UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington, DC
20549
   FORM
10-Q
  x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the quarterly
period ended January
31, 2010
 
 o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition
period from ______________________To ______________________
  Commission file
number: 333-145897
   URBAN BARNS FOODS
INC.
 (Exact
name of registrant as specified in its charter)
  Nevada
              
              N/A(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)7170
      Glover Road
                Milner, B.C.,
      Canada  V0X 1T0
              
              604-888-0420(Address
      of principal executive offices) (Zip Code)
              
              (Registrant’s
      telephone number, including area
code)
  Indicate by check
mark whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was require to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.  Yes xNo o
  Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See the definitions of  “large accelerated
filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large accelerated
filer o       Accelerated
filer o     Non-accelerated
filer o    Smaller reporting companyþ
 
 Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
 Yes o No  x
  APPLICABLE ONLY TO
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS:
  Indicate by check
mark whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
oYesoNo
  APPLICABLE ONLY TO
CORPORATE ISSUERS
  As of March 30,
2010 the registrant’s outstanding common stock consisted of 48,259,573
shares.
   
   Table
of Contents
   PART I.  FINANCIAL INFORMATION
                2ITEM 1.  FINANCIAL STATEMENTS
                2ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.
                3ITEM 4.  CONTROLS AND PROCEDURES
                6PART II. OTHER INFORMATION
                7ITEM 1.  LEGAL PROCEEDINGS
                7ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCCEDS
                7ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES
                7ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
                7ITEM 5.  OTHER INFORMATION
                7
  
 
 1
  PART I - FINANCIAL INFORMATION
  Item 1. Financial Statements
 
 The unaudited
interim financial statements of Urban Barns Foods Inc. (the “Company”, “Urban
Barns”, “we”, “our”, “us”) follow. All currency references in this report are to
U.S. dollars unless otherwise noted.
 
 Urban
Barns Foods Inc.
 (A
Development Stage Company)
 January 31,
2010
 (Unaudited)
 
 Financial Statement
Index
 
 
 Balance
      Sheets
              F-1Statements of
      Expenses
              F-2Statements of
      Cash Flows
              F-3Notes to the
      Financial Statements
              F-4




2


URBAN
BARNS FOODS INC.
 (f.k.a.
HL Ventures Inc.)
 (A
Development Stage Company)
 Balance
Sheets
 (Unaudited)
 As
      of
              
              
              As
      ofJanuary
      31, 2010
              
              
              July
      31, 2009(Unaudited)
              
              
              (Unaudited)ASSETSCurrent
      AssetsCash
              
              $
              22,049
              
              
              $
              1,081Total
      Cash
              
              
              22,049
              
              
              
              1,081Other
      AssetsDeposits
              
              
              175
              
              
              
              -Total
      Other Assets
              
              
              175
              
              
              
              -Total
      Current Assets
              
              
              22,224
              
              
              
              1,081Fixed
      AssetsGrowing
      Machines (Net of Depreciation)
              
              
              11,672
              
              
              
              -Website
      (Net of Depreciation)
              
              
              6,917
              
              
              
              -Total
      Fixed Assets
              
              
              18,590
              
              
              
              -TOTAL
      ASSETS
              
              $
              40,814
              
              
              $
              1,081LIABILITIES
      & STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      Payable (see Note 5)
              
              $
              56,489
              
              
              $
              -Capital
      Lease Payable
              
              
              5,611
              
              
              
              -Total
      Current Liabilities
              
              
              62,100
              
              
              
              -Long
      Term LiabilitiesConvertible
      Debentures (Net of Discount)
              
              $
              19,324
              
              
              $
              -Total
      Long Term Liabilities
              
              
              19,324
              
              
              
              -Total
      Liabilities
              
              
              81,424
              
              
              
              -Stockholders'
      EquityCommon stock,
      ($0.001 par value, 100,000,000 shares authorized; 48,009,573 and 400,000
      shares issued and outstanding as of January 31, 2010 and July 31, 2009
      respectively)
              
              
              48,010
              
              
              
              1,846Additional
      paid-in capital
              
              
              24,296
              
              
              
              -Comprehensive
      Income
              
              
              (2,330
              )Deficit
      accumulated during development stage
              
              
              (110,585
              )
              
              
              (765
              )Total
      Stockholders' Equity
              
              
              (40,610
              )
              
              
              1,081TOTAL
      LIABILITIES &STOCKHOLDERS'
      EQUITY
              
              $
              40,814
              
              
              $
              1,081






F-1


URBAN
BARNS FOODS INC.
 (f.k.a.
HL Ventures Inc.)
 (A
Development Stage Company)
 Statements
of Operations
 (Unaudited)
   Three
      Months
                
                
                Three
      Months
                
                
                Six
      Months
                
                
                Six
      Months
                
                
                July
      3, 2009 (inception)Ended
                
                
                Ended
                
                
                Ended
                
                
                Ended
                
                
                throughJanuary
      31, 2010
                
                
                January
      31, 2009
                
                
                January
      31, 2010
                
                
                January
      31, 2009
                
                
                January
      31, 2010(Unaudited)
                
                
                
                
                
                (Unaudited)
                
                
                
                
                
                (Unaudited)RevenuesRevenues
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Gross
      Profit
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Operating
      ExpensesResearch
      & Development
                
                
                19,827
                
                
                
                -
                
                
                
                20,431
                
                
                
                -
                
                
                
                20,431Depreciation
      Expense
                
                
                652
                
                
                
                -
                
                
                
                652
                
                
                
                -
                
                
                
                652Bank
      Charges
                
                
                80
                
                
                
                -
                
                
                
                125
                
                
                
                -
                
                
                
                125Travel
      Expense
                
                
                3,832
                
                
                
                -
                
                
                
                8,936
                
                
                
                
                
                
                
                8,936Consulting
      Fees
                
                
                -
                
                
                
                -
                
                
                
                9,750
                
                
                
                -
                
                
                
                9,750Professional
      Fees
                
                
                52,448
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Property
      Expenditures
                
                
                -
                
                
                
                -
                
                
                
                58,202
                
                
                
                -
                
                
                
                58,876Office
      and Administration
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                --
                
                
                
                -
                
                
                
                91Total
      Operating Expenses
                
                
                (76,839
                )
                
                
                -
                
                
                
                (98,096
                )
                
                
                -
                
                
                
                (98,861
                )Operating
      Income (Loss)
                
                $
                (76,839
                )
                
                $
                -
                
                
                $
                (98,096
                )
                
                $
                -
                
                
                $
                (98,861
                )Other
      Income and ExpensesInterest
      Expense
                
                
                (11,669
                )
                
                
                -
                
                
                
                (11,724
                )
                
                
                -
                
                
                
                (11,724
                )Net
      Income (Loss) before Taxes
                
                $
                (88,509
                )
                
                $
                -
                
                
                $
                (109,820
                )
                
                $
                -
                
                
                $
                (110,585
                )Provision
      for Income Taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      Income (Loss)
                
                $
                (88,509
                )
                
                $
                -
                
                
                $
                (109,820
                )
                
                $
                -
                
                
                $
                (110,585
                )Basic
      earnings per share
                
                $
                (0.00
                )
                
                $
                -
                
                
                $
                (0.01
                )
                
                $
                -
                
                
                $Weighted
      average number of common shares outstanding
                
                
                30,485,025
                
                
                
                -
                
                
                
                16,014,523
                
                
                
                -
 F-2
  URBAN
BARNS FOODS INC.
 (f.k.a.
HL Ventures Inc.)
 (A
Development Stage Company)
 Statement
of Cash Flows
 (Unaudited)
  July
      3, 2009Six
      Months
                
                
                Six
      Months
                
                
                (inception)Ended
                
                
                Ended
                
                
                throughJanuary
      31, 2010
                
                
                January
      31, 2009
                
                
                January
      31, 2010(Unaudited)
                
                
                
                
                
                (Unaudited)OPERATING ACTIVITIESNet
      income (loss)
                
                $
                (109,820
                )
                
                $
                -
                
                
                $
                (110,585
                )Adjustments
      to reconcile net loss to net cashprovided
      by (used in) operating activities:Depreciation
      Expense
                
                
                652
                
                
                
                
                
                
                
                652Amortization
      of OID
                
                
                9,905
                
                
                
                -
                
                
                
                9,905Conversion
      Inducement Expense
                
                
                8,936
                
                
                
                -
                
                
                
                8,936(90,327
                )
                
                
                -
                
                
                
                (91,092
                )Changes
      in operating assets and liabilities:Increase
      (decrease) in Accrued Interest
                
                
                1,638
                
                
                
                -
                
                
                
                1,638Increase
      (decrease) in Interest Payable
                
                
                53
                
                
                
                -
                
                
                
                53Increase
      (decrease) in Accounts Payable
                
                
                17,287
                
                
                
                -
                
                
                
                17,287Net
      cash provided by (used in) operating activities
                
                
                (71,349
                )
                
                
                -
                
                
                
                (72,114
                )INVESTING ACTIVITIESAcquisition
      of property and equipment
                
                
                -
                
                
                
                -
                
                
                
                -Acquisition
      of Other Assets
                
                
                -
                
                
                
                -
                
                
                
                -Net
      cash provided by (used in) investing activities
                
                
                -
                
                
                
                -
                
                
                
                -FINANCING ACTIVITIESProceeds
      from Cash Acquired with Merger
                
                
                86,401
                
                
                
                -
                
                
                
                86,401Proceeds
      from Capital Lease Payable
                
                
                5,641
                
                
                
                -
                
                
                
                5,641Proceeds
      from issuance of common stock
                
                
                2,774
                
                
                
                -
                
                
                
                4,620Net
      cash provided by (used in) financing activities
                
                
                94,816
                
                
                
                -
                
                
                
                96,662Foreign
      Currency Conversion
                
                
                (2,499
                )
                
                
                -
                
                
                
                (2,499
                )Net
      increase (decrease) in cash
                
                
                20,968
                
                
                
                -
                
                
                
                22,049Cash
      at beginning of period
                
                
                1,081
                
                
                
                -
                
                
                
                -Cash
      at end of period
                
                $
                22,049
                
                
                $
                -
                
                
                $
                22,049SUPPLEMENTAL DISCLOSURES OF CASH FLOW
      INFORMATIONNon-cash
      transactions :Debt
      Converted to Equity
                
                $
                42,500
                
                
                $
                -
                
                
                $
                42,500Convertible
      Notes Converted
                
                $
                49,000
                
                
                $
                -
                
                
                $
                49,000Original
      Issue Discount (OID) Expensed
                
                $
                9,905
                
                
                $
                -
                
                
                $
                9,905Conversion
      Inducement Expense
                
                $
                8,936
                
                
                $
                -
                
                
                $
                8,936Upon Merger,
      in addition to caash, we acquired the following assets:Fixed
      Assets - Growing Machines
                
                $
                12,082
                
                
                $
                -
                
                
                $
                12,082Fixed
      Assets - Website
                
                
                1,282
                
                
                $
                -
                
                
                $
                1,282Deposits
                
                
                175
                
                
                $
                -
                
                
                $
                175
   F-3
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 NOTE
1.   ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 Urban Barns
Foods Inc. (f/k/a HL Ventures Inc., the “Company”) was incorporated under the
laws of the State of Nevada on May 21, 2007.
 
 On July 22, 2009
the Company filed an amendment to its articles of incorporation to change its
name from HL Ventures Inc. to Urban Barns Foods Inc.as well as increase the
authorized shares to 100,000,000, $0.001 par value common shares from
75,000,000, $0.001 par value common shares.
 
 On December 4,
2009, the Company closed a Reverse Take Over (RTO) transaction with Urban Barns
Foods Inc., a privately-held company incorporated July 3, 2009 under the laws of
the Province of Alberta (“UB”).  In accordance with the RTO, the
Company issued 25,000,000 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. Also in accordance with the RTO, the Company cancelled
20,500,000 shares of common stock held by our former President, Chief Executive
Officer, Chief Financial Officer, Secretary, Treasurer and
Director.
 
 Our financial
statements present the historical operations of UB from July 3, 2009, and the
combined operations of UB and the Company from December 4, 2009, through January
31, 2010.
 
 The Company is in
the development stage. Its activities to date have been limited to capital
formation, organization, and development of its business plan.
 
 NOTE
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a.   Basis of
Accounting
 
 The Company’s
financial statements are prepared using the accrual method of
accounting.  The Company has elected a July 31 year-end.
 
 b.   Basic Earnings per
Share
 
 In February 1997,
the FASB (Financial Accounting Standards Board) issued ASC-260 (Accounting
Standards Codification-260), “Earnings per Share”, which specifies the
computation, presentation and disclosure requirements for earnings (loss) per
share for entities with publicly held common stock.  ASC-260
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share.  The
Company has adopted the provisions of ASC-260 effective May 21, 2007
(inception).
  F-4
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Basic net loss per
share amounts is computed by dividing the net loss by the weighted average
number of common shares outstanding.  Diluted earnings per share are
the same as basic earnings per share due to the operating loss, which makes our
contingently issuable shares anti-dilutive.
 
 c.  Use of Estimates and
Assumptions
 
 The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. In accordance with FASB 16 all adjustments are normal and
recurring.
 
 d.   Income
Taxes
 
 Income taxes are
provided in accordance with FASB issued (ASC-740), Accounting for Income
Taxes.  A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net operating loss
carry-forwards.  Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
 
 Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion of all of the deferred tax assets will be
realized.  Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
 
 e.   Revenue
 
 The Company records
revenue on the accrual basis when all goods and services have been performed and
delivered, the amounts are readily determinable, and collection is reasonably
assured.  The Company has not generated any revenue since its
inception.
 
 f.   Depreciation
 
 The Company entered
into a 33-month capital lease for equipment to conduct research and development.
Due to the nature of the research, the leased equipment does not have any resale
value and has been expensed out fully as research and development; however the
Company carries a liability for the outstanding balance of the lease payments.
The capital portion of the lease payments will be applied to reduce the
liability and the interest portion will be expensed as interest. The Company’s
obligation to service this debt is $227 per month until April 2012. The Company
also purchased some other equipment for research and development and records it
on the balance sheet as fixed assets. These assets are written down every four
years with the expense being recorded as research and
 
 f.   Depreciation
(Continued)
 
 development. The
Company’s website is under construction and will be interactive with the
clients, who will be able to place orders directly thorough the web portal. As a
result of the interactivity the website will be carried as an asset on the
balance sheet and depreciated over time.
 
 g.   Consolidated
Financial Statements
 
 This is the first
reporting period since the Company acquired UB. The financial information is
presented on an unaudited consolidated basis.
 
 F-5
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Recent Accounting
Pronouncements
 
 In February 2010,
the FASB (Financial Accounting Standards Board) issued Accounting Standards
Update 2010-08 (ASU 2010-08), Technical Corrections to Various
Topics.  This amendment eliminated inconsistencies and outdated
provisions and provided the needed clarifications to various topics within Topic
815.  The amendments are effective for the first reporting period
(including interim periods) beginning after issuance (February 2, 2010), except
for certain amendments.  The amendments to the guidance on accounting
for income taxes in a reorganization (Subtopic 852-740) should be applied to
reorganizations for which the date of the reorganization is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008.  For those reorganizations reflected in interim financial
statements issued before the amendments in this Update are effective,
retrospective application is required.  The clarifications of the
guidance on the embedded derivates and hedging (Subtopic 815-15) are effective
for fiscal years beginning after December 15, 2009, and should be applied to
existing contracts (hybrid instruments) containing embedded derivative features
at the date of adoption.  The Company does not expect the provisions
of ASU 2010-08 to have a material effect on the financial position, results of
operations or cash flows of the Company.
 
 In January 2010,
the FASB (Financial Accounting Standards Board) issued Accounting Standards
Update 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements.  This
amendment to Topic 820 has improved disclosures about fair value measurements on
the basis of input received from the users of financial
statements.  This is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measurements.  Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years.  Early adoption is permitted.  The
Company does not expect the provisions of ASU 2010-06 to have a material effect on
the financial position, results of operations or cash flows of the
Company.
 
 In January 2010,
the FASB (Financial Accounting Standards Board) issued Accounting Standards
Update 2010-05 (ASU 2010-05), Compensation – Stock Compensation (Topic
718).  This standard codifies EITF Topic D-110 Escrowed Share
Arrangements and the Presumption of Compensation.
 
 In January 2010,
the FASB (Financial Accounting Standards Board) issued Accounting Standards
Update 2010-04 (ASU 2010-04), Accounting for Various Topics—Technical
Corrections to SEC Paragraphs.
 
 In January 2010,
the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810):
Accounting and Reporting for Decreases in Ownership of a
Subsidiary.  This amendment to Topic 810 clarifies, but does not
change, the scope of current US GAAP.  It clarifies the decrease in
ownership provisions of Subtopic 810-10 and removes the potential conflict
between guidance in that Subtopic and asset derecognition and gain or loss
recognition guidance that may exist in other US GAAP.  An entity will
be required to follow the amended guidance beginning in the period that it first
adopts FAS 160 (now included in Subtopic 810-10).  For those entities
that have already adopted FAS 160, the amendments are effective at the beginning
of the first interim or annual reporting period ending on or after December 15,
2009. The amendments should be applied retrospectively to the first period that
an entity adopted FAS 160.  The Company does not expect the provisions
of ASU 2010-02 to have a material effect on the financial position, results of
operations or cash flows of the Company.
 
 In January 2010,
the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505):
Accounting for Distributions to Shareholders with Components of Stock and Cash
(A Consensus of the FASB Emerging Issues Task Force).  This amendment
to Topic 505 clarifies the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a limit on the amount of cash
that will be distributed is not a stock dividend for purposes of applying Topics
505 and 260. Effective for interim and annual periods ending on or after
December 15, 2009, and would be applied on a retrospective basis.  The
Company does not expect the provisions of ASU 2010-01 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
 
 In December 2009,
the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810):
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities.  This Accounting Standards Update amends the FASB
Accounting Standards Codification for Statement 167. (See FAS 167 effective date
below)
 
 F-6
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 In December 2009,
the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing
(Topic 860): Accounting for Transfers of Financial Assets.  This
Accounting Standards Update amends the FASB Accounting Standards Codification
for Statement 166. (See FAS 166 effective date below)
 
 In October 2009,
the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share
Lending Arrangements in Contemplation of Convertible Debt Issuance or Other
Financing.  This Accounting Standards Update amends the FASB
Accounting Standard Codification for EITF 09-1.  (See EITF 09-1
effective date below)
 
 In October 2009,
the FASB issued Accounting Standards Update 2009-14, Software (Topic 985):
Certain Revenue Arrangements That Include Software Elements.  This
update changed the accounting model for revenue arrangements that include both
tangible products and software elements.  Effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010.  Early adoption is
permitted.  The Company does not expect the provisions of ASU 2009-14
to have a material effect on the financial position, results of operations or
cash flows of the Company.
 
 In October 2009,
the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic
605): Multiple-Deliverable Revenue Arrangements.  This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances that under existing US
GAAP.  This amendment has eliminated that residual method of
allocation.  Effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15,
2010.  Early adoption is permitted. The Company does not expect the
provisions of ASU 2009-13 to have a material effect on the financial position,
results of operations or cash flows of the Company.
 
 In July 2009, the
FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued
EITF No. 09-1, (ASC Topic 470) “Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance” (“EITF 09-1”).  The
provisions of EITF 09-1, clarifies the accounting treatment and disclosure of
share-lending arrangements that are classified as equity in the financial
statements of the share lender.  An example of a share-lending
arrangement is an agreement between the Company (share lender) and an investment
bank (share borrower) which allows the investment bank to use the loaned shares
to enter into equity derivative contracts with investors.  EITF 09-1
is effective for fiscal years that beginning on or after December 15, 2009 and
requires retrospective application for all arrangements outstanding as of the
beginning of fiscal years beginning on or after December 15,
2009.   Share-lending arrangements that have been terminated as a
result of counterparty default prior to December 15, 2009, but for which the
entity has not reached a final settlement as of December 15, 2009
are within the scope.  Effective for share-lending arrangements
entered into on or after the beginning of the first reporting period that begins
on or after June 15, 2009.  The Company does not expect the provisions
of EITF 09-1 to have a material effect on the financial position, results of
operations or cash flows of the Company. 
 In June 2009, the
Securities and Exchange Commission’s Office of the Chief Accountant and Division
of Corporation Finance announced the release of Staff Accounting Bulletin (SAB)
No. 112. This staff accounting bulletin amends or rescinds portions of the
interpretive guidance included in the Staff Accounting Bulletin Series in order
to make the relevant interpretive guidance consistent with current authoritative
accounting and auditing guidance and Securities and Exchange Commission rules
and regulations. Specifically, the staff is updating the Series in order to
bring existing guidance into conformity with recent pronouncements by the
Financial Accounting Standards Board (ASC Topic 805), Business Combinations, and
(ASC Topic 810), Non-controlling Interests in Consolidated Financial Statements.
The statements in staff accounting bulletins are not rules or interpretations of
the Commission, nor are they published as bearing the Commission's official
approval. They represent interpretations and practices followed by the Division
of Corporation Finance and the Office of the Chief Accountant in administering
the disclosure requirements of the Federal securities laws.
  F-7
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
  NOTE
3.   GOING CONCERN
 
 The accompanying
financial statements are presented on a going concern basis. This is the first
reporting period since the Company acquired UB. The financial information is
presented on an unaudited consolidated basis. Neither the parent Company nor the
newly acquired subsidiary (UB) had operations during the period from July 3,
2009 (inception) to January 31, 2010 and generated a net loss of
$110,585.  This condition raises substantial doubt about the Company’s
ability to continue as a going concern.  The Company is currently in
the development stage and has minimal expenses, management does not believe that
the company’s current cash of $22,224 will be sufficient to cover the expenses
they will incur during the next twelve months. The Company will require
additional capital to become operational. The Company plans to generate working
capital through the issuance of common shares to unrelated parties for cash.
There is no assurance that the Company will be able to raise sufficient capital
from the sale of common shares to become operational.
 
 NOTE
4.   WARRANTS AND OPTIONS
  During September
and October 2009, before the common stock began trading, the Company sold in a
private placement to qualified buyers and accredited investors 71,500 Note Units
(the Note Offering).  Each Note Unit consisted of $1.00 principal
amount of 12% secured Notes (collectively, the Notes) due during September and
October 2012 and 1 (one) Common Stock Warrant (collectively, the Warrants) to
purchase 1 (one) share of the Company’s Common Stock, par value $0.001 per share
(the Common Stock), at an exercise price of $1.50 per share, exercisable at any
time until March and April 2011 (18 months from investment date). Total funds
received of $71,500 were allocated $14,858 to the Warrants and $56,642 to the
Notes.  The fair Value of the Warrants of $18,755 at the time of
issuance, which was determined using the Black-Scholes option-pricing model, was
recorded as additional paid-in capital and reduced the carrying value of the
Notes. The discount on the Notes is being amortized to interest expense over the
term of the Notes.  At January 31, 2010, the unamortized discount on
the Notes is approximately $4,128.
 
 Interest on the
Notes is accruing monthly until maturity payable September and October
2012.  The Notes will mature during September and October
2012.  The Notes are redeemable at the option of the Company prior to
September and October 2012, in whole or in part, at an initial redemption price
of 100% of the aggregate principal amount of the Notes until September and
October 2012 plus accrued and unpaid interest, if any, to the date of
redemption.
 
 Due to an
accounting error, the Company failed to disclose the terms of the warrants and
convertible debt and the related discount value in the first quarter financial
statements. A discount value of $14,858 has been applied to the Convertible
Debentures for the value of the warrants issued. This led to expenses being
understated by $341, liabilities were overstated by $14,517, and capital
understated by $14,858.  The Company has now correctly accounted for
these amounts in this second quarter filing. The Company does not believe the
undisclosed $341 additional expenses incurred in the first quarter is a material
event to require a restatement of the first quarter results. The discount is
amortized over the 36-month term of the Convertible Debenture or will be
recognized in full upon conversion or redemption and will be expensed as
Interest Expense. To date, the Company’s stock has not traded at or above the
exercise price.
 
 During this period
the Company also issued 50,000 warrants with an Exercise Price of $1.25 per
share and Expiry Date of December 17, 2012, to investors in connection with a
$42,500 private placement. The cost of these warrants has been treated as an
expense related to an Equity Offering (ASC 505-10-S25).
 
 The total number of
shares that could be issued in connection with our Convertible Debentures and
warrants is 193,000.
 
 The Company offered
an inducement to the debenture holders by offering a reduced conversions price
of $0.85 per share. Debenture holders owning $49,000 of the $71,500 total accepted the
offer to convert their note plus accrued interest. A total amount of $8,936 was
expensed as Conversion Inducement and an offsetting amount to Additional Paid in
Capital.
 
 F-8
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 NOTE
5.   RELATED PARTY TRANSACTIONS
 
 The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities as they become
available.
 
 Thus they may face
a conflict in selecting between the Company and their other business
interests.  The Company has not formulated a policy for the resolution
of such conflicts.
 
 The Company’s
research and development is conducted by a shareholder at a facility owned by a
company that shareholder has an interest in. Under this program the Company
spent $20,431 amount classified as research and development. $16,672 amount of
our accounts payable are to this related party.
 
 NOTE
6.  INCOME TAXES
 
 As
      of January 31, 2010Deferred tax
      assets:Net operating
      tax carryforwards
                
                $
                110,585Other
                
                
                -0-Gross
      deferred tax assets
                
                
                40,090Valuation
      allowance
                
                
                (40,090
                )Net deferred
      tax assets
                
                $
                -0-
 
 Realization of
deferred tax assets is dependent upon sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income.  As the achievement of
required future taxable income is uncertain, the Company recorded a valuation
allowance.
 
 NOTE
7.  NET OPERATING LOSSES
 
 As of January 31,
2010, the Company has a net operating loss carry-forward of approximately
$110,585.  Net operating loss carryforward expires twenty years from
the date the loss was incurred.
  
 F-9
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 NOTE
8.  STOCK TRANSACTIONS
 
 Transactions, other
than employees’ stock issuance, are in accordance with paragraph 8 of ASC-718.
Thus issuances shall be accounted for based on the fair value of the consideration
received.  Transactions with employees’ stock issuance are in
accordance with paragraphs (16-44) of ASC-718. These issuances shall be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, or whichever is more readily
determinable.
 
 On July 9, 2009 the
Company issued a total of 20,000 shares of common stock to one investor for cash
at $0.0046 per share for a total of $87.
 
 On July 27, 2009
the Company issued a total of 120,000 shares of common stock to one investor for
cash at $0.0046 per share for a total of $556.
 
 On July 29, 2009
the Company issued a total of 126,000 shares of common stock to one investor for
cash at $0.0046 per share for a total of $582.
 
 On July 31, 2009
the Company issued a total of 134,000 shares of common stock to one investor for
cash at $0.0046 per share for a total of $622.
 
 On August 14, 2009
the Company issued a total of 400,000 shares of common stock to one investor for
cash at $0.0046 per share for a total of $1,849.
 
 On August 14, 2009
the Company issued a total of 200,000 shares of common stock to one investor for
cash at $0.0046 per share for a total of $925.
 
 On December 4,
2009, as per the Share Exchange Agreement dated October 9, 2009, 43,450,000
shares of common stock, which was all the issued and outstanding stock of Urban
Barns Foods Inc. (f/k/a HL Ventures Inc.), was transferred to UB. Also in
accordance with the Share Exchange Agreement, the Company issued 25,000,000
shares of common stock to the shareholders of Urban Barns in exchange for the
issued and outstanding shares of common stock of Urban Barns and the Company
cancelled 20,500,000 shares of common stock held by our former President, Chief
Executive Officer, Chief Financial Officer, Secretary, Treasurer and
Director.
 
 On January 14,
2010, five of the Secured Convertible Debenture Agreements were converted into a
total of 59,573 shares of common stock.
 
 As of January 31,
2010 the Company had 48,009,573 shares of common stock issued and
outstanding.  (As of February 10, 2010 the company had 48,259,573
shares of common stock issued and outstanding. See Note 11.)
 
 NOTE
9.  STOCKHOLDERS’ EQUITY
 
 The stockholders’
equity section of the Company contains the following classes of capital stock as
of January 31, 2010:
 
 ·
                Common stock,
      $ 0.001 par value: 100,000,000 shares authorized; 48,009,573 shares issued
      and outstanding.
 F-10
 URBAN
BARNS FOODS INC.
 (f/k/a
HL Ventures Inc.)
 (A
Development Stage Company)
 Notes
to Financial Statements
 January
31, 2010
 
 NOTE
10.  DEBENTURES PAYABLE
 
 At January 31, 2010
the Company has a balance of $22,500 debentures at 12% interest, carrying a
$4,128 discount, which mature and are payable on September 25, 2012. The total
accrued and unpaid interest on January 31, 2010, is $953. The Company’s
obligation to service this debt is $235 per month. The debentures can be
converted at a conversion price of $1.00 per share for any principal and accrued
interest.  At January 31, 2010, the debentures, including accrued
interest, could convert to a total of no more than 23,453 shares of the
Company’s common stock.
  NOTE
11.  SUBSEQUENT EVENTS
 
 The Company raised
$200,000 by entering into subscription agreements with a non-US investor (the
"Investor") for the sale of shares at a price of $0.80 per share (the "Shares").
In addition, the Company granted a warrant for every share issued to the
Investor. The warrants are non-transferable securities to purchase one further
share of the Company's common stock at an exercise price of $1.08 per share at
any time during twelve months from the date of issuance and at an exercise price
of $1.20 per share at any time during twenty-four months from the date of
issuance. These warrants expire twenty-four months from the date of issuance of
the warrant certificate.
 
 The full
subscription price was delivered to the Company’s lawyer in the form of $200,000
cash on January 29, 2010 and was held in trust pending the completion of the
subscription documents.  There were no commissions or fees deducted
from this capital raise. The subscription documents were completed and the
shares and warrants were issued on February 10, 2010.
 
 Subsequent events
have been analyzed through March 30, 2010.
 F-11
 
 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
 
 Forward Looking
Statements
 
 This report on Form
10-Q contains certain forward-looking statements.  All statements
other than statements of historical fact are “forward-looking statements” for
purposes of these provisions, including any projections of earnings, revenues,
or other financial items; any statements of the plans, strategies, and
objectives of management for future operation; any statements concerning
proposed new products, services, or developments; any statements regarding
future economic conditions or performance; statements of belief; and any
statement of assumptions underlying any of the foregoing. Such forward-looking
statements are subject to inherent risks and uncertainties, and actual results
could differ materially from those anticipated by the forward-looking
statements.
  These
forward-looking statements involve significant risks and uncertainties,
including, but not limited to, the following: competition, promotional costs and
the risk of declining revenues. Our actual results could differ materially from
those anticipated in such forward-looking statements as a result of a number of
factors. These forward-looking statements are made as of the date of this
filing, and we assume no obligation to update such forward-looking statements.
The following discusses our financial condition and results of operations based
upon our consolidated financial statements which have been prepared in
conformity with accounting principles generally accepted in the United States.
It should be read in conjunction with our financial statements and the notes
thereto included elsewhere herein.
 
 Results of
Operations
 
 We
are still in our development stage and have generated no revenues to
date.
 
 We
incurred operating expenses of $98,861 for the six months ended January 31,
2010.  These expenses consisted of $4,565 in general operating
expenses, $19,827 in research and development expenses, $8,936 conversion
inducement expenses and $52,448 in professional fees.  For the same
period ended January 31, 2009 we incurred operating expenses of $0 as the
Company was incorporated on July 3, 2009.
 
 Our net loss from
inception (July 3, 2009) through January 31, 2010 was $110,585.
 
 The following table
provides selected financial data about our company for the quarter ended January
31, 2010.
 
 Balance
      Sheet Data:
                
                01/31/10Cash
                
                $
                22,049Fixed
      assets
                
                $
                18,590Total
      assets
                
                $
                40,814Total
      liabilities
                
                $
                81,424Shareholders'
      equity
                
                $
                (40,610
                )
   3
  Liquidity and Capital
Resources
 
 As
of January 31, 2010, we had cash of $22,049 in our bank accounts and a working
capital deficit of $39,876.
 
 For the six months
ended January 31, 2010, we had net cash spending of $98,096 on operating
activities, compared to net cash spending of $0 on operating activities during
the same period in 2009. The increase of the cash used in operating activities
for the six months ended January 31, 2010 was primarily due to Legal and
Accounting costs.
 
 During the six
months ended January 31, 2010, we had a decrease in cash of $0 due to investing
activities, compared to net cash decrease of $0 due to financing activities
during the same period in fiscal 2009. The decrease in cash from investing
activities was due to the acquisition of growing equipment and the company’s
website.
 
 During the six
months ended January 31, 2010, we received net cash of $98,861 from financing
activities, compared to net cash received of $0 from financing activities during
the same period in fiscal 2009. The increase in cash from financing activities
was due to the issuance of Convertible Debentures and the issuance of common
stock.
 
 Our cash level
increased by $22,049 during the six months ended January 31, 2010.
 
 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
 
 Recently, our
management decided to focus on acquiring or merging with one or more operating
businesses.  Our efforts to identify a target business resulted in the
Share Exchange Agreement with Urban Barns Foods Inc., a private company. 
On December 4, 2009 the share exchange with Urban Barns closed, and we
accordingly adopted the business of Urban Barns.  We are now an urban
produce production company that aims to be the supplier of choice of fresh,
locally grown, high-quality organic and conventional fruits and vegetables for
urban consumers.
 
 We
estimate that our expenses over the next 12 months (beginning December 2009)
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.
 
 
 4
  Description
              Potential
      Completion Date
              Estimated
      Expenses
                ($)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
 
 Our general and
administrative expenses for the year will consist of professional fees, office
maintenance, communication expenses (cellular, internet, fax and telephone),
bank charges, courier and postage costs, office supply costs and fees related to
our website. Our professional fees will include legal, accounting and auditing
fees related to our regulatory filings throughout the year.
 
 Based on our
planned expenditures, we require additional funds of $2,301,800 to proceed with
our business plan over the next 12 months.  If we are not able to obtain
additional financing on a timely basis, we will be unable to conduct our
operations as planned, and we will not be able to meet our obligations as they
become due.  In such event, we will be forced to scale down or perhaps even
cease our operations.
 
 Inflation
 
 The amounts
presented in the financial statements do not provide for the effect of inflation
on our operations or financial position. The net operating losses shown would be
greater than reported if the effects of inflation were reflected either by
charging operations with amounts that represent replacement costs or by using
other inflation adjustments.
 
 Off-Balance Sheet
Arrangements
 
 As
of January 31, 2010 we had no off balance sheet transactions that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
 
 Critical Accounting
Policies
 
 Our financial
statements are impacted by the accounting policies used and the estimates and
assumptions made by management during their preparation. A complete summary of
these policies are included in note 2 of the Notes to our Financial
Statements. We have identified below the accounting policies that are of
particular importance in the presentation of our financial position, results of
operations and cash flows, and which require the application of significant
judgment by our management.
 
 Basic Earnings per
Share
 
 In
February 1997, the FASB issued ASC-260, “Earnings per Share”, which specifies
the computation, presentation and disclosure requirements for earnings (loss)
per share for entities with publicly held common stock.  ASC-260
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share.  We
have adopted the provisions of ASC-260 effective May 21, 2007 (inception). Basic
net loss per share amounts is computed by dividing the net loss by the weighted
average number of common shares outstanding.  Diluted earnings per
share are the same as basic earnings per share due to the lack of dilutive items
in our company.
  5
  Use of Estimates and
Assumptions
 
 The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. In accordance with FASB 16 all adjustments are normal and
recurring.
 
 Depreciation
 
 We
depreciate our fixed assets once they have been placed into service. Equipment
purchased or leased for research and development are fully expensed as research
and development. We are currently developing an interactive website and classify
it as a balance sheet asset and is depreciated over 5 years.
  ITEM 4.     CONTROLS AND PROCEDURES.
  Evaluation
of Disclosure Controls and Procedures
 
 We
maintain disclosure controls and procedures, as defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. We carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of January 31, 2010. Based on the
evaluation of these disclosure controls and procedures the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were not effective.
  
 Changes
in Internal Controls
 
 During the quarter
covered by this report there were no changes in our internal control over
financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the
Exchange Act) that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
 
  
 6
  PART II. OTHER INFORMATION
  ITEM 1. LEGAL PROCEEDINGS
 
 None.
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCCEDS
 
 During the period
covered by this report we had the following issuances of previously undisclosed
and unregistered securities:
 
 ·
              On December
      17, 2009 we issued 50,000 units at $0.85 per unit for gross proceeds of
      $42,500 to one non-US investor.  Each unit consists of one share of
      our common stock and a warrant to purchase an additional share of our
      common stock at $1.25 per share for a period of twenty four months. 
      These securities were issued pursuant to exemptions from prospectus
      requirements under Regulation S of the Securities Act of 1933, as
      amended.
 
 ·
              On January
      14, 2010 we converted $50,637.50 worth of convertible debentures into
      shares of our common stock for an aggregate of 59,573
      shares.   The former debenture holders continue to own
      Warrants which represent the right to purchase from the Company up to
      49,000 shares of common stock at the purchase price of $1.50 per share
      exercisable at any time until April 30, 2011.   These
      securities were issued pursuant to exemptions from prospectus requirements
      under Regulation S of the Securities Act of 1933, as
    amended.
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
 None.
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 None.
 
 ITEM 5. OTHER INFORMATION
 
 None.
  ITEM 6. EXHIBITS.
  The following
exhibits are included with this quarterly filing:
 
 Exhibit
      No.
                Description31.1
                Sec. 302 Certification of Principal Executive
      Officer31.2
                Sec. 302 Certification of Principal Financial
      Officer32.1
                Sec. 906 Certification of Principal Executive
      Officer32.2
                Sec. 906 Certification of Principal Financial
      Officer
  7
 
 SIGNATURES
 
 Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
    March 31,
      2010
              Urban Barns Foods
      Inc./s/
      Jacob Benne
                By: Jacob
      Benne
                (Chief
      Executive Officer, President, & Director)/s/
      Daniel Meikleham
                By: Daniel
      Meikleham
                (Chief
      Financial Officer, Principal Accounting Officer & Director)
  8