Urban Barns Foods Inc. (OTCMKTS:URBF) Files Disastrous 10-K
Urban Barns Foods Inc. (OTCMKTS:URBF) finally filed its annual report for the period ended Jul 31, 2015 and it showed investors a horrible, horrible sight.
It is ironic, how the ticker jumped 100% up the charts mere hours before the 10-K came out. Had the numbers in it been clear before the beginning of the market session, URBF‘s charts would have looked a lot worse for wear. Why?
Because even a cursory glance at the company’s reports makes it abundantly clear that things haven’t improved for URBF since the previous time it filed a financial report. Indeed, they even got worse:
- Cash – $7 thousand
- Total current assets – $70 thousand
- Current liabilities – $1.1 MILLION
- Annual revenue – $101 thousand
- Annual net loss – $1.6 MILLION
Reportedly, at the end of the period, the company had not only lost a major chunk of its current assets, but had racked up some more net loss. There is a very slim chance that the investors will take that news well. Unfortunately for them, as bad as the numbers may be, they’re not even the biggest and most blatantly obvious threat to investor value that the report holds.
Because, as it turns out, committing to URBF stock still comes with the extra risk of your investment being drowned in dilution:
As of June 15, 2015 URBF had 289 million shares of common stock outstanding
As of October 28, 2015 URBF had 429 million shares of common stock outstanding
So where did all this dilution come from?
Well, section F-10 of the report can give investors a good answer to that question. But make no mistake, said answer is “good” in the sense that it’s informative – not because it is one you will like.
Because, as it turns out, URBF has hundreds of thousands of dollars worth of toxic debt, with conversion provisions such as:
“at a conversion rate of 70% of the average of the three lowest closing bid prices of the Company’s Class A common stock for the 12 trading days ending one trading day prior to the date a notice of conversion”
and
“at a price of $0.021 per share or 65% of the lowest closing bid price of the Company’s Class A common stock for the 20 trading days ending one day prior to the date a notice of conversion is sent by the holder to the Company”
Long story short – investors may want to keep a very close eye on URBF in the opening of the market session to come, as there’s a very good chance that they will be yelling “TIMBER!” before long.
