AGR TOOLS, INC. - FORM 10-Q - February 17, 2012

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - AGR TOOLS, INC.	Financial_Report.xls
EX-31.1 - AGR TOOLS, INC.	ex31-1.htm
EX-32.1 - AGR TOOLS, INC.	ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2011

o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission File Number: 000-52043

AGR TOOLS, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0480810
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

100 Lido Circle, Suite C-1

Lakeway, TX 78724

(Address of principal executive offices)

936-539-5744

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (of for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

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

As of January 31, 2012, there were 91,823,986 shares of common stock of the registrant outstanding.

Table of Contents

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4.	Controls and Procedures	8

PART II- OTHER INFORMATION

Item 1.	Legal Proceedings	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3.	Defaults Upon Senior Securities	9
Item 4.	(Removed and Reserved)	9
Item 5.	Other Information	9
Item 6	Exhibits	9

Table of Contents

AGR TOOLS, INC.

(formerly known as Laburnum Ventures, Inc.)

Consolidated Financial Statements

For the three and six months ended December 31, 2011 and 2010

Item 1. Financial Statements

	Index

Consolidated Balance Sheets (unaudited)	F–1

Consolidated Statements of Operations (unaudited)	F–2

Consolidated Statements of Stockholders’ Deficit (unaudited)	F–3

Consolidated Statements of Cash Flows (unaudited)	F–4

Notes to the Consolidated Financial Statements (unaudited)	F–5

Table of Contents

AGR TOOLS, INC.

(formerly known as Laburnum Ventures, Inc.)

Consolidated Balance Sheets

	December 31, 2011 $			June 30, 2011 $
	(unaudited)
ASSETS

Current assets

Cash		3,169			8,621
Accounts receivable		1,987			2,731
Inventory		266,387			258,177
Prepaid expenses and deposits		3,000			12,018

Total current assets		274,543			281,547

Property and equipment, net		4,528			10,758
Advances receivable, net		-			-

Total assets		279,071			292,305

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities

Bank indebtedness		23,157			23,126
Accounts payable		255,281			226,413
Accounts payable –related parties		16,635			16,485
Accrued liabilities		96,000			58,106
Customer deposits		118,057			121,266
Convertible debt, net of discount		80,000			64,860
Current portion of loans payable		325,000			325,000

Total current liabilities		914,130			835,256

Total liabilities		914,130			835,256

Stockholders’ deficit

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

Common stock Authorized: 200,000,000 shares, par value $0.001 per share Issued and outstanding: 91,823,986 shares as of December 31, 2011 (June 30, 2011 – 87,823,986 shares)		91,825			87,825

Additional Paid in Capital		1,150,743			1,139,943
Accumulated deficit		(1,877,627	)		(1,770,719	)

Total stockholders’ deficit		(635,059	)		(542,951	)

Total liabilities and stockholders’ deficit		279,071			292,305

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

F-1

Table of Contents

AGR TOOLS, INC.

(formerly known as Laburnum Ventures, Inc.)

Consolidated Statements of Operations

Unaudited

	Three months ended						Six months ended
	December 31,						December 31,
	2011			2010			2011			2010

Revenue		33,589			110,718			67,313			316,161
Cost of goods sold		17,914			60,642			40,953			183,777

Gross profit		15,675			50,076			26,360			132,384

Operating expenses

Advertising and promotion		-			3,561			3,000			17,931
Automotive		989			1,022			1,975			2,626
Bad debts		(4,200	)		(15,000	)		(4,200	)		(15,500	)
Consulting fees		2,080			5,037			2,080			6,537
Depreciation		1,438			1,125			6,231			4,725
Insurance		-			2,532			233			5,748
Office and miscellaneous		3,851			2,499			32,648			8,409
Professional fees		15			882			3,154			41,804
Rent and utilities		18,478			32,588			38,335			57,839
Telephone and internet		1,583			1,598			3,185			5,598
Travel		-			350			-			477
Wages and benefits		-			43,972			-			98,169

Total operating expenses		24,234			80,166			86,641			234,363

Loss from operations		(8,559	)		(30,090	)		(60,281	)		(101,979	)

Other income(expenses)
Interest income		-			906			75			1,816
Interest and bank charges		(15,781	)		(13,942	)		(35,902	)		(21,755	)
Loss on extinguishment of debt		-			-			(10,800	)
Gain on disposal of property and equipment		-			-			-			2,872

Total other expenses		(15,781	)		(13,036	)		(46,627	)		(17,067	)

Loss before income taxes		(24,340	)		(43,126	)		(106,908	)		(119,046	)

Income taxes (recovery)		-			-			-			-

Net loss for the year		(24,340	)		(43,126	)		(106,908	)		(119,046	)

Net loss per share, basic and diluted		(0.00	)		(0.00	)		(0.00	)		(0.00	)

Weighted average number of shares outstanding		91,823,986			86,265,976			90,106,591			92,286,029

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

F-2

Table of Contents

AGR TOOLS, INC.

(formerly known as Laburnum Ventures, Inc.)

Consolidated Statements of Stockholder’s Deficit

For the six months ended December 31, 2011

	Common stock
	Number		Amount		Additional Paid in Capital		Accumulated deficit			Total stockholders’ deficit

Balance, June 30, 2011		87,823,986		87,825		1,139,943		(1,770,719	)		(542,951	)

Conversion of promissory note into common shares		4,000,000		4,000		10,800		-			14,800
Net loss for the period (unaudited)		–		–		–		(106,908	)		(106,908	)

Balance, December 31, 2011		91,823,986		91,825		1,150,743		(1,877,627	)		(635,059	)

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

F-3

Table of Contents

AGR TOOLS, INC.

(formally known as Laburnum Ventures, Inc.)

Consolidated Statements of Cash Flows

Unaudited

	Six months ended
	December 31,
	2011			2010
Operating activities
Net loss for the period		(106,908	)		(119,046	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6,231			4,725
Debt discount amortization		15,140			9,358
Shares issued for consulting fees		-			15,000
Loss on extinguishment of debt		10,800			-
Loss on disposal of property and equipment		-			(2,871	)
Changes in operating assets and liabilities:
Accounts receivable		744			(223	)
Advances receivable		-			1,286
Inventory		(8,210	)		57,979
Prepaid expenses and deposits		9,018			6,366
Accounts payable		32,867			(41,319	)
Accrued liabilities		37,894			10,357
Due to related parties		150			(34,874	)
Customer deposits		(3,209	)		(38,428	)
Corporate taxes		-			-

Net cash used in operating activities		(5,483	)		(131,690	)
Financing activities
Bank indebtedness, net		31			1,766
Loans provided by related parties, net		-			58,000
Convertible debt, net		-			90,000

Net cash provided by financing activities		31			149,766

Change in cash		(5,452	)		18,076
Cash, beginning of year		8,621			11,396
Cash, end of year		3,169			29,472

Non-cash investing and financing activities:
Debt exchanged for shares		4,000			520,012
Beneficial conversion feature of short term debt		-			82,506
Cancellation of shares		-			25,000

Supplemental disclosures:
Interest paid		4,858			7,143
Income taxes paid		-			-

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

F-4

Table of Contents

AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

1. Interim Financial Statements

While the information presented in the accompanying interim financial statements for the three and six months ending December 31, 2011 is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with the accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these financial statements be read in conjunction with the Company’s June 30, 2011, financial statements. Operating results for the three and six months ended December 31, 2011 are not necessarily indicative of the results that can be expected for the year ending June 30, 2012.

2. Nature of Operations and Continuance of Business

Laburnum Ventures Inc. (the “Company”) was incorporated in the State of Nevada on March 11, 2004. On June 22, 2004, the Company acquired a 100% interest in five mineral claims located in the Similkameen Mining Division in British Columbia, Canada. In 2007 the Company abandoned these mineral claims. On September 10, 2009, the Company changed its name to AGR Tools, Inc. The Company was an exploration stage company, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”.

AGR Stone & Tools USA, Inc. (“AGR USA”) was incorporated in the State of Texas on December 23, 2004 and is a manufacturer of diamond tooling and related products. The Company specializes in producing consumable tools for the natural stone, engineered stone, concrete and masonry industries.

Effective May 27, 2010, the Company closed a share exchange agreement with AGR USA., whereby the Company acquired all of the issued and outstanding shares of AGR USA. For financial statement reporting purposes, the share exchange was treated as a reverse acquisition with AGR USA deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with Accounting Standards Codification (“ASC”) 805-10-40, Business Combinations – Reverse Acquisitions. The reverse merger is deemed a recapitalization and the consolidated financial statements represent the continuation of the financial statements of AGR USA (the accounting acquirer/legal subsidiary) except for its capital structure, and the consolidated financial statements reflect the assets and liabilities of AGR USA recognized and measured at their carrying value before the combination and the assets and liabilities of the Company (the accounting acquiree/legal parent). The equity structure reflects the equity structure of the Company, the legal parent, and the equity structure of AGR Stone and Tools, USA, Inc., the accounting acquirer, as restated using the exchange ratios established in the share exchange agreement to reflect the numbers of shares of the legal parent.

3. Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As at December 31, 2011, the Company has a working capital deficit of $639,587, and has an accumulated deficit of $1,877,627 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

F-5

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

4. Summary of Significant Accounting Policies

a) Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America.

b) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, inventory valuation, the useful lives and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

c) Reclassification in prior period

Certain reclassifications to the financial statements have been made to prior period amounts to conform to the presentation of the current period.

d) Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. There were no cash equivalents at December 31, 2011 and June 30, 2011.

e) Accounts Receivable

The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company considers at risk. The allowance for doubtful accounts was $0 at December 31, 2011 and June 30, 2011.

f) Advances Receivable

g) Inventory

Inventory consists of diamond tools and is carried at the lower of cost and market value. The Company uses the FIFO inventory costing method.

F-6

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

4. Summary of Significant Accounting Policies (continued)

h) Property and Equipment

Property and equipment are stated at cost. The Company depreciates the cost of property and equipment straight-line over their estimated useful lives:

Automotive	3 years
Computer equipment	3 years
Furniture and equipment	5 years

The depreciation expense for the three and six months ended December 31, 2011 was $1,438 and $6,231 (December 31, 2010: $1,125 and $4,725) respectively.

i) Corporate Taxes Receivable

Corporate taxes receivable pertain to refundable amounts owed to the Company for corporate taxes from the United States Treasury. These amounts are recorded at the value anticipated to be received based on tax returns filed.

j) Long-lived Assets

In accordance with ASC 360, Impairment or Disposal of Long-Lived Assets, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. There was no impairment of long-lived assets for periods ended December 31, 2011 and June 30, 2011.

k) Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

The Company files federal, state and local income tax returns in the U.S., as applicable. The open taxation years range from 2008 to 2010. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three and six year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of the U.S. have not audited any of the Company’s income tax returns for the open taxation years noted above.

F-7

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

4. Summary of Significant Accounting Policies (continued)

The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the three and six months ended December 31, 2011 and June 30, 2011, there were no charges for interest or penalties.

l) Revenue Recognition

The Company earns revenue from the sale of diamond tooling and related products. The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the goods have been delivered, and collectability is reasonably assured. Sales returns are recognized as incurred. The amount of returns is not significant and the Company evaluates the need to record an allowance for each reporting period.

m) Financial Instruments and Fair Value Measures

ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company’s financial instruments consist principally of cash, accounts receivable, advances receivable, bank demand loan, accounts payable, accrued liabilities, corporate taxes payable/receivable, loans payable, and amount due to a related party. Pursuant to ASC 820, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

n) Concentrations

As at December 31, 2011, 95% (June 30, 2011 – 91%) of accounts receivable is comprised of two customers. (June 30, 2011 – two customers). As at December 31, 2011, the specific concentrations of each customer included in this total were 68% and 27%. As at June 30, 2011, the specific concentrations of each customer included in this total were 65% and 26%. During the six month period ended December 31, 2011, the Company has four customers that total 66% of its revenue. The specific concentrations of each customer included in this total were 26%, 16, 14% and 10%.

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

4. Summary of Significant Accounting Policies (continued)

o) Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

p) Earnings (Loss) Per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earning Per Share”. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. All potentially dilutive shares as of December 31, 2011 were anti-dilutive. There were no potentially dilutive shares as of June 30, 2011.

q) Comprehensive Loss

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2011 and June 30, 2011, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

r) Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04), which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on April 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

4. Summary of Significant Accounting Policies (continued)

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (ASU 2011-05), which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on April 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.

In December 2010, the FASB issued ASU 2010-29, “Business Combinations (Topic 805): Disclosure of supplementary pro forma information for business combinations.” This update changes the disclosure of pro forma information for business combinations. These changes clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. Also, the existing supplemental pro forma disclosures were expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. These changes become effective for the Company beginning January 1, 2011. The Company’s adoption of this update did not have an impact on the Company’s financial condition or results of operations. In June 2009, In August 2009, the FASB issued an amendment to the accounting standards related to the measurement of liabilities that are recognized or disclosed at fair value on a recurring basis. This standard clarifies how a company should measure the fair value of liabilities and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The adoption of this amendment did not have a material effect on the Company’s financial statements.

5. Property and Equipment

	December 31, 2011 Net carrying value $		June 30, 2011 Net carrying value $

Automotive		-		-
Computer equipment		-		3,665
Furniture and equipment		4,528		7,093

		4,528		10,758

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

6. Bank Indebtedness

The Company has a revolving bank credit line with a limit of $24,300.00 that bears interest at 9.75% per annum and is secured by a personal guarantee of the Vice-President of the Company. The balance in this account at December 31, 2011 was $23,157 (June 30, 2011 - $23,126).

7. Convertible Notes

During the year ended June 30, 2011, the Company issued convertible notes for a total principal of $45,000 and $45,000, respectively. These notes carry an 8% annual interest rate. These convertible notes of $45,000 each have stated terms as the following, convertible at the greater of a fixed conversion price of $.00009 or 55% of lowest average 3 trading price over 10 days preceding the day of the note. In addition, there is a cap on the number of shares convertible under the note to prevent a derivative and these subordinated convertible debentures may have conversion prices that at issuance could be lower than the fair market value of the underlying stock.

In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible debts by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible debt. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt. This beneficial conversion feature is amortized as a non-cash interest expense from the issuance date of the debenture through the earlier of the stated redemption date, which is nine months from issuance, or conversion into common stock. The amortization was calculated on a quarterly basis using the effective interest method. The offset was a credit to the discount. The notes were discounted $82,506 at issuance for a carrying value of $7,494. During the year ending June 30, 2011, the notes were accreted $67,366 and have a balance as of June 30, 2011 of $64,860. During the six months ended December 31, 2011, the remaining $15,140 was accreted and the balance as of December 31, 2011 is $80,000.

During the year ended June 30, 2011, the company issued non-convertible promissory notes in the amount of $325,000. There were three notes and they were denominated in the amounts of $25,000, $100,000, and $200,000. The note with a face value of $25,000 is due on August 13, 2011 and accrues interest of 12%. The notes with face values of $100,000 and $200,000 are due on December 14, 2011 and accrue interest of 12%. The note issued for $200,000 was issued as a payment for services rendered to a third party.

8. Related Party Transactions

a) During the period ended December 31, 2011, the Company paid rent of $Nil (2010: $3,000) to the former President of the Company. As of December 31, 2011 the Company owes $12,500 to the former President of the Company.

b) During the period ended December 31, 2011, the Company incurred rent of $Nil (2010: $3,000) to the Secretary and Treasurer of the Company. As of December 31, 2011, the Company owes $2,194 to the former Secretary and Treasurer of the Company.

c) At December 31, 2011, the Company owes $1,961 to a former director of the Company.

9. Common Stock

Stock transactions during the six months ended December 31, 2011:

a) On September 17, 2011, the Company settled debt of $4,000 by issuing 4,000,000 shares of stock at the fair market value of the date of grant, valued at $14,800. This resulted in a loss of $10,800.

F-11

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AGR TOOLS, INC.

Notes to Consolidated Financial Statements

(unaudited)

10. Litigation

The company is not aware of any material pending or threatened litigation through the date of these financial statements. On January 13, 2012, a mediation involving the Company and a stocking dealer was concluded. The stocking dealer had purchased inventory from the Company, but had subsequently refused delivery and demanded a refund. The mediator held that the Company is required to deliver inventory of equal value to the stocking dealer.

11. Subsequent Events

In January 2012, the three largest shareholders sold an aggregate 40,267,390 shares of common stock of the Company to third parties. In connection with the sale of the shares, the then-current Board of Directors (comprised of the controlling shareholders) resigned from their officer and director positions and concurrently appointed Mr. Vern O.C. Wilson to the Board of Directors appointed as Chief Executive Officer, Secretary and Treasurer. Additional information on the sale and changes in the Board of Directors is available on Form 8-K, filed with the SEC on February 14, 2102 and incorporated by reference to Exhibit 17.1.

F-12

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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

As used in this quarterly report: (i) the terms “we”, “us”, “our”, and the “Company” mean AGR Tools, Inc. and its subsidiaries, unless otherwise indicated and (ii) all dollar amounts in this quarterly report refer to U.S. dollars unless otherwise indicated.

Cautionary Statement Regarding Forward-Looking Information

The statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements appear in a number of different places in this report and can be identified by words such as “estimates”, “projects”, “expects”, “intends”, “believes”, “plans”, or their negatives or other comparable words. Also look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include, among others, statements regarding our markets and the demand for our services.

You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to actual facts differing from the assumptions underlying our estimates. Some of these risks and assumptions include those set forth in reports and other documents we have filed with or furnished to the United States Securities and Exchange Commission (“SEC”). We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Readers are cautioned not to place undue reliance on our forward-looking statements, as they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-looking statements. However, you should carefully review the reports and other documents we file from time to time with the SEC.

Our Business

We were incorporated under the name “Laburnum Ventures Inc.” on March 11, 2004, under the laws of the State of Nevada. Until recently, we were a pre-exploration stage company engaged in the acquisition and exploration of mineral properties. We formerly owned a 100% undivided interest in a mineral property located in the Province of British Columbia, Canada known as the Sum Mineral Claim, but we decided not to pursue this claim.

On July 21, 2009, we entered into a share exchange agreement (the “Original Share Exchange Agreement”) with AGR Stone & Tools USA, Inc., a private Texas company (“AGR USA”). Pursuant to the terms of the Original Share Exchange Agreement, we agreed to acquire all of the outstanding shares of AGR USA from its shareholders in exchange for our shares on a one-for-one basis, which, if completed, would result in AGR USA becoming our wholly owned subsidiary.

On September 15, 2009, in contemplation of the completion of the share exchange with AGR USA, we completed a name change from Laburnum Ventures Inc. to AGR Tools, Inc. in accordance with Nevada law.

On October 29, 2009, pursuant to the terms of the Original Share Exchange Agreement, we agreed to terminate the Original Share Exchange Agreement with AGR USA and enter into a new share exchange agreement (the “New Share Exchange Agreement”). Under the New Share Exchange Agreement, we agreed to carry out the exchange of shares with the shareholders of AGR USA through a statutory process pursuant to Part 5 of the Texas Business Corporation Act in order to effect the transaction in a more efficient manner.

The closing of the transactions contemplated by the New Share Exchange Agreement occurred on May 27, 2010, at which time AGR USA became our wholly-owned operating subsidiary and we adopted the business of AGR USA. In connection with the closing, we issued 46,186,516 shares of our common stock to the shareholders of AGR USA and our former sole officer and director, Thomas Brown, cancelled 25,000,000 shares of our common stock held in his name.

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In January 2012, our directors and officers resigned from the Company and sold all of their shares of the Company to third parties, resulting in a change of ownership of approximately 43.85% of the outstanding shares of common stock of the Company. The resignations were voluntary and did not involve a disagreement with the Company on any matters relating to the Company’s operations, policies or practice. A new director was concurrently appointed by the departing board members to fill the resulting vacancies pursuant to NRS § 78.130 and the sole board member subsequently appointed a new officer to fill all vacant positions.

We are a Texas-based company in the business of manufacturing and selling tooling and accessories to the construction, building, maintenance and demolition industries in the United States and Canada. Tooling is the consumable disposal portion of a tool that makes the tool work. It wears out as the tool is operated, and as a result, demand for our products is driven by the need for original and replacement tool parts, not the tools themselves. We currently sell more than 700 products through our stocking dealer network, which consists of dealers in 15 U.S. states and two Canadian provinces. Our products include diamond-based blades, diamond drill bits, diamond cup wheels, resin polyesters, glues, inks, resin-based waterproof grinding stones and diamond polishing pads, all of which are manufactured in a number of different sizes.

Our products are manufactured in China on a contract basis and we subject the manufacturers to strict standards. We field-test the products by using them in construction, building and demolition projects. We also test our products alongside the products of our competitors both in the field and in our testing facility. All of our products are accompanied by a warranty against defects in workmanship.

We currently focus on sales through our stocking dealers. We also sell a number of our products through our website, which are delivered to customers either through our storage centers or our stocking dealers. Our stocking dealers act as face-to-face contacts for our customers and provide support to one another by sharing order fulfillment with our storage centers. We train and provide training manuals to our stocking dealers and require each one to be familiar with at least 200 of our products during their initial training. We currently do not have brokers or commission sales representatives involved in the distribution of our products.

Results of Operations

The following discussion and analysis of our results of operations and financial condition for the three months ended December 31, 2011 should be read in conjunction with our interim financial statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K.

Three Months Ended December 31, 2011 Compared to Three Months Ended December 31, 2010

Revenues

We generated revenue of $33,589 during the three months ended December 31, 2011, compared to revenue of $110,718 during the three months ended December 31, 2010. The decrease in revenue was primarily due to a decrease in overall activity in the construction, building and demolition industries in the United States and Canada during the most recent fiscal year.

Although the prices for our products are relatively stable, the recent global recession significantly affected demand in the construction, building and demolition industries in the United States and Canada and the corresponding demand for our products, and resulted in a decrease in the number of dealers in our network to whom we sell our products. However, as world economies recover, particularly those of the United States and Canada, activity in the construction, building and demolition industries is expected to increase from the levels experienced during the recession. We anticipate that the demand for our products will increase when these economies grow and activity in our target industries increases.

Our cost of goods sold decreased to $17,914 in the three months ended December 31, 2011 from $60,642 in the prior period as a result of the decrease in overall activity in the construction, building and demolition industries in the United States and Canada during the most recent fiscal year. Consequently, we yielded gross profit of $15,675 during the three months ended December 31, 2011, compared to gross profit of $50,076 during the three months ended December 31, 2010.

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Expenses

During the three months ended December 31, 2011, our total operating expenses decreased to $24,234 from $80,166 during the prior period. The decrease in our operating expenses was primarily due to the overall decrease in our operations resulting from the recent global recession significantly affecting demand in the construction, building and demolition industries in the United States and Canada and the corresponding demand for our products, and resulted in a decrease in the number of dealers in our network to whom we sell our products.

We incurred a loss from our operations of $8,559 during the three months ended December 31, 2011, compared to a loss from operations of $30,090 during the three months ended December 31, 2010.

Our total other expenses during the three months ended December 31, 2011 were $15,781 compared to $13,036 during the prior period, primarily due to increased interest and bank charges.

Net Loss

During the three months ended December 31, 2011, we incurred a net loss of $24,340. During the three months ended December 31, 2010, we incurred a net loss of $43,126.

Six Months Ended December 31, 2011 Compared to Six Months Ended December 31, 2010

Revenues

We generated revenue of $67,313 during the six months ended December 31, 2011, compared to revenue of $316,161 during the six months ended December 31, 2010. The decrease in revenue was primarily due to a decrease in overall activity in the construction, building and demolition industries in the United States and Canada during the most recent fiscal year.

Our cost of goods sold decreased to $40,953 in the six months ended December 31, 2011 from $183,777 in the prior period as a result of the decrease in overall activity in the construction, building and demolition industries in the United States and Canada during the most recent fiscal year. Consequently, we yielded gross profit of $23,360 during the six months ended December 31, 2011, compared to gross profit of $132,384 during the six months ended December 31, 2010.

Expenses

During the six months ended December 31, 2011, our total operating expenses decreased to $86,641 from $243,363 during the prior period. The decrease in our operating expenses was primarily due to the overall decrease in our operations resulting from the recent global recession significantly affecting demand in the construction, building and demolition industries in the United States and Canada and the corresponding demand for our products, and resulted in a decrease in the number of dealers in our network to whom we sell our products.

We incurred a loss from our operations of $60,281 during the six months ended December 31, 2011, compared to a loss from operations of $101,979 during the six months ended December 31, 2010.

Our total other expenses during the six months ended December 31, 2011 were $46,627 compared to $17,067 during the prior period, primarily due to increased interest and bank charges and a loss on extinguishment of debt.

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Net Loss

During the six months ended December 31, 2011, we incurred a net loss of $106,908. During the six months ended December 31, 2010, we incurred a net loss of $119,046.

Liquidity and Capital Resources

As of December 31, 2011, we had $3,169 in cash, $279,071 in total assets, $914,130 in total liabilities and a working capital deficit of $639,587. As of December 31, 2011, we had an accumulated deficit of $1,877,627.

During the six months ended December 31, 2011, operating activities used cash of $5,483, compared to $131,690 during the six months ended December 31, 2010. An increase in inventory reduced cash in the amount of $8,210 in the current period, compared to an increase of cash of $57,979 in the prior period. An increase in accounts payable in the current period provided cash of $32,867, compared to a decrease of $41,319 in the prior period. An increase in accrued liabilities provided cash of $37,894 in the current period, compared to a decrease of $41,319 in the prior period. An increase in amounts due to related parties provided cash of $150 in the current period, compared to a decrease in same using cash of $34,874 in the prior period. A decrease in customer deposits used cash of $3,209 in the current period, compared to a decrease in customer deposits using cash of $38,428 in the prior period.

Investing activities used cash of $0 in the three months ended December 31, 2011 and 2010.

Financing activities in the three months ended September 30, 2011 provided cash of $31, compared to $149,766 in the prior period primarily from loans from related parties.

Our plan of operations over the next 12 months is to (i) expand our stocking dealer network throughout the Unites States and Canada, (ii) monitor the quality of our products and accessories, (iii) further develop our website and online sales volume, and (iv) increase our exposure to participants in the construction, building, maintenance and demolition industries. We expect we will require approximately $3.5 million to pursue our plan of operations over this period.

We intend to raise the additional funds we require from the sale of our equity securities or loans from related or third parties. There can be no assurance that we will be able to secure the necessary financing from the sale of our securities or loans from related parties. If we are unable to raise sufficient funds to finance our operations our business may fail. In addition, if we are unable to raise the funds required to expand our operations, we may be forced to proceed with a scaled back business plan based on our available financial resources. An investment in our securities involves significant risk and you could lose your entire investment.

Going Concern

Our financial statements for the three months ended December 31, 2011 have been prepared on a going concern basis and Note 2 to the financial statements identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, our management, with the participation of our sole officer serving as the Chief Executive Officer and acting Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer/acting Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms due to the following deficiencies:

1.	Management override of existing controls is possible given our small size and lack of personnel; and

2.	We maintain an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.

In light of the existence of these control deficiencies, our management concluded that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls.

Management is currently evaluating remediation plans for the above control deficiencies. Management plans to enhance our risk assessment, internal control design and documentation and implement other procedures in the internal control function.

Changes in Internal Control

Other than as described above, during the three months ended December 31, 2011, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceedings and are not aware of any legal proceedings that have been threatened against us. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings.

On January 13, 2012, a mediation involving the Company and a stocking dealer was concluded. The stocking dealer had purchased inventory from the Company, but had subsequently refused delivery and demanded a refund. The mediator held that the Company is required to deliver inventory of equal value to the stocking dealer.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Exhibit Description
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 17, 2012	AGR TOOLS, INC.



By:	/s/ Vern O.C. Wilson
	Vern O.C. Wilson
	Chief Executive Officer, President Sole Director, Acting Chief Financial Officer

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