UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
£ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-50367
NATURALLY ADVANCED TECHNOLOGIES INC.
(Exact name of small business issuer as specified in its charter)
British Columbia | | 98-0359306 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | |
402-1008 Homer Street
Vancouver, British Columbia, Canada | |
V6B 2X1
|
(Address of principal executive offices) | | (Zip Code) |
| | | |
(604) 683-8582 |
Registrant's telephone number, including area code |
| |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
| | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesT No£
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes£ No£
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," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer£ | Accelerated filer£ |
Non-accelerated filer£ (Do not check if a smaller reporting company) | Smaller reporting companyT |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes£ NoT
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.35,313,202shares of common stock as of August 11, 2010.
NATURALLY ADVANCED TECHNOLOGIES INC.
Quarterly Report On Form 10-Q
For The Quarterly Period Ended
June 30, 2010
INDEX
PART I - FINANCIAL INFORMATION | 4 |
| | Item 1. | Financial Statements | 4 |
| | Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
| | Item 4. | Controls and Procedures | 19 |
PART II - OTHER INFORMATION | 19 |
| | Item 1. | Legal Proceedings | 19 |
| | Item 1A. | Risk Factors | 19 |
| | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
| | Item 3. | Defaults Upon Senior Securities | 19 |
| | Item 4. | (Removed and Reserved) | 19 |
| | Item 5. | Other Information | 19 |
| | Item 6. | Exhibits | 19 |
2
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this quarterly report include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements include, but are not limited to, statements with respect to the following:
- our need for additional financing;
- the competitive environment in which we operate;
- our dependence on key personnel;
- conflicts of interest of our directors and officers;
- our ability to fully implement our business plan;
- our ability to effectively manage our growth; and
- other regulatory, legislative and judicial developments.
Forward-looking statements are made, without limitation, in relation to operating plans, property exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in our annual report on Form 10-K for the year ended December 31, 2009, this quarterly report on Form 10-Q, and, from time to time, in other reports that we file with the Securities and Exchange Commission (the "SEC"). These factors may cause our actual results to differ materially from any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited interim financial statements of Naturally Advanced Technologies, Inc. (sometimes referred to as "we", "us" or "our Company") are included in this quarterly report on Form 10-Q:
| | Page |
Consolidated Balance Sheets | 5 |
Consolidated Statements of Operations | 6 |
Consolidated Statements of Cash Flows | 7 |
Notes to Consolidated Financial Statements | 8 |
4
Naturally Advanced Technologies, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(In US Dollars)
(Unaudited) |
| | | | | | | June 30,
2010 | | December 31,
2009 |
| ASSETS | | | | | | | |
| | | | | | | | |
Current | | | | | | | |
| Cash and cash equivalents | | $ | 877,003 | $ | 421,452 |
| Accounts receivable | | | | 12,320 | | 11,552 |
| Prepaid expenses and other | | | 40,317 | | 48,367 |
| Current assets of discontinued operations | | | 23,352 | | 42,218 |
| | | | | | | 952,992 | | 523,589 |
Property and Equipment | | | 127,566 | | 132,185 |
Intangible Assets | | | | 78,262 | | 85,071 |
| | | | | | $ | 1,158,820 | $ | 740,845 |
| | | | | | | | | |
LIABILITIES | | | | | | | |
| | | | | | | | |
Current | | | | | | | |
| Accounts payable | | | $ | 306,917 | $ | 234,313 |
| Accrued Liabilities (Note 5) | | | | 172,446 | | 346,963 |
| Due to related party (Note 2) | | | 928,268 | | - |
| Note payable (Note 5) | | | | 200,000 | | - |
| | | | | | | 1,607,631 | | 581,276 |
| | | | | | | | |
Note payable(Note 5) | | | | | | 200,000 |
Due to Related Party(Note 2) | | | | - | | 928,347 |
| | | | | | | 1,607,631 | | 1,709,623 |
| | | | | | | | |
STOCKHOLDERS' DEFICIT | | | | | |
Capital Stock(Note 3) | | | | | | | |
| Authorized: 100,000,000 common shares without par value | | | | | |
| Issued and outstanding : 35,254,079 common shares | | | | | |
| (December 31, 2009 - 33,354,215) | | | 12,216,231 | | 10,443,962 |
| | | | | | | | |
Additional Paid-in Capital | | | 2,286,770 | | 2,011,047 |
Accumulated Other Loss | | (71,287) | | (12,840) |
Deficit | | | | | (12,251,005) | | (12,251,005) |
Deficit accumulated in the development stage | | (2,629,520) | | (1,159,942) |
| | | | | | | (448,811) | | (968,778) |
| | | | | | $ | 1,158,820 | $ | 740,845 |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
Naturally Advanced Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(In US Dollars)
(Unaudited) |
| | | For the three month period ended
June 30, | | For the six month period ended
June 30, | | Cumulative from
October 1, to
June 30, 2010 |
| | | | |
| | | 2010 | | 2009 | | 2010 | | 2009 | |
| | | | | | | | | | | | |
Expenses | | | | | | | | | | |
| Advertising and promotion | $ | 50,628 | $ | 35,292 | $ | 102,861 | $ | 97,860 | $ | 173,528 |
| Amortization & depreciation | | 8,453 | | 6,642 | | 16,730 | | 10,346 | | 27,493 |
| Consulting & Contract Labour (Note 2 and 3) | | 81,527 | | 84,743 | | 209,807 | | 225,754 | | 332,162 |
| General & Administrative | | 104,315 | | 58,119 | | 193,394 | | 108,681 | | 370,592 |
| Interest & finance charge | | 89,397 | | 35,467 | | 123,339 | | 65,967 | | 161,381 |
| Professional Fees | | 69,931 | | 65,015 | | 96,946 | | 126,253 | | 211,809 |
| Research & Development | | 133,858 | | 88,585 | | 259,999 | | 170,199 | | 497,449 |
| Salaries & Benefits (Note 2 and 3) | | 265,858 | | 147,110 | | 478,026 | | 295,665 | | 867,807 |
| Write down of equipment | | - | | 163,371 | | | | 163,371 | | |
| | | | | | | | | | | | |
Loss from other income | | 803,967 | | 684,344 | | 1,481,102 | | 1,264,096 | | 2,642,221 |
Other income | | - | | - | | 150 | | - | | 1,327 |
| Loss from continuing operations | | (803,967) | | (684,344) | | (1,480,952) | | (1,264,096) | | (2,640,894) |
| | | | | | | | | | | |
Gain (Loss) from discontinued operations | | (22,055) | | (188,304) | | 11,374 | | (470,799) | | 11,374 |
| Net loss for the period | $ | (826,022) | $ | (872,648) | $ | (1,469,578) | $ | (1,734,895) | $ | (2,629,520) |
| Loss from continuing operations per share (basic and diluted) | $ | (0.02) | $ | (0.02) | $ | (0.04) | $ | (0.04) | | |
| Earnings (Loss) from discontinued operations per share (basic and diluted) | $ | (0.00) | $ | (0.01) | $ | 0.00 | $ | (0.02) | | |
| Weighted average number of common shares outstanding (basic and diluted) | | 34,318,198 | | 31,310,619 | | 33,851,332 | | 31,167,149 | | |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
Naturally Advanced Technologies, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(In US Dollars) |
| |
For six months ended June 30,
| | Cumulative from
October 1, 2009
to
June 30, 2010 |
| | 2010 | | 2009 | |
| Cash flows from (used in) operating activities | | | | | | |
Net loss from continuing operation for the period | $ | (1,480,952) | $ | (1,264,096) | $ | (2,640,894) |
Adjustments to reconcile net loss to net cash from operating activities | | | | | | |
Amortization & depreciation | | 16,730 | | 12,451 | | 27,493 |
Stock based compensation | | 372,475 | | 228,887 | | 621,255 |
Non cash finance charge | | 54,580 | | - | | 54,580 |
Changes in working capital assets and liabilities | | | | | | |
Decrease (increase) in accounts receivable | | (768) | | - | | 64,627 |
Decrease in prepaid expenses | | 8,050 | | 58,544 | | 29,808 |
Increase (decrease) in accounts payable | | 72,604 | | 84,372 | | (30,944) |
(Decrease) increase in accrued liabilities | | (174,517) | | (131,962) | | 42,757 |
(Decrease) increase in due to related parties | | (79) | | 19,208 | | 28,268 |
| Net cash used in operating activities of continuing operations | | (1,131,877) | | (992,596) | | (1,803,050) |
| Net cash provided by discontinued operations | | 30,240 | | 312,085 | | 56,687 |
| Cash flows used in investing activities | | | | | | |
Purchase of property and equipment | | (225) | | (16,509) | | (8,228) |
Acquisition of trademarks & license | | (5,077) | | (31,994) | | (5,077) |
| Net cash flows used in investing activities | | (5,302) | | (48,503) | | (13,305) |
| Cash flows from (used in) financing activities | | | | | | |
Issuance of capital stock | | 1,620,937 | | 346,476 | | 1,627,370 |
Related parties advances | | - | | 200,000 | | - |
Related parties payments | | - | | - | | (69,015) |
Short term loan | | - | | (26,590) | | - |
| Net cash flows from financing activities | | 1,620,937 | | 519,886 | | 1,558,355 |
| Effect of exchange rate changes on cash and cash equivalents | | (58,447) | | 26,324 | | 24,869 |
| Increase (decrease) in cash | | 455,551 | | (182,804) | | (176,444) |
Cash and cash equivalents, beginning of period | | 421,452 | | 319,358 | | 1,053,447 |
| Cash and cash equivalents, end of period | $ | 877,003 | $ | 136,554 | $ | 877,003 |
| SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | |
AND NON-CASH FINANCING AND INVESTING ACTIVITIES: | | | | | | |
Cash paid for interest | $ | 54,480 | $ | 35,968 | $ | 123,495 |
Cash paid for income taxes | $ | - | $ | - | $ | - |
Capital stock issued in settlement of accounts payable | $ | - | $ | - | $ | - |
Capital stock issued as finance fee | $ | - | $ | - | $ | - |
The accompanying notes are an integral part of these consolidated financial statements.
7
Naturally Advanced Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2010
(Unaudited)
1. Basis of Presentation
These unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial reporting and the rules and regulations of the Securities and Exchange Commission. They do not include all information and footnotes required by United States generally accepted accounting principles ("U.S. GAAP") for complete financial statement disclosure. However, except as disclosed herein, there have been no material changes in the information contained in the notes to the audited consolidated financial statements for the year ended December 31, 2009, included in the Company's Form 10-K filed with the Securities and Exchange Commission. Operating results for the six months ended June 30, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These interim unaudited consolidated financial statements should be read in conjunction with the in the information inc luded in the Company's Form 10-K filed on April 13, 2010, with the U.S. Securities and Exchange Commission. In the opinion of management, the accompanying balance sheets and related interim statements of income, cash flows, and stockholders' equity include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with US GAAP.
We evaluated events occurring between the end of our fiscal quarter, June 30, 2010, and the date financial statements were issued.
Recent accounting pronouncements with future effective dates are not expected to have an impact on the Company's financial statements.
2. Related Parties Transactions
a) As at June 30, 2010, a director had advanced the Company a total amount of $900,000. The secured loan agreement has an interest rate of 12% and a due date of February 16, 2011. An accrual for interest of $28,268 (December 31, 2009 - $28,347) has been included in amounts due to related party as at June 30, 2010.
b) During the six month period ended June 30, 2010, $248,511 (2009 - $224,490) was incurred as remuneration to officers and directors of the Company. Of this amount, $158,511 (2009 - $134,490) is recorded as salaries and benefits expense and $90,000 (2009 - $90,000) is recorded as contract labour expense.
8
Naturally Advanced Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2010
(Unaudited)
3. Capital Stock
During the period ended June 30, 2010, the Company issued shares of common stock as follows:
a) A total 475,125 shares were issued pursuant to the exercise of employee and consultants options between $0.37 and $0.80 per share for proceeds of $258,350.
b) During May 2010,the Company issued 1,424,739 units at $1.00 per unit for gross proceeds of $1,424,739. Each unit consists of one common share and one-half of one share purchase warrant of the Company. Each whole warrant entitles the subscriber thereof to acquire one additional common share of the Company at an exercise price of $1.25 per share up to and including May 19, 2013. The estimated fair value of the warrants is $262,667 using the Black Scholes option pricing model using a 3 year term, an expected volatility of 64% and a risk free interest rate of 1.26%. The Company paid a total $62,152 for agent commissions and other expenses which have been recorded as share issue costs.
Share purchase warrants outstanding at June 30, 2010, are summarized as follows:
| | Range of Exercise Prices | Number of Shares | Weighted Average
Remaining
Contractual Life (yr) |
|
$1.10 - $1.95
|
2,032,160
|
1.91
|
|
Share purchase warrants outstanding are:
| | | Shares | | Weighted-Average
Exercise Price |
| Warrants outstanding at December 31, 2009
Warrants granted during the period | 1,319,788
712,370 | $ | 1.69
1.25 |
| Warrants outstanding at June 30, 2010 | 2,032,160 | $ | 1.53 |
|
Share purchase warrants outstanding are:
On June 18, 2010, the Company extended the expiry date of 736,213 warrants from July 3, 2010, to July 3, 2011. The incremental increase in value of the warrants after the extension was estimated to be $54,580 usingthe Black Scholes option pricing model using a 1 year term, an expected volatility of 67% and a risk free interest rate of 0.28%. The amount was expensed during the six month period ended June 30, 2010, as interest and finance charge.
9
Naturally Advanced Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2010
(Unaudited)
3. Capital Stock (cont.)
Stock options outstanding at June 30, 2010 are summarized as follows:
| |
Range of
Exercise
Prices
|
Number
Outstanding
| Weighted
Average
Remaining
Contractual
Life (yr) |
Weighted
Average
Exercise
Price
| |
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
| $0.75 - $1.45 | 4,384,000 | 1.66 | $1.06 | | 2,901,535 | $1.00 |
|
Stock options outstanding are:
| | | Shares | | Weighted-Average
Exercise Price |
| Options outstanding, December 31, 2009 | 4,724,125 | | 1.01 |
Options exercised during the period | (475,125) | | 0.54 |
Options granted during the period | 135,000 | | 0.96 |
| Options outstanding, June 30, 2010 | 4,384,000 | $ | 1.06 |
|
During the six month period ended June30, 2010, 475,125 options were exercised and a total of $151,332 has been reclassified from additional paid-up capital to capital stock
During the six month period ended June 30, 2010, the Company granted a total of 135,000, five year common stock options to employees and consultants, exercisable between $0.95- $0.99 per share, which were valued at $81,915. These options were granted under the terms of the Company's 2008 Fixed Share Option Plan.
The fair value of options issued during the period ended June 30, 2010, was determined using the Black-Scholes option pricing model with the following assumptions:
| | |
Risk-free interest rate | | 2.1% to 2.51% |
Volatility factor | | 76% to 78% |
Expected life of options, in years | | 5 |
Weighted average fair value of options granted | | $0.61 |
During the six month period ended June 30, 2010, 349,100 (2009 - 406,777) options vested under the Company's 2008 Fixed Share Option Plan. Total expenses of $372,475 (2009 - $228,887) was recorded as stock-based compensation, $152,221 (2009 - $77,195) was included in Consulting and Contract Labour expense and $220,254 (2009 - $151,692) was included in Salaries & Benefits expense.
10
Naturally Advanced Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2010
(Unaudited)
5. Note payable
As at June 30, 2010, the Company owed $200,000 on a note payable which is due on January 22, 2011. Accrued interest for the note payable included in accrued liabilities at June 30, 2010, is $125,179 (December 31 2009- $102,169). The note bears interest at 12% per annum, is secured by a fixed charge and a security interest in all of the Company's accounts receivable insurance policy and a security interest in all assets of the Company, subject and subordinate to any borrowing by the Company with banks and lending institutions.
6. Subsequent Events
a) On August 9, 2010, the Company granted a total of 323,377 incentive stock options to directors, officers, employees and consultants of the Company. The options are exercisable at $1.02 per share and will expire on August 9th, 2015. An Officer of the Company agreed to cancel 100,000 of his existing stock options. The options will be returned to the pool of options currently available under the Company's 2008 fixed share option plan.
b) Effective August 9, 2010, the Company entered into a 10-month sub lease of a facility in South Carolina at a rental rate of $4,400 per month.
c) On August 9, 2010, the Company hired an unrrelated firm to perform investor relation activities. The agreement term is one year with ninety days notice of termination by either party. The monthly retainer is $10,000 with 125,000 stock options exercisable at $1.01 and expiring August 9, 2015.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations and financial position should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Report. Our consolidated financial statements are prepared in accordance with U.S. GAAP. All references to dollar amounts in this section are in U.S. dollars unless expressly stated otherwise.
The matters discussed in these sections that are not historical or current facts deal with potential future circumstances and developments. Such forward-looking statements include, but are not limited to, the development plans for the Company's growth, trends in the results of the Company's development, anticipated development plans, operating expenses and the Company's anticipated capital requirements and capital resources. As such, these forward-looking statements may include words such as "plans", "intends", "anticipates", "should", "estimates", "expects", "believes", "indicates", "targeting", "suggests" and similar expressions. The actual results are expected to differ from these forward-looking statements and these differences may be material.
Discontinued Operations -During fiscal 2009, the Company closed its apparel business, which operated under the brand "HTnaturals". The apparel business is classified as discontinued operations in the Company's financial statements.
In this Report, "NAT", "we", "us", "our" and the "Company" refer to Naturally Advanced Technologies Inc. and its subsidiaries, unless the context otherwise requires.
OVERVIEW
Naturally Advanced Technologies Inc. is a Green Tech company focused on providing environmentally friendly textile, composite, biomass and pulping solutions through the cost effective process of industrial hemp, flax and other bast fiber crops. Naturally Advanced Technologies is bringing sustainable bast fiber-based products to market, providing environmentally friendly natural fiber alternatives for a broad range of existing and emerging product applications, with equivalent or superior performance characteristics to cotton, wood or fossil-fuel based competitors. As of the date of this Report, our business operations consist of the development and execution of our proprietary processing platforms called CRAiLAR® and CRAiLEXTM technology, which are bast fiber processing technologies targeted at the textile, pulping, composite and plastics industries.
The Naturally Advanced Technologies Solution
Bast fiber from hemp and flax is known to combine attractive performance characteristics with superior agronomic properties, providing sustainable, natural product solutions for a vast range of market applications.
However, two factors have created a barrier to the exploitation of these crops: 1) until recently industrial hemp cultivation was prohibited in much of the developed world, and 2) the technologies had not been developed to transform raw bast fiber into the quality of products that was demanded.
The first barrier is no longer an issue, with commercial hemp cultivation legalized in Canada in 1998. The U.S. is one of the last countries that still actively discourage hemp cultivation.
NAT has dismantled the second barrier. In concert with its key technology partners the Alberta Research Council and the National Research Council, NAT has developed proprietary technologies (the CRAiLAR® and CRAiLEXTM platforms) to process hemp fiber into superior decorticated bast fiber, organic bast fiber, dissolving pulp and fluff pulp; all environmentally friendly products that are fully fungible with traditional pulp and cotton processing lines. These products offer the comfort apparel, absorbent pulp and paper, and performance apparel sectors the ability to substitute superior natural fiber alternatives into their existing production lines, while unlocking a host of additional commercial opportunities in existing and emerging markets.
12
Naturally Advanced Technologies (NAT) is developing proprietary technology for the engineering, processing and production of textile fibers, composite materials, cellulose pulp, and their resulting byproducts. Developed in collaboration with the National Research Council of Canada and the Alberta Research Council, the CRAiLAR and CRAiLEX biomass technology platforms offer cost-effective and environmentally friendly processing and production of industrial hemp for global textile, composite material, pulp and paper and energy markets. NAThas the global exclusive rights to any new intellectual property developed under these collaborations. The technology developed is expected to displace some cotton and organic cotton use in textiles, some polyester and nylon use in performance textiles, some fiberglass use in composite materials, some wood pulp use in pulp and paper applications and some oil and gas use in energy markets. The feedstock source is environmentally efficient industri al hemp; however, the feedstock source can also be from other environmentally efficient bast fibers, such as flax. During the third quarter of 2008, fiber was spun and then knitted into fabric suitable for T-shirt or other knit garments using the CRAiLAR® Organic Fibers technology.
As a result of testing of CRAiLAR Organic Fibers at NC State University during the third quarter of 2008, the Company entered into joint development agreements with Hanesbrands, and Georgia Pacific Consumer Products. The Company will be conducting further evaluation of its CRAiLAR Organic Fibers with both commercialization partners over the course of the next four months, with a view to arriving at commercialization terms at the successful conclusion of those trials.
NAT is organized into two brand platforms to best develop, test and commercialize its technology platforms. These include:
- CRAiLAROrganic Fibers: (near term development/ commercialization) The Organic Fibers division is responsible for CRAiLAR applications in the apparel and textile industries. Using the core fiber from the bast fiber crop, CRAiLAR Organic Fibers can be spun into a traditional yarn, or formed into a mat using non woven technology.
- CRAiLEX Advanced Materials: (near term development/ commercialization) Focused on applications for our eco-friendly cellulosic pulp, the Advanced Materials division develops technologies for the processing of these cellulose-based fibers in Pulp and Paper, Bioplastics and Performance Apparel industries.
HTnaturals Apparel Corp.
During fiscal 2009 the Company determined it prudent to close its apparel division HTnaturals and focus on its CRAiLAR and CRAiLEX technologies. The warehouse lease was not renewed, the sales team was terminated and all other elements of our apparel division were discontinued. The costs of the apparel division are classified as discontinued operations in the Company's financial statements.
Results of OperationS
Six Month Period Ended June 30, 2010 Compared to Six Month Period Ended June 30, 2009
| Three months ended June 30 | Six months ended June 30, |
| 2010 | 2009 | % Change | 2010 | 2009 | % Change |
Loss from Operations | ($803,967) | ($684,344) | 17% | ($1,481,952 | ($1,264,096) | 17% |
Gain (Loss) from Discontinued Operations | ($22,055) | ($188,304) | | $11,524 | ($470,799) | |
Net Loss | ($826,022) | ($872,648) | (5%) | ($1,469,578) | ($1,734,895) | (15%) |
Loss/share Operations | ($0.02) | ($0.02) | | ($0.04) | ($0.04) | |
Loss/share discontinued | ($0.00) | ($0.01) | | ($0.00) | ($0.02) | |
13
SIX-MONTH PERIOD ENDED JUNE 30, 2010 COMPARED WITH SIX-MONTH PERIOD ENDED JUNE 30, 2009
Operating Expenses
During the six-month period ended June 30, 2010, we recorded operating expenses of $1,481,102 compared to operating expenses of $1,264,096 during the six-month period ended June 30, 2009 (an increase of $217,006). The increase in loss was due to an increase on research and development spending, increased costs of commercialization, and an increase in stock based compensation expensed for options granted in the past.
Operating expenses consisted of: (i) $102,861 (2009: $97,860) in advertising and promotion; (ii) $16,730 (2009: $10,346) in amortization and depreciation; (iii) $209,807 (2009: $225,754) in consulting and contract labor; (iv) $193,394 (2009: $108,681) in general and administrative expenses; (v) $123,339 (2009: $65,967) in interest and finance charge; (vi) $96,946 (2009: $126,253) in legal and accounting; (vii) $259,999 (2009: ($170,199) in research and development; (viii) and $478,026 (2009: $295,665) in salaries and benefits.
Advertising and promotion expenses increased to $102,861 for the six-month period ended June 30, 2010, from $97,860 compared to the same period in 2009 as the Company did not have an outside PR firm for the entire period in 2009.
Consulting and contract labor expenses decreased to $209,807 for the six-month period ended June 30, 2010, from $225,754 compared to the same period in 2009 due to a decrease in stock based compensation and number of contractors.
General and administrative expenses increased to $193,394 for the six-month period ended June 30, 2010, compared to $108,681 for the same period in 2009. The increase in general and administrative expenses was due to the increase in travel for testing and commercialization of technology.
Interest and finance charge increased to $121,339 for the six-month period ended June 30, 2010, compared to $65,967 for the same period in 2009. The increase is mostly attributable to the increase in the loan from a director and the timing of interest payments, and the stock-based compensation resulting from extending expiry date of 736,233 share purchase warrants.
Research and development costs were $259,999 for the six-month period ended June 30, 2010, compared to $170,199 for the same six-month period in 2009. During this period, research and development was mainly focused on the refinement of the CRAiLAR Organic Fiber process through trials in Europe. The cost of these trials was the reason behind the increased costs for the period.
Salaries and benefits expenses increased to $478,026 for the six-month period ended June 30, 2010, compared with $295,665 for the same period in 2009. This increase was mostly due to an increase in stock based compensation.
Professional fees decreased to $96,946 for the six-month period ended June 30, 2010, compared with $126,253 for the same period in 2009 as there was a reduction in audit fees.
Discontinued operations contributed a gain of $11,374 for the six month period ended June 30, 2010, compared with a loss of ($470,799) for the same period in 2009 as the Company wound up its apparel business.
Net Loss
The net loss for the six-month period ended June 30, 2010, was ($1,469,578), or ($0.04) per share, compared to a loss of ($1,734,895), or ($0.04) per share, for the same period in 2009, which is a decrease in net loss of ($265,317). The decrease in loss was primarily associated with discontinued operations. For the six-month period ended June 30, 2010, the weighted average number of shares outstanding was 33,851,332 compared to 31,167,149 at June 30, 2009.
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THREE-MONTH PERIOD ENDED JUNE 30, 2010 COMPARED WITH THREE-MONTH PERIOD ENDED JUNE 30, 2009
Operating Expenses
During the three-month period ended June 30, 2010, we recorded operating expenses of $803,967 compared to operating expenses of $684,344 during the three-month period ended June 30, 2009, (a increase of $119,623). The increase in loss was due to an increase in stock based compensation.
Operating expenses consisted of: (i) $50,628 (2009: $35,292) in advertising and promotion; (ii) $8,453 (2009: $6,642) in amortization and depreciation; (iii) $81,527 (2009: $84,743) in consulting and contract labor; (iv) $104,315 (2009: $58,119) in general and administrative expenses; (v) $89,397 (2009: $35,467) in interest and finance charge; (vi) $69,931 (2009: $65,015) in legal and accounting; (vii) $133,858 (2009: ($88,585) in research and development; (viii) and $265,858 (2009: $147,110) in salaries and benefits.
Advertising and promotion expenses increased to $50,628 for the three-month period ended June 30, 2010, from $35,292 compared to the same period in 2009 as the Company did not have an outside PR firm for the entire period in 2009.
Consulting and contract labor expenses decreased to $81,527 for the three-month period ended June 30, 2010, from $84,743 compared to the same period in 2009 due to a decrease in stock based compensation and number of contractors.
General and administrative expenses increased to $104,315 for the three-month period ended June 30, 2010, compared to $58,119 for the same period in 2009. This increase was due to travel costs associated with the testing and commercialization of our technology.
Interest and finance charge increased to $89,397 for the three-month period ended June 30, 2010, compared to $35,467 for the same period in 2009. The increase is due to the stock-based compensation resulting from extending expiry date of 736,233 share purchase warrants.
Research and development costs were $133,858 for the three-month period ended June 30, 2010, compared to $88,585 for the same three-month period in 2009. During this period, research and development was mainly focused on the refinement of the CRAiLAR Organic Fiber process and ongoing trials in Europe. The cost of these trials was the reason for the increased costs for the period.
Salaries and benefits expenses increased to $265,858 for the three-month period ended June 30, 2010, compared with $147,110 for the same period in 2009. This increase was due to an increase in stock based compensation.
Professional fees increased to $69,931 for the three-month period ended June 30, 2010, compared with $65,015 for the same period in 2009 due to an increase in legal fees for the PIPE in the period.
Discontinued operations contributed a loss of $22,055 for the three month period ended June 30, 2010, compared with a loss of $188,304 for the same period in 2009 as the Company wound up its apparel business.
Net Loss
The net loss for the three-month period ended June 30, 2010, was ($826,022), or ($0.02) per share, compared to a loss of ($872,648), or ($0.02) per share, for the same period in 2009, which is a decrease in net loss of ($46,626). The decrease in loss was primarily associated with discontinued operations. For the three-month period ended June 30, 2010, the weighted average number of shares outstanding was 34,318,198 compared to 31,310,619 at June 30, 2009.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2010, the Company's current assets were $952,992 and the Company's current liabilities were $1,607,631, which resulted in working capital deficit of $654,639. As of June 30, 2010, total assets were $1,158,820, consisting of: (i) $877,003 in cash and cash equivalents; (ii) $12,320 in trade accounts receivable; (iii) $40,317 in prepaid expenses and other; (iv) $23,352 in current assets of discontinued operations; (v) $127,566 in property and equipment; and (vi) $78,262 in intangible assets.
As at June 30, 2010, total liabilities were $1,607,631 and were comprised of: (i) $306,917 in accounts payable; (ii) $172,446 in accrued liabilities; (iii) $928,268 in amounts due to related party; (iv) $200,000 in note payable.
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Stockholders' deficit increased by $417,975 from ($968,778), at December 31, 2009, to ($448,811) as at June 30, 2010.
As of June 30, 2010, the Company had cash and cash equivalents of $877,003 compared with $421,452 at December 31, 2009, an increase of $455,551.
The cash flows used in continuing operations for the six-month period ended June 30, 2010, were ($1,132,027) compared with ($1,463,395) for the same period in 2009. Cash flows used in operations for the six-month period ended June 30, 2010, consisted primarily of a net loss from continued operation of ($1,481,102); $16,730 in depreciation and amortization; stock based compensation of $427,055; a decrease in accounts receivable of ($768); a increase in prepaid expenses of ($8,050); an increase in accounts payable of $72,604; a decrease of accrued liabilities of ($174,517); and a decrease in amounts due to related parties of ($79).
Net cash flows used in discontinued operations for the six-month period ending June 30, 2010, were $30,390 compared to 782,884 for the same period in 2009.
The cash flows used in investing activities for the six-month period ended June 30, 2010, were ($5,302) compared to ($48,503) for the same period in 2009. Cash flows used in investing activities during the six months ended June 30, 2010 consisted of (i) a purchase of property and equipment totaling ($225) and (ii) the acquisition of trademarks and licenses for ($5,077).
Cash flows provided by financing activities at June 30, 2010, totaled $1,620,937 versus $519,886 during the same period in 2009 as the Company issued $1,620,937 of capital stock for cash (2009: $346,476).
The effect of exchange rates on cash resulted in an unrealized loss of ($58,447) for the six-month period ended June 30, 2010, compared with a $26,324 unrealized gain in the same period of 2009.
PLAN OF OPERATION
Management expects to continue expanding its business platform through the development and commercialization of CRAiLAR®Organic Fibers and CRAiLEXTM Advanced Materials technology for bast fiber processing and production, with resulting textile, composite, pulp and fiber products expected to address inherent environmental problems currently affecting these industries.
CRAiLAR Organic Fibers technology developed with the National Research Council (NRC) of Canada is a clean, sustainable, environmentally responsible organic fiber replacement that grows naturally, without excessive water and pesticide usage. CRAiLAR will be used in union with cotton, and when blended together, will create a much better performing fiber than cotton alone, taking on some of the characteristics of CRAiLAR, which are durability, superior dye characteristics, and less shrinkage.
CRAiLEX Advanced Materials technology developed with the Alberta Research Council creates a superior dissolving pulp from the hemp plant to be used in performance yarns, industrial additives and absorbent pulp and paper products.
Through our innovative CRAiLAR and CRAiLEX processes, the vast potential benefits locked up in hemp and other bast fiber crops will finally be realized after years of unnecessary stigma and regulations. Industrial hemp, which is grown specifically for commercial use in the textile and other industries, has none of the negative aspects of the plant's infamous cousin, and is loaded with environmental and performance benefits.
Management recognizes the disruptive potential that the CRAiLAR and CRAiLEX technology platforms possess for global textile, composite material and pulp and paper markets. As such, management is focusing on our growth through the commercialization of CRAILARand CRAiLEX. Management believes that an ongoing relationship in the form of joint ventures with established market leaders in both the CRAiLAR Organic Fibers division and the CRAiLEX Advanced Materials division would be the optimum commercialization strategy. Currently, testing and further development of fiber is taking place in conjunction with leading global brands. Last year we reported that at the date of the Annual Report, no agreements had been signed with any potential partner. We are pleased to report the following.
In July of 2009 we announced Joint Development Agreements with Hanesbrands Inc., and Georgia Pacific Consumer Products, for our CRAiLAR Organic Fiber technology evaluation, and commercial scale up capability. Since then, we have conducted increasingly larger bulk commercial trails in both partners' facilities, to provide evidence of our ability to seamlessly integrate into existing natural fiber operations and to validate the performance attributes of our organic fiber, over the materials they would be replacing. In January of 2010 we received a purchase order of 10,000 lbs of CRAiLAR Organic Fiber from Hanesbrands Inc, for the final evaluation of the selected processing equipment from a supplier in Germany, in order to validate our enzyme process and scalability potential in volumes that would mimic those seen on a daily basis in full production.
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The following results were achieved as a result of improved enzyme processing protocols, better understanding of crop management inputs as it related to enzyme performance, and improved processing efficiency due to the effectiveness of the latest processing equipment available to us:
- Spun commercial grade yarn in a blend of 25% CRAiLAR Organic Hemp Fiber and 75% cotton, to a yarn count of 18 singles, suitable for tees shirts, socks, fleece garments and similar type apparel.
- Processed flax fiber through our CRAiLAR enzyme process, to spin a commercial grade yarn in a blend of 25% CRAiLAR Flax Fiber, to a yarn count of 20 singles, suitable for all garment types listed in point 1 above, plus underwear.
The above test results were successfully replicated in fiber processed at our licensed CRAiLAR third party manufacturer in Philadelphia, GJ Littlewood and Sons, and thereafter were successfully spun by our Licensed CRAiLAR spinner, Patrick Yarns, confirming our ability to commence supplying our development partners and additional customers in non competing industries with commercials scale fiber volumes immediately.
As a result of the success achieved in these latest trials, Hanesbrands Inc. has elected to move to the final stage of our joint development agreement, namely commercialization. We are in the process of finalizing supply chain, marketing and product positioning strategies with Hanes, before finally determining structure, location and timing of our commercialization of CRAiLAR Organic Fiber with them.
Our joint development agreement with Georgia Pacific Consumer Products continues to execute along the timelines laid out in the agreement, with one final round of testing to complete. At the conclusion of that project, we will be in a position to discuss commercialization opportunities.
As a result of the announcement of the successful conclusion of our latest bulk commercial scale trials, we have received enquiries from parties interested in sourcing CRAiLAR Organic Fibers for their apparel programs
We entered into a sub lease of a mid volume decortication facility located in Kingstree, South Carolina, in early August. The facility was established under a USDA flax initiative that failed to reach commercial viability. Having successfully spun flax fiber after processing it through our CRAiLAR process, we have unlocked the potential of flax as a bast fiber alternative to cotton, that is sustainable, performs like cotton, and is cost competitive. We intend to use this facility to prove out the viability of flax farming in this region, and to commence early volumes of CRAiLAR fiber to our commercial partners.
Finally, the testing and evaluation of our CRAiLEX Advanced Materials pulping technology continues with a leading North American pulp and paper company, having produced commercial grade results. We expect to move to commercialization in this division, once our partner has completed their evaluation and go-to -market plans.
HTnaturals
As the effect of the financial crisis took its toll on all sectors of retail industry, and our focus shifted in increasing intensity to our rapidly developing CRAiLAR and CRAiLEX Fiber business, it became obvious that we needed to concentrate on our CRAiLAR and CRAiLEX technology business model and opportunity.
As a result, we closed our HT Naturals business at the end of the second quarter of 2009, and continued to sell off our remaining inventory over the balance of the year. We have now fully transitioned to a "Green Tech" organic fiber company, with industry changing technologies in the natural fiber and forest pulping industries.
Note on Plan of Operation
While the Company expects that profitable operations will be achieved in the future, there can be no assurance that revenue, margins, and profitability will increase, or be sufficient to support operations over the long term. Management expects that the Company will need to raise additional capital to meet short and long-term operating requirements. Management believes that private placements of equity capital and debt financing may be adequate to fund the Company's long-term operating requirements. Management may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If the Company raises additional funds through the issuance of equity or convertible debt securities other than to current shareholders, the percentage ownership of current shareholders would be reduced, and such securities might have rights, preferences or privileges senior to the Company's common stock. Additi onal financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict business operations. Management is continuing to pursue external financing alternatives to improve the Company's working capital position and to grow the business to the greatest possible extent.
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MATERIAL COMMITMENTS
Rana Corp.
A significant commitment for us during fiscal year 2010 is the principal amount of $200,000 due and owing pursuant to a secured and subordinated loan agreement with Rana Corp. ("Rana"). The term of the loan is from July 21, 2007, until April 22, 2009, at 12% per annum, calculated semi-annually, with payments due semi-annually. An extension of the amount due on July 22, 2009 has been granted to January 22, 2011. There was no fee paid for arranging the renewal of the loan. As at June 30, 2010, accrued interest on the loan was $114,554, which was included in accrued liabilities. The security granted to Rana is a floating charge and a security interest in all of our assets, subject and subordinate to any borrowing by us with banks and lending institutions.
Loan from Director
Another significant commitment for us in fiscal year 2010 is the amount of $700,000 advanced by a director to facilitate the production of the new apparel designs. The loan has an interest rate of 12% with a 1% charge for each advance. The loan matured on February 28, 2009. On February 16, 2009, the director advanced the Company an additional $200,000 for a total amount due to the director, of $900,000. A new secured loan agreement, with an interest rate of 12% is due in February, 2011 and is for the total amount outstanding ($900,000).
NRC Agreement
An additional significant commitment for the Company in fiscal year 2010 is the Joint Collaboration Agreement (JCA) the Company entered into with the NRC during 2008 to continue to develop a patentable enzyme technology for the processing of hemp fibers. Phase II of this agreement is for a three year term, which expires on May 9, 2010. On February 19, 2010, the Company signed an amendment to the agreement which will now expire on May 9, 2012. Over the term of the amended agreement, the Company will pay the NRC, $280, 536 ($294,822 CDN). The NRC is to be paid as it conducts work on the joint collaboration. As the NRC completes research and development work, the monies become due. There are no further costs or other off-balance sheet liabilities associated with the NRC JCA agreement. In addition to cash payments, the Company is to contribute $1,350,000 of "in kind" contributions over the course of the JCA.
Public Relations Agreement
On November 25, 2009, the Company signed a service agreement with a company to provide public relations services. Pursuant to the agreement, the Company agreed to pay $7,500 per month for a period of one year ending October, 2010. Starting August 1, 2010, the public relations services provider has agreed to reduce their monthly fee to $4,000. Either party may terminate the agreement with 30 days notice.
Investor Relations Agreement
On August 9, 2010, the Company hired a firm to perform investor relation activities. The agreement term is one year with ninety days notice of termination by either party. The monthly retainer is $10,000 with 125,000 stock options exercisable at $1.01 and expiring August 9, 2015.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, the Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable because we are a smaller reporting company.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Kenneth Barker, our Chief Executive Officer, and Guy Prevost, our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, they concluded that our disclosure controls and procedures were effective as of June 30, 2010.
No Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We currently are not a party to any material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated.
Item 1A. Risk Factors
Not applicable because we are a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 19, 2010, we issued 1,424,739 units pursuant to a private placement to 16 subscribers at $1.00 per unit, for proceeds of $1,424,739. Each unit consists of one common share and one-half of one non-transferable common stock purchase warrant, with each whole warrant exercisable to purchase one additional share at $1.25 per share, expiring on May 19 2013. The units issued to eight of the subscribers under an exemption from the registration requirements of the U.S. Securities Act pursuant to Regulation S and to the remaining eight subscribers under an exemption from the registration requirements of the U.S. Securities Act pursuant to Rule 506 for accredited investors, in each case based on representations and warranties made by the subscribers in their respective subscription agreements with the Company. One of the subscribers is an officer and director of the Company, and another subscriber is a director of the Company. We paid a total $67,374 for agent commis sions and other expenses which have been recorded as share issue costs.
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Removed and Reserved)
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit No. | Document |
3.1 | Articles of Incorporation, as amended (1) |
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3.2 | Bylaws (1) |
10.1 | Collaboration Agreement dated effective May 7, 2004 between Hemptown Clothing, Inc., and the National Research Council of Canada (2) |
10.2 | Renewed Collaboration Agreement dated effective December 7, 2007 between Crailar Fiber Technologies, Inc., and the National Research Council of Canada (2) |
10.3 | Amendment to the Renewed Collaboration Agreement dated effective February 19, 2010 between Naturally Advanced Technologies, Inc. and the National Research Council of Canada (2) |
10.4 | Master Agreement for Technology Development between Alberta Research Council and Crailar Fiber Technologies dated January 1, 2007 (3) |
10.5 | CEO Executive Services Agreement between Naturally Advanced Technologies Inc. and Meriwether Accelerators LLC dated November 27, 2007 with effective date of August 24, 2007 (4) |
10.6 | 2006 Stock Option Plan (5) |
10.7 | Letter Agreement dated September 2, 2008 between Naturally Advanced Technologies Inc. and Lipper/Heilshorn & Associates, Inc. (6) |
10.7 | Renewal of CEO Executive Services Agreement Between Naturally Advanced Technologies Inc. And Meriwether Accelerators LLC dated October 14, 2008 (7) |
10.8 | 2008 Fixed Share Stock Option Plan (8) |
10.9 | CEO Executive Services Agreement between Naturally Advanced Technologies Inc. and Kenneth Barker, dated for reference August 24, 2009 |
10.10 | Service Agreement between Naturally Advanced Technologies Inc. and OrganicWorks Marketing LLC dated November 25, 2010 |
14.1 | Corporate Governance Policy (9) |
14.2 | Corporate Disclosure Policy (9) |
14.3 | Securities Trading Policy (9) |
14.4 | Board of Directors Charter (9) |
14.5 | Terms of Reference for the Chief Financial Officer (9) |
14.6 | Terms of Reference of Committee Chairs (9) |
14.7 | Audit Committee Charter (9) |
14.8 | Corporate Governance Committee Charter (9) |
14.9 | Compensation Committee Charter (9) |
14.10 | Disclosure Charter Policy (9) |
14.11 | Code of Ethics (9) |
14.12 | Insider Trading and Reporting Guidelines (9) |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act. |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act. |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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(1) Filed as an exhibit to our Form 10-KSB for fiscal year ended December 31, 2004, as filed with the SEC on March 31, 2005.
(2) Filed as an exhibit to our Form 8-K as filed with the SEC on March 8, 2010.
(3) Filed as an exhibit to our Form 8-K as filed with the SEC on June 25, 2007.
(4) Filed as an exhibit to our Form 8-K as filed with the SEC on December 21, 2007.
(5) Filed as an exhibit to our Form 10-KSB for fiscal year ended December 31, 2006 as filed with the SEC Commission on March 31, 2007.
(6) Filed as an exhibit to our Form 8-K as filed with the SEC on September 8, 2008.
(7) Filed as an exhibit to our Form 8-K as filed with the SEC on October 28, 2008.
(8) Filed as an exhibit to our Form S-8 as filed with the SEC on October 10, 2008.
(9) Filed as an exhibit to our Form 10-KSB for fiscal year ended December 31, 2007 as filed with the SEC on April 11, 2008.
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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.
NATURALLY ADVANCED TECHNOLOGIES INC.
By: "Kenneth C. Barker"
Kenneth C. Barker
Chief Executive Officer, and a director
Date: August 16, 2010
By: "Guy Prevost"
Guy Prevost
Chief Financial Officer and a director
Date: August 16, 2010
