Ya Zhu Silk 10-Q 2011 Q2 Quarterly report

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:		February 28, 2011
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: 333-155486
	YA ZHU SILK, INC.
	(Exact name of registrant as specified in its charter)
	Nevada		26-3062449
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	112 North Curry Street, Carson City, NV   89703-4934
	(Address of principal executive offices)   (Zip Code)
	(775) 284-3710
	(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
					Yesx  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.
Large accelerated filer  o				Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)				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).
					Yesx  No o
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of March 22, 2011, the registrant had 5,180,000 shares of common stock, $0.001 par value, issued and outstanding.

YA ZHU SILK, INC.

ANNUAL REPORT ON FORM 10-Q

INDEX

		Page
		Number
	PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4	Controls and Procedures	12
	PART II – OTHER INFORMATION
Item 1	Legal Proceedings	12
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3	Defaults Upon Senior Securities	13
Item 4	Submission of  Matters to a Vote of  Security Holders	13
Item 5	Other Information	13
Item 6	Exhibits	13

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YA ZHU SILK, INC.

(A Development Stage Company)

CONDENSED FINANCIAL STATEMENTS

February 28, 2011

Unaudited

CONDENSED BALANCE SHEETS

CONDENSED STATEMENTS OF OPERATIONS

CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

CONDENSED STATEMENTS OF CASH FLOW

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

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YA ZHU SILK, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
Unaudited
	February 28, 2011			August 31, 2010
ASSETS
CURRENT ASSETS
Cash	$	9,118		$	924
TOTAL ASSETS	$	9,118		$	924
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT  LIABILITIES
Accounts payable and accrued liabilities	$	6,000		$	16,250
Loans from Related Party		39,704			16,516
TOTAL CURRENT LIABILITIES		45,704			32,766
STOCKHOLDERS'  EQUITY ( DEFICIT )
Capital stock (Note 5)
Authorized
75,000,000 shares of common stock, $0.001 par value,	��
Issued and outstanding
5,180,000 shares of common stock (5,000,000 shares August 31,2010)		5,180			5,000
Additional Paid in Capital		10,320			1,500
Subscription Receivable		(5,100	)		-
Deficit accumulated during the development stage		(46,986	)		(38,342	)
TOTAL STOCKHOLDERS' EQUITY/(DEFICIT)		(36,586	)		(31,842	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)	$	9,118		$	924
The accompanying notes are an integral part of these financial statements

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YA ZHU SILK, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
Unaudited
													Cumulative results
	Three months			Three months			Six months			Six months			from inception
	ended			ended			ended			ended			(July22, 2008) to
	February 28, 2011			February 28, 2010			February 28, 2011			February 28, 2010			February 28, 2011
REVENUE
Revenues	$	-		$	-		$	-		$	-		$	-
Total Revenues		-			-			-			-			-
EXPENSES
Office and general		-			-			1,454			712			6,659
Professional Fees		4,190			3,250			7,190			4,940			40,328
Total Expenses		4,190			3,250			8,644			5,652			46,986
Provision for Income Tax								-			-			-
NET LOSS	$	(4,190	)	$	(3,250	)	$	(8,644	)	$	(5,652	)	$	(46,986	)
BASIC AND DILUTED LOSS PER COMMON SHARE
	$	-		$	-		$	-		$	-
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
		5,120,467			5,000,000			5,059,901			5,000,000
The accompanying notes are an integral part of these financial statements

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YA ZHU SILK, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
From inception (July 22, 2008) to February 28, 2011
Unaudited
										Deficit
										accumulated
	Common Stock				Additional		Share			during the
	Number of				Paid-in		Subscription			development
	shares		Amount		Capital		Receivable			stage			Total
Common stock issued for cash at $0.001
per share on August 12, 2008		5,000,000	$	5,000	$	-	$	(5,000	)	$	-		$	-
Net loss for the period ended
August 31, 2008											(3,500	)		(3,500	)
Balance, August 31, 2008		5,000,000		5,000		-		(5,000	)		(3,500	)		(3,500	)
Subscription Receivable								5,000						5,000
Net loss for the year ended
August 31, 2009		-		-		-		-			(16,960	)		(16,960	)
Balance, August 31, 2009		5,000,000		5,000		-		-			(20,460	)		(15,460	)
Related Party Forgiveness						1,500								1,500
Net loss for the year ended
August 31, 2010		-		-		-		-			(17,882	)		(17,882	)
Balance, August 31, 2010		5,000,000		5,000		1,500		-			(38,342	)		(31,842	)
Common stock issued for cash at $0.05
per share on Dec 2010 & Jan 2011		180,000		180		8,820		(5,100	)		-			3,900
Net loss for the period ended
February 28, 2011		-		-		-		-			(8,644	)		(8,644	)
Balance,  February 28, 2011		5,180,000	$	5,180	$	10,320	$	(5,100	)	$	(46,986	)	$	(36,586	)
The accompanying notes are an integral part of these financial statements

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YA ZHU SILK, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOW
Unaudited
	Six months			Six months			July22, 2008
	ended			ended			(inception date) to
	February 28, 2011			February 28, 2010			February 28, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(8,644	)	$	(5,652	)	$	(46,986	)
Adjustment to reconcile net loss to net cash
used in operating activities:
Expenses paid by related party on behalf
of the company		5,688			902			7,204
Increase (decrease) in accrued expenses		(10,250	)		1,250			6,000
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
		(13,206	)		(3,500	)		(33,782	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock		3,900						8,900
Increase in shareholder loan		17,500			4,000			34,000
NET CASH PROVIDED BY FINANCING ACTIVITIES
		21,400			4,000			42,900
NET INCREASE ( DECREASE) IN CASH		8,194			500			9,118
CASH, BEGINNING OF PERIOD		924			40			-
CASH, END OF PERIOD	$	9,118		$	540		$	9,118
Supplemental cash flow information and noncash financing activities:
Cash paid for:
Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-
Non-Cash activities
Expenses paid by related party on behalf
of the company	$	5,688		$	902		$	7,204
Loan forgiveness - related party	$	-		$	1,500		$	1,500
The accompanying notes are an integral part of these financial statements

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YA ZHU SILK, INC.

(A Development Stage Company)

NOTES TO THE CONDENSED INTERIM UNAUDITED FINANCIAL STATEMENTS

February 28, 2011

NOTE 1 – CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at February 28, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 August 31, 2010 audited financial statements.  The results of operations for the periods ended February 28, 2011 and the same period last year are not necessarily indicative of the operating results for the full years.

NOTE 2 – GOING CONCERN

The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern.  This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has a working capital deficit of $36,586 and an accumulated deficit of $46,986. The Company does not have a source of revenue sufficient to cover its operation costs giving substantial doubt for it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company.  There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.  The Company is funding its initial operations by way of issuing Founder’s shares.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 - CAPITAL STOCK

The Company’s capitalization is 75,000,000 common shares with a par value of $0.001 per share.  No preferred shares have been authorized or issued.

On August 12, 2008, the President was issued 5,000,000 common shares for cash, which was received on October 22, 2008.

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YA ZHU SILK, INC.

(A Development Stage Company)

NOTES TO THE CONDENSED INTERIM UNAUDITED FINANCIAL STATEMENTS

February 28, 2011

In December 2010 and January 2011, the Company issued 180,000 common shares at $0.05 for $5,100 in subscriptions receivable and $3,900 in cash.

NOTE 4 - RELATED PARTY TRANSACTIONS

The Company has received $41,204 in non-interest bearing loans from related parties with no specific terms of repayment since inception. $1,500 of these loans were forgiven in February 2010 by a former director of the company.  This item was recorded as an increase to Additional Paid in Capital and is reflected in these financial statements accordingly.

As of February 28, 2011 a total of $39,704 in related party loans was outstanding.

NOTE 5 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were available to be issued and has determined that there are no further events to disclose.

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

This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance.  Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions or words which, by their nature, refer to future events.  You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report.  These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

Overview

YA ZHU SILK, INC. ("Ya Zhu Silk", "the Company", “our” or "we") was incorporated in the State of Nevada as a for-profit company on July 22, 2008.  The Company is a development stage company that intends to import and to distribute high quality silk fabric made in China.

Liquidity

The Company has not yet generated any revenue from its operations.  As of the fiscal quarter ended February 28, 2011 we had $9,118 of current assets. We incurred operating expenses in the amount of $4,190 in the quarter ended February 28, 2011. These operating expenses were comprised of professional fees and office and general expenses.

Our current cash holdings will not satisfy our liquidity requirements and we will require additional financing to pursue our planned business activities.  We have registered 2,000,000 of or our common stock for sale to the public.  Our registration statement became effective on September 23, 2010 and we are in the process of seeking equity financing to fund our operations over the next 12 months.

Plan of Operation

Management believes that if subsequent private placements are successful, we will generate sales revenue within the following twelve months thereof. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.

If Ya Zhu Silk is unsuccessful in raising the additional proceeds through a private placement offering it will then have to seek additional funds through debt financing, which would be very difficult for a new development stage company to secure. Therefore, the company is highly dependent upon the success of the anticipated private placement offering described herein and failure thereof would result in Ya Zhu Silk having to seek capital from other resources such as debt financing, which may not even be available to the company. However, if such financing were available, because Ya Zhu Silk is a development stage company with no operations to date, it would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If Ya Zhu Silk cannot raise additional proceeds via a private placement of its common stock or secure debt financing it would be required to cease business operations. As a result, investors in Ya Zhu Silk common stock would lose all of their investment.

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Over the 12 month period starting upon raising enough funds, our Company must raise capital and begin executing its marketing plan. The first stage of our operations over this period is to produce some of our sample fabrics. The first step in producing some printed silk samples are to secure unique fabric designs by contacting the arts department and or graphic design or fashion design departments of various art colleges throughout the United States. The Company anticipates holding a fabric design contest allowing students to submit their patterns and designs, the winner will receive a cash prize that the company has not yet determined.  We expect to complete this step within 120 days after raising enough funds. The Company anticipates spending $3,500 dollars securing pattern designs from students.

Once the Company has secured what it believes to be saleable print designs it will then begin contacting mills in China to have them quote on producing the first 250 to 300 yards of fabric to be used in the Company’s sample books. The Company anticipates completing this phase within 180 days after raising enough funds.  The Company anticipates spending $15,000 for on its initial fabric stock. The Company will then produce 100 sample books of its print for samples to be sent to potential customers, the company anticipates the cost of 100 sample books to be $5,000 and should be completed within 270 days after raising enough funds.

Once the Company has secured its fabric samples and assembled its sample books the Company will begin contacting business that specialize in custom made women’s clothing, the Company anticipates its initial focus will be in New York, Los Angeles, Chicago, Miami and Palm Springs. The Company anticipates it will begin marketing its sample books within 270 days after raising enough funds. During this period the Company will develop a price list, a sale brochure explaining the exclusive limited print runs of the Company’s fabric and a certificate of authenticity to be shipped with every order the company has budgeted $5,000 for pricelist and brochure, The company will hire commission only sales reps though the United States to attend trade shows and follow-up with potential customers The company has budget $30,000 dollars for its initial sales and marketing efforts.  The Company will also develop its website with some online marketing activities, the company has budgeted $15,000. The Company anticipates it will begin generation revenues within 330 days after raising enough funds.

We do not currently have any employees and management does not plan to hire employees at this time. We do not expect the purchase or sale of any significant equipment and has no current material commitments.

Results of Operations

We did not generate any revenue during the quarter ended February 28, 2011.  As of the quarter ended February 28, 2011 we had $ 9,118 of current assets. We incurred operating expenses in the amount of $4,190 in the quarter ended February 28, 2011 compared to $3,250 in the quarter ended February 28, 2010. These operating expenses were comprised of professional fees and office and general expenses. Since inception we have incurred operating expenses of $46,986.

Off Balance Sheet Arrangement

The company is dependent upon the sale of its common shares to obtain the funding necessary to carry its business plan.  Our President, Ya Zhu has undertaken to provide the Company with operating capital to sustain its business over the next twelve month period, as the expenses are incurred, in the form of a non-secured loan. However, there is no contract in place or written agreement securing these agreements.

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Investors should be aware that Mrs. Zhu expression is neither a contract nor agreement between her and the company.

Other than the above described situation 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”), who is also our Chief Financial Officer (“CFO”), the Company’s principal executive officer and principal financial officer, of the design and effectiveness of our “disclosure controls and procedures” (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our CEO/CFO concluded that as of the end of the period covered by this report these disclosure controls and procedures were not effective. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in disclosure controls and procedures which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment as the Company had only one officer (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC Guidelines; and (iii) inadequate security and restricted access to computer systems including insufficient disaster recovery plans; and (iv) no written whistleblower policy. Our CEO/CFO plans to implement appropriate disclosure controls and procedures to remediate these material weaknesses, including (i) appointing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting and a whistle blower policy; and (iii) implement sufficient security and restricted access measures regarding our computer systems and implement a disaster recovery plan.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.

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No director, officer, or affiliate of the issuer and no owner of record or beneficiary of more than 5% of the securities of the issuer, or any security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer.

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 Security Holders

        None

Item 5. Other Information

None

Item 6. Exhibits

3.1 Articles of Incorporation [1]

3.2 By-Laws [1]

31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer *

31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer

32.1 Section 1350 Certification of Chief Executive Officer

32.2 Section 1350 Certification of Chief Financial Officer **

[1]     Incorporated by reference from the Company’s filing with the Commission on November 19, 2008.

*     Included in Exhibit 31.1

**    Included in Exhibit 32.1

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SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

YA ZHU SILK, INC.

BY:      /s/ Ya Zhu

Ya Zhu

President, Secretary Treasurer, Principal Executive Officer,

Principal Financial Officer and sole Director

Dated:  April 5, 2011

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