UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2008 Commission file number 333-143626 YELLOW HILL ENERGY INC. (Exact name of registrant as specified in its charter) NEVADA (State or other jurisdiction of incorporation or organization) 350-409 Granville Street Vancouver, BC V6C 1T2 (Address of principal executive offices, including zip code.) Phone (604) 696-2711 Fax (604) 683-2506 (Telephone number, including area code) Karen Batcher Batcher & Zarcone, LLP 4252 Bonita Road #151 Bonita, CA 91902 Phone (619) 475-7882 Fax (619) 789-6262 (Name, address and telephone number of agent for service) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 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," "non-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 [X] NO [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 30,000,000 shares as of August 27, 2008. ITEM 1. FINANCIAL STATEMENTS YELLOW HILL ENERGY INC (An Exploration Stage Enterprise) Balance Sheet (Expressed in U.S. Dollars) July 31, April 30, 2008 2008 -------- -------- (Audited) A S S E T S CURRENT ASSETS Cash $ 24,863 $ 28,398 -------- -------- Total Current Assets 24,863 28,398 -------- -------- Total Assets $ 24,863 $ 28,398 ======== ======== L I A B I L I T I E S CURRENT LIABILITIES Accounts Payable and Accrued Liabilities 400 400 -------- -------- Total Current Liabilities 400 400 -------- -------- S T O C K H O L D E R S ' E Q U I T Y Common Stock 75,000,000 authorized shares, par value $0.001 30,000,000 shares issued and outstanding 30,000 30,000 Additional Paid-in-Capital 30,000 30,000 Deficit accumulated during exploration stage (35,537) (32,002) Total Stockholders' Equity 24,463 27,998 -------- -------- Total Liabilities and Stockholders' Equity $ 24,863 $ 28,398 ======== ======== The accompanying notes are an integral part of these financial statements. 2 YELLOW HILL ENERGY INC. (An Exploration Stage Enterprise) Statement of Operations (Expressed in U.S. Dollars) Period from March 14, 2007 Three Months Three Months (Date of inception) Ended Ended through July 31, July 31, July 31, 2008 2007 2008 ------------ ------------ ------------ REVENUES: Revenues $ -- $ -- $ -- ------------ ------------ ------------ Total Revenues -- -- -- ------------ ------------ ------------ EXPENSES: Operating Expenses Impairment of mineral property -- -- 8,650 Exploration -- -- 7,880 General and Adminstrative 535 1,716 6,657 Professional Fees 3,000 3,350 12,350 ------------ ------------ ------------ Total Expenses 3,535 5,066 35,537 ------------ ------------ ------------ Net loss from Operations (3,535) (5,066) (35,537) PROVISION FOR INCOME TAXES: Income Tax Benefit -- -- -- ------------ ------------ ------------ Net Income (Loss) for the period $ (3,535) $ (5,066) $ (35,537) ============ ============ ============ Basic and Diluted Earnings Per Common Share (0.00) (0.00) ------------ ------------ Weighted Average number of Common Shares used in per share calculations 30,000,000 15,000,000 ============ ============ The accompanying notes are an integral part of these financial statements. 3 YELLOW HILL ENERGY INC (An Exploration Stage Enterprise) Statement of Stockholders' Equity For the period from March 14, 2007 (inception) to July 31, 2008 (Expressed in U.S. Dollars) $0.001 Paid-In Accumulated Stockholders' Shares Par Value Capital Deficit Equity ------ --------- ------- ------- ------ Balance, March 14, 2007 (Date of Inception) -- $ -- $ -- $ -- $ -- Stock Issued for cash at $0.001 per share 15,000,000 15,000 -- -- 15,000 on April 28, 2007 Net Loss for the Period -- -- -- (15,890) (15,890) ----------- -------- -------- --------- -------- Balance, April 30, 2007 15,000,000 15,000 -- (15,890) (890) Stock Issued for cash at $0.003 per share 15,000,000 15,000 30,000 -- 45,000 on July 31, 2007 Net Loss for the Period -- -- -- (16,112) (16,112) ----------- -------- -------- --------- -------- Balance, April 30, 2008 30,000,000 30,000 30,000 (32,002) 27,998 Net Loss for the Period -- -- -- (3,535) (3,535) ----------- -------- -------- --------- -------- Balance, July 31, 2008 $30,000,000 $ 30,000 $ 30,000 $ (35,537) $ 24,463 =========== ======== ======== ========= ======== The accompanying notes are an integral part of these financial statements. 4 YELLOW HILL ENERGY INC (An Exploration Stage Enterprise) Statement of Cash Flows (Expressed in U.S. Dollars) Period from For the Three For the Three March 14, 2007 Months Ended Months Ended (Date of inception) to July 31, July 31, July 31, 2008 2007 2008 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (3,535) $ (5,066) $(35,537) Adjustments to reconcile net loss to net cash used in operating activities: Impairment of mineral property -- -- 8,650 Accounts Payable and Accrued Liabilities -- 1,000 400 -------- -------- -------- Net Cash Provided from Operating Activities (3,535) (4,066) (26,487) -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Mineral property acquisition cost -- -- (8,650) -------- -------- -------- Net Cash Used in Investing Activities -- -- (8,650) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Common Stock issued for cash -- 45,000 60,000 -------- -------- -------- Net Cash Provided from Financing Activities -- 45,000 60,000 -------- -------- -------- Increase (decrease) in Cash (3,535) 40,934 24,863 -------- -------- -------- Cash, Beginning of the period 28,398 5,760 -- -------- -------- -------- Cash, End of the period $ 24,863 $ 46,694 $ 24,863 ======== ======== ======== Supplemental Information: Taxes paid $ -- $ -- $ -- ======== ======== ======== Interest paid $ -- $ -- $ -- ======== ======== ======== The accompanying notes are an integral part of these financial statements. 5 YELLOW HILL ENERGY INC. (AN EXPLORATION STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS AND HISTORY - Yellow Hill Energy Inc., a Nevada corporation, (hereinafter referred to as the "Company" or "Yellow Hill Energy") was incorporated in the State of Nevada on March 14, 2007. The Company was formed to engage in the acquisition, exploration and development of natural resource properties of merit. The Company acquired mineral claims during the initial period ending April 30, 2007 for $8,650. The Company's operations have been limited to general administrative operations, initial property staking and investigation, and is considered an Exploration Stage Company in accordance with Statement of Financial Accounting Standards No. 7. The Company will review and further develop the accounting policies as the business plan is implemented. The Company completed its prospectus offering of 15,000,000 shares of the Company's common stock at a price of $0.003 per share for gross proceeds of $45,000 on July 31, 2007. MANAGEMENT OF COMPANY - The Company filed its articles of incorporation with the Nevada Secretary of State on March 14, 2007, indicating Sandra L. Miller on behalf of Resident Agents of Nevada, Inc. as the sole incorporator. The initial list of officers filed with the Nevada Secretary of State on April 13, 2007, indicates Craig T. Lindsay as the President and Treasurer; and Sean Mitchell as Secretary and Director. GOING CONCERN - The Company has incurred net losses of approximately $35,537 for the period from March 14, 2007 (Date of Inception) through July 31, 2008 and has commenced limited operations, raising substantial doubt about the Company's ability to continue as a going concern. The Company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives. The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company's plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. YEAR END - The Company's year end is April 30. 6 YELLOW HILL ENERGY INC. (AN EXPLORATION STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) USE OF ESTIMATES - The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES - The Company accounts for its income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Management feels the Company will have a net operating loss carryover to be used for future years. The Company has recorded a valuation allowance for the full potential tax benefit of the operating loss carryovers due to the uncertainty regarding realization. NET LOSS PER COMMON SHARE - The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share ("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB 98, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. For all periods presented from March 14, 2007 (Date of Inception) through July 31, 2008, the Company had no potentially dilutive securities. STOCK-BASED COMPENSATION - The Company has not adopted a stock option plan and has not granted any stock options. Accordingly no stock-based compensation has been recorded to date. LONG-LIVED ASSETS - In accordance with Financial Accounting Standards Board ("FASB") SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. 7 YELLOW HILL ENERGY INC. (AN EXPLORATION STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) MINERAL PROPERTY COSTS - The Company has been in the exploration stage since its inception on March 14, 2007 and has not yet realized any revenues from its planned operations, being the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred using the guidance in EITF 04-02, "Whether Mineral Rights Are Tangible or Intangible Assets". The Company assesses the carrying costs for impairment under SFAS No. 144, "Accounting for Impairment or Disposal of Long Lived Assets" 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. NEW ACCOUNTING PRONOUNCEMENTS - In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS ("SFAS No. 155"), which amends Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133") and Statement of Financial Accounting Standards No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES ("SFAS No. 140"). SFAS No. 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or hybrid financial instruments containing embedded derivatives. We do not expect the adoption of SFAS 155 to have a material impact on the company's financial position, results of operations or cash flows. In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS ("SFAS No. 156"), which amends FASB Statement No. 140 ("SFAS No. 140"). SFAS 156 may be adopted as early as January 1, 2006, for calendar year-end entities, provided that no interim financial statements have been issued. Those not choosing to early adopt are required to apply the provisions as of the beginning of the first fiscal year after September 15, 2006. The intention of the new statement is to simplify accounting for separately recognized servicing assets and liabilities, such as those common with mortgage securitization activities, as well as to simplify efforts to obtain hedge-like accounting. Specifically, FAS No. 156 permits a service using derivative financial instruments to report both the derivative financial instrument and related servicing asset or liability by using a consistent measurement attribute, or fair value. We do not expect the adoption of SFAS 155 to have a material impact on the Company's financial position, results of operations or cash flows. 8 YELLOW HILL ENERGY INC. (AN EXPLORATION STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS 2. PROPERTY AND EQUIPMENT As of July 31, 2008, the Company does not own any property and/or equipment. 3. STOCKHOLDER'S EQUITY The Company has 75,000,000 shares authorized with a par value of $0.001 per share. Effective April 28, 2007, a total of 15,000,000 shares of the Company's common stock were issued to the sole director of the Company pursuant to a stock subscription agreement at $0.001 per share for total proceeds of $15,000. Effective July 31, 2007, a total of 15,000,000 shares of the Company's common stock were issued pursuant to stock subscription agreements at $0.003 per share for total proceeds of $45,000. 4. RELATED PARTY TRANSACTIONS Craig T. Lindsay, Director, President and Treasurer; and Sean Mitchell, Director, and Secretary of the Company will not be paid for any underwriting services that they perform on behalf of the Company. To July 31, 2008 there have been no other related party transactions between the Company and any officers other than those mentioned above. 5. STOCK OPTIONS As of July 31, 2008, the Company does not have any stock options outstanding, nor does it have any written or verbal agreements for the issuance or distribution of stock options at any point in the future. 7. LITIGATION As of July 31, 2008, the Company is not aware of any current or pending litigation which may affect the Company's operations. 8. SUBSEQUENT EVENTS There have been no significant events for the period subsequent to July 31, 2008. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. RESULTS OF OPERATIONS We are an exploration stage company and have generated no revenues. We incurred operating expenses of $3,535 for the three month period ended July 31, 2008. For the same period in 2007 our operating expenses were $5,066. These expenses consisted of general operating expenses incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports. Our net loss for from inception (March 14, 2007) through July 31, 2008 was $35,537. In their report on our audited financial statements as at April 30, 2008, our auditors expressed their doubt about our ability to continue as a going concern unless we are able to raise additional capital and ultimately to generate profitable operations. The following table provides selected financial data about our company for the period from the date of incorporation through July 31, 2008. Balance Sheet Data: 7/31/08 ------------------- ------- Cash $24,863 Total assets $24,863 Total liabilities $ 400 Shareholders' equity $24,463 LIQUIDITY AND CAPITAL RESOURCES Our cash in the bank at July 31, 2008 was $24,863. In order to satisfy our cash requirements we needed to complete our offering of 15,000,000 shares registered pursuant to our SB-2 Registration Statement which became effective on June 25, 2007 to raise $45,000. The offering was completed on July 31, 2007 for total proceeds of $45,000. We cannot continually incur operating losses in the future and may decide that we can no longer continue with our business operations as detailed in our original business plan because of a lack of financial results, a lack of available financial resources or a lack of mineral exploration results. PLAN OF OPERATION Our registration statement became effective on June 25, 2007. Our 12 month budget is based on operations which will be funded by the $45,000 raised through our offering. The completed fieldworks of the Phase I of the exploration program do not appear to indicate an economically viable mineral deposit and as a result, we have decided to not renew the Company's "Bond Uranium Prospect" federal lode mining claims which were assigned U.S. Bureau of Land Management ORMC nos. 161450 through 161471 in the name of Yellow Hill Energy, Inc.. 10 We will look for other potential business opportunities that might be available to the Company. Our management will begin analyzing various alternatives available to our Company to ensure our survival and to preserve our shareholder's investment in our common shares. This analysis will include sourcing additional forms of financing to continue in mineral exploration, or mergers and/or acquisitions. At this stage in our operations, we believe either course is acceptable, as our operations have not been profitable and our future prospects for our original business are not good. We will be focusing our preliminary merger/acquisition activities on potential business opportunities with established business entities for the merger of a target business with our Company. In certain instances, a target business may wish to become a subsidiary of our Company or may wish to contribute assets to our Company rather than merge. There can be no assurances that there will be other business opportunities available nor can there be any certainties of the business industry of the opportunity that might be available nor any indication of the financial resources required of any possible business opportunity. We anticipate that any new acquisition or business opportunities by our Company will require additional financing. There can be no assurance, however, that we will be able to acquire the financing necessary to enable us to pursue our plan of operation. If our Company requires additional financing and we are unable to acquire such funds, our business may fail. In implementing a structure for a particular business acquisition or opportunity, we may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. We may also acquire stock or assets of an existing business. Upon the consummation of a transaction, it is likely that our present management will no longer be in control of our company and our existing business will close down. In addition, it is likely that our officers and directors will, as part of the terms of the acquisition transaction, resign and be replaced by one or more new officers and directors. We anticipate that the selection of a business opportunity in which to participate will be complex and without certainty of success. Management believes that there are numerous firms in various industries seeking the perceived benefits of being a publicly registered corporation. Business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. We may seek a business opportunity with entities who have recently commenced operations, or entities who wish to utilize the public marketplace in order to raise additional capital in order to expand business development activities, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries. At this stage, we can provide no assurance that we will be able to locate compatible business opportunities, what additional financing we will require to complete a combination or merger with another business opportunity or whether the opportunity's operations will be profitable. As of the date hereof, we have not been successful in our exploration efforts. We are uncertain about our continued ability to raise funds. Further, we believe that our Company may have more difficulties raising capital for our existing 11 operations than for a new business opportunity. We have not entered into any formal written agreements for a business combination or opportunity. If any such agreement is reached, we intend to disclose such an agreement by filing a current report on Form 8-K with the Securities and Exchange Commission. If we are unable to secure adequate capital to continue our business or alternatively, complete a merger or acquisition, our shareholders will lose some or all of their investment and our business will likely fail. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements. ITEM 4. CONTROLS AND PROCEDURES. Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation 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 and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared. Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken. 12 PART II. OTHER INFORMATION ITEM 6. EXHIBITS The following exhibits are included with this quarterly filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our original Form SB-2 Registration Statement, filed under SEC File Number 333-143626, at the SEC website at www.sec.gov: Exhibit No. Description ----------- ----------- 3.1 Articles of Incorporation* 3.2 Bylaws* 31.1 Sec. 302 Certification of Chief Executive Officer 31.2 Sec. 302 Certification of Chief Financial Officer 32.1 Sec. 906 Certification of Chief Executive Officer 32.2 Sec. 906 Certification of Chief Financial Officer 13 SIGNATURES Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. September 4, 2008 Yellow Hill Energy Inc., Registrant /s/ Craig Lindsay ---------------------------------------- By: Craig Lindsay (Chief Executive Officer & Director) /s/ Sean Mitchell ---------------------------------------- By: Sean Mitchell (Secretary & Director) In accordance with the Exchange Act, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated. /s/ Craig Lindsay September 4, 2008 - ------------------------------------- ----------------- Craig Lindsay, President & Director Date (Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer) /s/ Sean Mitchell September 4, 2008 - ------------------------------------- ----------------- Sean Mitchell, Secretary & Director Date 14