UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 2008
| [ ] | 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 000-52739
YAFARM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 20-5156305 (I.R.S. EmployerIdentification No.) |
197 Route 18 South, Suite 3000, PMB 4157 East Brunswick, NJ (Address of principal executive offices) | 08816 (Zip Code) |
Registrant’s telephone number, including area code (732) 658-4280
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 required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 _______ | Accelerated filer ________ |
| | | |
| | Non-accelerated filer | Smaller reporting company X |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes No X .
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No .
Applicable only to corporate issuers
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 2, 2008, there were 10,000,000 shares of common stock, $0.001 par value, issued and outstanding.
YAFARM TECHNOLOGIES, INC.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | | 3 |
| | | |
| ITEM 1 | Financial Statements | 7 |
| | | |
| ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 |
| | | |
| ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 9 |
| | | |
| ITEM 4 | Controls and Procedures | 10 |
| | | |
| ITEM 4T | Controls and Procedures | 12 |
| | | |
| PART II – OTHER INFORMATION | | 12 |
| | | |
| ITEM 1 | Legal Proceedings | 12 |
| | | |
| ITEM 1A | Risk Factors | 12 |
| | | |
| ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 12 |
| | | |
| ITEM 3 | Defaults Upon Senior Securities | 12 |
| | | |
| ITEM 4 | Submission of Matters to a Vote of Security Holders | 12 |
| | | |
| ITEM 5 | Other Information | 12 |
| | | |
| ITEM 6 | Exhibits | 12 |
PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
ITEM 1 Financial Statements
YAFARM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2008
(Unaudited)
| | | March 31, 2008 | | | December 31, 2007 | |
| | | (Unaudited) | | | (Audited) | |
| | | | | | | |
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | | $ | 440 | | | $ | 1,971 | |
| Receivable | | | - | | | | - | |
| Total Current Assets | | | 440 | | | | 6,971 | |
| | | | | | | | | |
| Fixed Assets | | | | | | | | |
| Computer equipment | | | 3,308 | | | | 3,308 | |
| Accumulated depreciation | | | (2,419 | ) | | | (2,150 | ) |
| Total Fixed Assets | | | 889 | | | | 1,158 | |
| | | | | | | | | |
| Total Assets | | $ | 1,329 | | | $ | 8,129 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accrued expenses and other payables | | $ | 4,457 | | | $ | 9,974 | |
| Related party payable | | | 20,290 | | | | 6,094 | |
| Total Current Liabilities | | | 24,747 | | | | 16,068 | |
| Long Term Liabilities | | | | | | | | |
| Total Long Term Liabilities | | | - | | | | - | |
| | | | | | | | | |
| Total Liabilities | | | 24,747 | | | | 16,068 | |
| | | | | | | | | |
| Stockholders' Equity (Deficit) | | | | | | | | |
| Preferred stock -- 10,000,000 shares authorized having a | | | | | |
| par value of $.001 per share; 0 shares issued and | | | | | | | | |
| outstanding | | | | | | | | |
| Common stock -- 100,000,000 shares authorized having a | | | | | | | | |
| par value of $.001 per share; 10,000,000 shares issued | | | | | | | | |
| and outstanding | | | 10,000 | | | | 10,000 | |
| Additional paid-in capital | | | 26,188 | | | | 26,188 | |
| Retained earnings (deficit) | | | (59,606 | ) | | | (44,127 | ) |
| Total Stockholders' Equity (deficit) | | | (23,418 | ) | | | (7,939 | ) |
| | | | | | | | | |
| Total Liabilities and Stockholders' Equity (Deficit) | | $ | 1,329 | | | $ | 8,129 | |
The accompanying notes are an integral part of these financial statements
YAFARM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Unaudited)
| | | For the Three Months Ended March 31, 2008 (Unaudited) | | | For the Three Months Ended March 31, 2007 (Unaudited) | |
| | | | | | | |
| Revenues, net of discounts | | $ | - | | | $ | 642 | |
| Operating Expenses | | | 15,189 | | | | 4,626 | |
| Net Income (Loss) from Operations | | | (15,189 | ) | | | (3,984 | ) |
| Other Income (Expense) | | | | | | | | |
| Interest Expenses | | | (290 | ) | | | - | |
| Total Other Income (Expense) | | | (290 | ) | | | - | |
| Net Income (Loss) before taxes | | | (15,479 | ) | | | (3,984 | ) |
| Provision for Income Taxes (Benefit) | | | - | | | | (598 | ) |
| Net Income (Loss) | | $ | (15,479 | ) | | $ | (3,386 | ) |
| | | | | | | | | |
| Income (Loss) Per Share Basic and Fully Diluted | | $ | (0.01 | ) | | $ | (0.01 | ) |
| | | | | | | | | |
| Weighted Average Shares Outstanding Basic and Fully Diluted | | | 10,000,000 | | | | 9,824,433 | |
| | | | | | | | | |
The accompanying notes are an integral part of these financial statements
YAFARM TECHNOLOGIES, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Unaudited)
| | | For the Three Months Ended March 31, 2008 (Unaudited) | | | For the Three Months Ended March 31, 2007 (Unaudited) | |
| Cash Flows From Operating Activities | | | | | | |
| Net Income (Loss) | | $ | (15,479 | ) | | $ | (3,386 | ) |
| Adjustments to reconcile net income (loss) | | | | | | | | |
| to net cash from operating activities: | | | | | | | | |
| Depreciation and Amortization | | | 269 | | | | 58 | |
| (Increase)/Decrease-Receivables | | | 5,000 | | | | - | |
| (Increase)/Decrease-Prepaid Expenses | | | - | | | | 14,300 | |
| (Increase)/Decrease-Deferred Taxes | | | - | | | | (598 | ) |
| Increase/(Decrease)-Accrued Expenses | | | (9,974 | ) | | | 2,545 | |
| Increase/(Decrease)-Related Party Payables | | | (1,347 | ) | | | (16,099 | ) |
| Increase/(Decrease)-Customer Deposits | | | - | | | | - | |
| Net Cash From Operating Activities | | | (21,531 | ) | | | (3,180 | ) |
| | | | | | | | | |
| Cash Flows From Investing Activities | | | - | | | | - | |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Proceeds from Issuance of Common Stock | | | - | | | | 40,400 | |
| Professional Fees related to stock offering | | | - | | | | (36,867 | ) |
| Proceeds from related party note payable | | | 20,000 | | | | | |
| Net Cash From Financing Activities | | | 20,000 | | | | 3,533 | |
| Net Increase (Decrease) in Cash | | | (1,531 | ) | | | 353 | |
| Beginning Cash Balance | | | 1,971 | | | | 35,716 | |
| Ending Cash Balance | | $ | 440 | | | $ | 36,069 | |
| | | | | | | | | |
| | | | | | | | | |
Supplemental Disclosure of Cash Flow information: | | | | | | | | |
| Cash paid during the period for interest | | $ | - | | | $ | - | |
| Cash paid during the period for income taxes | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these financial statements
YAFARM TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
(Unaudited)
NOTE A – PRELIMINARY NOTE
The accompanying condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the interim financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of the results for the period. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-KSB for the year ended December 31, 2007.
NOTE B- RELATED PARTY NOTE PAYABLE
On February 8, 2008, the Company borrowed $20,000 through the issuance of a Note to Columbia China Capital Group, Inc., an affiliated party and a shareholder of the Company. The Note carries 10% interest per annum for a term of one year. The proceeds of the Note are used to pay for certain professional costs such as legal, accounting and listing services. The Company has accrued $290 of interest on the note during the period ended March 31, 2008.
NOTE C- GOING CONCERN
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2008, the Company had an accumulated deficit of ($59,606), negative working capital of $24,307 and negative cash flows from operations of $21,531 raising substantial doubt about its ability to continue as a going concern.
Management’s plan to address the Company’s ability to continue as a going concern includes: obtaining additional funding from the sale of the Company’s securities and establishing revenues. Although management believes that it will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful. Should we be unsuccessful, the Company may need to discontinue its operations.
NOTE D – NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. The Company adopted SFAS 157 on January 1, 2008 with no impact on the Company’s condensed consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. The Company elected not to measure any additional financial assets or liabilities at fair value at the time SFAS 159 was adopted on January 1, 2008. As a result, implementation of SFAS 159 had no impact on the Company’s condensed consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51(“SFAS 160”). SFAS No. 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141R and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has not yet determined the effect on its consolidated financial statements, if any, upon adoption of SFAS No. 141R or SFAS No. 160.
* * * * * *
| ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.
Overview
We are a web development and web hosting company. Our wholly-owned subsidiary, YaFarm Group, LLC, offers a broad range of business-class website development and web hosting products and services for small and medium-sized businesses. Our goal is to help many traditional businesses go online to tap into the market potential offered by the Internet.
We face many challenges in meeting our goal. The market for Internet services is large, but fragmented, and constantly changing. In the short-term, we are focused on establishing ourselves in the web development and web hosting niche by providing quality service at a reasonable cost. In order to manage anticipated growth, we will rely on independent contractors to provide many of the services we intend to offer, which comes at the risk of losing quality when compared to having a large staff of employees. In addition, we will initially contract out web hosting services at a cost of approximately $100 plus $20 per month, per site, as opposed to spending approximately $100,000 to purchase and maintain the equipment necessary to do it in-house. In the long-term, intense competition is anticipated to reduce the price we can charge for our services and thus our profit margins.
We believe that, if properly capitalized, we can establish ourselves in the identified niche and capture enough market share to be able to begin to offer other, to-be-developed cutting edge related Internet services.
Results of Operations for the Three Months Ended March 31, 2008 and 2007
Introduction
Our revenues for the first quarter of 2008 were lower, as compared to the first quarter of 2007.
Revenues and Income (Loss) from Operations
Our revenue, operating expenses and net income (loss) from operations for the three months ended March 31, 2008, as compared to the three months ended March 31, 2007, are as follows:
| | | 3 Months Ended March 31, 2008 | | | 3 Months Ended March 31, 2007 | | | Percentage Change | |
| | | | | | | | | | |
| Revenue | | $ | - | | | $ | 642 | | | | (100 | ) % |
| Operating expenses | | | 15,189 | | | | 4,626 | | | | 228.3 | % |
| | | | | | | | | | | | | |
| Net loss from operations | | $ | (15,189 | ) | | $ | (3,984 | ) | | | 281.3 | % |
Our revenues were $zero for the three month period ended March 31, 2008, as compared to $642 for the three month period ended March 31, 2007 because of lower marketing expenditures. During the same time periods, our operating expenses increased by 228.3% because of professional fees associated with being a public, reporting company. As a result, we had net loss from operations of $15,189 for the three month period ended March 31, 2008, as compared to net loss from operations of $3,984 for the three month period ended March 31, 2007.
Liquidity and Capital Resources
Introduction
During the three months ended March 31, 2008, we had a net loss of $15,479 and a negative cash flow from operations of $21,531. Because our revenues are small, almost any change in our revenues or operating expenses has a material effect, and we anticipate that our net profit or loss, and operating profit or loss, will continue to vary widely from time period to time period.
Our cash and cash equivalents, total current assets, total assets, total current liabilities, and total liabilities as of March 31, 2008, as compared to December 31, 2007, are as follows:
| | | March 31, | | | December 31, | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| Cash | | $ | 440 | | | $ | 1,971 | |
| Total current assets | | | 440 | | | | 6,971 | |
| Total assets | | | 1,329 | | | | 8,129 | |
| Total current liabilities | | | 24,747 | | | | 16,068 | |
| Total liabilities | | | 24,747 | | | | 16,068 | |
Cash Requirements
Our cash requirements are expected to remain consistent with our historical needs over the next 12 months. During the three months ended March 31, 2008, we received total proceeds of $0.00 from the issuance of common stock. Our cash is utilized primarily for professional fees associated with being a public, reporting company.
Beyond the next 12 months, our cash needs are anticipated to increase substantially as we anticipate making one or more acquisitions. We anticipate fulfilling our cash needs primarily through the sale of our common stock, followed by increased cash flows from operations. We cannot estimate what our cash needs will be in the future, other than the approximately $100,000 annually we anticipate spending on the cost of being a publicly registered company, and we have not entered into any discussions concerning the sale of our common stock in the future.
Sources and Uses of Cash
Operations and Financing
During the three months ended March 31, 2008, we generated a negative cash flow of $21,531. Net cash used in operating activities for the three months ended March 31, 2008 and 2007, were $21,531 and $3,180, respectively. Negative operating cash flows during the three ended March 31, 2008 were primarily created by the decrease in our revenues without a corresponding decrease in our operating expenses.
Net cash provided by financing activities for the three months ended March 31, 2008 and 2007, were $20,000 and $3,533, respectively.
We anticipate that we will continue to operate at a loss until we are able to obtain substantial financing.
Critical Accounting Policies
Our accounting policies are fully described in Note A to our consolidated financial statements contained in our Annual Report on Form 10-KSB, filed on April 15, 2008. The following describes the general application of accounting principles that impact our consolidated financial statements.
Our results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt, inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
| ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk |
As a smaller reporting company, we are not required to provide the information required by this Item.
| ITEM 4 | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2008, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2008, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following three material weaknesses which have caused management to conclude that, as of March 31, 2008, our disclosure controls and procedures were not effective at the reasonable assurance level:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act and will be applicable to us for the year ending December 31, 2008. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. We had a significant number of audit adjustments last fiscal year. Audit adjustments are the result of a failure of the internal controls to prevent or detect misstatements of accounting information. The failure could be due to inadequate design of the internal controls or to a misapplication or override of controls. Management evaluated the impact of our significant number of audit adjustments last year and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Remediation of Material Weaknesses
To remediate the material weaknesses in our disclosure controls and procedures identified above, in addition to working with our independent registered public accounting firm, we have continued to refine our internal procedures to begin to implement segregation of duties and to reduce the number of audit adjustments.
Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 4T | Controls and Procedures |
At the end of the period covered by this report, we carried out the above evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14.
Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, based on the above factors, our disclosure controls and procedures were not effective (1) to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
Management’s Report On Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control over financial reporting is a process designed under the supervision of our CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Management has made a comprehensive review, evaluation and assessment of the Company's internal control over financial reporting as of December 31, 2007, which is contained in our Annual Report on Form 10-KSB, filed on April 15, 2008. In making its assessment of internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control − Integrated Framework. In accordance with Section 404 of the Sarbanes Oxley Act of 2002, management makes the following assertions:
| · | Management has implemented a process to monitor and assess both the design and operating effectiveness of internal control over financial reporting. |
| · | All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. |
| · | Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2008. In making this assessment, it used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on that assessment, we believe that, as of March 31, 2008, the Company’s internal control over financial reporting is deficient based on those criteria for the reasons stated above. |
This quarterly report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this quarterly report.
In accordance with current SEC guidelines, our external auditors are required to provide their initial attestation in our Annual Report on Form 10-K for the fiscal year ending December 31, 2008. In February 2008, the SEC published a proposed amendment to these guidelines. If the amendment is approved as proposed, it would require our external auditors to provide their initial attestation in our Annual Report on Form 10-K for the fiscal year ending December 31, 2009.
PART II – OTHER INFORMATION
ITEM 1 Legal Proceedings
In the ordinary course of business, we may be from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 1A Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities by the Company during the three month period ended March 31, 2008.
ITEM 3 Defaults Upon Senior Securities
There have been no events which are required to be reported under this Item.
ITEM 4 Submission of Matters to a Vote of Security Holders
There have been no events which are required to be reported under this Item.
ITEM 5 Other Information
None.
ITEM 6 Exhibits
(a) Exhibits
| 2.1 (1) | | Reorganization and Stock Purchase Agreement dated as of July 31, 2006, between the Company and YaFarm Group, LLC |
| | | |
| 3.1 (1) | | Certificate of Incorporation of YaFarm Technologies, Inc., filed on June 16, 2006 |
| | | |
| 3.2 (1) | | Certificate of Amendment of Certificate of Incorporation of YaFarm Technologies, Inc., filed on June 28, 2006 |
| | | |
| 3.3 (1) | | Bylaws of YaFarm Technologies, Inc. |
| | | |
| 31.1 | | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
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| 31.2 | | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
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| 32.1 | | Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 32.2 | | Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(1) Incorporated by reference from our registration statement on Form SB-2, filed with theCommission on February 16, 2007
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | YaFarm Technologies, Inc. |
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| Dated: May 20, 2008 | /s/ Zhiguang Zhang |
| | By: Zhiguang Zhang |
| | Its: Chief Executive Officer |
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