10-Q 1 form10q.htm FORM 10-Q form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Form 10-Q

 
(Mark One)

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

For the quarterly period ended September 30, 2009

[   ]
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. Employer
Identification No.)
 
197 Route 18 South,
Suite 3000, PMB 4157
East Brunswick, NJ
(Address of principal executive offices)
 
 
08816
(Zip Code)
(732) 658-4280
(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 required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     XNo 

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 (or for such shorter period that the registrant was required to submit and post such files).  Yes       No     X    .

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 companyX 
(Do not check if a smaller reporting company)

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 filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   YesNo

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 November 9, 2009, 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
4
     
ITEM 1
Financial Statements
4
     
ITEM 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
9
     
ITEM 3
Quantitative and Qualitative Disclosures About Market Risk
13
     
ITEM 4T
Controls and Procedures
13
     
PART II – OTHER INFORMATION
15
     
ITEM 1
Legal Proceedings
15
     
ITEM 1A
Risk Factors
15
     
ITEM 2
Unregistered Sales of Equity Securities and Use of Proceeds
15
     
ITEM 3
Defaults Upon Senior Securities
15
     
ITEM 4
Submission of Matters to a Vote of Security Holders
15
     
ITEM 5
Other Information
15
     
ITEM 6
Exhibits
15

2
 
 
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 and Results of Operations.”  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
 
3
 

 
 
Condensed Consolidated Balance Sheet
  
             
 
  
September 30, 2009
    
December 31, 2008
  
   
(Unaudited)
    
(Audited)
  
             
ASSETS
  
 
    
 
  
Current Assets
            
Cash and cash equivalents
   $ 5,807     $ 9,132  
Total Current Assets
     5,807       9,132  
                 
Property and Equipment
                
Computer equipment
     3,308       3,308  
Accumulated depreciation
     (3,235 )     (2,739 )
Total Property and Equipment
     73       569  
                 
Total Assets
   $ 5,880     $ 9,701  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
                
                 
Liabilities
                
Current Liabilities
                
Accrued expenses and other payables
   $ 1,742     $ 3,248  
Related party payable
     83,062       64,568  
Total Current Liabilities
     84,804       67,816  
Long Term Liabilities
     -       -  
Total Long Term Liabilities
     -       -  
                 
Total Liabilities
     84,804       67,816  
                 
Stockholders’ Equity (Deficit)
                
Convertible Preferred Stock -- 1,500,000 shares authorized having a par value of $.001 per share; 0 shares issued and outstanding
                
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)
     (115,112 )     (94,303 )
Total Stockholders’ Equity(Deficit)
     (78,699 )     (58,115 )
                 
Total Liabilities and Stockholders’ Equity
   $ 5,880     $ 9,701  
 
 
The accompanying notes are an integral part of these interim financial statements.
 
4
 
 
 
 
 
 
  
Condensed Consolidated Statements of Operations
  
                         
   
For the Three
    
For the Three
    
For the Nine
    
For the Nine
  
   
Months Ended
    
Months Ended
    
Months Ended
    
Months Ended
  
   
September 30, 2009
    
September 30, 2008
    
September 30, 2009
    
September 30, 2008
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
                         
Revenues, net of discounts
   $ -     $ -     $ -     $ -  
Operating Expenses
     3,476       9,346       15,372       41,341  
Net Income (Loss) from Operations
     (3,476 )     (9,346 )     (15,372 )     (41,341 )
Other Income (Expense):
     -       -       -       -  
Interest expense
     (2,026 )     (500 )     (5,438 )     (1,290 )
Total Other Income (Expense)
     (2,026 )     (500 )     (5,438 )     (1,290 )
Net Income (Loss) before taxes
     (5,502 )     (9,846 )     (20,810 )     (42,631 )
Provision for Income Taxes (Benefit)
     -       -       -       -  
Net Income (Loss)
   $ (5,502 )   $ (9,846 )   $ (20,810 )   $ (42,631 )
                                 
Income (Loss) Per Share Basic and Fully Diluted
   $ (0.01 )   $ (0.01 )   $ (0.01 )   $ (0.01 )
                                 
Weighted Average Shares Outstanding Basic and Fully Diluted
     10,000,000       10,000,000       10,000,000       10,000,000  
                                 
 
 
 
The accompanying notes are an integral part of these interim financial statements.
 
 
5
 
       
Condensed Consolidated Statements of Cash Flows
        
             
   
For the Nine
    
For the Nine
  
   
Months Ended
    
Months Ended
  
   
September 30, 2009
    
September 30, 2008
  
 
  
(Unaudited)
    
(Unaudited)
  
Cash Flows From Operating Activities
            
Net Income (Loss)
   $ (20,810 )     (42,631 )
Adjustments to reconcile net income (loss)
                
to net cash from operating activities:
                
Depreciation and Amortization
     496       496  
(Increase)/Decrease-Receivables
     -       5,000  
(Increase)/Decrease-Prepaid Expenses
     -       -  
(Increase)/Decrease-Deferred Taxes
     -       -  
Increase/(Decrease)-Accrued Expenses
     (1,505 )     (7,472 )
Increase/(Decrease)-Related Party Payables
     5,438       47,448  
Net Cash From Operating Activities
     (16,381 )     2,841  
                 
Cash Flows From Investing Activities
                
Proceeds from related party note payable
     13,056       -  
Net Cash From Investing Activities
     13,056       -  
                 
Cash Flows From Financing Activities
                
Issuance of Common Stock
     -       -  
Professional Fees related to stock offering
     -       -  
Net Cash From Financing Activities
     -       -  
Net Increase (Decrease) in Cash
     (3,325 )     2,841  
Beginning Cash Balance
     9,132       1,971  
Ending Cash Balance
   $ 5,807       4,812  
 
                
Supplemental Disclosure of Cash Flow Information
                
Cash Paid During the Year for Interest
   $ -     $ -  
Cash Paid During the Year for Income Taxes
   $ -     $ -  
                 
 
 
The accompanying notes are an integral part of these interim financial statements.
 
 
 
6
 
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 condensed 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 interim financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2008.

YaFarm Technologies, Inc. was formed as a corporation under the laws of the State of Delaware on June 16, 2006. On July 31, 2006, YaFarm Technologies, Inc. acquired YaFarm Group, LLC, a limited liability company formed under the laws of the State of New Jersey on November 13, 2003. The acquisition was accounted for as a reverse merger.

NOTE B – NEW ACCOUNTING PRONOUNCEMENTS
 
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS 168”). The FASB Accounting Standards Codification TM, (“Codification”) became the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative.

Following SFAS 168, the FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it will issue Accounting Standards Updates (ASU’s). The FASB will not consider ASU’s as authoritative in their own right; rather these updates will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification. SFAS No. 168 is incorporated in ASC Topic 105, Generally Accepted Accounting Principles. The Company adopted SFAS No. 168 in its financial statements for the quarter ended September 30, 2009, and the Company will provide reference to both the Codification topic reference and the previously authoritative references related to Codification topics and subtopics, as appropriate.

In May 2009, the FASB issued FASB ASC 855-10-25 (Prior authoritative literature: FASB Statement 165, Subsequent Events). FASB ASC 855-10-25 provides guidance on management’s assessment of subsequent events and incorporates this guidance into accounting literature. FASB ASC 855-10-25 is effective prospectively for interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on the Company’s financial position and results of operations. The Company has evaluated subsequent events through November 16, 2009, the date of issuance of the Company’s financial position and results of operations.
 
 
7

 
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 September 30, 2009, the Company had an accumulated deficit of ($115,112), 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 - Related Party 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 have been used to pay for certain professional costs such as legal, accounting and listing services. On November 1, 2008, the Company signed a $32,252 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 Note was exchanged for related party payables to Columbia China Capital Group as a result of professional fees paid by Columbia and cash injection made by Columbia. On December 31, 2008, the Company signed a $9,994 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 Note was exchanged for related party payables to Columbia China Capital Group as a result of professional fees paid by Columbia and cash injection made by Columbia. On May 20, 2009, the Company signed a $13,056. 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 and the proceeds from the note issuance was deposited into the Company’s bank account. For the quarter ended on September 30, 2009, the Company accrued total $2,026 in accrued interest related to the notes payable to Columbia.  The balance due including accrued interest, as of September 30, 2009 was $83,062.

NOTE E – AMENDMENT TO ARTICLES OF INCORPORATION

On June 9, 2008, the Company amended its Certificate of Incorporation with a Certificate of Designation of the Rights, Preferences, Privileges, and Restrictions, which had not been set forth in the Certificate of Incorporation or in any amendment thereto, of the Series A Convertible Preferred Stock of YaFarm Technologies, Inc.  The Certificate of Designation created a new series of preferred stock, consisting of 1,500,000 shares, each with an original issue price of $3.25 per share.   Each share of Series A Convertible Preferred Stock will automatically convert, without any action on the part of the holder into (i) twenty (20) shares of common stock of the Company, and (ii) three (3) warrants to purchase common stock of the Company, exercisable for a period of five (5) years, at an exercise price of $0.1875 per share, upon the closing of an acquisition of a company by the Company that (a) has net income of at least $2.4 million for the fiscal year immediately preceding the year of acquisition, and (b) results in the shareholders of the Company immediately prior to the closing of the acquisition owning less than 50% of the voting power of the Company immediately following the acquisition.  The holders of a majority of the Series A Convertible Preferred Stock may require that the Corporation redeem the Series A Convertible Preferred Stock at the original issue price of $3.25 if the acquisition transaction described above does not close on or before the date which is ninety (90) days from the date on which the first share of Series A Convertible Preferred Stock is issued by the Company.  Each outstanding share of Series A Convertible Preferred Stock is entitled to one (1) vote per share on all matters to which the shareholders of the Company are entitled or required to vote.  No shares of Series A Convertible Preferred Stock have been issued as of September 30, 2009.

NOTE F – APPROVAL OF PROSPECTIVE REVERSE STOCK SPLIT

On June 13, 2008, the holders of a majority of the issued and outstanding shares of common stock of the Company approved a prospective amendment to the Certificate of Incorporation of the Company to effectuate a 1-for-4 reverse stock split of the issued and outstanding shares of common stock of the Company.  The purpose of the reverse stock split is to attract additional capital and to reduce the time involved and provide the Company with flexibility with respect to creating an optimal capital structure to complete an acquisition or merger with a future, as yet unidentified, company or companies.  The Company anticipates effectuating the reverse stock split shortly before or after the consummation of an acquisition or merger with a future, as yet unidentified, company or companies.  On July 7, 2008, the Company filed a Definitive Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 to inform the Company’s stockholders of the above action.  As of September 30, 2009 no acquisition or merger has occurred and no reverse stock split has been effectuated.

*  *  *  *  *  *
8
 
 
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.
 
 
9

 
Prospective Reverse Split

On June 13, 2008, the holders of a majority of our issued and outstanding shares of common stock approved a prospective amendment to our Certificate of Incorporation to effectuate a 1-for-4 reverse stock split of our issued and outstanding shares of common stock.  The purpose of the reverse stock split is to attract additional capital and to reduce the time involved and provide us with flexibility with respect to creating an optimal capital structure to complete an acquisition or merger with a future, as yet unidentified, company or companies.  We anticipate effectuating the reverse stock split shortly before or after the consummation of an acquisition or merger with a future, as yet unidentified, company or companies.  On July 7, 2008, we filed a Definitive Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 to inform the Company’s stockholders of the above action.  As of September 30, 2009, no acquisition or merger has occurred and no reverse stock split has been effectuated.

Series A Convertible Preferred Stock

On June 9, 2008, we amended our Certificate of Incorporation with a Certificate of Designation of the Rights, Preferences, Privileges, and Restrictions, which had not been set forth in the Certificate of Incorporation or in any amendment thereto, of the Series A Convertible Preferred Stock of YaFarm Technologies, Inc.  The Certificate of Designation created a new series of preferred stock, consisting of 1,500,000 shares, each with an original issue price of $3.25 per share.   Each share of Series A Convertible Preferred Stock will automatically convert, without any action on the part of the holder into (i) twenty (20) shares of our common stock, and (ii) three (3) warrants to purchase our common stock, exercisable for a period of five (5) years, at an exercise price of $0.1875 per share, upon the closing of an acquisition of a company by us that (a) has net income of at least $2.4 million for the fiscal year immediately preceding the year of acquisition, and (b) results in our shareholders immediately prior to the closing of the acquisition owning less than 50% of our voting power immediately following the acquisition.  The holders of a majority of the Series A Convertible Preferred Stock may require that we redeem the Series A Convertible Preferred Stock at the original issue price of $3.25 if the acquisition transaction described above does not close on or before the date which is ninety (90) days from the date on which the first share of Series A Convertible Preferred Stock is issued by us.  Each outstanding share of Series A Convertible Preferred Stock is entitled to one (1) vote per share on all matters to which our shareholders are entitled or required to vote.  No shares of Series A Convertible Preferred Stock have been issued as of September 30, 2009.

Results of Operations for the Three and Nine Months Ended September 30, 2009 and 2008

Introduction

We generated no revenues during the third quarters of 2009 and 2008, while our operating expenses during the third quarter of 2009 were substantially lower as compared to the third quarter of 2008.  As a result, our net loss for the third quarter of 2009 was less than our net loss for the third quarter of 2008.

Revenues and Income (Loss) from Operations
 

Our revenue, operating expenses and net income (loss) from operations for the three and nine months ended September 30, 2009, as compared to the three and nine months ended September 30, 2008, are as follows:

   
3 Months Ended
September 30,
2009
    
3 Months Ended
September 30,
2008
    
9 Months
Ended
September 30,
2009
    
9 Months
Ended
September 30,
2008
  
                         
Revenue
   $ -     $ -     $ -     $ -  
Operating expenses
     (3,476 )     (9,346 )     (15,372 )     (41,341 )
                                 
Net loss from operations
   $ (5,502 )   $ (9,846 )   $ (20,810 )   $ (42,631 )

We generated no revenues during the three and nine month periods ended September 30, 2009 and 2008 because of the loss of a key employee.  During the comparable nine month periods, our operating expenses decreased by almost 63% because of our reduced operations.  As a result, we had net loss from operations of $5,502 and $20,810 for the three and nine months ended September 30, 2009, as compared to $9,846 and $42,631 for the three and nine months ended September 30, 2008.

10
Liquidity and Capital Resources

Introduction

During the nine months ended September 30, 2009, we had a net loss of $20,810 and net cash used in operations of $3,325.  Because we don’t have any revenues, 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 September 30, 2009, as compared to June 30, 2009, are as follows:

   
September 30,
    
June 30,
  
   
2009
    
2009
  
             
Cash
   $ 5,807     $ 10,657  
Total current assets
     5,807       10,657  
Total assets
     5,880       10,895  
Total current liabilities
     84,804       84,318  
Total liabilities
     84,804       84,318  

Cash Requirements

Our cash requirements are expected to remain consistent with our historical needs over the next 12 months.  Our cash is utilized primarily for professional fees associated with operating as a fully reporting public company.

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 the majority shareholder of the Company. The Note carries 10% interest per annum for a term of one year.

11
On November 1, 2008, the Company issued a $32,252 Note to Columbia China Capital Group, Inc., which Note carries 10% interest per annum for a term of one year.  In addition, on December 31, 2008, the Company issued a $9,994 Note to Columbia China Capital Group, Inc., which Note carries 10% interest per annum for a term of one year.  These Notes were issued to Columbia China Capital Group, Inc. for a cash injection into the Company and for expenses paid by Columbia China Capital Group, Inc. in behalf of the Company.  The proceeds of the Notes were used to pay for certain professional costs such as legal, accounting and listing services.  Total cash received by the Company was $21,994, whereas expenses paid directly by Columbia China Capital Group, Inc. on behalf of the Company comprise the remaining balance.

On May 20, 2009, the Company borrowed $13,056 through the issuance of a Note to Columbia China Capital Group, Inc., an affiliated party and the majority shareholder of the Company. The Note carries 10% interest per annum for a term of one year.

Beyond the next 12 months, our cash needs are anticipated to remain relatively constant.  We anticipate fulfilling our cash needs primarily through the sale of our common stock or the issuance of debt securities.  We cannot estimate what our cash needs will be in the future, other than the approximately $50,000 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 nine months ended September 30, 2009, we generated a decrease in cashflow of $(3,325).  Net cash provided by (used in) operating activities for the nine months ended September 30, 2009 and 2008, were $(16,381) and $2,841, respectively.  The principal component of the net cash used in operations during the nine months ended September 30, 2009 was a net loss of $(20,810), which was partially offset by an increase in related party payables of $5,438.

We anticipate that we will continue to operate at a loss until we are able to obtain substantial financing or acquire a profitable business.

Critical Accounting Policies

Our accounting policies are fully described in Note A to our consolidated financial statements within the 10-K.

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.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is deemed by our management to be material to investors.

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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 4T
Controls and Procedures

We believe our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  However, 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 September 30, 2009, 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 September 30, 2009, 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 consolidated financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the consolidated 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. 2) or combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  Management has identified the following material weaknesses which have caused management to conclude that, as of September 30, 2009, 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, 2009.  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.

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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.

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

We have attempted to remediate the material weaknesses in our disclosure controls and procedures identified above by working with our independent registered public accounting firm and refining our internal procedures.  We intend to prepare written documentation of our internal control policies and procedures and intend to complete such documentation by the filing date of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.  This process will include identifying the risks to reliable financial and nonfinancial reporting by us and developing and documenting the nature, timing, and extent of the controls and procedures that we believe are necessary to adequately address these risks.

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.
 
 
 
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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 September 30, 2009.

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 (2)
  
Certificate of Designation of Series A Convertible Preferred Stock filed on June 9, 2008
     
3.4 (1)
  
Bylaws of YaFarm Technologies, Inc.
     
31.1
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
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.
     
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 the Commission on February 16, 2007.

(2)           Incorporated by reference from our quarterly report on Form 10-Q, filed with the Commission on November 19, 2008.


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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.
   
   
Dated: November 16, 2009
/s/ Zhiguang Zhang
 
By:  Zhiguang Zhang
 
Its:  Chief Executive Officer and Director
   

 
 
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