptions on current facts, historical experience and various
other factors that we believe 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 us may
differ materially and adversely from our estimates. To the extent there are
material differences between the estimates and the actual results, future
results of operations will be affected.

Stock-Based Compensation

We record stock-based compensation using the fair value method
in accordance with ASC 718, Compensation  Stock Compensation.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.

27

---

We use the Black-Scholes option pricing model to calculate the
fair value of stock-based awards. This model is affected by our stock price as
well as assumptions regarding a number of subjective variables. These subjective
variables include, but are not limited to our 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 consolidated statement of
operations over the requisite service period.

Loss Per Share

We compute net loss per share in accordance with ASC 260
Earnings Per Sharewhich requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti
dilutive.

|Item 7A | Qualitative and Qualitative Disclosures
      about Market Risk
|------- | ---------------------------------------------------------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

28

---

|Item 8. | Financial Statements and Supplementary
      Data
|------- | -------------------------------------------------

|URBAN BARNS FOODS INC.           
|---------------------------------
|                                 
|(A Development Stage Company)    
|Consolidated Financial Statements
|(Expressed in U.S. dollars)      
|July 31, 2011 and 2010           



|Financial Statement Index                                    
|-------------------------------------------------------------
|Report of Independent Registered Public
      Accounting Firm
|Consolidated Balance Sheets                                  
|Consolidated Statements of Operations                        
|Consolidated Statements of Stockholder's Deficit             
|Consolidated Statements of Cash Flows                        
|Notes to the Consolidated Financial Statements               

29

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Stockholders ofUrban Barns
Foods Inc.(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of
Urban Barns Foods Inc. (A Development Stage Company) as of July 31, 2011 and
2010, and the related consolidated statements of operations, stockholders
equity (deficit) and cash flows for the year ended July 31, 2011, the period
from February 10, 2010 (Date of Inception) to July 31, 2010, and accumulated
from February 10, 2010 (Date of Inception) to July 31, 2011. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as of July 31, 2011 and 2010, and the results of its operations and its
cash flows for the year ended July 31, 2011, the period from February 10, 2010
(Date of Inception) to July 31, 2010, and accumulated from February 10, 2010
(Date of Inception) to July 31, 2011, in conformity with accounting principles
generally accepted in the United States.

The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has a working
capital deficit and has incurred operating losses since inception. These factors
raise substantial doubt about the Companys ability to continue as a going
concern. Managements plans in regard to these matters are also discussed in
Note 1 to the consolidated financial statements. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ SATURNA GROUP CHARTERED ACCOUNTANTS
LLPSaturna Group Chartered Accountants LLPVancouver,
CanadaNovember 15, 2011

F-1

---

|Urban Barns Foods Inc.       
|-----------------------------
|(A Development Stage Company)
|Consolidated Balance Sheets  
|(expressed in U.S. dollars)  

|                                                                                    |  | July 31, |   |  | July 31, |  
|----------------------------------------------------------------------------------- |  | -------- | - |  | -------- | -
|                                                                                    |  | 2011     |   |  | 2010     |  
|                                                                                    |  | $        |   |  | $        |  
|ASSETS                                                                              |  |          |   |  |          |  
|Current assets                                                                      |  |          |   |  |          |  
|Cash                                                                                |  | 32,907   |   |  | 42       |  
|Prepaid expenses and deposits                                                       |  | 13,606   |   |  |         |  
|Total current assets                                                                |  | 46,513   |   |  | 42       |  
|Property and
      equipment (Note 4)                                               |  | 66,351   |   |  |         |  
|Total assets                                                                        |  | 112,864  |   |  | 42       |  
|                                                                                    |  |          |   |  |          |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                               |  |          |   |  |          |  
|Current liabilities                                                                 |  |          |   |  |          |  
|Accounts payable                                                                    |  | 100,825  |   |  |         |  
|Due
      to related parties (Note 5)                                               |  | 79,837   |   |  | 3,522    |  
|Total liabilities                                                                   |  | 180,662  |   |  | 3,522    |  
|Nature of Operations and Continuance of Business (Note 1)                           |  |          |   |  |          |  
|Subsequent Events (Note 9)                                                          |  |          |   |  |          |  
|Stockholders deficit                                                               |  |          |   |  |          |  
|Preferred stock                                                                     |  |          |   |  |          |  
|Authorized: 100,000,000 common shares, with a
      par value of $0.001 per share   |  |          |   |  |          |  
|Issued and outstanding: nil
      shares                                            |  |         |   |  |         |  
|Common stock, Class A                                                               |  |          |   |  |          |  
|Authorized: 500,000,000 common
      shares, with a par value of $0.001 per share   |  |          |   |  |          |  
|Issued and outstanding: 50,261,671 and
      30,000,000 common shares, respectively |  | 50,262   |   |  |         |  
|Common stock, Class B                                                               |  |          |   |  |          |  
|Authorized: 25,000,000 common shares, with a
      par value of $0.001 per share    |  |          |   |  |          |  
|Issued and outstanding: nil
      and 2,500,000 common shares, respectively         |  |         |   |  | 2,500    |  
|Additional paid-in capital                                                          |  | 54,919   |   |  | (2,186   | )
|Accumulated deficit during the development stage                                    |  | (172,979 | ) |  | (3,794   | )
|Total
      stockholders deficit                                                   |  | (67,798  | ) |  | (3,480   | )
|Total liabilities and stockholders deficit                                         |  | 112,864  |   |  | 42       |  

(The accompanying notes are an integral part of these
consolidated financial statements)

F-2

---

|Urban Barns Foods Inc.               
|-------------------------------------
|(A Development Stage Company)        
|Consolidated Statements of Operations
|(expressed in U.S. dollars)          

|                                    |  |            |   |  |               |   |  | Accumulated   |  
|----------------------------------- |  | ---------- | - |  | ------------- | - |  | ------------- | -
|                                    |  |            |   |  | Period from   |   |  | from          |  
|                                    |  |            |   |  | February 10,  |   |  | February 10,  |  
|                                    |  | For the    |   |  | 2010 (Date of |   |  | 2010 (Date of |  
|                                    |  | Year Ended |   |  | Inception)    |   |  | Inception) to |  
|                                    |  | July 31,   |   |  | July 31,      |   |  | July 31,      |  
|                                    |  | 2011       |   |  | 2010          |   |  | 2011          |  
|                                    |  | $          |   |  | $             |   |  | $             |  
|                                    |  |            |   |  |               |   |  |               |  
|                                    |  |            |   |  |               |   |  |               |  
|Revenue                             |  |           |   |  |              |   |  |              |  
|                                    |  |            |   |  |               |   |  |               |  
|Expenses                            |  |            |   |  |               |   |  |               |  
|Depreciation                        |  | 6,329      |   |  |              |   |  | 6,329         |  
|Foreign exchange gain               |  | (17,041    | ) |  |              |   |  | (17,041       | )
|General and administrative          |  | 26,377     |   |  | 3,794         |   |  | 30,171        |  
|Professional fees                   |  | 18,345     |   |  |              |   |  | 18,345        |  
|Research and development            |  | 190        |   |  |              |   |  | 190           |  
|                                    |  |            |   |  |               |   |  |               |  
|Total expenses                      |  | 34,200     |   |  | 3,794         |   |  | 37,994        |  
|Net loss                            |  | (34,200    | ) |  | (3,794        | ) |  | (37,994       | )
|                                    |  |            |   |  |               |   |  |               |  
|Loss per share  basic and diluted  |  |           |   |  |              |   |  |               |  
|                                    |  |            |   |  |               |   |  |               |  
|Weighted average shares outstanding |  | 15,481,000 |   |  | 2,500,000     |   |  |               |  

(The accompanying notes are an integral part of these
consolidated financial statements)

F-3

---

|Urban Barns Foods Inc.               
|-------------------------------------
|(A Development Stage Company)        
|Consolidated Statements of Cash Flows
|(expressed in U.S. dollars)          

|                                                                            |              |               | Accumulated  
|--------------------------------------------------------------------------- | ------------ | ------------- | -------------
|                                                                            |              | Period from   | from         
|                                                                            |              | February 10,  | February 10, 
|                                                                            | For the Year | 2010 (Date of | 2010 (Date of
|                                                                            | Ended        | Inception) to | Inception) to
|                                                                            | July 31,     | July 31,      | July 31,     
|                                                                            | 2011         | 2010          | 2011         
|                                                                            | $            | $             | $            
|Operating Activities                                                        |              |               |              
|Net loss for the period                                                     | (34,200)     | (3,794)       | (37,994)     
|Adjustments to reconcile net loss to net cash used in operating activities: |              |               |              
|Depreciation                                                                | 6,329        |              | 6,329        
|Changes in operating assets and
      liabilities:                          |              |               |              
|Prepaid expenses and deposits                                               | (3,356)      |              | (3,356)      
|Accounts payable                                                            | 7,585        |              | 7,585        
|Due
      to related parties                                                | 10,687       | 3,522         | 14,209       
|Net cash used in operating activities                                       | (12,955)     | (272)         | (13,227)     
|Investing Activities                                                        |              |               |              
|Purchase of property and
      equipment                                    | (60,821)     |              | (60,821)     
|Cash
      acquired on recapitalization                                     | 1,774        |              | 1,774        
|Net cash used in investing activities                                       | (59,047)     |              | (59,047)     
|Financing Activities                                                        |              |               |              
|Proceeds from issuance of common shares                                     | 104,867      | 314           | 105,181      
|Net cash provided
      by financing activities                             | 104,867      | 314           | 105,181      
|Increase in cash                                                            | 32,865       | 42            | 32,907       
|Cash  beginning
      of period                                            | 42           |              |             
|Cash  end of period                                                        | 32,907       | 42            | 32,907       
|Non-cash investing and financing activities                                 |              |               |              
|Conversion of Class B shares to Class A
      shares                        | 50,000       |              | 50,000       
|Supplemental disclosures                                                    |              |               |              
|Interest paid                                                               |             |              |             
|Income tax paid                                                             |             |              |             

(The accompanying notes are an integral part of these
consolidated financial statements)

F-4

---

|Urban Barns Foods Inc.                          
|------------------------------------------------
|(A Development Stage Company)                   
|Consolidated Statements of Stockholders Deficit
|(Expressed in U.S. dollars)                     

|                                                      |         |             |   |         |              |   |             |            |   |  |            |   |  |            |   |  | Deficit     |   |  |          |  
|----------------------------------------------------- | ------- | ----------- | - | ------- | ------------ | - | ----------- | ---------- | - |  | ---------- | - |  | ---------- | - |  | ----------- | - |  | -------- | -
|                                                      |         |             |   |         |              |   |             |            |   |  |            |   |  |            |   |  | Accumulated |   |  |          |  
|                                                      |         |             |   |         | Common Stock |   |             |            |   |  | Additional |   |  | During the |   |  |             |  
|                                                      | Class A | Class B     |   | Paid-In |              |   | Development |            |   |  |           
|                                                      |         | Shares      |   |         | Amount       |   |             | Shares     |   |  | Amount     |   |  | Capital    |   |  | Stage       |   |  | Total    |  
|                                                      |         | #           |   |         | $            |   |             | #          |   |  | $          |   |  | $          |   |  | $           |   |  | $        |  
|Balance  February 10, 2010 (Date of
      Inception) |         |            |   |         |             |   |             |           |   |  |           |   |  |           |   |  |            |   |  |         |  
|Issuance for cash                                     |         |            |   |         |             |   |             | 2,500,000  |   |  | 2,500      |   |  | (2,186     | ) |  |            |   |  | 314      |  
|Net loss for the period                               |         |            |   |         |             |   |             |           |   |  |           |   |  |           |   |  | (3,794      | ) |  | (3,794   | )
|Balance  July 31, 2010                               |         |            |   |         |             |   |             | 2,500,000  |   |  | 2,500      |   |  | (2,186     | ) |  | (3,794      | ) |  | (3,480   | )
|Issuance for cash                                     |         | 20,000,000  |   |         | 20,000       |   |             |           |   |  |           |   |  | 84,867     |   |  |            |   |  | 104,867  |  
|June 2, 2011  recapitalization transactions          |         |             |   |         |              |   |             |            |   |  |            |   |  |            |   |  |             |   |  |          |  
|Shares cancelled on
      acquisition                 |         | (20,000,000 | ) |         | (20,000      | ) |             |           |   |  |           |   |  | 20,000     |   |  |            |   |  |         |  
|Shares held by legal parent                           |         | 261,671     |   |         | 262          |   |             |           |   |  |           |   |  | (262       | ) |  |            |   |  |         |  
|Net liabilities assumed upon
      recapitalization   |         |            |   |         |             |   |             |           |   |  |           |   |  |           |   |  | (134,985    | ) |  | (134,985 | )
|Conversion of Class B common stock                    |         | 50,000,000  |   |         | 50,000       |   |             | (2,500,000 | ) |  | (2,500     | ) |  | (47,500    | ) |  |            |   |  |         |  
|Net loss for the year                                 |         |            |   |         |             |   |             |           |   |  |           |   |  |           |   |  | (34,200     | ) |  | (34,200  | )
|Balance  July 31,
      2011                         |         | 50,261,671  |   |         | 50,262       |   |             |           |   |  |           |   |  | 54,919     |   |  | (172,979    | ) |  | (67,798  | )

(The accompanying notes are an integral part of these
consolidated financial statements)

F-5

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|1. | Nature of Operations and Continuance of
      Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Urban Barns Foods Inc. (the Company) was incorporated
      under the laws of the State of Nevada on May 21, 2007 as HL Ventures
      Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On December 4, 2009, the Company closed a reverse
      takeover transaction with Urban Barns Foods Inc., a privately-held company
      incorporated on July 3, 2009 under the laws of the province of Alberta. In
      accordance with the transaction, the Company issued 125,000 shares of
      common stock to the shareholders of Urban Barns in exchange for 100% of
      the issued and outstanding shares of common stock of Urban Barns. As part
      of the acquisition, the Company also cancelled 102,500 shares of common
      stock held by management.                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On June 2, 2011, the Company closed a reverse takeover
      transaction with Non Industrial Manufacture Inc. (Non Industrial), a
      privately-held company incorporated on February 10, 2010, under the laws
      of the Province of Alberta. In accordance with the transaction, the
      Company issued 2,500,000 shares of Class B common stock to the
      shareholders of Non Industrial in exchange for 100% of the issued and
      outstanding shares of common stock of Non Industrial.                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company is a development stage company and is an
      urban produce production company that aims to be the supplier of choice
      for fresh and high-quality organic and conventional fruits and vegetables
      for urban consumers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These financial statements have been prepared on the
      going concern basis, which assumes that the Company will be able to
      realize its assets and discharge its liabilities in the normal course of
      business. As at July 31, 2011, the Company has not realized any revenues,
      has a working capital deficit of $134,149 and has an accumulated deficit
      of $172,979. The continued operations of the Company are dependent on its
      ability to generate future cash flows from operations or obtain additional
      financing. These factors raise substantial doubt about the Companys
      ability to continue as a going concern. These consolidated financial
      statements do not include any adjustments to the recorded assets or
      liabilities that might be necessary should the Company be unable to
      continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-6

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|   |                                           
|   | (c)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (d)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (e)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (f)                                       
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           

F-7

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|2. | Significant Accounting Policies
  (continued)
|-- | ---------------------------------------------
|   |                                              
|   | (f)                                          
|   |                                              
|   |                                              
|   |                                              
|   | (g)                                          
|   |                                              
|   |                                              
|   |                                              
|   | (h)                                          
|   |                                              
|   |                                              
|   |                                              
|   | (i)                                          
|   |                                              
|   |                                              

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.

F-8

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|2. | Significant Accounting Policies(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (k)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | Acquisition of Non Industrial Manufacture Inc. and
      Recapitalization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On June 2, 2011, the Company acquired 100% of the issued
      and outstanding shares of common stock of Non Industrial Manufacture Inc.
      (NIM) in exchange for 2,500,000 shares of Class B common stock. The
      acquisition was a capital transaction in substance and therefore was
      accounted for as a recapitalization of the business of NIM. Under
      recapitalization accounting, NIM is considered the acquirer for accounting
      and financial reporting purposes, and acquired the assets and assumed the
      liabilities of the Company. These financial statements include the
      accounts of the Company since the effective date of the recapitalization
      being June 2, 2011, and the historical accounts of the business of NIM
      since inception being February 10, 2010.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The assets acquired and liabilities assumed are as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                               |  | $        |  
| | ----------------------------- |  | -------- | -
| | Cash                          |  | 1,774    |  
| | Prepaid expenses              |  | 10,250   |  
| | Property and equipment        |  | 11,859   |  
| | Accounts payable              |  | (89,718  | )
| | Due to related parties        |  | (69,150  | )
| | Net liabilities
      assumed |  | (134,985 | )

F-9

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|4. | Property and Equipment
|-- | ----------------------

| |                      |  |        |  |  |              |  |  | 2011         |  |  | 2010         | 
| | -------------------- |  | ------ |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                      |  |        |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                      |  | Cost   |  |  | Amortization |  |  | Value        |  |  | Value        | 
| |                      |  | $      |  |  | $            |  |  | $            |  |  | $            | 
| | Production equipment |  | 76,752 |  |  | 10,401       |  |  | 66,351       |  |  |             | 

|5. | Related Party Transactions
|-- | --------------------------
|   |                           
|   | (a)                       
|   |                           
|   | (b)                       
|   |                           
|6. | Common Stock              
|   |                           
|   | (a)                       
|   |                           
|   | (b)                       
|   |                           
|   | (c)                       
|   |                           
|   | (d)                       
|   |                           
|   | (e)                       
|   |                           
|   | (f)                       
|   |                           
|   | (g)                       

F-10

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|7. | Share Purchase Warrants                                                        
|-- | -------------------------------------------------------------------------------
|   |                                                                                
|   | The following table summarizes the continuity of share
      purchase warrants:

| |                                                      |  |           |   |  | Weighted       | 
| | ---------------------------------------------------- |  | --------- | - |  | -------------- | 
| |                                                      |  |           |   |  | Average        | 
| |                                                      |  | Number of |   |  | Exercise Price | 
| |                                                      |  | Warrants  |   |  | $              | 
| | Balance, February 10, 2010 (Date of
      Inception) |  |          |   |  |               | 
| | Issued                                               |  | 1,858     |   |  | 236            | 
| | Balance, July 31, 2010                               |  | 1,858     |   |  | 236            | 
| | Expired                                              |  | (358      | ) |  | 300            | 
| | Balance, July 31, 2011                               |  | 1,500     |   |  | 222            | 

As at July 31, 2011, the following
share purchase warrants were outstanding:

ExerciseNumber of
    PriceWarrants
    $
    Expiry Date250
    250
    December 17, 20111,250
    216
    February 10, 20121,500




|   |             
|-- | ------------
|8. | Income Taxes

The Company has net operating losses
carried forward of $152,527 available to offset taxable income in future years
which expires in beginning in fiscal 2030.

The Company is subject to United States
federal and state income taxes and Canadian federal and provincial taxes. The
reconciliation of the provision for income taxes compared to the Companys
income tax expense as reported is as follows:

| |                                       |  | 2011     |   |  | 2010     |  
| | ------------------------------------- |  | -------- | - |  | -------- | -
| |                                       |  | $        |   |  | $        |  
| | Income tax recovery at statutory rate |  | (139,708 | ) |  | (114,173 | )
| | Permanent differences and other       |  | 33,579   |   |  | 32,871   |  
| | Change in enacted tax rates           |  | 2,724    |   |  | 9,580    |  
| | Valuation
      allowance change      |  | 103,405  |   |  | 71,722   |  
| | Provision for income taxes            |  |         |   |  |         |  

The significant components of deferred
income taxes and assets as at July 31, 2011 and 2010 are as follows:

| |                                      |  | 2011     |   |  | 2010    |  
| | ------------------------------------ |  | -------- | - |  | ------- | -
| |                                      |  | $        |   |  | $       |  
| | Net operating losses carried forward |  | 175,321  |   |  | 71,916  |  
| | Valuation
      allowance            |  | (175,321 | ) |  | (71,916 | )
| | Net deferred income tax asset        |  |         |   |  |        |  

As at July 31, 2011, the Company is in
arrears on filing its statutory corporate income tax returns and the amounts
presented above are based on estimates. The actual losses available could differ
from these estimates.

F-11

---

|Urban Barns Foods Inc.                        
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(expressed in U.S. dollars)                   

|9. | Subsequent Events
|-- | -----------------
|   |                  
|   | (a)              
|   |                  
|   | (b)              
|   |                  
|   | (c)              
|   |                  
|   | (d)              
|   |                  
|   | (e)              

F-12

---

|Item 9. | Changes In and Disagreements with
      Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------------

There were no disagreements or reportable events in connection
with any changes in accountants undertaken by us.

|Item 9A. | Controls and Procedures
|-------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

Under the supervision and with the participation of our
management, including our principal executive officer and the principal
financial officer, we have conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
of the end of the period covered by this report. Based on this evaluation, our
principal executive officer and principal financial officer concluded as of the
evaluation date that our disclosure controls and procedures were effective such
that the material information required to be included in our Securities and
Exchange Commission reports is accumulated and communicated to our management,
including our principal executive and financial officer, recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms relating to our company, particularly during
the period when this report was being prepared.

Management's Annual Report on Internal Control Over
Financial Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the company.

Internal control over financial reporting includes those
policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of its
management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.

Management recognizes that there are inherent limitations in
the effectiveness of any system of internal control, and accordingly, even
effective internal control can provide only reasonable assurance with respect to
financial statement preparation and may not prevent or detect material
misstatements. In addition, effective internal control at a point in time may
become ineffective in future periods because of changes in conditions
or due to deterioration in the degree of compliance with our established
policies and procedures.

30

---

A material weakness is a significant deficiency, or combination
of significant deficiencies, that results in there being a more than remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected.

Under the supervision and with the participation of our
president, management conducted an evaluation of the effectiveness of our
internal control over financial reporting, as of July 31, 2011, based on the
framework set forth in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on our evaluation under this framework, management concluded that our internal
control over financial reporting was effective as of the evaluation date.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the our
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this annual report.

Changes in Internal Controls Over Financial
Reporting

There have been no changes in our internal control over
financial reporting that occurred during the last fiscal quarter for our fiscal
year ended July 31, 2011 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

|Item 9B. | Other Information
|-------- | -----------------

None.

PART III

|Item 10. | Directors, Executive Officers and Corporate
      Governance
|-------- | ------------------------------------------------------------

The following table sets forth the name, age, and position of
our executive officers and directors of as of November 11, 2011.

|Name             | Age | Position                                                                                                    
|---------------- | --- | ------------------------------------------------------------------------------------------------------------
|Jacob Benne      | 68  | President, Chief Executive Officer and Director
      Chief Financial Officer, Principal Accounting Officer,
|Daniel Meikleham | 67  | Secretary, Treasurer and
      Director                                                                     
|Robyn Jackson    | 64  | Vice President, Logistics and
      Director                                                                
|Mark Hanson      | 58  | Director, Chairman of Audit
      Committee                                                                 
|Cesar Montilla   | 68  | Director of Business
      Development and Director                                                         

31

---

Our Directors will serve in that capacity until our next annual
shareholder meeting or until their successors are elected and qualified.
Officers hold their positions at the will of our Board of Directors. There are
no arrangements, agreements or understandings between non-management security
holders and management under which non-management security holders may directly
or indirectly participate in or influence the management of our affairs.

Jacob Benne, President, Chief Executive Officer and
Director

Jacob Benne has been our President, Chief Executive Officer and
Director since November 18, 2009.

Mr. Benne graduated from the Dutch Agricultural College in 1960
in the top 5% of his class. Following graduation, he joined the Dutch army and
served his country for two years before entering the agricultural/horticultural
industry. He has since enjoyed a distinguished 46 year career that began with
establishing his first greenhouse entrepreneurial enterprise in August 1963.

Mr. Benne immigrated to Canada in 1981, and upon his arrival he
established an eight-acre greenhouse facility with a local partner, acting as
its project manager. In nine years, the facility grew to cover fourteen acres.
Following this success, Mr. Benne acquired a neighboring property and
established Bevo Farms Ltd. in 1987. For the last 22 years he has operated Bevo
Farms Ltd. (which subsequently became Bevo Agro Inc.), and in 2000 he took the
company public by listing it on the TSX Venture Exchange under the trading
symbol BVO.V. Mr. Benne has served as the President and Chief Executive Officer
of Bevo Agro Inc. for the past nine years and in that time has built the company
into North Americas leading provider of propagated plants, with annual sales in
excess of $15 million. Mr. Benne brings his vast experience and enthusiasm to
Urban Barns Foods Inc. as its President and is committed to the goal of making
the company an international leader in the horticulture business.

Daniel Meikleham, Chief Financial Officer, Principal
Accounting Officer, Secretary, Treasurer and Director

Daniel Meikleham has been our Chief Financial Officer,
Principal Accounting Officer, Secretary and Treasurer since November 27, 2009.
He has also been our Director since September 21, 2009. He is a co-creator of
the Urban Barns Foods Inc. business concept.

Mr. Meikleham is the former Chief Financial Officer and current
Enterprise Risk Manager for Red Sea Housing Services, a publicly listed
corporation in Saudi Arabia that employs over 3,000 people and has a market
capitalization of approximately $500 Million. In 2006, he was instrumental in
transforming the company from a private enterprise into a listed public company
through a $140 million full prospectus IPO. Mr. Meiklehams responsibilities
include strategic planning and overseeing the set-up of subsidiaries positioned
throughout the world, including the Caribbean, North and Sub-Saharan Africa, the
Middle East and Southeast Asia.

Until 2005, Mr. Meikleham worked in the insurance business for
28 years with three major insurance corporations, culminating in a seven year
stint with the Prudential Insurance Company of America during which he was
honored five times as President of the Gibraltar Club for being their top
national producer. From 1998 to 2000, Mr. Meikleham also served as a co-founder
and Director of a Puerto Rico venture capital fund. Mr. Meikleham was educated
at the Central College of Commerce and Distribution in Glasgow, Scotland, where
he won the annual national British-wide government competition in
mathematics.

32

---

Robyn Jackson, Vice President, Logistics and
Director

Robyn Jackson has been our Vice President, Logistics and
Director since November 20, 2009.

Mr. Jackson founded Robyns Transportation & Distribution
Services Ltd. (formerly Robyns Trucking) in Alberta, Canada in 1976. For the
past 33 years he has served as its President and Chief Executive Officer and
built the company into a niche refrigerated shipper of food and propagated
plants, with annual revenues of more than CAD$17,000,000. Mr. Jacksons company
currently owns five refrigerated distribution facilities across Western Canada,
employs more than 60 professional drivers and ships food products and plants to
all Wal-Mart, Sobeys and Canadian Tire stores in Canada located west of Thunder
Bay, Ontario. It also delivers goods to Canadian Superstore and Safeway
warehouses across Western Canada.

Mark Hanson, Director

Mr. Hanson has been our director since December 1, 2009. He is
a qualified barrister and solicitor in four jurisdictions (New Zealand, the
United Kingdom, Hong Kong and Australia), and has enjoyed a 22-year career in
investment banking specializing in corporate finance, mergers and acquisitions,
private equity and structured finance, including the formation of investment
funds.

Mr. Hanson has been based in Bahrain since 2007, during which
time he has been the Chief Executive Officer of Global Banking Corporation, an
Islamic investment bank with a market capitalization of $250 million that is
active in financial services in the private equity, real estate and energy
sectors. Prior to moving to Bahrain, Mr. Hanson worked in Saudi Arabia for a
period of three years as an advisor to the Deputy Governor of the countrys
central bank (SAMA) before establishing the Saudi investment banking arm of ABN
AMRO.

Currently, he is a consultant with Cynosure Associates
consulting in financial, oil & gas, real estate, logistics and agriculture
sectors. He is active in Bahrain, Kuwait, Sudan and North America.

Before his stint in the Middle East, Mr. Hanson worked in Hong
Kong for 11 years and Singapore for two years acting variously as the Chief
Executive Officer of Bain Securities Limited, the Managing Director of Peregrine
Capital Limited and the Deputy Chief Executive of the Hong Kong Stock Exchange,
the latter for a period of three-and-a-half years. Mr. Hanson graduated from the
University of Auckland, New Zealand with a Bachelor of Laws degree in 1976.

Cesar Montilla, Director of Business Development,
Director

Mr. Montilla has been the Chief Executive Officer of SPECTRUM
Finance Network, an international consulting organization, and private capital
firm with expertise and experience, on the structuring, re-structuring, and
financing of companies, since 2000. He was also President of Ascender Management
Services, Inc. an SEC registered investment advisory firm to individuals and
institutions between 2004 and 2007.

He had been Chairman and Chief Executive Officer of Clark
Melvin Securities Corporation since 1990. In October 1997 Samuel Ramirez &
Co., one of the nation's largest municipal bond dealers, purchased Clark Melvin,
and he became a Managing Director at that firm and left in 1998. From 1980 he
was Managing Director in charge of Kidder, Peabody's total business in Florida
and South America and President of Kidder Peabody, Puerto Rico Inc., until he
became a Managing Director of Merrill Lynch, who acquired that region
in 1989. He left Merrill Lynch in 1990 to become the principle of Clark Melvin.
Prior to 1980, Mr. Montilla was Chairman of the Securities Corporation of Puerto
Rico which, at that time, was Puerto Rico's only native investment banking
corporation, and an affiliate of the First Boston Corporation. From 1965 to 1973
he was Vice President and stockholder of Blyth, Eastman Dillon and Co.

33

---

A native of Puerto Rico, Mr. Montilla graduated from the
Cheshire Academy in Connecticut, attended Cornell University, Ithaca, N.Y., the
University of Puerto Rico, and the University of Florida in Gainesville where he
studied Architecture. He completed studies at the New York Institute of Finance
in 1965.

Mr. Montilla has served on the Board of Directors of the Puerto
Rican Society of Financial Analysts and the Puerto Rico Development Fund of the
Government Development Bank of Puerto Rico. He has also served on Advisory
Councils for the United States Department of Commerce, Banco Popular de Puerto
Rico and the New York Stock Exchange. He was a registered principal with the
National Association of Securities Dealers (NASD), served on the Public Finance
Committee of the Public Securities Association (PSA), the Executive Committee of
the Public Securities Association and the Executive Committee of the New York
Region of the Securities Industry Association (SIA). He served on the Boards of
GM Group and Fajardo Federal Bank until both institutions were sold in 1999; he
also served as Chairman of the Salvation Army's Advisory Council and was on the
Board of Directors of the Puerto Rico Aqueduct and Sewer Authority (PRASA) for
six years.

Mr. Montilla currently sits on the Boards of GM Capital,
HIMASan Pablo Hospitals; Sofscape Caribe, Opera de Puerto Rico, Inc., Fondita
de Jesus and is on the Puerto Rico Advisory Board of the United States
Army.

Board of Directors and Director Nominees

Since our Board of Directors does not include a majority of
independent directors, the decisions of the Board regarding director nominees
are made by persons who have an interest in the outcome of the determination.
The Board will consider candidates for directors proposed by security holders,
although no formal procedures for submitting candidates have been adopted.
Unless otherwise determined, at any time not less than 90 days prior to the next
annual Board meeting at which the slate of director nominees is adopted, the
Board will accept written submissions from proposed nominees that include the
name, address and telephone number of the proposed nominee; a brief statement of
the nominees qualifications to serve as a director; and a statement as to why
the security holder submitting the proposed nominee believes that the nomination
would be in the best interests of our security holders. If the proposed nominee
is not the same person as the security holder submitting the name of the
nominee, a letter from the nominee agreeing to the submission of his or her name
for consideration should be provided at the time of submission. The letter
should be accompanied by a résumé supporting the nominee's qualifications to
serve on the Board, as well as a list of references.

The Board identifies director nominees through a combination of
referrals from different people, including management, existing Board members
and security holders. Once a candidate has been identified, the Board reviews
the individual's experience and background and may discuss the proposed nominee
with the source of the recommendation. If the Board believes it to be
appropriate, Board members may meet with the proposed nominee before making a
final determination whether to include the proposed nominee as a member of the
slate of director nominees submitted to security holders for election to the
Board.

34

---

Some of the factors which the Board considers when evaluating
proposed nominees include their knowledge of and experience in business matters,
finance, capital markets and mergers and acquisitions. The Board may request
additional information from each candidate prior to reaching a determination.
The Board is under no obligation to formally respond to all recommendations,
although as a matter of practice, it will endeavor to do so.

Conflicts of Interest

Our directors are not obligated to commit their full time and
attention to our business and, accordingly, they may encounter a conflict of
interest in allocating their time between our operations and those of other
businesses. In the course of their other business activities, they may become
aware of investment and business opportunities which may be appropriate for
presentation to us as well as other entities to which they owe a fiduciary duty.
As a result, they may have conflicts of interest in determining to which entity
a particular business opportunity should be presented. They may also in the
future become affiliated with entities, engaged in business activities similar
to those we intend to conduct.

In general, officers and directors of a corporation are
required to present business opportunities to a corporation if:

- the corporation could financially undertake the opportunity;
- the opportunity is within the corporations line of business; and
- it would be unfair to the corporation and its stockholders not to bring the
  opportunity to the attention of the corporation.

We have a code of ethics manual that obligates our directors,
officers and employees to disclose potential conflicts of interest and prohibits
those persons from engaging in such transactions without our consent.

Significant Employees

Other than as described above, we do not expect any other
individuals to make a significant contribution to our business.

Legal Proceedings

None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past ten
years:

|1. | A petition under the Federal bankruptcy laws or any state
      insolvency law was filed by or against, or a receiver, fiscal agent or
      similar officer was appointed by a court for the business or property of
      such person, or any partnership in which he was a general partner at or
      within two years before the time of such filing, or any corporation or
      business association of which he was an executive officer at or within two
      years before the time of such filing;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | Such person was convicted in a criminal proceeding or is
      a named subject of a pending criminal proceeding (excluding traffic
      violations and other minor offenses);                                                                                                                                                                                                                                                                                                                               

35

---

|3. | Such person was the subject of any order, judgment, or
      decree, not subsequently reversed, suspended or vacated, of any court of
      competent jurisdiction, permanently or temporarily enjoining him from, or
      otherwise limiting, the following activities:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | i.   | Acting as a futures commission merchant, introducing
      broker, commodity trading advisor, commodity pool operator, floor broker,
      leverage transaction merchant, any other person regulated by the Commodity
      Futures Trading Commission, or an associated person of any of the
      foregoing, or as an investment adviser, underwriter, broker or dealer in
      securities, or as an affiliated person, director or employee of any
      investment company, bank, savings and loan association or insurance
      company, or engaging in or continuing any conduct or practice in
      connection with such activity;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ii.  | Engaging in any type of business practice; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | iii. | Engaging in any activity in connection with the purchase
      or sale of any security or commodity or in connection with any violation
      of Federal or State securities laws or Federal commodities
  laws;                                                                                                                                                                                                                                                                                                                                                                                                                            

|4. | Such person was the subject of any order, judgment or
      decree, not subsequently reversed, suspended or vacated, of any Federal or
      State authority barring, suspending or otherwise limiting for more than 60
      days the right of such person to engage in any activity described in
      paragraph (f)(3)(i) of this section, or to be associated with persons
      engaged in any such activity;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                   
|5. | Such person was found by a court of competent
      jurisdiction in a civil action or by the Commission to have violated any
      Federal or State securities law, and the judgment in such civil action or
      finding by the Commission has not been subsequently reversed, suspended,
      or vacated;                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                   
|6. | Such person was found by a court of competent
      jurisdiction in a civil action or by the Commodity Futures Trading
      Commission to have violated any Federal commodities law, and the judgment
      in such civil action or finding by the Commodity Futures Trading
      Commission has not been subsequently reversed, suspended or
  vacated;                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                   
|7. | Such person was the subject of, or a party to, any
      Federal or State judicial or administrative order, judgment, decree, or
      finding, not subsequently reversed, suspended or vacated, relating to an
      alleged violation of:                                                                                                                                                                       

| | i.   | Any Federal or State securities or commodities law or
      regulation; or                                                                                                                                                                                                                                                 
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                            
| | ii.  | Any law or regulation respecting financial institutions
      or insurance companies including, but not limited to, a temporary or
      permanent injunction, order of disgorgement or restitution, civil money
      penalty or temporary or permanent cease- and-desist order, or removal or
      prohibition order; or
| |      |                                                                                                                                                                                                                                                                                                                            
| | iii. | Any law or regulation prohibiting mail or wire fraud or
      fraud in connection with any business entity;
or                                                                                                                                                                                                             

|8. | Such person was the subject of, or a party to, any
      sanction or order, not subsequently reversed, suspended or vacated, of any
      self-regulatory organization (as defined in Section 3(a)(26) of the
      Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined
      in Section 1(a)(29) of the Commodity
Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association,
entity or organization that has disciplinary authority over its members or
persons associated with a member.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36

---

Director Independence

Our securities are quoted on the OTC Bulletin Board which does
not have any director independence requirements. Once we engage further
directors and officers, we will develop a definition of independence and
scrutinize our Board of Directors with regard to this definition.

Audit Committee

The functions of the Audit Committee are currently carried out
by our Board of Directors. Our Board of Directors has determined that we do not
have an audit committee financial expert on our Board of Directors carrying out
the duties of the Audit Committee. The Board of Directors has determined that
the cost of hiring a financial expert to act as a director of us and to be a
member of the Audit Committee or otherwise perform Audit Committee functions
outweighs the benefits of having a financial expert on the Audit Committee.

Significant Employees

Other than the directors and officer described above, we do not
expect any other individuals to make a significant contribution to our business.

Family Relationships

There are no family relationships among our officers or
directors.

Section 16(a) Beneficial Ownership Compliance
Reporting

Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during the year ended July 31, 2011, all filing requirements
applicable to its officers, directors and greater than 10% percent beneficial
owners were complied with.

Code of Ethics

Our company's board of directors adopted a Code of Business
Conduct and Ethics that applies to, among other persons, members of our board of
directors, our company's officers including our president, chief executive
officer and chief financial officer, employees, consultants and advisors. As
adopted, our Code of Business Conduct and Ethics sets forth written standards
that are designed to deter wrongdoing and to promote:

| | 1. | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

37

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| | 2. | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that we file with, or submit to, the
      Securities and Exchange Commission and in other public communications made
      by us;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                              
| | 3. | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                                   
| |    |                                                                                                                                                                                                                              
| | 4. | the prompt internal reporting of violations of the Code
      of Business Conduct and Ethics to an appropriate person or persons
      identified in the Code of Business Conduct and Ethics; and                            
| |    |                                                                                                                                                                                                                              
| | 5. | accountability for adherence to the Code of Business
      Conduct and Ethics.                                                                                                                                               

Our Code of Business Conduct and Ethics requires, among other
things, that all of our company's Senior Officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly Senior Officers, have a responsibility for
maintaining financial integrity within our company, consistent with generally
accepted accounting principles, and federal and state securities laws. Any
Senior Officer who becomes aware of any incidents involving financial or
accounting manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to our company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a
severe disciplinary matter. It is against our company policy to retaliate
against any individual who reports in good faith the violation or potential
violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics is being filed with the
Securities and Exchange Commission as Exhibit 14.1 to our Registration Statement
on Form S-1. We will provide a copy of the Code of Business Conduct and Ethics
to any person without charge, upon request. Requests can be sent to: Urban Barns
Foods Inc., 7170 Glover Road, Milner, BC V0Z 1T0

|Item 11. | Executive Compensation
|-------- | ----------------------

None of our directors or executive officers received any
compensation from us during our last two completed fiscal years. Pursuant to
Item 402(f)(4) of Regulation S-K we have omitted the Summary Compensation table
since no compensation has been awarded to, earned by, or paid to these
individuals.

Option Grants

We did not grant any options or stock appreciation rights to
our named executive officers or directors from our inception to July 31, 2011.
We plan to implement, after we become operational and contract full-time
executives and managers to run our operations, our 2011 Stock Plan which allows
for the issuance of 7,000,000 shares of our common stock or options to acquire
7,000,000 shares of our common stock.

Management Agreements

We have not yet entered into any consulting or management
agreements with any of our current executive officers or directors.

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Compensation of Directors

Our directors did not receive any compensation for their
services as directors from our inception to July 31, 2011. We may compensate our
directors for their services in the future, and such directors are expected in
the future to receive shares of our common stock and options to purchase
additional shares of our common stock as awarded by our Board of Directors or by
any compensation committee that may be established.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits to our directors or executive officers. We have
no material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the Board of Directors or
a committee thereof.

Compensation Committee

We do not currently have a compensation committee of the Board
of Directors or a committee performing similar functions. The Board of Directors
as a whole participates in the consideration of executive officer and director
compensation.

Change of Control

As of November 11, 2011 we had no pension plans or compensatory
plans or other arrangements which provide compensation on the event of
termination of employment or change in control of us.

|Item 12. | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------------

The following table sets forth certain information concerning
the number of shares of our common stock owned beneficially as of November 11,
2011 by: (i) each of our directors, (ii) each of our named executive officers
and (iii) owners of 5% or more of our common shares. There was no other person
or group known by us to beneficially own more than 5% of our outstanding shares
of common stock. Unless otherwise indicated, the shareholders listed below
possess sole voting and investment power with respect to the shares they own.
All persons named have sole voting and investment power with respect to the
shares, except as otherwise noted. The number of shares described below includes
shares which the beneficial owner described has the right to acquire within 60
days of the date of this Annual Report on Form 10-K.

39

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|Title of Class | Name and Address of
      Beneficial Owner                                      | Amount and Nature
      of Beneficial Ownership | Percent of
      Class (1)
|-------------- | ------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------
|Common Stock   | Jacob Benne (2) 7170 Glover Drive
      Milner, British Columbia Canada V0X 1T0 | 22,037,500 (3)                                  | 38.8                      
|               | Daniel
      Meikleham (4)                                                      |                                                 |                           
|Common         | 12936 Elbow Drive SW                                                            |                                                 |                           
|Stock          | Calgary, Alberta                                                                | 22,062,500 (5)                                  | 38.8                      
|               | Canada
      T2W 6G6                                                            |                                                 |                           
|               | Robyn Jackson (6)                                                               |                                                 |                           
|Common         | 72 Prestwick Estate Way SE                                                      |                                                 |                           
|Stock          | Calgary, Alberta                                                                | 150,000                                         | 0.3                       
|               | Canada
      T2Z 3Y9                                                            |                                                 |                           
|               |                                                                                 |                                                 |                           
|               | Mark Hanson (7)                                                                 |                                                 |                           
|Common         | House No. 43, Block 4                                                           | 150,000                                         | 0.3                       
|Stock          | Kaifan, Kuwait                                                                  |                                                 |                           
|               |                                                                                 |                                                 |                           
|               | Cesar Montilla (8)                                                              |                                                 |                           
|Common         | 1825 Miosotis Street,"Santa Maria",                                             | 126,000                                         | 0.2                       
|Stock          | San
      Juan, Puerto Rico (USA), 00927                                        |                                                 |                           
|               |                                                                                 |                                                 |                           
|               | All
      Officers and Directors as a Group                                     | 44,526,000                                      | 78.4                      

|(1) | Based on 56,869,053 shares of our common stock, and
      warrants to acquire a further 1,500 shares of our common stock issued and
      outstanding for a total of 56,869,053 shares of common stock issued and
      outstanding as of November 11, 2011.                                                                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Jacob Benne is our President, Chief Executive Officer and
      Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | Includes 21,775,000 shares held by the Benne Family
      Trust, a trust over which Mr. Benne has sole voting and investment power,
      50,000 shares held by the Meikleham Family Trust, a trust over which
      Daniel Meikleham, our Chief Financial Officer, Principal Accounting
      Officer, Secretary, Treasurer and Director, has shared voting and
      investment power, and 50,000 shares held by Gerald Fitzpatrick. All of
      these shares are subject to a voting and lock up agreement between the
      Benne Family Trust, the Meikleham Family Trust and Gerald Fitzpatrick
      dated December 4, 2009.
|(4) | Daniel Meikleham is our Chief Financial Officer,
      Principal Accounting Officer, Secretary, Treasurer and Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(5) | Includes 21,800,000 shares held by the Meikleham Family
      Trust, a trust over which Mr. Meikleham has shared voting and investment
      power, 25,000 shares held by the Benne Family Trust, a trust over which
      Jacob Benne, our President, Chief Executive Officer and Director, has sole
      voting and investment power, and 50,000 shares held by Gerald Fitzpatrick.
      All of these shares are subject to a voting and lock up agreement between
      the Benne Family Trust, the Meikleham Family Trust and Gerald Fitzpatrick
      dated December 4, 2009.                                                
|(6) | Robyn Jackson is our Vice President, Logistics and
      Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(7) | Mark Hanson is our Director and the Chairman of our Audit
      Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(8) | Cesar Montilla is our Director of Corporate
      Development.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|Item 13. | Certain Relationships and Related
      Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------------

On June 2, 2011 we closed our reverse merger with Non
Industrial Manufacture Inc., an Alberta company. Pursuant to the terms of the
reverse merger, we issued 2,500,000 shares of our Class B common stock
(converted to 50,000,000 shares of our Class A common stock on July 22, 2011) to
the Meikleham Family Trust, the Benne Family Trust and the former shareholders
of the Alberta company and our affiliates.

Our research and development is conducted by Jacob Benne, our
President, Chief Executive Officer and director at a facility owned by a company
that he has an interest in. Under this program we have spent $190 classified
as research and development as of July 31, 2011.

40

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There have been no other transactions since the beginning of
our last fiscal year or any currently proposed transactions in which we are, or
plan to be, a participant and the amount involved exceeds $120,000 or one
percent of the average of our total assets at year end for the last two
completed fiscal years, and in which any related person had or will have a
direct or indirect material interest.

|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

Audit and Non-Audit Fees

The aggregate fees billed for the most recently completed
fiscal year ended July 31, 2011 and for fiscal period from February 10, 2010
(inception) to July 31, 2010 for professional services rendered by the principal
accountant for the audit of our annual financial statements and review of the
financial statements included in our quarterly reports on Form 10-Q and services
that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for these fiscal periods were as follows:

Year Ended
      July 312011 ($)
    2010 ($)Audit Fees
    21,000
    12,268Audit Related Fees
    Nil
    NilTax Fees
    Nil
    NilAll Other Fees
    Nil
    NilTotal
    21,000
    12,268


Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.

Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors independence.

PART IV

|Item 15. | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------

(a) (1) Financial Statements

See Index to Consolidated Financial Statements set forth on
page F-1.

(a) (2) Financial Statement Schedules

41

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None. The financial statement schedules are omitted because
they are inapplicable or the requested information is shown in our financial
statements or related notes thereto.

Exhibits

|Exhibit | Exhibit                                                                                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | **Description**                                                                                                                                                                              
|2.1     | Share Exchange Agreement with Non Industrial Manufacture
      Inc. dated May 2, 2011 (Incorporated by reference to our Current Report on
      Form 8-K/A filed on June 2, 2011)            
|3.1     | Articles of Incorporation of Urban Barns Foods Inc.
      (formerly HL Ventures Inc.) (Incorporated by reference to our Registration
      Statement on Form SB-2 filed on September 6, 2007)
|3.2     | Certificate of Amendment filed with the Nevada Secretary
      of State on June 28, 2011 (Incorporated by reference to our Current Report
      on Form 8-K filed on July 25, 2011)          
|3.3     | Bylaws of Urban Barns Foods Inc. (formerly HL Ventures
      Inc.) (Incorporated by reference to our Registration Statement on Form
      SB-2 filed on September 6, 2007)                   
|4.1     | Form of Share Certificate (Incorporated by reference to
  our Registration Statement on Form SB-2 filed on September 6, 2007)                                                                
|14.1    | Code of Ethics (Incorporated by reference to our
      Registration Statement filed on Form S-1 June 3, 2010)                                                                                
|21      | List of Subsidiaries: Urban Barns Foods Inc., an Alberta
      Company, Non-Industrial Manufacture, an Alberta Company.                                                                      
|31.1*   | Section 302 Certification of Principal Executive Officer                                                                                                                                     
|31.2*   | Section 302 Certification of Principal Financial Officer                                                                                                                                     
|32.1*   | Section 906 Certification of Principal Executive Officer                                                                                                                                     
|32.2*   | Section 906 Certification Principal Financial Officer                                                                                                                                        

*filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.

|                        | URBAN BARNS FOODS INC.
|----------------------- | ----------------------
|                        |                       
|Date: November 14, 2011 | By:                   
|                        |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       
|Date: November 14, 2011 |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       

Pursuant to the requirements of the Exchange Act this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

|SIGNATURES        | TITLE                                     | DATE             
|----------------- | ----------------------------------------- | -----------------
|                  |                                           |                  
|                  |                                           |                  
|/s/ Jacob Benne   |                                           | November 14, 2011
|Jacob Benne       | Chief Executive
      Officer, President  |                  
|                  | and Director                              |                  
|                  |                                           |                  
|                  |                                           |                  
|/s/ Dan Meikleham |                                           | November 14, 2011
|Dan Meikleham     | Chief Financial
      Officer, Secretary, |                  
|                  | Treasurer and Director                    |                  
|                  |                                           |                  
|/s/ Robyn Jackson |                                           | November 14, 2011
|Robyn Jackson     | Director                                  |                  

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