form10q.htm

10-Q 1 form10q.htm YAFARM TECHNOLOGIES, INC 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 June 30, 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. Employer Identification 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer _______ 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 o 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 o No o

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 August 19, 2008, there were 10,000,000 shares of common stock, $0.001 par value, issued and outstanding.

YAFARM TECHNOLOGIES, INC.

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION	3

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	13

ITEM 4 Controls and Procedures	13

ITEM 4T Controls and Procedures	14

PART II – OTHER INFORMATION	16

ITEM 1 Legal Proceedings	16

ITEM 1A Risk Factors	16

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds	16

ITEM 3 Defaults Upon Senior Securities	16

ITEM 4 Submission of Matters to a Vote of Security Holders	16

ITEM 5 Other Information	16

ITEM 6 Exhibits	17

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 SHEET

AS OF JUNE 30, 2008

(Unaudited)

	June 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	11,597		$	1,971
Accounts receivable, net		-			5,000
Total Current Assets		11,597			6,971

Fixed Assets
Computer equipment		3,308			3,308
Accumulated depreciation		(2,481	)		(2,150	)
Total Fixed Assets		827			1,158

Total Assets	$	12,424		$	8,129

LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)

Liabilities
Current Liabilities
Accrued expenses and other payables	$	3,291		$	9,974
Related party payable		49,857			6,094
Total Current Liabilities		53,148			16,068
Long Term Liabilities		-			-
Total Long Term Liabilities		-			-

Total Liabilities		53,148			16,068

Stockholders' Equity
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)		(76,912	)		(44,127	)
Total Stockholders' Equity(Deficit)		(40,724	)		(7,939	)

Total Liabilities and Stockholders' Equity	$	12,424		$	8,129

The accompanying notes are an integral part of these financial statements.

YAFARM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007

(Unaudited)

	For the Three			For the Three			For the Six			For the Six
	Months Ended			Months Ended			Months Ended			Months Ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Revenues, net of discounts	$	-		$	6,092		$	-		$	6,734
Operating Expenses		16,806			15,496			31,995			20,122
Net Income (Loss) from Operations		(16,806	)		(9,404	)		(31,995	)		(13,388	)
Other Income (Expense):		-						-
Interest expense		(500	)		-			(790	)		-
Total Other Income (Expense)		(500	)		-			(790	)		-
Net Income (Loss) before taxes		(17,306	)		(9,404	)		(32,785	)		(13,388	)
Provision for Income Taxes (Benefit)		-			(1,413	)		-			(2,011	)
Net Income (Loss)	$	(17,306	)	$	(7,991	)	$	(32,785	)	$	(11,377	)

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			9,912,701

The accompanying notes are an integral part of these financial statements.

YAFARM TECHNOLOGIES, INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007

(Unaudited)

	For the Six			For the Six
	Months Ended			Months Ended
	June 30, 2008			June 30, 2007
	(Unaudited)			(Unaudited)
Cash Flows From Operating Activities
Net Income (Loss)	$	(32,785	)	$	(11,377	)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and Amortization		331			116
(Increase)/Decrease-Receivables		5,000			(5,000	)
(Increase)/Decrease-Prepaid Expenses		-			14,300
(Increase)/Decrease-Deferred Taxes		-			(2,011	)
Increase/(Decrease)-Accrued Expenses		(6,683	)		(1,830	)
Increase/(Decrease)-Related Party Payables		43,763			(16,099	)
Net Cash From Operating Activities		9,626			(21,901	)

Cash Flows From Investing Activities
Purchase of Equipment		-			(1,184	)
Net Cash From Investing Activities		-			(1,184	)

Cash Flows From Financing Activities
Issuance of Common Stock		-			40,400
Professional Fees related to stock offering		-			(36,867	)
Net Cash From Financing Activities		-			3,533
Net Increase (Decrease) in Cash		9,626			(19,552	)
Beginning Cash Balance		1,971			35,716
Ending Cash Balance	$	11,597		$	16,164

The accompanying notes are an integral part of these financial statements.

YAFARM TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 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 $790 of interest on the note during the six months period ended June 30, 2008. During the second quarter of 2008, Columbia China Capital Group has also loaned to the Company $12,000.

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 June 30, 2008, the Company had an accumulated deficit of ($76,912), 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 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.

YAFARM TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

(Unaudited)

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“FAS 161”), which requires enhanced disclosures about a company’s derivative and hedging activities. The Company currently is evaluating the impact of the adoption of the enhanced disclosures required by FAS 161 which is effective for the Company at the beginning of its fiscal year 2010.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting Principles (“FAS 162”). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles (“GAAP”) for nongovernmental entities in the United States. FAS 162 is effective 60 days following SEC approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the impact, if any, of adopting FAS 162, on its Consolidated Financial Statements

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts – an Interpretation of FASB Statement No. 60 (“SFAS 163”). SFAS 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claim liabilities. This Statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company does not expect that the adoption of SFAS 163 will have a material impact on its financial statements.

YAFARM TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

(Unaudited)

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.

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.

* * * * * *

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 June 30, 2008 and 2007

Introduction

Our revenues for the second quarter of 2008 were significantly lower, as compared to the second quarter of 2007.

Revenues and Income (Loss) from Operations

Our revenue, operating expenses and net income (loss) from operations for the three months ended June 30, 2008, as compared to the three months ended June 30, 2007, are as follows:

	3 Months Ended June 30, 2008			3 Months Ended June 30, 2007			Percentage Change

Revenue	$	-		$	6,092			(100	) %
Operating expenses		16,806			15,496			8.5	%

Net loss from operations	$	(16,806	)	$	(9,404	)		78.7	%

Our revenues were $0 for the three month period ended June 30, 2008, as compared to $6,092 for the three month period ended June 30, 2007. During the same time periods, our operating expenses increased by 8.5% because of professional fees associated with being a public, reporting company. As a result, we had net loss from operations of $16,806 for the three month period ended June 30, 2008, as compared to net loss from operations of $9,404 for the three month period ended June 30, 2007.

Liquidity and Capital Resources

Introduction

During the six months ended June 30, 2008, we had a net loss of $32,785 and cash flow from operating activities of $9,626. 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 June 30, 2008, as compared to March 31, 2008, are as follows:

	June 30,		March 31,
	2008		2008

Cash	$	11,597	$	440
Total current assets		11,597		440
Total assets		12,424		1,329
Total current liabilities		53,148		24,747
Total liabilities		53,148		24,747

Cash Requirements

Our cash requirements are expected to remain consistent with our historical needs over the next 12 months. During the six months ended June 30, 2008, we received total proceeds of $0 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 six months ended June 30, 2008, we generated a positive cash flow of $9,626. Net cash from operating activities for the six months ended June 30, 2008 and 2007, were $9,626 and $(21,901), respectively. Positive operating cash flows during the six months ended June 30, 2008 were primarily created by an increase of $43,763 in related party payables.

Net cash provided by financing activities for the six months ended June 30, 2008 and 2007, were $0 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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, 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 June 30, 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

On June 13, 2008, stockholders owning a majority of our issued and outstanding common stock approved, by written consent, in lieu of a special meeting of the stockholders, a prospective amendment to our Articles of Incorporation to effectuate a 1-for-4 reverse stock split of our issued and outstanding shares of common stock. We anticipate that this amendment will become effective shortly before or after the consummation of an acquisition or merger with a future, as yet unidentified, company or companies. The results of the voting were as follows:

Votes For	Votes Against	Votes Withheld	Abstentions	Broker Non-Votes
5,870,374	-0-	-0-	-0-	-0-

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

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 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.

August 19, 2008	By:	/s/ Zhiguang Zhang
		Zhiguang Zhang
		Chief Executive Officer