UNITED STATES ~~STATESSECURITIES~~ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~October~~January 31, ~~2015~~ 2016

[ ] 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: 000-53942

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

Nevada	20-0215404
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
organization)
13,000 Chemin Bélanger
Mirabel, Québec,
J7J 2N8	450-434-4344
(Address of principal executive offices) (Zip Code)	(Registrant’s telephone number, including area code)

13,000 Chemin Bélanger

Mirabel, Québec,

J7J 2N8

450-434-4344

(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 [X] No [ ]

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 [ ]

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 Exchange Act). Yes [ ] 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. [ ] Yes [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS

As of ~~January~~March 816, 2016 the registrant’s outstanding common stock consisted of ~~499~~24,~~948~~998,~~520~~217 shares.

Table of Contents

PART I - FINANCIAL INFORMATION		2
Item 1.	Financial Statements	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5
Item 4.	Controls and Procedures	5
PART II - OTHER INFORMATION		6
Item 1.	Legal Proceedings	6
Item 1A.	Risk Factors	6
Item 2.	Unregistered Sales of Equity Securities and Use of Procceds	6
Item 3.	Defaults Upon Senior Securities	6
Item 4.	Mine Safety Disclosures	6
Item 5.	Other Information	6

PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3. Quantitative and Qualitative Disclosures About Market Risk	7
Item 4. Controls and Procedures	7
PART II - OTHER INFORMATION	8
Item 1. Legal Proceedings	8
Item 1A. Risk Factors	8
Item 2. Unregistered Sales of Equity Securities and Use of Procceds	8
Item 3. Defaults Upon Senior Securities	8
Item 4. Mine Safety Disclosures	8
Item 5. Other Information	8

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited interim consolidated financial statements of Urban Barns Foods Inc. (the “Company”, “Urban Barns”) follow. All currency references in this report are to U.S. dollars unless otherwise noted.

URBAN BARNS FOODS INC. ~~Interim Consolidated Financial Statements For the Three Months Ended October 31, 2015 (Expressed in U.S. dollars) (unaudited)~~

Interim Consolidated Financial ~~Statement Index~~ Statements

Interim Consolidated Balance Sheets	F–1
Interim Consolidated Statements of Operations	F–2
Interim Consolidated Statement of Stockholder’s Deficit	F–3
Interim Consolidated Statements of Cash Flows	F–4
Notes to the Interim Consolidated Financial Statements	F–5

For the Three and Six Months Ended January 31, 2016

2(Expressed in U.S. dollars)

~~URBAN BARNS FOODS INC. Interim Consolidated Balance Sheets~~ (~~Expressed in U.S. dollars~~unaudited)

	October 31,		July 31,
	2015		2015
	$		$
	(unaudited)
ASSETS
Current assets
Cash	610		7,442
Accounts receivable	41,198		20,141
Other receivables	–		21,229
Inventory	16,283		18,767
Prepaid expenses and deposits	3,433		3,304
Total current assets	61,524		70,883
Prepaid expenses and deposits non-current	23,606		23,221
Property and equipment	425,750		449,800
Intangible assets	109,001		106,913
Total assets	619,881		650,817
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities	405,971		336,478
Notes payable	251,280		244,854
Convertible notes (elected to record at fair value)	1,313,151		396,135
Due to related parties	267,058		165,270
Total current liabilities	2,237,460		1,142,737
Warrant derivative liability	34,454		35,262
Total liabilities	2,271,914		1,177,999
Stockholders’ deficit
Preferred stock Authorized: 100,000,000 shares, par value $0.001 Issued and outstanding: nil shares	–		–
Common stock, Class A Authorized: 500,000,000 shares, par value $0.001 Issued and outstanding: 472,248,520 and 289,500,928 shares, respectively	472,249		289,501
Common stock, Class B Authorized: 25,000,000 shares, value of $0.001 Issued and outstanding: nil shares	–		–
Additional paid-in capital	5,348,053		5,036,168
Common stock Issuable	1,618		1,618
Deferred compensation	–		(2,009	)
Accumulated other comprehensive loss	(68,747	)	(79,983	)
Deficit	(7,405,206	)	(5,772,477	)
Total stockholders’ deficit	(1,652,033	)	(527,182	)
Total liabilities and stockholders’ deficit	619,881		650,817
Nature of operations and continuance of business (Note 1)
Commitments (Note 12)
Subsequent events (Note 13)

Financial Statement Index

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

Interim Consolidated Balance Sheets	F–1

Interim Consolidated Statements of Operations	F–2

Interim Consolidated Statement of Stockholders’ Deficit	F–3

Interim Consolidated Statements of Cash Flows	F–4

Notes to the Interim Consolidated Financial Statements	F–5

~~F-1~~ 3

URBAN BARNS FOODS INC. ~~Interim Consolidated Statements of Operations (Expressed in U.S. dollars) (unaudited)~~

	Three Months		Three Months
	Ended		Ended
	October 31,		October 31,
	2015		2014
	$		$
Revenue	36,027		17,252
Cost of sales	9,103		5,908
Gross margin	26,924		11,344
Operating expenses
Bad debt expense	3,979		–
Depreciation	23,925		27,310
Foreign exchange loss	14,177		2,827
General and administrative	87,295		467,455
Professional fees	42,267		64,910
Research and development	61,675		215,147
Total operating expenses	233,318		777,649
Loss from operations	(206,394	)	(766,305	)
Other income (expense)
Interest expense	(17,237	)	–
Warrant derivative liability recovery	810		–
Loss on change in fair value of convertible notes	(1,409,908	)	–
Total other income (expense)	(1,426,335	)	–
Net loss	(1,632,729	)	(766,305	)
Translation adjustment	11,236		–
Comprehensive loss	(1,621,493	)	(766,305	)
Net loss per share, basic and diluted	(0.01	)	(0.00	)
Weighted average shares outstanding	315,661,226		278,242,125

Interim Consolidated Balance Sheets

(~~The accompanying notes are an integral part of these interim~~Expressed ~~consolidated~~in ~~financial~~U.S. ~~statements~~dollars)

F-2

	January 31, 2016 $			July 31, 2015 $
	(unaudited)
ASSETS

Current assets

Cash		3,812			7,442
Accounts receivable		28,836			20,141
Other receivables		–			21,229
Inventory		20,820			18,767
Prepaid expenses and deposits		5,208			3,304
Total current assets		58,676			70,883

Prepaid expenses and deposits non-current		22,688			23,221
Property and equipment		373,838			449,800
Intangible assets		111,063			106,913
Total assets		566,265			650,817

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities

Accounts payable and accrued liabilities		412,684			336,478
Notes payable		239,205			244,854
Convertible notes (elected to record at fair value)		208,812			396,135
Due to related parties		273,997			165,270
Total current liabilities		1,134,698			1,142,737

Warrant derivative liability		10,790			35,262
Total liabilities		1,145,488			1,177,999

Stockholders’ deficit

Preferred stock Authorized: 100,000,000 shares, par value $0.001 Issued and outstanding: nil shares		–			–

Common stock, Class A Authorized: 25,000,000 shares, par value $0.001 Issued and outstanding: 24,997,426 and 14,475,046 shares, respectively		24,997			14,475

Common stock, Class B Authorized: 25,000,000 shares, value of $0.001 Issued and outstanding: nil shares		–			–

Additional paid-in capital		5,878,405			5,311,194
Common stock Issuable		1,618			1,618
Deferred compensation		–			(2,009	)

Accumulated other comprehensive loss		(87,617	)		(79,983	)
Deficit		(6,396,626	)		(5,772,477	)
Total stockholders’ deficit		(579,223	)		(527,182	)
Total liabilities and stockholders’ deficit		566,265			650,817

~~URBAN~~Nature of ~~BARNS~~operations ~~FOODS~~and ~~INC.~~continuance ~~Interim Consolidated Statement~~ of ~~Stockholders~~business ~~Deficit~~ (~~Expressed~~Note ~~in U.S. dollars~~1)

									Deficit
							Accumulated		Accumulated
	Common Stock		Additional	Common			Other		During the
	Class A		Paid-In	Stock	Deferred		Comprehensive		Development
	Shares	Amount	Capital	Issuable	Compensation		Loss		Stage		Total
	#	$	$	$	$		$		$		$
Balance, July 31, 2015	289,500,928	289,501	5,036,168	1,618	(2,009	)	(79,983	)	(5,772477	)	(527,182	)
Shares issued for the conversion of notes and accrued interest	182,747,592	182,748	311,885	–	–		–		–		494,633
Deferred compensation costs charged to operations	–	–	–	–	2,009		–		–		2,009
Translation adjustment	–		–	–	–		11,236		–		11,236
Net loss for the period	–	–	–	–	–		–		(1,632,729	)	(1,632,729	)
Balance, October 31, 2015 (unaudited)	472,248,520	472,248	5,348,053	1,618	–		(68,747	)	(7,405,206	)	(1,652,033	)

Commitments and contingencies (Note 12)

~~(The accompanying notes are an integral part of these interim~~Subsequent ~~consolidated~~events ~~financial~~(Note ~~statements~~13)

~~F-3~~(The accompanying notes are an integral part of these interim consolidated financial statements)

~~URBAN BARNS FOODS INC. Interim Consolidated Statements of Cash Flows (Expressed in U.S. dollars) (unaudited)~~F-1

	Three Months		Three Months
	Ended		Ended
	October 31,		October 31,
	2015		2014
	$		$
Operating Activities
Net loss for the period	(1,632,729	)	(766,305	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest accrual	9,915		–
Bad debt expense	3,979		–
Depreciation	23,925		27,310
Deferred compensation	2,009		8,402
Loss on change in fair value of convertible notes	1,409,908		–
Warrant derivative recovery	(810	)	–
Stock-based compensation	–		280,000
Unrealized foreign exchange	15,613		–
Changes in operating assets and liabilities:
Accounts receivable	(20,819	)	(9,779	)
Other receivables	16,900		(24,253	)
Inventory	(8,227	)	(6,204	)
Prepaid expenses and deposits	(577	)	8,058
Accounts payable and accrued liabilities	77,119		21,100
Due to related parties	4,974		(12,001	)
Net cash used in operating activities	(98,820	)	(473,672	)
Investing Activities
Purchase of intangible assets	(2,344	)	(3,570	)
Purchase of property and equipment	(254	)	(88,981	)
Net cash used in investing activities	(2,598	)	(92,551
Financing Activities
Proceeds from issuance of common stock	–		400,500
Proceeds from related parties	94,696		–
Proceeds from note payable	–		197,835
Net cash provided by financing activities	94,696		598,335
Effect of foreign exchange on cash	(110	)	–
Change in cash	(6,832	)	32,112
Cash, beginning of period	7,442		75,969
Cash, end of period	610		108,081
Non-cash investing and financing activities:
Shares issued upon conversion of notes	494,633		–
Property, plant, and equipment included in due to related party	1,162		–
Property, plant, and equipment included in accounts payable	58,846		–
Supplemental disclosures:
Interest paid	–		–
Income tax paid	–		–

URBAN BARNS FOODS INC.

~~(The~~Interim Consolidated ~~accompanying~~Statements ~~notes are an integral part~~ of ~~these interim consolidated financial statements)~~ Operations

~~F-4~~(Expressed in U.S. dollars)

~~URBAN BARNS FOODS INC. Notes to the Interim Consolidated Financial Statements October 31, 2015~~ (~~Expressed in U.S. dollars) (~~unaudited)

1.	Nature of Operations and Continuance of Business
		Three Months Ended January 31, 2016 $			Three Months Ended January 31, 2015 $			Six Months Ended January 31, 2016 $			Six Months Ended January 31, 2015 $
	Urban Barns Foods Inc. (the “Company”) was incorporated under the laws of the State of Nevada on May 21, 2007 as HL Ventures Inc. The Company is a produce production company, or grower, that aims to be the supplier of choice for fresh, locally grown, Kosher-certified organic or high-quality fruits and vegetables for urban consumers.
Sales revenue			29,357			24,084			65,384			41,336
	These interim consolidated 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 October 31, 2015, the Company had a working capital deficit of $2,175,936, had reported losses since inception from operations, and had an accumulated deficit of $7,405,206. The continued operations of the Company are dependent on its ability to generate future cash flows from operations or obtain additional financing. Management is obtaining working capital through debt or equity financing until such time that the Company’s operations generate positive operating cash flow. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These interim 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.
Royalty revenue			43,680			-			43,680			-
Cost of sales			(6,121	)		(6,984	)		(15,224	)		(12,892	)
Gross margin			66,916			17,100			93,840			28,444
Operating expenses
Bad debt recovery			(3,979	)		–			–			–
Depreciation			22,287			25,293			46,212			52,603
Foreign exchange loss (gain)			(31,763	)		(1,881	)		(17,586	)		946
General and administrative			52,049			215,866			139,344			683,321
Professional fees			21,912			16,861			64,179			81,771
Research and development			47,525			107,475			109,200			322,622
Total operating expenses			108,031			363,614			341,349			1,141,263
Loss from operations			(41,115	)		(346,514	)		(247,509	)		(1,112,819	)
Other income (expense)
						–						–
Other income			18,200			-			18,200			-
Interest expense			(16,635	)		–			(33,872	)		–
Change in warrant derivative fair value			23,662			–			24,472			–
Gain (loss) on change in fair value of convertible notes			1,024,468			–			(385,440	)		–
Total other income (expense)			1,049,695			–			(376,640	)		–
Net income (loss)			1,008,580			(346,514	)		(624,149	)		(1,112,819	)
Translation adjustment			(18,870	)		–			(7,634	)		–
Comprehensive income (loss)			989,710			(346,514	)		(631,783	)		(1,112,819	)
Net income (loss) per share, basic and diluted			0.04			(0.02	)		(0.03	)		(0.08	)
Weighted average shares outstanding, basic and diluted			24,661,176			14,070,857			20,224,225			13,997,346

2.	Summary of Significant Accounting Policies
	Basis of Presentation
	The unaudited consolidated interim financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). They do not include all information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended July 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the SEC. The consolidated interim financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended October 31, 2015 are not necessarily indicative of the results that may be expected for the year ending July 31, 2016.
	Recent Accounting Pronouncements
	Recent pronouncements with future effective dates are either not applicable or are not expected to be significant to the interim consolidated financial statements of the Company.

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

~~3. Property and Equipment~~F-2

		Accumulated		Net Carrying
	Cost	Depreciation	Impairment	Value
	$	$	$	$
Production equipment
October 31, 2015	649,736	223,986	–	425,750
Production equipment
July 31, 2015	700,621	200,233	50,588	449,800

URBAN BARNS FOODS INC.

4.Interim Consolidated ~~Intangible~~Statement ~~Assets~~of Stockholders’ Deficit

		Accumulated
	Cost	Depreciation	Net Carrying Value
	$	$	$
Patent development costs October 31, 2015	109,001	–	109,001
Patent development costs July 31, 2015	106,913	–	106,913

(Expressed in U.S. dollars)

F-5

	Common Stock				Additional		Common					Accumulated Other
	Class A				Paid-In		Stock		Deferred			Comprehensive
	Shares		Amount		Capital		Issuable		Compensation			Loss			Deficit			Total
	#		$		$		$		$			$			$			$

Balance, July 31, 2015		14,475,046		14,475		5,311,194		1,618		(2,009	)		(79,983	)		(5,772,477	)		(527,182	)

Shares issued for the conversion of notes and accrued interest		10,522,380		10,522		567,211		–		–			–			–			577,733

Deferred compensation costs charged to operations		–		–		–		–		2,009			–			–			2,009

Translation adjustment		–				–		–		–			(7,634	)		–			(7,634	)

Net loss for the period		–		–		–		–		–			–			(624,149	)		(624,149	)

Balance, January 31, 2016 (unaudited)		24,997,426		24,997		5,878,405		1,618		–			(87,617	)		(6,396,626	)		(579,223	)

~~URBAN~~(The accompanying ~~BARNS~~notes ~~FOODS~~are ~~INC.~~an ~~Notes~~integral topart ~~the~~of ~~Interim~~these ~~Consolidated~~interim ~~Financial~~consolidated ~~Statements~~financial ~~October 31, 2015 (Expressed in U.S. dollars~~statements) ~~(unaudited)~~

~~5. Convertible Notes~~F-3

~~(a)~~URBAN BARNS OnFOODS ~~February 10, 2015, the Company issued a promissory note for $166,000, less an initial financing charge of $12,000~~INC. Pursuant to the note, the amount owing is unsecured, bears interest at 8% per annum, and is due on February 12, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock 180 days after the date of issuance of the note (August 9, 2015) 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 is sent by the holder to the Company. As at October 31, 2015, the Company recorded accrued interest of $9,026, which has been included in accounts payable and accrued liabilities. During the period ended October 31, 2015, the Company issued 55,249,826 shares of Class A common stock pursuant to the conversion of principal of $78,960. Principal outstanding at October 31, 2015 was $87,040. The Company has elected to record this note at fair value. As at October 31, 2015, the fair value of the note was $746,057, which is based on the market price of the shares that would be issuable upon conversion. (b) On March 23, 2015, the Company issued a promissory note for $115,000, less an initial financing charge of $15,000. Pursuant to the note, the amount owing is unsecured, bears guaranteed interest at 7% per annum, and is due on March 23, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock 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. As at October 31, 2015, the Company recorded accrued interest of $8,050, which has been included in accounts payable and accrued liabilities. During the period ended October 31, 2015, the Company issued 84,997,766 shares of Class A common stock pursuant to the conversion of principal of $53,574. Principal outstanding at October 31, 2015 was $61,426. The Company has elected to record this note at fair value. As at October 31, 2015, the fair value of the note was $567,094, which is based on the market price of the shares that would be issuable upon conversion. (c) On March 23, 2015, the Company issued a promissory note for $27,500, less an initial financing charge of $2,500. Pursuant to the note, the amount owing is unsecured, bears guaranteed interest at 7% per annum, and is due on March 23, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock 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. The Company has elected to record this note at fair value. During the period ended October 31, 2015 the Company issued 42,500,000 shares of Class A common stock pursuant to the conversion of the entire principal and accrued interest.

6.	Warrant Derivative Liability
	The non-compensatory warrants issued, as disclosed in Note 10, are a derivative liability due to being exercisable in a currency different than the functional currency of the Company. These warrants will continue to be a derivative liability until exercised or expired.
	The fair values as at October 31, 2015 and July 31, 2015 are as follows:

Interim Consolidated Statements of Cash Flows

	October 31,	July 31,
	2015	2015
	$	$
Warrant derivative liabilities:
6,500,000 warrants issued on August 20, 2014	19,128	20,520
3,150,000 warrants issued on September 17, 2014	10,761	11,590
1,736,445 warrants issued on February 19, 2015	4,565	3,512
	34,454	35,262

(Expressed in U.S. dollars)

~~F-6~~(unaudited)

URBAN BARNS FOODS INC. Notes to the Interim Consolidated Financial Statements October 31, 2015 (Expressed in U.S. dollars) (unaudited)

	Six Months Ended January 31, 2016			Six Months Ended January 31, 2015
	$			$
Operating Activities

Net loss for the period		(624,149	)		(1,112,819	)

Adjustments to reconcile net loss to net cash used in operating activities:

Interest accrual		33,872			–
Depreciation		46,212			52,603
Deferred compensation		2,009			16,804
Loss on change in fair value of convertible notes		385,440			–
Warrant derivative loss (recovery)		(24,472	)		–
Unrealized foreign exchange		(16,955	)		15,127
Issuance of shares for services		–			32,464
Stock-based compensation		–			280,000

Changes in operating assets and liabilities:
Accounts receivable		(10,429	)		(14,167	)
Other receivables		20,164			(31,361	)
Inventory		(13,780	)		(12,587	)
Prepaid expenses and deposits		(3,400	)		18,663
Accounts payable and accrued liabilities		104,964			(7,907	)
Due to related parties		9,505			(10,913	)
Net cash used in operating activities		(91,019	)		(774,093	)

Investing Activities
Purchase of intangible assets		(12,298	)		(7,388	)
Purchase of property and equipment		(837	)		(88,980	)
Net cash used in investing activities		(13,135	)		(96,368	)

Financing Activities
Proceeds from issuance of common stock		–			540,500
Proceeds from related parties		100,524			180,631
Proceeds from note payable		–			94,368
Net cash provided by financing activities		100,524			815,499

Change in cash		(3,630	)		(54,962	)

Cash, beginning of period		7,442			75,969

Cash, end of period		3,812			21,007

Non-cash investing and financing activities:
Shares issued upon conversion of notes		577,733			–
Property, plant, and equipment included in due to related party		1,320			–
Property, plant, and equipment included in accounts payable		58,846			–

Supplemental disclosures:
Interest paid		–			–
Income tax paid		–			–

6.(The accompanying ~~Warrant~~notes ~~Derivative~~are ~~Liability~~an ~~(continued~~integral part of these interim consolidated financial statements)

~~The Company recorded a recovery of $810 being the reduction in the fair value to October 31, 2015.~~ F-4

~~The fair value of the derivative~~URBAN ~~financial~~BARNS ~~liabilities~~FOODS ~~was determined using the Black-Scholes Model using the following assumptions:~~ INC.

		Risk-free	Expected	Expected
	Expected	Interest	Dividend	Life (in
	Volatility	Rate	Yield	years)
At the issuance date:
6,500,000 warrants issued on August 20, 2014	281%	0.94%	0%	3.00
3,150,000 warrants issued on September 17, 2014	281%	1.08%	0%	3.00
1,736,445 warrants issued on February 19, 2015	144%	0.67%	0%	2.00
As at October 31, 2015:
6,500,000 warrants issued on August 20, 2014	194%	0.67%	0%	1.81
3,150,000 warrants issued on September 17, 2014	194%	0.67%	0%	1.88
1,736,445 warrants issued on February 19, 2015	194%	0.67%	0%	1.31

Notes to the Interim Consolidated Financial Statements

7.January 31, ~~Notes Payable~~2016

	(a)	During the year ended July 31, 2014, the Company entered into an agreement with certain shareholders, whereby the shareholders would buy certain licenses required by the Company. The Company would then buy back the licenses for Cdn$50,500 plus a 25% premium within the first 90 days, a 35% premium for the balance of the first 12 months, and a 50% premium during months 13-24. If the Company does not buy the licenses back within 2 years (expiring October 21, 2015), the license will be subject to a 5% royalty for the following 3 years. As at October 31, 2015, the Company owed $57,093 (Cdn$75,750), (July 31, 2015 - $58,059 (Cdn$68,175)) in order to buy back the licenses.
	(b)	As at October 31, 2015, the Company owed $170,450 (Cdn$223,000) for a promissory note that was issued on October 29, 2014. The note is secured against the Company’s net assets, bears interest at a rate of 12.68% per annum, and is due the earlier of: (i) the Company raising Cdn$1,000,000 or more through issuance of equity or debt; or (ii) October 29, 2015. As at October 31, 2015, $193,377 is owed on this note which includes accrued interest of $22,291. This note was issued to a significant shareholder of the Company.

(Expressed in U.S. dollars)

~~8. Related Party Transactions The following are related party transactions not disclosed elsewhere in these interim consolidated financial statements:~~(unaudited)

(a) During the year ended July 31, 2015, the Company accrued $18,356 for severance pay to the former President and CEO of the Company which is unsecured, non-interest bearing, and due on demand. As at October 31, 2015, $17,914 (July 31, 2015 - $17,964) was owing to the former President. (b) As at October 31, 2015, the Company was owed $1~~,371 (July 31, 2015 - $1,374) from the Vice President of the Company which is unsecured, non-interest bearing, and due on demand~~. ~~(c)~~Nature ~~As at October 31, 2015, the Company owed $45,864 (Cdn$60,000) (July 31, 2015 - $45,988) for a loan payable to a director~~ of ~~the~~Operations ~~Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum~~ and ~~due~~Continuance ~~on the earlier~~ of i) the Company raising Cdn$1,000,000 or more through issuance of equity or debt or ii) January 31, 2016. As at October 31, 2015, $5,038 (Cdn$6,590) (July 31, 2015 - $3,352) is owed for accrued interest.Business

FUrban Barns Foods Inc. (the “Company”) was incorporated under the laws of the State of Nevada on May 21, 2007 as HL Ventures Inc. The Company is a produce production company, or grower, that aims to be the supplier of choice for fresh, locally grown, Kosher-7certified organic or high-quality fruits and vegetables for urban consumers.

~~URBAN~~These interim ~~BARNS~~consolidated ~~FOODS~~financial ~~INC.~~statements ~~Notes~~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 ~~Interim~~normal ~~Consolidated~~course ~~Financial~~of ~~Statements~~business. ~~October~~As at January 31, ~~2015~~2016, ~~(Expressed~~the inCompany had Ua working capital deficit of $1,076,022, had reported losses since inception from operations, and had an accumulated deficit of $6,396,626.S The continued operations of the Company are dependent on its ability to generate future cash flows from operations or obtain additional financing. ~~dollars)~~Management ~~(unaudited)~~is obtaining working capital through debt or equity financing until such time that the Company’s operations generate positive operating cash flow. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These interim 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.

8Subsequent to the period end, the company completed a 1 for 20 reverse split of its Class A common stock. ~~Related~~All ~~Party~~share ~~Transactions~~and ~~(continued)~~per share amounts have been reflected on a post reverse split basis.

(d) As at October 31, 2015, the Company owed $45,864 (Cdn$60,000) (July 31, 2015 - $45,988) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on the earlier of i) the Company raising Cdn$1,000,000 or more through issuance of equity or debt or ii) January 31, 2016. As at October 31, 2015, $4,808 (Cdn$6,290) (July 31, 2015 - $3,362) is owed for accrued interest. (e) As at October 31, 2015, the Company owed $24,523 (Cdn$32,082) (July 31, 2015 - $24,591) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on January 31, 2016. As at October 31, 2015, $1,187 (Cdn$1,553) (July 31, 2015 - $405) is owed for accrued interest. (f) As at October 31, 2015, the Company owed $21,280 (Cdn$27,839) (July 31, 2015 - $21,338) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on January 31, 2016. As at October 31, 2015, $1,054 (Cdn$1,378) (July 31, 2015 - $375) is owed for accrued interest. (g) As at October 31, 2015, the Company owed $48,025 (Cdn$62,249) (July 31, 2015 - $nil) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on January 31, 2016. As at October 31, 2015, $620 (Cdn$812) is owed for accrued interest. (h) As at October 31, 2015, the Company owed $47,207 (Cdn$61,758) (July 31, 2015 - $nil) for a loan payable to a former director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on January 31, 2016. As at October 31, 2015, $616 (Cdn$806) is owed for accrued interest. (i) As at October 31, 2015, the Company owed $3,058 (Cdn$4,000) (July 2015 - $3,065) to a company controlled by the former President of the Company which is unsecured, non-interest bearing, and due on demand. (j) Included in accounts payable as at October 31, 2015 is $23,893 (July 31, 2015 - $20,275) owing to related parties for expense reimbursements. (k) As at October 31, 2015, the Company had deferred compensation of $nil (July 31, 2015 - $2~~,009) incurred to directors and officers of the Company~~. ~~During~~Summary ~~the period ended October 31, 2015, deferred compensation~~ of ~~$2,009~~Significant ~~(2014~~Accounting - $8,402) was charged to operations and included in general and administrative expenses. (l) During the period ended October 31, 2015, the Company incurred consulting fees (included in general and administrative expenses) of $27,702 (Cdn$36,750) (2014 - $49,902) to directors and officers of the Company. (m) During the period ended October 31, 2015, the Company incurred consulting fees (included in general and administrative expenses) of $nil (2014 - $2,034) to the daughter of the former President of the Company. (n) During the period ended October 31, 2015, the Company incurred consulting fees (included in general and administrative expenses) of $nil (2014 - $4,072) and research and development expenses of $nil (2014 - $19,001) to the daughter of the Vice President of the Company. (o) During the period ended October 31, 2015, the Company granted nil (2014 - 5,925,000) stock options with a fair value of $nil (2014 - $237,000) (included in general and administrative expenses) to directors and officers of the Company. (p) During the period ended October 31, 2015, the Company granted nil (2014 - 200,000) stock options with a fair value of $nil (2014 - $8,000) (included in general and administrative expenses) for bookkeeping services to the spouse of the President of the Company.Policies

~~F-8~~Basis of Presentation

~~URBAN~~These unaudited ~~BARNS~~consolidated ~~FOODS~~interim ~~INC~~financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). ~~Notes~~They do not include all information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the ~~Interim~~financial statements ~~Consolidated~~for ~~Financial~~the ~~Statements~~year ~~October~~ended July 31, 2015 ~~(Expressed~~included in Uthe Company’s Annual Report on Form 10-K filed with the SEC.S These consolidated interim financial statements should be read in conjunction with those financial statements included in the Form 10-K. In ~~dollars)~~the ~~(unaudited)~~opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and six months ended January 31, 2016 are not necessarily indicative of the results that may be expected for the year ending July 31, 2016.

9.Recent Accounting ~~Common Stock~~Pronouncements

~~(a)~~Recent pronouncements Onwith ~~August~~future ~~19,~~effective ~~2015,~~dates ~~the~~are ~~Company~~either ~~issued~~not ~~1,785,714~~applicable ~~shares~~or ofare ~~Class~~not Aexpected ~~common stock at $0.011 per share pursuant~~ to ~~the~~be ~~conversion~~significant ~~of $15,000 of the convertible note as described in Note 5(a). (b) On September 25, 2015, the Company issued 8,823,529 shares of Class A common stock at $0.008 per share pursuant~~ to the ~~conversion~~consolidated financial ofstatements ~~$15,000~~ of the ~~convertible note as described in Note 5(a). (c) On October 2, 2015, the~~ Company ~~issued 5,000,000 shares of Class A common stock at $0~~.01 per share pursuant to the conversion of $7,475 of the convertible note as described in Note 5(c). (d) On October 2, 2015, the Company issued 7,246,377 shares of Class A common stock at $0.004 per share pursuant to the conversion of $10,000 of the convertible note as described in Note 5(b). (e) On October 12, 2015, the Company issued 13,333,333 shares of Class A common stock at $0.002 per share pursuant to the conversion of $20,000 of the convertible note as described in Note 5(a). (f) On October 12, 2015, the Company issued 14,888,889 shares of Class A common stock at $0.002 per share pursuant to the conversion of $13,400 of the convertible note as described in Note 5(b). (g) On October 15, 2015, the Company issued 13,636,364 shares of Class A common stock at $0.001 per share pursuant to the conversion of $15,000 of the convertible note as described in Note 5(a). (h) On October 15, 2015, the Company issued 7,000,000 shares of Class A common stock at $0.001 per share pursuant to the conversion of $5,915 of the convertible note as described in Note 5(c). (i) On October 20, 2015, the Company issued 17,670,886 shares of Class A common stock at $0.001 per share pursuant to the conversion of $13,960 of the convertible note as described in Note 5(a). (j) On October 20, 2015, the Company issued 18,060,417 shares of Class A common stock at $0.001 per share pursuant to the conversion of $8,669 of the convertible note as described in Note 5(b). (k) On October 22, 2015, the Company issued 14,000,000 shares of Class A common stock at $0.002 per share pursuant to the conversion of $7,280 of the convertible note as described in Note 5(c). (l) On October 22, 2015, the Company issued 18,958,333 shares of Class A common stock at $0.002 per share pursuant to the conversion of $9,100 of the convertible note as described in Note 5(b). (m) On October 28, 2015, the Company issued 16,500,000 shares of Class A common stock at $0.002 per share pursuant to the conversion of $8,580 of the convertible note as described in Note 5(c). (n) On October 28, 2015, the Company issued 18,093,750 shares of Class A common stock at $0.002 per share pursuant to the conversion of $8,685 of the convertible note as described in Note 5(b). (o) On October 30, 2015, the Company issued 7,750,000 shares of Class A common stock at $0.01 per share pursuant to the conversion of $3,720 of the convertible note as described in Note 5(b).

103. ~~Share~~Property ~~Purchase~~and ~~Warrants~~Equipment

The following table summarizes the continuity of share purchase warrants:

	Cost $		Accumulated Depreciation $		Impairment $		Net Carrying Value $

Production equipment January 31, 2016		605,522		231,684		–		373,838
Production equipment July 31, 2015		700,621		200,233		50,588		449,800

		Weighted Average
	Number of	Exercise Price
	Warrants	$
Balance, July 31,2014	2,027,027	–
Issued	11,746,445	0.07
Balance, July 31, 2015	13,773,472	0.07
Issued	–	–
Balance, October 31, 2015	13,773,472	0.07

F-5

~~F-9~~URBAN BARNS FOODS INC.

~~URBAN BARNS FOODS INC.~~ Notes to the Interim Consolidated Financial Statements ~~October 31, 2015 (Expressed in U.S. dollars) (unaudited)~~

~~10.~~January 31, ~~Share Purchase Warrants (continued)~~2016

~~A summary of share purchase warrants~~(Expressed ~~outstanding~~in ~~and~~U.S. ~~exercisable as at October 31, 2015 is as follows:~~ dollars)

	Exercise Price	Number of warrants	Remaining life
Expiry Date	$	Outstanding and exercisable	(years)
October 29, 2016	0.070	2,027,027	1.00
August 20, 2017	0.075	6,500,000	1.81
September 17, 2017	0.075	3,510,000	1.88
February 19, 2017	0.040	1,736,445	1.31
		13,773,472	1.64

(unaudited)

114. ~~Stock~~Intangible Options The Company has adopted a stock option plan pursuant to which options may be granted to directors, officers, employees and consultants of the Company to a maximum of 25,000,000 shares issued and outstanding at the time of the grant. The exercise price of each option is equal to the market price on the date of the grant. The options vest at the discretion of the Board of Directors.Assets

The following table summarizes the continuity of the Company’s stock options:

Cost
$

Accumulated Depreciation
$

Net Carrying Value
$

Patent development costs January 31, 2016

111,063

–

111,063

Patent development costs July 31, 2015

106,913

–

106,913

			Weighted	Aggregate
			Average	Intrinsic
	Number		Exercise Price	Value
	of Options		$	$
Outstanding, July 31, 2014	10,500,000		0.10	–
Granted	7,200,000		0.10
Expired	(200,000	)	0.10
Outstanding, July 31, 2015	17,500,000		0.10	–
Granted	–		0.10
Forfeited	(10,100,000	)	0.10
Outstanding, October 31, 2015	7,400,000		0.10	–

Convertible Notes

F-(a) On February 10, 2015, the Company issued a promissory note for $166,000, less an initial financing charge of $12,000. Pursuant to the note, the amount owing is unsecured, bears interest at 8% per annum, and is due on February 12, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock 180 days after the date of issuance of the note (August 9, 2015) 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 is sent by the holder to the Company. On November 13, 2015, pursuant to an exchange agreement, this noteholder exchanged a principal amount of $65,280 together with accrued interest of $3,219 with a new noteholder as disclosed in Note 5(d). As at January 31, 2016, the Company recorded accrued interest of $6,431, which has been included in accounts payable and accrued liabilities. During the period ended January 31, 2016, the Company issued 2,762,491 shares of Class A common stock pursuant to the conversion of principal of $78,960. Principal outstanding at January 31, 2016 was $21,760. The Company has elected to record this note at fair value. As at January 31, 2016, the fair value of the note was $31,086, which is based on the market price of the shares that would be issuable on conversion. (b) On March 23, 2015, the Company issued a promissory note for $115,000, less an initial financing charge of $15,000. Pursuant to the note, the amount owing is unsecured, bears guaranteed interest at 7% per annum, and is due on March 23, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock 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. As at January 31, 2016, the Company recorded accrued interest of $8,050, which has been included in accounts payable and accrued liabilities. During the period ended January 31, 2016 the Company issued 4,249,889 shares of Class A common stock pursuant to the conversion of principal of $53,574. Principal outstanding at January 31, 2016 was $61,426. The Company has elected to record this note at fair value. As at January 31, 2016, the fair value of the note was $94,502, which is based on the market price of the shares that would be issuable on conversion. (c) On March 23, 2015, the Company issued a promissory note for $27,500, less an initial financing charge of $2,500. Pursuant to the note, the amount owing is unsecured, bears guaranteed interest at 7% per annum, and is due on March 23, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock 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. During the period ended January 31, 2016 the Company issued 2,125,000 shares of Class A common stock pursuant to the conversion of the entire principal and accrued interest of $1,750.

~~URBAN BARNS FOODS INC. Notes to the Interim Consolidated Financial Statements October 31, 2015 (Expressed in U.S. dollars) (unaudited)~~F-6

~~11.~~URBAN BARNS ~~Stock~~FOODS ~~Options (continued)~~INC.

~~A summary of stock options outstanding~~Notes ~~and~~to ~~exercisable~~the asInterim atConsolidated ~~October~~Financial ~~31, 2015 is as follows:~~ Statements

	Exercise
	Price	Number of warrants	Remaining life
Expiry Date	$	Outstanding and exercisable	(years)
February 6, 2024	0.10	3,750,000	8.27
September 5, 2024	0.10	3,450,000	8.85
March 5, 2025	0.10	200,000	9.35
		7,400,000	8.57

January 31, 2016

12(Expressed in U.S. ~~Commitments and Contingencies~~dollars)

(aunaudited) The Company has entered into a research agreement with McGill University (“McGill”), where McGill will perform testing, research and development towards improvements and efficiency gains on the Company’s patent-pending growing machines. Under the terms of the agreement, the Company will pay $500,000, where $25,000 was due upon the signing of the agreement (paid), $75,000 is due when the Company either completes financing or four growing machines, and $100,000 annually on October 1, 2014 (paid), October 1, 2015, October 1, 2016, and October 1, 2017. The agreement expires on January 1, 2018.

~~(b) On March 19, 2014, the Company leased a warehouse located in Québec~~5. ~~The~~Convertible ~~term~~Notes of the lease commenced on March 20, 2014, and expires on May 31, 2019. The monthly lease rate is subject to an annual increase of 2%. The minimum lease payments over the remaining term of the lease are as follows:(continued)

	Year	Cdn$
	2016	184,824
	2017	188,520
	2018	192,291
	2019	195,487
		761,122

(d)

On November 13, 2015, pursuant to an exchange agreement (Note 5a), the Company issued a new promissory note for $68,500. Pursuant to the note, the amount owing is unsecured, bears guaranteed interest at 8% per annum, and is due on November 13, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock at a price of 65% of the lowest trading price of the Company’s Class A common stock for the 25 consecutive trading days prior to the date a notice of conversion is sent by the holder to the Company. As at January 31, 2016, the Company recorded accrued interest of $5,480, which has been included in accounts payable and accrued liabilities. During the period ended January 31, 2016 the Company issued 1,385,000 shares of Class A common stock pursuant to the conversion of principal of $14,404. Principal outstanding at January 31, 2016 was $54,095.

~~(c)~~The Company Onhas ~~July~~elected ~~17,~~to ~~2014,~~record ~~the~~this ~~Company~~note ~~entered~~at ~~into~~fair avalue. ~~lease~~As ~~agreement~~at ~~for~~January a31, ~~delivery~~2016, ~~van~~the atfair avalue ~~rate~~ of ~~Cdn$630~~the ~~per~~note ~~month~~was ~~until July 17~~$83,224, ~~2019.~~which ~~The~~is based ~~minimum~~on ~~lease payments over~~ the ~~remaining~~market ~~term~~price of the ~~lease~~shares ~~are~~that aswould ~~follows:~~be issuable on conversion.

	Year	Cdn$
	2016	7,560
	2017	7,560
	2018	7,560
	2019	7,560
		30,240

Warrant Derivative Liability

FThe non-compensatory warrants issued, as disclosed in Note 11, are a derivative liability due to being exercisable in a currency different than the functional currency of the Company. These warrants will continue to be a derivative liability until exercised or expired.

~~URBAN~~The fair ~~BARNS~~values ~~FOODS~~as ~~INC.~~at ~~Notes~~January to31, ~~the~~2016 ~~Interim~~and ~~Consolidated~~July ~~Financial Statements October~~ 31, 2015 ~~(Expressed~~are inas ~~U.S. dollars) (unaudited)~~follows:

12. Commitments and Contingencies (continued)

	January 31, 2016 $		July 31, 2015 $

Warrant derivative liabilities:
325,000 warrants issued on August 20, 2014		6,093		20,520
157,500 warrants issued on September 17, 2014		3,484		11,590
86,822 warrants issued on February 19, 2015		1,213		3,512
		10,790		35,262

~~(d) On December 1, 2014, the~~ The Company ~~entered~~recorded ~~into~~ a ~~lease~~recovery ~~agreement for a vehicle at a rate~~ of ~~Cdn~~$~~952~~24,472 ~~per~~being ~~month~~the ~~until~~reduction ~~October~~in ~~31,~~the ~~2018.~~fair ~~The~~value ~~minimum~~during ~~lease payments over~~ the ~~remaining~~six ~~term~~month ofperiod ~~the~~ended ~~lease~~January ~~are~~31, ~~as follows:~~2016.

	Year	Cdn$
	2016	11,424
	2017	11,424
	2018	11,424
	2019	2,856
		37,128

The fair value of the derivative financial liabilities was determined using the Black-Scholes Model using the following assumptions:

(e) During the year ended July 31, 2015, the Company was subject to two civil claims totaling $25,380, filed by family members of a former director and officer of the Company. The family members received a judgement in their favor. As at October 31, 2015, $25,380 remained unpaid and has been recorded in accounts payable and accrued liabilities.

	Expected Volatility			Risk-free Interest Rate			Expected Dividend Yield			Expected Life (in years)

At the issuance date:

325,000 warrants issued on August 20, 2014		281	%		0.94	%		0	%		3.00
157,500 warrants issued on September 17, 2014		281	%		1.08	%		0	%		3.00
86,822 warrants issued on February 19, 2015		144	%		0.67	%		0	%		2.00

As at January 31, 2016:

325,000 warrants issued on August 20, 2014		236	%		0.67	%		0	%		1.55
157,500 warrants issued on September 17, 2014		236	%		0.67	%		0	%		1.63
86,822 warrants issued on February 19, 2015		236	%		0.67	%		0	%		1.05

~~13. Subsequent Events~~F-7

	(a)	On November 13, 2015, the Company received a loan of $1,875 (Cdn$2,500) from a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and is due on January 31, 2016.
	(b)	On November 13, 2015, the Company received a loan of $1,875 (Cdn$2,500) from a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and is due on January 31, 2016.

URBAN BARNS FOODS INC.

~~(c) On November 13, 2015, pursuant~~ Notes to ~~an exchange agreement entered into by two of~~ the ~~convertible~~Interim ~~note~~Consolidated ~~holders,~~Financial the Company issued a new promissory note for $68,449. Pursuant to the note, the amount owing is unsecured, bears guaranteed interest at 8% per annum, and is due on November 13, 2016. The amount owing is convertible at the option of the holder into shares of the Company’s Class A common stock at a rate of 65% of the lowest trading price of the Company’s Class A common stock for the 25 consecutive trading days prior to the date a notice of conversion is sent by the holder to the Company. (d) On November 16, 2015, the Company issued 20,000,000 shares of Class A common stock at $0.00052 per share pursuant to the conversion of $10,400 of the convertible note as described in Subsequent Event Note 5(d). (e) On November 20, 2015, the Company received a non-refundable deposit of $18,743 (Cdn$25,000) from a potential investor for the ability to perform due diligence. (f) On November 23, 2015, the Company issued 7,700,000 shares of Class A common stock at $0.00052 per share pursuant to the conversion of $4,004 of the convertible note as described in Note 13(d). (g) On December 8, 2015, the Company received $18,393 (Cdn$25,000) from a related party. (h) On December 8, 2015, the Company received $21,612 (Cdn$30,000) from a related party.Statements

~~F-12~~January 31, 2016

~~ITEM~~(Expressed in 2U. ~~MANAGEMENT’~~S ~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~. dollars)

~~Forward Looking Statements~~ (unaudited)

~~This quarterly report on Form 10-Q contains certain forward-looking statements~~7. ~~All~~Notes statements other than statements of historical fact are “forward-looking statements” for purposes of this report, 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. Payable

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 in this report.

	(a)	During the year ended July 31, 2014, the Company entered into an agreement with certain shareholders, whereby the shareholders would buy certain licenses required by the Company. The Company would then buy back the licenses for Cdn$50,500 plus a 25% premium within the first 90 days, a 35% premium for the balance of the first 12 months, and a 50% premium during months 13-24. If the Company does not buy the licenses back within 2 years (expiring October 21, 2015), the license will be subject to a 5% royalty for the following 3 years. As at January 31, 2016, the Company owed $53,797 (Cdn$75,750), (July 31, 2015 - $58,059 (Cdn$68,175)) in order to buy back the licenses.

	(b)	As at January 31, 2016, the Company owed $158,374 (Cdn$223,000) for a promissory note that was issued on October 29, 2014. The note is secured against the Company’s net assets, bears interest at a rate of 12.68% per annum, and is due the earlier of: (i) the Company raising Cdn$1,000,000 or more through issuance of equity or debt; or (ii) October 29, 2015. As at January 31, 2016, the Company owed $185,408 on this note which includes accrued interest of $27,034. This note was issued to a significant shareholder of the Company. As at January 31, 2016, this loan was past due, however the shareholder has agreed not to call the loan for the time being.

~~Results~~8. ofRoyalty ~~Operations~~Revenue and Other Income

~~For~~During the period ended January 31, 2016, the ~~Three~~Company ~~Months~~entered ~~Ended~~into ~~October~~a 31license agreement where it granted a licensee the rights to use its growing machine technology relating to the cultivation of fruits and vegetables in a controlled environment. The Company received $43,680 ~~2015~~(Cdn$60,000), and will receive a royalty equal to 2.5% of the revenue the licensee receives from the sale, marketing, ~~2014~~manufacturing or distribution of the growing machines.

During the ~~three~~period ~~months~~ ended ~~October~~January 31, ~~2015~~2016, the Company ~~generated~~ ~~revenues~~earned ofother ~~$36,027~~income ~~with a cost~~ of ~~sales of~~ $918,~~103,~~200 ~~resulting in a gross margin of~~ (Cdn$2625,~~924.~~000) ~~This~~from ~~compares~~an ~~favourably~~exclusivity ~~with revenues of $17,252, a cost of sales of $5,908 and a gross margin of $11,344 for the corresponding period in 2014~~agreement. During the three months ended October 31, 2015, the Company experienced a consistent increase in demand for its leafy green vegetables. In addition, the Company was able to rectify previous difficulties with water issues, together with broken cables on certain of its Generation 3 growing machines, and production continued to steadily increase as a result. During the three months ended October 31, 2014, revenues were impacted by the fact that the Company’s first growing facility had only commenced operations in June 2014.

~~The Company incurred operating expenses of $233,318 for the three months ended October 31, 2015, compared with $777,649 during the three months ended October 31, 2014~~9. ~~This~~Related ~~decrease~~Party was due to tighter controls over spending, resulting in significantly lower general and administrative expenses, professional fees, and research and development costs offset by higher depreciation expense.Transactions

The ~~Company incurred a net loss of $1,632,729 for the three~~ ~~months~~following ~~ended~~are ~~October~~related ~~31,~~party ~~2015,~~transactions ~~compared~~not ~~with~~disclosed aelsewhere ~~net loss of $766,305 during the three months ended October 31, 2014. The increase~~ in ~~the~~these ~~net~~interim ~~loss~~consolidated ~~was~~financial primarily due to a significant increase in the loss on conversion of convertible notes. In contrast, the Company’s loss from operations for the three months ended October 31, 2015 was only $206,394, compared to $766,305 for the three months ended October 31, 2014. This reflects the increase in sales described above as well as lower operating costs, offset to some extent by a higher interest expense figure. statements:

~~Liquidity~~(a) During the year ended July 31, 2015, the Company accrued $18,356 for severance pay to the former President and ~~Capital~~CEO ~~Resources~~of the Company which is unsecured, non-interest bearing, and due on demand. As at January 31, 2016, $16,645 (July 31, 2015 - $17,964) was owing to the former President. (b) As at January 31, 2016, the Company was owed $1,273 (July 31, 2015 - $1,374) from the Vice President of the Company which is unsecured, non-interest bearing, and due on demand. (c) As at January 31, 2016, the Company owed $42,612 (Cdn$60,000) (July 31, 2015 - $45,988) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on the earlier of (i) the Company raising Cdn$1,000,000 or more through issuance of equity or debt or (ii) November 19, 2016. As at January 31, 2016, $6,042 (Cdn$8,508) (July 31, 2015 - $3,581) was owed for accrued interest. (d) As at January 31, 2016, the Company owed $42,612 (Cdn$60,000) (July 31, 2015 - $45,988) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on the earlier of (i) the Company raising Cdn$1,000,000 or more through issuance of equity or debt or (ii) November 19, 2016. As at January 31, 2016, $5,829 (Cdn$8,208) (July 31, 2015 - $3,351) was owed for accrued interest. (e) As at January 31, 2016, the Company owed $22,785 (Cdn$32,082) (July 31, 2015 - $24,591) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on November 19, 2016. As at January 31, 2016, $1,832 (Cdn$2,579) (July 31, 2015 - $404) was owed for accrued interest.

~~The following table provides selected financial data about the Company for the quarter ended October 31, 2015:~~ F-8

	October 31,		July 31,
	2015		2015
	$		$
Cash	610		7,442
Current Assets	61,524		70,883
Total Assets	619,881		650,817
Current Liabilities	2,237,460		1,142,737
Accumulated Deficit	(7,405,206	)	(5,772,477	)

URBAN BARNS FOODS INC.

3Notes to the Interim Consolidated Financial Statements

~~As of October 31, 2015, the Company had cash of $610, total~~January current assets of $61,524, total current liabilities of $2,237,460 and a working capital deficit $2,175,936, compared to cash of $7,442, total current assets of $70,883, total current liabilities of $1,142,737 and a working capital deficit of $1,071,854 as of July 31, ~~2015. The increase in the Company’s working capital deficit is due in large part to the revaluation of the convertible notes to fair value at October 31, 2015.~~2016

~~During the three months ended October 31, 2015, the Company~~(Expressed received net cash of $94,696 from financing activities, compared to net cash received of $598,335 from financing activities during the three months ended October 31, 2014. The decrease is primarily due to $400,500 in ~~proceeds the Company received in the prior period from the issuance of its common stock and $197,835 in proceeds the Company received from the issuance of a note payable~~U. ~~During the quarter ended October 31, 2015, the Company received proceeds of $94,696 from related parties~~S. dollars)

During the three months ended October 31, 2015, the Company used net cash of $98,820 on operating activities compared to $473,672 during the three months ended October 31, 2014. The decrease in net cash used was due primarily to the fact there was no stock-based compensation in this period compared to the prior year. (unaudited)

~~During the three months ended October 31, 2015, the Company used net cash of $2,597 on investing activities compared to $92,551 during the period ended October 31, 2014~~9. ~~The~~Related ~~decrease~~Party inTransactions cash used was due to the fact that purchases of equipment to open the Company’s first growing facility had been spent in the previous year. The Company is continuing its payments for patents on its intellectual property.(continued)

(f) As at January 31, 2016, the Company owed $19,774 (Cdn$27,844) (July 31, 2015 - $21,337) for a loan payable to a director of the Company. The loan is secured against the Company’s ~~estimates~~assets, ~~that~~bears ~~its~~interest ~~expenses~~at ~~over~~a rate of 12.68% per annum and due on November 19, 2016. As at January 31, 2016, $1,611 (Cdn$2,268) (July 31, 2015 - $375) was owed for accrued interest. (g) As at January 31, 2016, the ~~next~~Company owed $41,730 (Cdn$58,759) (July 31, 2015 - $nil) for a loan payable to a director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% ~~months will~~per beannum ~~approximately~~and due on November 19, 2016. As at January 31, 2016, $1,~~632~~911 (Cdn$2,~~021~~690) (July 31, 2015 - $nil) was owed for accrued interest. (h) As at January 31, 2016, the Company owed $44,267 (Cdn$62,330) (July 31, 2015 - $nil) for a loan payable to a former director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on November 19, 2016. As at January 31, 2016, $1,988 (Cdn$2,799) (July 31, 2015 - $nil) was owed for accrued interest. (i) As at January 31, 2016, the Company owed $1,775 (Cdn$2,500) (July 31, 2015 - $nil) for a loan payable to a former director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on November 19, 2016. As at January 31, 2016, $49 (Cdn$69) (July 31, 2015 - $nil) was owed for accrued interest. (j) As at January 31, 2016, the Company owed $3,126 (Cdn$4,402) (July 31, 2015 - $nil) for a loan payable to a former director of the Company. The loan is secured against the Company’s assets, bears interest at a rate of 12.68% per annum and due on November 19, 2016. As at January 31, 2016, $86 (Cdn$121) (July 31, 2015 - $nil) was owed for accrued interest. (k) As at January 31, 2016, the Company owed $2,841 (Cdn$4,000) (July 31, 2015 - $3,065) to a company controlled by the former President of the Company which is unsecured, non-interest bearing, and due on demand. (l) Included in accounts payable as ~~summarized~~at January 31, 2016 is $21,639 (July 31, 2015 - $20,275) owing to related parties for expense reimbursements. (m) As at January 31, 2016, the Company had deferred compensation of $nil (July 31, 2015 - $2,009) incurred to directors and officers of the Company. During the period ended January 31, 2016, deferred compensation of $2,009 (2015 - $nil) was charged to operations and included in general and administrative expenses. (n) During the ~~table~~period ~~below~~ended January 31, 2016, the Company incurred consulting fees (included in general and administrative expenses) of $53,726 (Cdn$73,800) (2015 - $88,472) to directors and officers of the Company. ~~These estimates~~(o) ~~may~~During ~~change~~the ~~significantly~~period ~~depending~~ended onJanuary 31, 2016, the ~~nature~~Company incurred consulting fees (included in general and administrative expenses) of ~~its~~$nil ~~future business~~(2015 ~~activities~~- $1,928) to the daughter of the former President of the Company. (p) During the period ended January 31, 2016, the Company incurred consulting fees (included in general and ~~its~~administrative ~~ability~~expenses) of $nil (2015 - $35,994) and cost of living expenses of $nil (2015 - $7,713) to ~~raise~~the ~~capital~~daughter ~~from~~of ~~investors~~the orVice ~~other sources~~President of the Company. (q) During the period ended January 31, 2016, the Company granted nil (2015 - 5,925,000) stock options with a fair value of $nil (2015 - $237,000) (included in general and administrative expenses) to directors and officers of the Company. (r) During the period ended January 31, 2016, the Company granted nil (2015 - 200,000) stock options with a fair value of $nil (2015 - $8,000) (included in general and administrative expenses) for bookkeeping services to the spouse of the former President of the Company. (s) As at January 31, 2016, the company owed $17,755 (Cdn$25,000) (July 31, 2015 - $nil) for a loan payable to a majority shareholder of the Company. This loan is secured against the Company’s assets, non-interest bearing and due on demand.

Description	Potential Completion Date	Estimated Expenses ($)
Cost of sales	12 months	282,248
Direct and indirect labour	12 months	407,531
Rent	12 months	151,709
Professional fees	12 months	100,000
General & administrative expenses	12 months	212,105
Purchase of additional growing machines & building improvements	12 months	478,428
Total		1,632,021

F-9

~~The Company’s general and administrative expenses for the year~~URBAN ~~will~~BARNS ~~consist~~FOODS ~~of consulting fees, office maintenance, communication expenses (cellular, internet, fax and telephone), bank charges, courier and postage costs, office supply costs and fees related to its website~~INC. ~~The Company plans to build 12 new large capacity growing machines for installation into currently available space within its Mirabel, Québec growing facility.~~

~~Based on its planned expenditures, the Company will require~~Notes ~~additional funds of at least $1,600,000~~ to ~~proceed with its business plan over~~ the ~~next~~Interim 12Consolidated ~~months.~~Financial If it is not able to obtain additional financing on a timely basis, the Company will be unable to conduct its operations as planned, and will not be able to meet its obligations as they become due. In such event, the Company will be forced to delay its growing capacity expansion, scale down or perhaps even cease its operations. Statements

~~Inflation~~January 31, 2016

~~The amounts presented~~ (Expressed in ~~the Company’s financial statements do not provide for the effect of inflation on its operations or financial position~~U. 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 adjustmentsS. dollars)

4(unaudited)

~~Off-Balance~~10. ~~Sheet~~Common ~~Arrangements~~ Stock

As(a) ofOn ~~October~~August 3119, 2015, the Company ~~had~~issued ~~one~~89,286 ~~off~~shares ~~balance~~of ~~sheet transaction~~Class ~~that~~A ~~will~~common ~~have~~stock orat is$0.22 ~~reasonably~~per ~~likely~~share pursuant to ~~have~~the conversion of $15,000 of the convertible note as described in Note 5(a). ~~current~~(b) orOn ~~future effect~~September on25, ~~its~~2015, ~~financial~~the ~~condition~~Company issued 441,176 ~~changes~~shares of Class A common stock at $0.16 per share pursuant to the conversion of $15,000 of the convertible note as described in ~~its~~Note ~~financial~~5(a). ~~condition~~(c) On October 2, ~~revenues or~~2015, ~~expenses~~the Company issued 250,000 ~~results~~shares of ~~operations~~Class A common stock at $0.20 per share pursuant to the conversion of $7,475 ~~liquidity~~of the convertible note as described in Note 5(c). (d) On October 2, ~~capital~~2015, ~~expenditures~~the orCompany ~~capital resources~~issued 362,319 shares of Class A common stock at $0.08 Inper ~~collaboration~~share ~~with~~pursuant ~~McGill~~to ~~University~~the ~~researcher~~conversion Drof $10,000 of the convertible note as described in Note 5(b). ~~Mark~~(e) ~~Lefsrud~~ On October 12, 2015, the Company issued 666,667 shares of Class A common stock at $0.04 per share pursuant to the ~~Faculty~~conversion of ~~Agricultural~~$20,000 ~~and~~of ~~Environmental~~the ~~Sciences~~convertible note as described in Note 5(a). (f) On October 12, 2015, the Company ~~will further~~issued ~~develop~~744,444 anshares ~~indoor~~of ~~plant~~Class ~~growth~~A ~~system~~common ~~aimed~~stock at ~~expanding~~$0.04 ~~locally~~per ~~grown food~~share pursuant to the conversion of $13,400 of the convertible note as described in Note 5(b). ~~With~~(g) ~~industrial~~On ~~support~~October ~~from~~15, 2015, the Company issued 681,818 ~~McGill~~shares ~~University~~of ~~was~~Class ~~awarded~~A ~~an NSERC~~common ~~Collaborative~~stock ~~Research~~at &$0.02 ~~Development~~per share pursuant to the conversion of $15,000 of the convertible note as described in Note 5(~~CRD~~a). ~~grant~~(h) On October 15, 2015, the Company issued 350,000 shares of Class A common stock at $0.02 per share pursuant to the conversion of $5,915 of the convertible note as described in Note 5(c). (i) On October 20, 2015, the ~~amount~~Company issued 883,544 shares of Class A common stock at $~~240~~0.02 per share pursuant to the conversion of $13,~~000~~960 of the convertible note as described in ~~order~~Note 5(a). (j) On October 20, 2015, the Company issued 903,021 shares of Class A common stock at $0.02 per share pursuant to ~~continue~~the conversion of $8,669 of the ~~development~~convertible note as described in Note 5(b). (k) On October 22, 2015, the Company issued 700,000 shares of ~~this~~Class ~~important~~A ~~project~~common stock at $0.04 ~~The grant~~per ~~will~~share ~~run~~pursuant ~~for~~to anthe ~~initial~~conversion ~~period~~of $7,280 of ~~two~~the ~~years~~convertible ~~with~~note as described in Note 5(c). (l) On October 22, 2015, the ~~aim~~Company issued 947,917 shares of ~~optimizing light~~Class ~~emitting~~A ~~diodes~~common stock at $0.04 per share pursuant to ~~assess~~the ~~photosynthetic~~conversion ~~efficiency~~of $9,100 of ~~horticultural plants~~the convertible note as described in Note 5(b). ~~The~~(m) ~~project~~On isOctober ~~focused~~28, on2015, the ~~refinement~~Company issued 825,000 shares of Class A common stock at $0.04 per share pursuant to the ~~photo~~conversion ~~synthetically active~~of ~~radiation~~$8,580 ~~efficiency~~of the convertible note as described in Note 5(~~PAR~~c). ~~curve~~(n) On October 28, 2015, the Company issued 904,688 shares of ~~plants~~Class ~~using~~A ~~light~~common ~~emitting~~stock ~~diodes~~ at $0.04 per share pursuant to the conversion of $8,685 of the convertible note as described in Note 5(~~LEDs~~b). (o) On October 30, ~~and~~2015, the ~~basic~~Company ~~science~~issued ~~research~~387,500 ~~will~~shares beof ~~used~~Class A common stock at $0.20 per share pursuant to ~~optimize~~the conversion of $3,720 of the ~~lighting~~convertible note as described in Note 5(b). (p) On November 16, 2015, the Company’s ~~cubic~~issued ~~farming~~1,000,000 ~~system~~shares of Class A common stock at $0.06 per share pursuant to ~~maximize~~the ~~production~~conversion ~~and~~of ~~reduce~~$10,400 ~~energy costs~~of the convertible note as described in Note 5(d). (q) On November 23, 2015, the Company issued 385,000 shares of Class A common stock at $0.06 per share pursuant to the conversion of $4,004 of the convertible note as described in Note 5(d).

~~Critical Accounting Policies~~ F-10

~~The Company’s financial statements are impacted by the accounting~~URBAN ~~policies~~BARNS ~~used~~FOODS ~~and the estimates and assumptions made by management during their preparation~~INC. A complete summary of these policies are included in Note 2 of the notes to the Company’s financial statements. The Company has identified below the accounting policies that are of particular importance in the presentation of its financial position, results of operations and cash flows, and which require the application of significant judgment by management.

~~Inventory~~Notes to the Interim Consolidated Financial Statements

~~Inventory is comprised of seeds for growing agricultural~~January ~~products~~31, and is recorded at the lower of cost or net realizable value on a first-in first-out basis. The Company establishes inventory reserves for estimated obsolete or unsaleable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future and market conditions. 2016

~~Intangible~~(Expressed in ~~Assets~~U.S. dollars)

Intangible assets consist of patent development costs. Intangible assets acquired are initially recognized and measured at cost and amortized over its expected useful life once the patents are in use. Impairment tests are conducted annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. The impairment test compares the carrying amount of the intangible asset with its fair value, and an impairment loss is recognized in income for the excess, if any. The amortization methods and estimated useful lives of intangible assets are reviewed annually. (unaudited)

~~Foreign~~11. ~~Currency~~Share ~~Translation~~Purchase Warrants

~~Our functional and reporting currency is the Canadian, dollar,~~The ~~and~~following ~~our~~table ~~reporting~~summarizes ~~currency is~~ the ~~U.S.~~continuity dollar. Accordingly, monetary assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date while non-monetary assets and liabilities denominated in a foreign currency are translated at historical rates. Revenue and expense items denominated in a foreign currency are translated at exchange rates prevailing when such items are recognized in the statement of ~~operations~~share ~~and~~purchase ~~comprehensive loss.~~ warrants:

Exchange gains or losses arising on translation of foreign currency items are included in the statement of operations. We follow the current rate method of translation with respect to the presentation of our consolidated financial statements in the reporting currency, which is the United States dollar. Accordingly, assets and liabilities are translated into United States dollars at the period-end exchange rates while revenue and expenses are translated at the prevailing exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity (deficit) as accumulated other comprehensive income..

	Number of Warrants		Weighted Average Exercise Price $

Balance, July 31,2014		101,351		–
Issued		587,322		1.40
Balance, July 31, 2015		688,673		1.40
Issued		–		–
Balance, January 31, 2016		688,673		1.40

~~ITEM~~A summary 3.of ~~QUANTITATIVE~~share ~~AND~~purchase ~~QUALITATIVE~~warrants ~~DISCLOSURES~~outstanding ~~ABOUT~~and ~~MARKET~~exercisable ~~RISK.~~as at January 31, 2016 is as follows:

Not required.

Expiry Date	Exercise Price $		Number of warrants Outstanding and exercisable		Remaining life (years)

October 29, 2016		1.40		101,351		0.75
August 20, 2017		1.50		325,000		1.55
September 17, 2017		1.50		157,500		1.63
February 19, 2017		0.80		86,822		1.05
				688,673		1.39

~~ITEM 4~~12. ~~CONTROLS~~Stock ~~AND PROCEDURES.~~Options

~~Evaluation~~The Company has adopted a stock option plan pursuant to which options may be granted to directors, officers, employees and consultants of ~~Disclosure~~the ~~Controls~~Company to a maximum of 1,250,000 shares issued and ~~Procedures~~outstanding at the time of the grant. The exercise price of each option is equal to the market price on the date of the grant. The options vest at the discretion of the Board of Directors.

The ~~Company maintains disclosure controls and procedures, as~~ ~~defined~~following intable ~~Rule~~summarizes ~~13a-15(e) promulgated under~~ the ~~Securities~~continuity ~~Exchange Act~~ of ~~1934 (~~the ~~“Exchange Act”), that are designed to ensure that information required to be disclosed by it in the reports that the~~ Company ~~files 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~~stock and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Director of Finance, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Director of Finance, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of October 31, 2015. Based on the evaluation of these disclosure controls and procedures the Chief Executive Officer and Director of Finance concluded that the Company’s disclosure controls and procedures were effective. options:

	Number of Options			Weighted Average Exercise Price $		Aggregate Intrinsic Value $

Outstanding, July 31, 2014		525,000			2.00		–
Granted		360,000			2.00
Expired		(10,000	)		2.00

Outstanding, July 31, 2015		875,000			2.00		–
Forfeited		(505,000	)		2.00

Outstanding, January 31, 2016		370,000			2.00		–

~~Changes in Internal Controls~~ F-11

~~During the quarter covered by this report there were no changes~~URBAN inBARNS ~~the~~FOODS Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, its internal control over financial reportingINC.

~~PART~~Notes to IIthe –Interim ~~OTHER~~Consolidated ~~INFORMATION~~Financial Statements

~~ITEM~~January 31, ~~1. LEGAL PROCEEDINGS.~~2016

~~None~~(Expressed in U.S. dollars)

~~ITEM 1A. RISK FACTORS.~~(unaudited)

~~Not required~~12. Stock Options (continued)

~~ITEM~~A summary 2.of ~~UNREGISTERED~~stock ~~SALES~~options OFoutstanding ~~EQUITY~~and ~~SECURITIES~~exercisable ~~AND~~as ~~USE~~at OFJanuary ~~PROCEEDS.~~31, 2016 is as follows:

None.

Expiry Date	Exercise Price $		Number of warrants Outstanding and exercisable		Remaining life (years)

February 6, 2024		2.00		187,500		8.02
September 5, 2024		2.00		172,500		8.60
March 5, 2025		2.00		10,000		9.10
				370,000		8.32

~~ITEM 3~~13. ~~DEFAULTS~~Commitments ~~UPON~~and ~~SENIOR SECURITIES.~~Contingencies

None.

	(a)	The Company had entered into a research agreement with McGill University (“McGill”), where McGill would perform testing, research and development towards improvements and efficiency gains on the Company’s patent-pending growing machines. Under the terms of the agreement, the Company would pay $500,000, where $25,000 was due upon the signing of the agreement (paid), $75,000 is due when the Company either completes financing or four growing machines, and $100,000 annually on October 1, 2014 (paid), October 1, 2015, October 1, 2016, and October 1, 2017. This agreement was terminated on December 31, 2015.

	(b)	On March 19, 2014, the Company leased a warehouse located in Québec. The term of the lease commenced on March 20, 2014, and expires on May 31, 2019. The monthly lease rate is subject to an annual increase of 2%. The minimum lease payments over the remaining term of the lease are as follows:

ITEM 4. MINE SAFETY DISCLOSURES.

Year		Cdn$

2016		94,412
2017		188,520
2018		192,291
2019		195,487
		668,710

~~Not~~(c) ~~applicable~~On July 17, 2014, the Company entered into a lease agreement for a delivery van at a rate of Cdn$630 per month until July 17, 2019. The minimum lease payments over the remaining term of the lease are as follows:

ITEM 5. OTHER INFORMATION.

Year		Cdn$

2016		3,780
2017		7,560
2018		7,560
2019		7,560
		26,460

~~None.~~ F-12

~~ITEM~~URBAN BARNS 6.FOODS ~~EXHIBITS~~INC.

~~The~~Notes to ~~following~~the ~~exhibits~~Interim ~~are~~Consolidated ~~included~~Financial ~~with this quarterly filing:~~ Statements

	Exhibit No.	Description
	31.1	Sec. 302 Certification of Principal Executive Officer
	31.2	Sec. 302 Certification of Principal Financial Officer
	32.1	Sec. 906 Certification of Principal Executive Officer
	32.2	Sec. 906 Certification of Principal Financial Officer

January 31, 2016

6(Expressed in U.S. dollars)

~~SIGNATURES~~ (unaudited)

~~Pursuant~~13. toCommitments ~~the~~and ~~requirements~~Contingencies ~~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.~~ (continued)

January 8, 2016	Urban Barns Foods Inc.
	/s/ Robyn Jackson
	By: Robyn Jackson
	President, Chief Executive Officer, Secretary, Treasurer & Director

(d)

On December 1, 2014, the Company entered into a lease agreement for a vehicle at a rate of Cdn$952 per month until October 31, 2018. The minimum lease payments over the remaining term of the lease are as follows:

Year		Cdn$

2016		5,712
2017		11,424
2018		11,424
2019		2,856
		31,416

(e)

During the year ended July 31, 2015, the Company was subject to two civil claims totaling $25,380, filed by family members of a former director and officer of the Company. The family members received a judgement in their favor. As at January 31, 2016, $25,380 remained unpaid and has been recorded in accounts payable and accrued liabilities.

14.

Subsequent Events

	(a)	On February 8, 2016, the Company entered into a note purchase agreement with an investor providing for the issuance of a convertible promissory note in the principal amount of $55,000 bearing guaranteed interest of 12% and maturing on February 8, 2017. Under the terms of the note, the amount owing may be converted into shares of the Company’s Class A common stock, at any time, at a price equal to $0.002 or 60% of the lowest trading price of the Company’s Class A common stock during the 25 consecutive trading days prior to the date on which the holder elects to convert all or part of the note.

	(b)	On February 8, 2016, the Company entered into a note purchase agreement with an investor providing for the issuance of a convertible promissory note in the principal amount of $40,000 bearing guaranteed interest of 12% and maturing on February 8, 2018. Under the terms of the note, the amount owing may be converted into shares of the Company’s Class A common stock, at any time, at a price equal to $0.002 or 60% of the lowest trading price of the Company’s Class A common stock during the 25 trading days prior to the date on which the holder elects to convert all or part of the note.

	(c)	On February 16, 2016, the Company completed a 1 for 20 reverse split of its Class A common stock and effected a corresponding decrease in its authorized capital. As a result of the reverse split, the Company’s authorized capital decreased from 500,000,000 shares of Class A common stock to 25,000,000, and its issued and outstanding Class A common stock decreased from 499,948,520 shares to approximately 24,997,426, with each fractional share being rounded up to the nearest whole share. All share and per share amounts have been reflected on a post reverse split basis.

F-13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This quarterly 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 this report, 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. The Company’s 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 the Company assumes no obligation to update such forward-looking statements. The following discusses the Company’s financial condition and results of operations based upon its 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 the Company’s financial statements and the notes thereto included elsewhere in this report.

Results of Operations

For the Three Months Ended January 31, 2016 and 2015

During the three months ended January 31, 2016, the Company generated revenues of $73,037 with a cost of sales of $6,121, resulting in a gross margin of $66,916. This compares favourably with revenues of $24,084, a cost of sales of $6,984 and a gross margin of $17,100 for the corresponding period in fiscal 2015. During the three months ended January 31, 2016, the Company continued to experience a consistent increase in demand for its leafy green vegetables. In addition, the Company has been able to steadily increase the production on its Generation 3 growing machines through the addition of additional growing trays. During the three months ended January 31, 2015, revenues continued to be impacted by the fact that the Company’s first growing facility had only commenced operations in June 2014.

The Company incurred operating expenses of $108,031 for the three months ended January 31, 2016, compared with $363,614 during the three months ended January 31, 2015. This decrease was due to tighter controls over spending, resulting in significantly lower general and administrative expenses and research and development costs, as offset by a slight increase in professional fees. The Company’s loss from operations for the three months ended January 31, 2016 was only $41,115, compared to $346,514 for the three months ended January 31, 2015. This reflects the increases in sales described above as well as lower operating costs.

The Company generated net income of $1,008,580 for the three months ended January 31, 2016, compared with incurring a net loss of $346,514 during the comparable period in fiscal 2015. The decrease in the net loss was primarily due to the significant gain on the change in fair value of the Company’s convertible notes, and the receipt of a non-refundable deposit from a potential investor for the ability to perform due diligence. In addition, the Company received a one-time fee when it entered into a license agreement whereby the Company granted the licensor an exclusive, worldwide license to use its technology in exchange for that fee and an ongoing royalty on any revenue received by the licensor from the sale, marketing, manufacturing or distribution of any growing machines developed using the technology.

For the Six Months Ended January 31, 2016 and 2015

During the six months ended January 31, 2016, the Company generated revenues of $109,064 with a cost of sales of $15,224, resulting in a gross margin of $93,840. This compares favourably with revenues of $41,336, a cost of sales of $12,892 and a gross margin of $28,444 for the corresponding period in 2015. During the six months ended January 31, 2016, the Company experienced a consistent increase in demand for its leafy green vegetables. In addition, the Company was able to rectify previous difficulties with water issues, together with broken cables on certain of its Generation 3 growing machines, and production continued to steadily increase as a result. During the six months ended January 31, 2015, revenues were impacted by the fact that the Company’s first growing facility had only commenced operations in June 2014.

The Company incurred operating expenses of $341,349 for the three months ended January 31, 2016, compared with $1,141,263 during the six months ended January 31, 2015. This decrease was due to tighter controls over spending, resulting in significantly lower general and administrative expenses, professional fees, and research and development costs.

The Company’s loss from operations for the six months ended January 31, 2016 was only $247,509, compared to $1,112,819 for the six months ended January 31, 2015.

The Company incurred a net loss of $624,149 for the six months ended January 31, 2016, compared with a net loss of $1,112,819 during the six months ended January 31, 2015. This decrease was achieved through an increase in sales as well as lower operating costs, the one-time license fee, and the due diligence deposit, each as described above, offset to some extent by a higher interest expense and the loss on conversion of convertible notes.

Liquidity and Capital Resources

The following table provides selected financial data about the Company for the quarter ended January 31, 2016:

	January 31, 2016 $			July 31, 2015 $

Cash		3,812			7,442
Current Assets		58,676			70,883
Total Assets		566,265			650,817
Current Liabilities		1,134,698			1,142,737
Accumulated Deficit		(6,396,626	)		(5,772,477	)

As of January 31, 2016, the Company had cash of $3,812, total current assets of $58,676, total current liabilities of $1,134,698 and a working capital deficit $1,076,022, compared to cash of $7,442, total current assets of $70,883, total current liabilities of $1,142,737 and a working capital deficit of $1,071,854 as of July 31, 2015.

During the six months ended January 31, 2016, the Company received net cash of $100,524 from financing activities, compared to net cash received of $815,499 from financing activities during the six months ended January 31, 2015. The decrease is primarily due to $540,500 in proceeds the Company received in the prior period from the issuance of its Class A common stock, and $94,638 in proceeds the Company received from the issuance of a note payable. During the six months ended January 31, 2016, the Company received proceeds of $100,524 from related parties, whereas it received $180,631 in proceeds from related parties during the same period in fiscal 2015.

During the six months ended January 31, 2016, the Company used net cash of $91,019 on operating activities compared to $774,093 during the six months ended January 31, 2015. The decrease in net cash used was due primarily to the fact that the Company’s net loss for the period was down compared to the prior year, and partially offset by the loss on the change in the fair value of the convertible notes.

During the six months ended January 31, 2016, the Company used net cash of $13,135 on investing activities compared to $96,368 during the period ended January 31, 2015. The decrease in cash used was due to the fact that purchases of equipment to open the Company’s first growing facility had been completed in the previous year. The Company is continuing its payments for patents on its intellectual property.

The Company estimates that its expenses over the next 12 months will be approximately $1,632,021 as summarized in the table below. These estimates may change significantly depending on the nature of its future business activities and its ability to raise capital from investors or other sources.

Description	Potential Completion Date	Estimated Expenses ($)
Cost of sales	12 months		282,248
Direct and indirect labour	12 months		407,531
Rent	12 months		151,709
Professional fees	12 months		100,000
General & administrative expenses	12 months		212,105
Purchase of additional growing machines & building improvements	12 months		478,428
Total			1,632,021

The Company’s general and administrative expenses for the year will consist of consulting fees, office maintenance, communication expenses (cellular, internet, fax and telephone), bank charges, courier and postage costs, office supply costs and fees related to its website. The Company plans to expand production at its Mirabel, Québec growing facility by adding additional growing machines for installation into currently available space.

Based on its planned expenditures, the Company will require additional funds of at least $1,600,000 to proceed with its business plan over the next 12 months. If it is not able to obtain additional financing on a timely basis, the Company will be unable to conduct its operations as planned, and will not be able to meet its obligations as they become due. In such event, the Company will be forced to delay its growing capacity expansion, scale down or perhaps even cease its operations.

Inflation

The amounts presented in the Company’s financial statements do not provide for the effect of inflation on its 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

The Company has no off balance sheet transactions that have or are reasonably likely to have a current or future effect on its financial condition, changes in its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.

In October 2013, the Company entered into a research agreement with McGill University (“McGill”), where McGill would perform testing, research and development towards improvements and efficiency gains on the Company’s patent-pending growing machines. Under the terms of the agreement, the Company would pay $500,000, where $25,000 was due upon the signing of the agreement, $75,000 was due when the Company either completed financing or four growing machines were added, and $100,000 annually on October 1, 2014, October 1, 2015, October 1, 2016, and October 1, 2017. As part of management’s tighter controls over spending, the decision was made to terminate this agreement on December 31, 2015.

Critical Accounting Policies

The Company’s 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 the Company’s financial statements. The Company has identified below the accounting policies that are of particular importance in the presentation of its financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Inventory

Inventory is comprised of seeds for growing agricultural products and is recorded at the lower of cost or net realizable value on a first-in first-out basis. The Company establishes inventory reserves for estimated obsolete or unsaleable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future and market conditions.

Intangible Assets

Foreign Currency Translation

The Company’s functional and reporting currency is the Canadian, dollar, and its reporting currency is the U.S. dollar. Accordingly, monetary assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date while non-monetary assets and liabilities denominated in a foreign currency are translated at historical rates. Revenue and expense items denominated in a foreign currency are translated at exchange rates prevailing when such items are recognized in the statement of operations and comprehensive loss.

Exchange gains or losses arising on translation of foreign currency items are included in the statement of operations. The Company follows the current rate method of translation with respect to the presentation of its consolidated financial statements in the reporting currency, which is the United States dollar. Accordingly, assets and liabilities are translated into United States dollars at the period-end exchange rates while revenue and expenses are translated at the prevailing exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity (deficit) as accumulated other comprehensive income.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by it in the reports that the Company files or submits 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 the Company’s management, including its Chief Executive Officer and Director of Finance, as appropriate, to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Director of Finance, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of January 31, 2016. Based on the evaluation of these disclosure controls and procedures the Chief Executive Officer and Director of Finance concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Controls

During the quarter covered by this report there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Not required.

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

None, except as previously disclosed in the Company’s current reports on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The following exhibits are included with this quarterly filing:

Exhibit No.		Description

31.1		Sec. 302 Certification of Principal Executive Officer
31.2		Sec. 302 Certification of Principal Financial Officer
32.1		Sec. 906 Certification of Principal Executive Officer
32.2		Sec. 906 Certification of Principal Financial Officer

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 17, 2016	Urban Barns Foods Inc.

	By:	/s/ Robyn Jackson
	Name:	Robyn Jackson
	Title:	President, Chief Executive Officer, Secretary, Treasurer & Director

Filing Compare · Urban Barns Foods Inc.