Agr Tools (AGRT) 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended January 31, 2010

or

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

For the transition period from ______________________ to ______________________

Commission File Number: 000-52043

AGR Tools, Inc.

(Exact name of registrant as specified in its charter)

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

1944 Bayview Court

Kelowna, British Columbia, Canada V1Z 3L8

(Address of principal executive offices)

(250) 826-4101

(Registrant’s telephone number, including area code)

_____________________________________________________

(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 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 þ   No o

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 þ   No o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court.   Yes o   No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of March 17, 2010 the registrant’s outstanding common stock consisted of 60,000,000 shares. However, upon the closing of the proposed share exchange transaction with AGR Stone & Tools USA, Inc., the registrant will have 81,186,156 shares of common stock outstanding.

TABLE OF CONTENTS

PART I   FINANCIAL INFORMATION	2
Item 1. Financial Statements	2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3. Quantitative and Qualitative Disclosures About Market Risk	7
Item 4. Controls and Procedures	7
Item 4T. Controls and Procedures	7
PART II – OTHER INFORMATION	8
Item 1. Legal Proceedings	8
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3. Defaults Upon Senior Securities	8
Item 4. Submission of Matters to a Vote of Security Holders	8
Item 5. Other Information	8
Item 6. Exhibits	8

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited interim financial statements of AGR Tools, Inc. (formerly Laburnum Ventures Inc.) (“we”, “our”, “us”) follow. All currency references in this report are to U.S. dollars unless otherwise noted.

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

January 31, 2010

	Index
Balance Sheets	F-1
Statements of Operations	F-2
Statements of Cash Flows	F-3
Notes to the Financial Statements	F-4

2

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Balance Sheets

(expressed in U.S. dollars)

	January 31, 2010 $ (unaudited)			October 31, 2009 $
ASSETS
Current Assets
Cash		4			–
Total Assets		4			–
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Bank indebtedness		–			17
Accounts payable		15,420			77,236
Accrued liabilities		6,173			–
Due to related party (Note 3)		273,363			154,642
Total Liabilities		294,956			231,895
Nature of Operations and Continuance of Business (Note 1)
Commitment (Note 5)
Stockholders’ Deficit
Preferred Stock Authorized: 100,000,000 preferred shares, with a par value of $0.001 per share Issued and outstanding: nil		–			–
Common Stock Authorized: 100,000,000 common shares, with a par value of $0.001 Issued and outstanding: 60,000,000 shares		60,000			60,000
Additional paid-in capital		15,000			15,000
Other comprehensive loss		(738	)		(738	)
Accumulated deficit during the exploration stage		(369,214	)		(306,157	)
Total Stockholders’ Deficit		(294,952	)		(231,895	)
Total Liabilities and Stockholders’ Deficit		4			–

F-1

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Statements of Operations

(expressed in U.S. dollars)

(unaudited)

	For the three months ended January 31, 2010 $			For the three months ended January 31, 2009 $			Accumulated from March 11, 2004 (Date of Inception) to January 31, 2010 $
Revenue		–			–			–
Expenses
Consulting		14,973			–			40,540
General and administrative		24,943			2,315			87,200
Mineral property and exploration costs		–			–			16,898
Professional fees		23,141			23,465			224,576
Total Expenses		63,057			25,780			369,214
Net Loss for the Period		(63,057	)		(25,780	)		(369,214	)
Other Comprehensive Loss
Foreign currency translation adjustments		–			–			(738	)
Net Comprehensive Loss for the Period		(63,057	)		(25,780	)		(369,952	)
Net Loss Per Share – Basic and Diluted		–			–
Weighted Average Shares Outstanding		60,000,000			60,000,000

F-2

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Statements of Cash Flows

(expressed in U.S. dollars)

	For the three months ended January 31, 2010 $			For the three months ended January 31, 2009 $			Accumulated from March 11, 2004 (Date of Inception) to January 31, 2010 $
Operating Activities
Net loss for the period		(63,057	)		(25,780	)		(369,214	)
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities		(55,643	)		17,262			21,593
Net Cash Used In Operating Activities		(118,700	)		(8,518	)		(347,621	)
Financing Activities
Bank indebtedness		(17	)		5,817			–
Due to related party		118,721			2,250			273,363
Proceeds from issuance of common shares		–			–			3,200
Share subscriptions received		–			–			71,800
Net Cash Provided By Financing Activities		118,704			8,067			348,363
Effect of Exchange Rate Changes on Cash		–			–			(738	)
Increase (Decrease) in Cash		4			(451	)		4
Cash – Beginning of Period		–			451			–
Cash – End of Period		4			–			4
Supplemental Disclosures
Interest paid		–			–			–
Income tax paid		–			–			–

F-3

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)

1. 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 is an exploration stage company, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”.

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated no revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at January 31, 2010, the Company had a working capital deficit of $294,952 and an accumulated deficit of $369,214. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. 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. 

2. 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, and are expressed in U.S. dollars. The Company’s fiscal year-end is October 31.

b) Interim Financial Statements

These interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended October 31, 2009.

The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at January 31, 2010, and the results of its operations and cash flows for the three month period ended January 31, 2010 and 2009. The results of operations for the period ended January 31, 2010 are not necessarily indicative of the results to be expected for future quarters or the full year.

c) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 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.

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.

F-4

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)

2. Summary of Significant Accounting Policies (continued)

e) Loss per Share

The Company computes net loss per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

f) Financial Instruments

Pursuant to ASC 820, “Fair Value Measurements and Disclosures”, and ASC 825, “Financial Instruments”, an entity is required 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 instrument’s 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 payable, and amount due to 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. We believe that the recorded values of all of the Company’s other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

g) Comprehensive Loss

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. For the periods ended January 31, 2010 and October 31, 2009, the Company did not have any items representing other comprehensive income/loss.

h) Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830, “Foreign Currency Matters”, using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars.

F-5

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)

2. Summary of Significant Accounting Policies (continued)

i) Mineral Properties

The Company has been in the exploration stage since its formation on March 11, 2004 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under ASC 930, “Extractive Activities – Mining”, at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

j) Asset Retirement Obligations

The Company follows the provisions of ASC 410, “Asset Retirement and Environmental Obligations”, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.

k)  Recent Accounting Pronouncements

In January 2010, the FASB issued an amendment to ASC 820, “Fair Value Measurements and Disclosure”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis.  This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.

In January 2010, the FASB issued an amendment to ASC 505, “Equity”, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend.  This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis.  The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.

In October 2009, the FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.

F-6

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)

2. Summary of Significant Accounting Policies (continued)

k) Recent Accounting Pronouncements (continued)

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.

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

l) Comparative Figures

Certain comparative figures have been reclassified in order to conform to the current year’s financial statement presentation.

3. Related Party Transactions

a) As at January 31, 2010, the Company owed $148,666 (2009 - $136,165) to the former President of the Company for management fees and financing of day-to-day expenditures incurred on behalf of the Company. The amount owing is unsecured, non-interest bearing, and due on demand.

b)  As at January 31, 2010, the Company owed $124,697 (2009 - $18,477) to the President of the Company for management fees and financing of day-to-day expenditures incurred on behalf of the Company. The amount owing is unsecured, non-interest bearing, and due on demand.

4. Commitment

On July 21, 2009, the Company entered into a share exchange agreement (the “Original Share Exchange Agreement”) with AGR Stone & Tools USA, Inc., a Texas company (“AGR”). Pursuant to the terms of the Original Share Exchange Agreement, the Company and AGR agreed to engage in a share exchange which, if completed, would result in AGR becoming a wholly owned subsidiary of the Company subject to certain conditions and factors leading up to the final merger agreement.

On October 29, 2009, pursuant to the terms of the Original Share Exchange Agreement, the Company and AGR mutually agreed to terminate the Original Share Exchange Agreement and enter into a new share exchange agreement (the “New Share Exchange Agreement”) of which the following terms and conditions are required prior to the final merger agreement:

Pre-Merger Conditions

1)  AGR will have delivered to the Company audited financial statements for its last two fiscal years and any applicable interim period ended no more than 35 days before the closing of the New Share Exchange Agreement, prepared in accordance with accounting principles generally accepted in the United States and audited by an independent auditor registered with the Public Company Accounting Oversight Board in the United States (to be completed);

2)  AGR will receive approval for the share exchange from holders of at least 2/3rds of its voting securities pursuant to the Texas Business Corporation Act (completed); and

3)  The Company and AGR will be reasonably satisfied with their respective due diligence investigation of each other (completed).

F-7

AGR Tools, Inc.

(formerly Laburnum Ventures Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)

4. Commitment (continued)

Merger Conditions

1)  The Company will issue 46,186,516 common shares to the current shareholders of AGR in exchange for 48,186,516 issued and outstanding common shares of AGR. AGR is prohibited from having more than 48,186,516 common shares at the final merger agreement date, and the Company agrees to cancel all issued and outstanding common shares of AGR upon acquisition;

2)  The former President of the Company will surrender and cancel 25,000,000 issued and outstanding common shares;

3)  AGR will file all required documentation with the Texas Secretary of State to effect the share exchange; and

4)  The Company’s current director will resign and AGR will appoint a new director to fill the resulting vacancy.

As at January 31, 2010, all of the pre-merger conditions have yet to be completed. Therefore, the final merger agreement has not been signed.

5.      Subsequent Events

In accordance with ASC 855, “Subsequent Events”, the Company has evaluated subsequent event through to March 16, 2010, the date the financial statements were available to be issued. During this period, the Company did not have any material recognizable subsequent events.

F-8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This quarterly report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.

Business Overview

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 knows 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 Texas company (“AGR”).  Pursuant to the terms of the Original Share Exchange Agreement, we agreed to engage in a share exchange with AGR which, if completed, would result in AGR becoming our wholly owned subsidiary.  

On September 15, 2009, we completed a merger with our wholly owned subsidiary, AGR Tools, Inc., a Nevada company, and assumed the subsidiary’s name by filing Articles of Merger with the Nevada Secretary of State. The subsidiary was incorporated entirely for the purpose of effecting the name change and the merger did not affect our Articles of Incorporation or corporate structure in any other way.

On October 29, 2009, pursuant to the terms of the Original Share Exchange Agreement, we mutually agreed to terminate the Original Share Exchange Agreement with AGR and enter into a new share exchange agreement (the “New Share Exchange Agreement”).

The New Share Exchange Agreement provides that the share exchange between us and AGR will be carried out through a statutory process specified by Part 5 of the Texas Business Corporation Act in order to effect the transaction in a more efficient matter.

The following is a brief description of the material terms and conditions of the New Share Exchange Agreement:

1. we will issue 46,186,516 shares of our common stock to the current shareholders of AGR;

2. AGR will receive approval for the share exchange from holders of at least 2/3rds of its voting securities pursuant to the Texas Business Corporation Act;

3. AGR will have no more than 48,186,516 shares of its common stock issued and outstanding on the closing date of the New Share Exchange Agreement;

4. both AGR and us will be reasonably satisfied with our respective due diligence investigation of the other;

5. AGR will have delivered to us audited financial statements for its last two fiscal years and any applicable interim period ended no more than 35 days before the closing of the New Share Exchange Agreement, prepared in accordance with United States GAAP and audited by an independent auditor registered with the Public Company Accounting Oversight Board in the United States;

3

6. Tom Brown, our former sole officer and Director, will cancel 25,000,000 shares of our common stock held in his name;

7. AGR will file all required documentation with the Texas Secretary of State to effect the share exchange; and

8. David Chapman, our Director, will resign and AGR will appoint a new director to fill the resulting vacancy.

Due to the conditions precedent to closing the share exchange, including those set out above, and the risk that these conditions precedent will not be satisfied, there is no assurance that the share exchange will be completed as contemplated in the New Share Exchange Agreement.

AGR Stone & Tools USA, Inc.

AGR Stone & Tools USA, Inc. is a Texas-based company in the business of manufacturing and distributing diamond tools and accessories to the professional construction, building, maintenance and demolition industries. It currently distributes more than 700 products through its dealer network that encompasses 25 distributors in 17 U.S. states and Canadian provinces. These 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.

AGR subjects all of the products it manufactures and distributes to strict development standards. It field tests these products by using them in construction, building and demolition projects, and also tests them alongside the products of its competitors both in the field and in the laboratory. All of AGR’s products are accompanied by a warranty against defects in workmanship.

AGR’s business model focuses on direct sales through stocking dealers and online sales either through the company’s storage centers or its stocking dealers. The dealers act as face-to-face contacts for its customers and provide support to one another by sharing support for order fulfillment with the company’s storage centers. The company provides training manuals for these dealers and requires each one to be familiar with at least 200 of its products during their initial training. It does not have brokers or commission sales representatives involved in the distribution of its products.

The strategy AGR has undertaken to develop its business consists of three elements:

·   expanding its stocking dealer network throughout the United States and Canada;

·   monitoring the quality of its current and future products and accessories; and

·   aggressively developing its marketing expertise to increase its exposure to participants in the construction, building, maintenance and demolition industries.

The company has retained information technology personnel and has developed a stocking dealer email system and intranet communication network to facilitate growth. It is also in the process of developing an online shopping cart and software to expand its referral and re-ordering sales base.

AGR’s manufactures its products in China on a contract basis and distributes them through its stocking dealers and storage centers, which are located in Montgomery, Texas, Conroe, Texas and Anaheim, California.

Uncertainties

We are a development stage company that was incorporated on March 11, 2004. We have not generated any revenues from our business activities, and we do not expect to generate revenues for the foreseeable future. We have incurred operational losses since our inception, and we have been issued a going concern opinion by our auditors. To finance our operations, we have completed several rounds of financing and raised approximately $75,000 through private placements of our common stock.

We do not currently have sufficient financing to fully execute our business plan and there is no assurance that we will be able to obtain the necessary financing to do so. Accordingly, there is uncertainty about our ability to continue to operate.

4

Results of Operations

Results of Operations for the Three Months Ended January 31, 2010

For the three months ended January 31, 2010 we did not generate any revenues and we incurred a net loss of $63,057, compared to a net loss of $25,780 for the same period in 2009.

Our total expenses for the three months ended January 31, 2010 were $63,057, compared to total expenses of $25,780 for the same period in 2009, for a net increase of approximately 144%. Our total expenses for the three months ended January 31, 2010 consisted of $14,973 in consulting fees, $23,141 in professional fees and $24,943 in general and administrative expenses, whereas our total expenses for the same period in 2009 consisted of $23,465 in professional fees and $2,315 in general and administrative expenses. Our general and administrative expenses consist primarily of transfer agent fees and general office expenses. Our professional fees include legal, accounting and auditing fees.

Results of Operations for the Period from March 11, 2004 (Date of Inception) to January 31, 2010

From our inception on March 11, 2004 to January 31, 2010 we did not generate any revenues and we incurred a net loss of $369,952.

From our inception on March 11, 2004 to January 31, 2010 we incurred total expenses of $369,214, including $40,540 in consulting fees, $224,576 in professional fees, $16,898 in mineral property and exploration costs and $87,200 in general and administrative expenses. From our inception on March 11, 2004 to January 31, 2010 we also incurred $738 in foreign currency translation adjustments.

Liquidity and Capital Resources

We have limited operational history. As of January 31, 2010 we had $4 in cash and total assets, $294,956 in total liabilities and a working capital deficit of $294,952. As of January 31, 2010 we had an accumulated deficit of $369,214.

We are dependent on funds raised through equity financing and proceeds from related parties. Our net loss of $369,214 from our inception on March 11, 2004 to January 31, 2010 was funded primarily by such financing and proceeds. Since our inception on March 11, 2004 we have raised gross proceeds of $75,000 in cash from the sale of our common stock.

During the three months ended January 31, 2010 we spent $118,700 on operating activities, compared to $8,518 during the same period in 2009. From our inception on March 11, 2004 to January 31, 2010 we spent $347,621 on operating activities. The increase in our expenditures on operating activities during the three months ended January 31, 2010 was primarily due to increases in our net loss for the period and our accounts payable.

During the three months ended January 31, 2010 we received $118,704 from financing activities, including $118,721 in proceeds from related parties less $17 in bank indebtedness. During the three months ended January 31, 2009 we received $8,067 from financing activities, including $2,250 in proceeds from related parties and $5,817 in bank indebtedness. From our inception on March 11, 2004 to January 31, 2010 we received $348,363 from financing activities, including $273,363 in proceeds from related parties, $3,200 in proceeds from the issuance of our common stock and $71,800 in subscriptions for our common stock. The increase in our receipts from financing activities during the three months ended January 31, 2010 was primarily due to an increase in our proceeds from related parties.

From our inception on March 11, 2004 to January 31, 2010 we also experienced a loss of $738 in connection with foreign exchange translation.

Our increase in cash for the three months ended January, 31 2010 was $4 due to a combination of our operating and financing activities.

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If we are successful in completing the proposed share exchange transaction with AGR Stone & Tools USA, Inc., we will incur additional personnel and business costs. In order for us to attract and retain quality personnel, we anticipate that we will need to offer competitive salaries, issue common stock to consultants and employees and grant stock options to future employees. We estimate that our expenses over the next 12 months (beginning March 2010) will be approximately $570,000 as described in the table below. These estimates may change significantly depending on the nature of our business activities and our ability to raise capital from our shareholders or other sources.

Description	Potential Completion Date	Estimated Expenses ($)
Professional fees related to the closing of the share exchange	March 2010	50,000
AGR Stone & Tools USA, Inc. development costs	12 months	300,000
Investor relations costs and marketing expenses	12 months	60,000
Professional fees related to raising additional public or private equity	12 months	100,000
Professional fees	12 months	50,000
General and administrative expenses	12 months	10,000
Total		570,000

Our general and administrative expenses for the year will consist primarily of transfer agent fees, bank and interest charges and general office expenses. The professional fees are related to our regulatory filings throughout the year.

Based on our planned expenditures, we will require approximately $570,000 to proceed with our business plan over the next 12 months. If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources.

We intend to raise the balance of our cash requirements for the next 12 months from private placements, loans from related parties or possibly a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us.

Even though we plan to raise capital through equity or debt financing, we believe that the latter may not be a viable alternative for funding our operations as we do not have tangible assets to secure any such financing. We anticipate that any additional funding will be in the form of equity financing from the sale of our common stock. However, we do not have any financing arranged and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to finance our operations. In the absence of such financing, we may be forced to abandon our business plan.

Going Concern

Our financial statements for the three months ended January 31, 2010 have been prepared on a going concern basis and contain an additional explanatory paragraph in Note 1 which 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.

We have not generated any revenues, have achieved losses since our inception, and rely upon the sale of our common stock to fund our operations. We may not generate any revenues even if we close the proposed share exchange transaction with AGR Stone & Tools USA, Inc., and if we are unable to raise equity or secure alternative financing, we may not be able to continue our operations and our business plan may fail.

If our operations and cash flow improve, management believes that we can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or an improvement in our liquidity situation. The threat of our ability to continue as a going concern will cease to exist only when our revenues have reached a level able to sustain our business operations.

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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.

Inflation

The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Not applicable.

Item 4T. 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 Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our management 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, and that such information was not accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control

During the three months ended January 31, 2010 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 aware of any legal proceedings to which we are a party. 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. We are not aware of any other legal proceedings that have been threatened against us.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Exhibit Description
31.1	Certification of Chief Executive 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
31.2	Certification of 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 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
32.2	Certification of 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

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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.

	AGR Tools, Inc.
	(Registrant)
Date: March 17, 2010	/s/ George M. Rock Rutherford
	George M. Rock Rutherford
	President, Chief Executive Officer

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