UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 Form
10-KSB
 
 [X]
              ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the fiscal year ended December 31, 2007
 
 [   ]
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from _______________ to _______________.
 
 Commission
file number 0-30639
 
 
 YaFarm
Technologies, Inc.
 (Name of
small business issuer 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)
 
 Issuer’s
telephone number, including area code    (732)
658-4280
 
 Securities
registered under Section 12(b) of the Act:
 
 Title
      of each class
              
              Name
      of each exchange on which registeredNone
              
              None
 
 Securities
registered under Section 12(g) of the Act:
 
 Common
Stock, par value $0.001
 (Title of
class)
 
 Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act.  [ X ]
 
 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 past 90 days.     Yes X     No
.
 
 Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this
form, and no disclosure will be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ X]
 
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes     NoX.
  1
 
 State issuer’s revenues for its most
recent fiscal year.$9,807 for the year ended December 31, 2007.
 
 State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was sold, or the average bid and asked
price of such common equity, as of a specified date within the past 60
days.  (See definition of affiliate in rule 12b-2 of the Exchange
Act.)  There is no market price for the common stock as of a specified
date within the past 60 days.
 
 State the number of shares outstanding
of each of the issuer’s classes of common equity, as of the latest practicable
date.  As of April 14, 2008, there were 10,000,000 shares of common
stock, par value $0.001, issued and outstanding.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 If the following documents are
incorporated by reference, briefly describe them and identify the part of the
form 10-KSB (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to rule 424(b) or
(c) of the Securities Act of 1933 (“Securities Act”).  The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24,
1990).  None.
 
 Transitional Small Business Disclosure
Format (check
one):                                                                                                           Yes
   No  X.
  2
  YAFARM
TECHNOLOGIES, INC.
 
 TABLE OF
CONTENTS
 
  
  PART IITEM
      1 —
              DESCRIPTION
      OF BUSINESS
              4ITEM
      2 —
              DESCRIPTION
      OF PROPERTY
              7ITEM
      3 —
              LEGAL
      PROCEEDINGS
              7ITEM
      4 —
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              7PART IIITEM 5 —
              MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY SECURITIES
              8ITEM 6 —
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              9ITEM 7 —
              FINANCIAL
      STATEMENTS
              12ITEM 8 —
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
              12ITEM 8A —
              CONTROLS AND
      PROCEDURES
              12ITEM 8A(T)
    —
              CONTROLS AND
      PROCEDURES
              13ITEM
      8B —
              OTHER
      INFORMATION
              14PART IIIITEM 9 —
              DIRECTORS, EXECUTIVE
      OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT
              15ITEM
      10 —
              EXECUTIVE
      COMPENSATION
              16ITEM 11 —
              SECURITY OWNERSHIP
      OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS
              18ITEM 12 —
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
              19ITEM 13 —
              EXHIBITS
              20ITEM 14 —
              PRINCIPAL ACCOUNTANT
      FEES AND SERVICES
              21
  3
  PART
I
 
 This
Annual 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 possible or assumed future results of our 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 — DESCRIPTION OF BUSINESS
 
 Company
Overview
  
 We were
incorporated in the State of Delaware on June 16, 2006.  On July 31,
2006, we acquired 100% of the membership interests of YaFarm Group, LLC, a New
Jersey limited liability company, from Zhiguang Zhang and Jie Geng, its sole
owners, in exchange for a total of one million shares of our common stock,
valued at $7,823.  The purpose of the transaction was to recapitalize
the operating company and move its domicile to Delaware in anticipation of
becoming a publicly traded company.
 
 Since its
inception, YaFarm Group, LLC has operated as a web development and web hosting
company.  We acquired YaFarm Group, LLC to gain entry into the web
development and web hosting industry and combine our resources.
 
 We are a
New Jersey-based web development and web hosting company offering, through our
wholly-owned subsidiary, YaFarm Group, LLC, a New Jersey limited liability
company, a broad range of business-class website development and web hosting
products and services for small and medium-sized businesses.  We have
a web design team consisting of web designers, web developers, IT engineers, and
database specialists who collectively have over twenty years of experience in
providing advanced web solutions with leading firms such as AT&T, Lucent, XO
communications, BusinessEdge Solutions, and many other companies.  We
are offering one-stop shopping web solutions for small and medium sized
companies, including web development, web hosting, web maintenance and business
image consulting services.  Our goal is to help many traditional
businesses go online to tap into the market potential offered by the
Internet.
 
 Currently,
we offer the following web solution packages to small and medium-sized
businesses:
 
 l
              Bronze
      Small Business Package:
 
 n
              Up
      to 6 pages custom professional
design.
 n
              Meta
      tag generation for search engine
submission.
 n
              Hosting
      setup to bring website online.
 n
              Full
      support/maintenance plan available.
  4
 l
              Silver
      Medium-Sized Business Package:
 
 n
              Up
      to 12 pages custom professional
design.
 n
              One
      form submission for “contact us”
page.
 n
              Meta
      tag generation for search engine
submission.
 n
              Hosting
      setup to bring website online.
 n
              5
      Email account setup.
 n
              Full
      support/maintenance plan available.
 
 l
              Gold
      E-Commerce Package:
 
 n
              Up
      to 8 pages custom design.
 n
              Direct
      check out shopping cart for up to 10
products.
 n
              Merchant
      integration to accept online
payments.
 n
              One
      form submission for “contact us”.
 n
              Meta
      tag generation for search engine
submission.
 n
              Hosting
      setup to bring website online.
 n
              Full
      support/maintenance plan available.
 
 We
primarily rely on advertising and referrals to reach potential
customers.  We currently advertise on a number of local as well as
national newspapers including bi-lingual newspapers targeting the Chinese
American business community.  We currently do not employ salespersons
to sell our products.
 
 Our
Strategy
 
 Our
strategic objective is to be the leading provider of standardized web solution
services including web design and hosting products and services to small and
medium-sized businesses, which we consider to be the most profitable segment of
the web market.  We intend to profitably serve our target market by
achieving scale and efficiency in our operations.  Our target market
is large, growing rapidly, and may be served with standardized products and
services.  Standardization of products and services permits the use of
standardized processes and a higher degree of automation in many areas of
operation, including the sales process.  This approach contrasts with
that of many competitors that focus on providing labor-intensive, customized
solutions to larger enterprises.  By delivering business-class web
solutions in a scalable and efficient manner, we believe we can offer better
value to our customers, leading to growing market share and
profits.
 
 We intend
to utilize the low-cost production base in China to be able to offer competitive
and affordable web solutions to our small and medium-sized
customers.  We do not currently outsource website development or web
hosting services to persons in the Peoples Republic of China.  We plan
to raise additional capital in order to set-up web site development operation in
Beijing, China.  Currently, we do not have an estimate of how much
such operation will cost or whether we can successfully raise the necessary
capital to achieve such an objective.
 
 Currently,
we are relying on third-party web hosting vendors for our customers’ web-hosting
needs.  The cost to us of contracting out the hosting of websites
generally includes an upfront payment of up to $100 per website and monthly fees
of up to $20 per month.  There are no material up-front costs, or
material purchases of equipment, required when we contract out the hosting of
websites.  We maintain an arm’s length relationship with such
third-party web hosting vendors and are not affiliated with any of our
vendors.  In addition, we have not entered into written agreements
with our third-party web hosting vendors.
  5
 
 We plan
to acquire or set up our own web hosting operation in the future to ensure
product quality and consistency.  Hosting websites in-house typically
involves purchasing hardware which could cost up to $50,000 depending on the
size and capacity as well as staff to maintain it, costing approximately $50,000
more per year.  Given the small scale of our operation, we do not
currently provide such services in-house.
 
 We
believe the web-hosting market for the small and medium-sized market is very
fragmented in the U.S. and offers very attractive consolidation
opportunities.  With the addition of our in-house web-hosting
capability, we believe that our vertically-integrated operation will offer our
customers more-timely and higher-quality services thus leading to higher
profitability for our operation.
 
 The
Market
 
 We are
currently targeting the local business markets in the New York metropolitan
area, principally the State of New Jersey, where we are
operating.  The size of the total market is difficult to estimate due
to the fragmented nature of this industry.  However, we believe the
market to service small to medium sized businesses for their online web needs is
significant in the local market where we serve as well as the national market
due to the proliferation of small businesses in the United States, especially
since the last business downturn of 2001.
 
 Distribution
Methods
 
 We
currently do not rely on third-party salespersons or resellers to distribute our
services.  We primarily use direct marketing such as newspaper ads or
referrals from existing customers to reach our target market.
 
 Competition
 
 The
market for web development and web hosting services is extremely
competitive.  There are no substantial barriers to entry, and we
expect that competition will intensify in the future.  We believe that
our ability to compete successfully depends upon a number of factors, including
market presence; the capacity, reliability, low latency and security of network
infrastructure; technical expertise and functionality, performance and quality
of services; customization; ease of access to and navigation of the Internet;
the pricing policies of our competitors; the variety of services; the timing of
introductions of new services by the Company and our competitors; customer
support; our ability to support industry standards; and industry and
general economic trends.
 
 Many of
our competitors have greater market presence, engineering and marketing
capabilities, and financial, technological and personnel resources than those
available to the Company.  As a result, they may be able to develop
and expand their communications and network infrastructures more quickly, adapt
more swiftly to new or emerging technologies and changes in customer
requirements, take advantage of acquisition and other opportunities more
readily, and devote greater resources to the marketing and sale of their
products than can the Company.  In addition, various organizations,
may enter into or form joint ventures or consortiums to provide services similar
to those of the Company.
  6
 
 We
believe that new competitors, including large computer hardware, software, media
and other technology and telecommunications companies will enter the web
development and web hosting services markets, resulting in even greater
competition for the Company.  There can be no assurance that the
Company will have the financial resources, technical expertise or marketing and
support capabilities to continue to compete successfully
 
 Intellectual
Property
 
 We do not
have any trademarks, patents, or other intellectual property.
 
 Research
and Development
 
 We have
not spent any material amount of time or money on research and development, and
do not anticipate doing so in the future.
 
 Compliance
with Environmental Laws
 
 We have
no disclosure required by this Item.
 
 Employees
 
 We
currently employ two individuals, who are our officers and
directors.  For the rest of our operations we use the services of
independent contractors.
 
 ITEM
2 — DESCRIPTION OF PROPERTY
 
 We lease
our principal executive and administrative offices located at 197 Route 18
South, Suite 3000, PMB 4157, East Brunswick, NJ 08816.  On February 1,
2007, we entered into a 12-month lease with Ragus Management Group,
LLC.  Under the lease, we pay $118 per month as base rent and pay the
office and shared space expenses based on actual usage.  The typical
office is about 100 square feet and the total office space at 197 Route 18 South
is about 1,000 square feet.
 
 ITEM
3 — 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 4 — SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
 
 No
matters were submitted to a vote of the security holders during the fourth
quarter of the last fiscal year.
 
 7
 
 PART
II
 
 ITEM
5 — MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
 
 Market
Information
 
 Our
common stock began trading on the OTC Bulletin Board of the National Association
of Securities Dealers, Inc. on October 4, 2007, under the symbol
“YFRM.”  Our common stock is only traded on a limited or sporadic
basis and should not be deemed to constitute an established public trading
market.  There is no assurance that there will be liquidity in the
common stock.
 
 The
following table sets forth the high and low bid information for each quarter
within the two most recent fiscal years, as provided by the NASDAQ Stock
Markets, Inc.  The information reflects prices between dealers, and
does not include retail markup, markdown, or commission, and may not represent
actual transactions.
 
 Bid PricesQuarter Ended
              High
              LowMarch
      31, 2008
              -0-
              -0-December
      31, 2007
              -0-
              -0-
 
 The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock.  The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to a few exceptions
that we do not meet.  Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated therewith.
 
 Holders
 
 As of
April 14, 2008, there were 10,000,000 shares of our common stock issued and
outstanding and held by 51 holders of record.  We believe many of the
shares of our common stock are held in “street name” and, therefore, we believe
the actual number of shareholders is slightly higher.
 
 Dividend
Policy
 
 We have
not paid any dividends on our common stock and do not expect to do so in the
foreseeable future.  We intend to apply our earnings, if any, in
expanding our operations and related activities.  The payment of cash
dividends in the future will be at the discretion of the Board of Directors and
will depend upon such factors as earnings levels, capital requirements, our
financial condition and other factors deemed relevant by the Board of
Directors.
  8
 
 Recent
Issuance of Unregistered Securities
 
 There
were no unregistered sales of equity securities by the Company during the three
month period ended December 31, 2007.
 
 ITEM
6 — MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Disclaimer
Regarding Forward Looking Statements
 
 Except
for historical information, the materials contained in this Management's
Discussion and Analysis 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) and involve a number of risks and
uncertainties.  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; the ability of the Company to sustain, manage or forecast
its growth; the ability of the Company 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 detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
 
 Although
the forward-looking statements in this Annual Report reflect the good faith
judgment of management, such statements can only be based on facts and factors
currently known by the Company.  Consequently, and because
forward-looking statements are inherently subject to risks and
uncertainties,  actual results and outcomes may differ materially from
the results and outcomes discussed in the forward-looking
statements.  Readers are urged to carefully review and consider the
various disclosures made by the Company in this Annual Report and in its other
reports, as an attempt to advise interested parties of the risks and factors
that may affect the Company's business, financial condition, and results of
operations and prospects.
 
 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
 
 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.
 
 Year
ended December 31, 2007 compared to the Year ended December 31,
2006
 
 Results
of Operations
 
 Introduction
 
 Our
revenues decreased significantly in 2007 as compared to 2006, while our
operating expenses increased substantially.  As a result, we had a
considerable net loss for 2007, as compared to a positive net income for
2006.
 
 Revenues and Income (Loss)
from Operations
  Our
revenue, operating expenses and net income (loss) from operations for the year
ended December 31, 2007 as compared to the year ended December 31, 2006 are as
follows:
 
 Year
      Ended December 31, 2007
              
              
              Year
      Ended December 31, 2006
              
              
              Percentage
                Change
                Increase
                (Decrease)Revenue
              
              $
              9,807
              
              
              $
              19,302
              
              
              
              (49.2
              )
      %Operating
      expenses
              
              
              52,115
              
              
              
              13,702
              
              
              
              280.3
              %Net
      Income (loss) from operations
              
              $
              (42,308
              )
              
              $
              5,600
              
              
              
              (855.5
              )
      %
  Our
revenues decreased by $9,495 for the year ended December 31, 2007 as compared to
the year ended December 31, 2006 because of the loss of a key
employee.  During the same time periods, our operating expenses
increased by $38,413 as a result of operating as a fully reporting public
company.  As a result, we had net loss from operations of $42,308 for
the year ended December 31, 2007, as compared to net income from operations of
$5,600 for the year ended December 31, 2006.  After adjusting for
expenses related to operating as a fully reporting public company, our operating
expenses as a percentage of our revenue have remained relatively
consistent.
  Liquidity
and Capital Resources
 
 Introduction
 
 During
the year ended December 31, 2007, we had a net loss of ($43,000) and a negative
cash flow from operations of ($36,095).  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.
  10
 
 Our cash
and cash equivalents, total current assets, total assets, total current
liabilities, and total liabilities as of December 31, 2007 as compared to
December 31, 2006, are as follows:
 
 December
      31,
              
              
              December
      31,2007
              
              
              2006Cash
              
              $
              1,971
              
              
              $
              35,716Total
      current assets
              
              
              6,971
              
              
              
              50,162Total
      assets
              
              
              8,129
              
              
              
              50,604Total
      current liabilities
              
              
              16,068
              
              
              
              19,043Total
      liabilities
              
              
              16,068
              
              
              
              19,076
 
 Cash
Requirements
 
 Our cash
requirements are expected to remain consistent with our historical needs over
the next 12 months.  During the year ended December 31, 2007, we
received $40,400 from the issuance of common stock.  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 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.
 
 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,
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,
Investing  and Financing
 
 During
the year ended December 31, 2007, we generated a negative cash flow of
$33,745.  This was a result of net cash used in operating activities
of $36,095, net cash used in investing activities of $1,183 and net cash
provided by financing activities of $3,533.  Net cash used in
operating activities consisted primarily of net loss of $43,000, an increase in
accounts receivable of $5,000, and a decrease in related party payables of
$10,005.  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.  The following describes the general application of
accounting principles that impact our consolidated financial
statements.
  11
 
 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
7 — FINANCIAL STATEMENTS
 
 The
consolidated financial statements as of and for the years ended December 31,
2007 and 2006 are presented in a separate section of this report following Item
14.
 
 ITEM
8 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 There have been no events required to
be reported by this Item 8.
 
 ITEM
8A — 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 December 31, 2007, 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 December 31, 2007, 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 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, 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 December 31,
2007, our disclosure controls and procedures were not effective at the
reasonable assurance level:
  12
 
 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,
2007.  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, 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
8A(T) – 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.
  13
  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.  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 December 31, 2007.   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 December 31, 2007, the Company’s internal control over
      financial reporting is deficient based on those criteria for the reasons
      stated above.
 
 This
annual 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 annual
report.
 
 ITEM
8B — OTHER INFORMATION
 
 Subsequent
Events.
 
 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.
 
  14
  PART
III
 
 ITEM
9 — DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
 Directors
and Executive Officers
 
 The
following table sets forth the names and ages of the current directors and
executive officers of the Company, the director nominees, and the principal
offices and positions with the Company held by each person and the date such
person became a director or executive officer of the Company.  The
executive officers of the Company are appointed by the Board of
Directors.  The directors serve one-year terms until their successors
are elected.  The executive officers serve until their death,
resignation or removal by the Board of Directors.  Unless described
below, there are no family relationships among any of the directors and
officers, and none of our officers or directors serves as a director of another
reporting issuer.
 
 Name
              
              Age
              
              Position(s)Zhiguang
      Zhang
              
              43
              
              Chief
      Executive Officer and DirectorHong
      Zhao
              
              38
              
              President,
      Secretary, Chief Financial Officer, and Chairwoman of the Board of
      Directors
 
 Zhiguang Zhang, age 43, is our
Chief Executive Officer and Director, and has held these positions since July
2006.  Mr. Zhang has held technical and management positions with
leading telecom companies such as UTSTARCOM, Niksun Inc, AT&T Labs, Lucent
(Bell Labs Research).  He graduated with a PhD in electrical
engineering from City College, CUNY in New York.  Mr. Zhang obtained
his undergraduate degree from Huazhong University of Science and Technologies,
Wuhan, China.
 
 Hong Zhao,age 38, is our
President, Secretary, Chief Financial Officer, and Chairwoman of the Board of
Directors, and has held these positions since July 2006.  Ms. Zhao is
the vice president with Columbia China Capital Group, Inc., a greater-than-10%
shareholder of the Company, and a corporate finance firm targeting cross-border
merger and acquisitions, public listing and private placement
opportunities.  In addition, she is the Director, Chief Financial
Officer and Secretary of Paragon SemiTech USA, Inc.  Ms. Zhao was
previously a founding member of Performance-Based.com, a leading New York City
based human resources relation service provider.  Ms. Zhao graduated
from City College, CUNY with a M.S. in computer science degree.  She
obtained her B.S. degree from Tianjin University, Tianjin, China.
 
 Compliance
with Section 16(a) of the Securities Exchange Act of 1934
 
 Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
and executive officers and persons who own more than ten percent of a registered
class of the Company’s equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company.  Officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
  15
  To the
Company’s knowledge, none of the required parties are delinquent in their 16(a)
filings.
 
 Board
Meetings and Committees
  During
the fiscal year ended December 31, 2007, the Board of Directors did not
formally  meet but took written action on numerous
occasions.  The written actions were by unanimous
consent.
 Code
of Ethics.
  We have
not adopted a written code of ethics, primarily because we believe and
understand that our officers and directors adhere to and follow ethical
standards without the necessity of a written policy.
 
 ITEM
10 — EXECUTIVE COMPENSATION
 
 Executive
Officers and Directors
 
 The
following tables set forth certain information about compensation paid, earned
or accrued for services by (i) our Chief Executive Officer and (ii) all other
executive officers who earned in excess of $100,000 in the fiscal year ended
December 31, 2007 (“Named Executive Officers”):
 
 Name
      and
                Principal
      Position
              Year
              Salary
                ($)
              Bonus
                ($)
              Stock
                Awards
                ($)
      *
              Option
      Awards
                ($)
      *
              Non-Equity
      Incentive Plan Compensation ($)
              Nonqualified
      Deferred Compensation ($)
              All
      Other
                Compensation
                ($)
              Total
                ($)Zhiguang
      Zhang
              2007
              -
              -
              -
              -
              -
              -
              -
              -Director
      and CEO
              2006
              -
              -
              -
              -
              -
              -
              -
              -Hong
      Zhao
              2007
              -
              -
              -
              -
              -
              -
              -
              -President,
      Secretary, CFO and Chairwoman of the Board of Directors
 
 *
              Based
      upon the aggregate grant date fair value calculated in accordance with the
      Financial Accounting Standards Board (“FASB”) Statement of Financial
      Accounting Standard (“FAS”) No. 123R, Share Based Payment.  Our
      policy and assumptions made in valuation of share based payments are
      contained in Note A to our December 31, 2007 financial
      statements.
  16
  Employment
Contracts
 
 As of
December 31, 2007, there were no employment agreements in place covering any of
our executive officers.
 
 Other
Compensation
 
 None.
 
 Director
Compensation
 
 The following table sets forth director
compensation as of December 31, 2007:
 
 Name
              Fees
      Earned or Paid in Cash
                ($)
              Stock
      Awards
                ($)
      *
              Option
      Awards
                ($)
      *
              Non-Equity
      Incentive Plan Compensation
                ($)
              Nonqualified
      Deferred Compensation Earnings
                ($)
              All
      Other Compensation
                ($)
              Total
                ($)Zhiguang
      Zhang
              -0-
              -0-
              -0-
              -0-
              -0-
              -0-
              -0-Hong
      Zhao
              -0-
              -0-
              -0-
              -0-
              -0-
              -0-
              -0-
 
 *
              Based
      upon the aggregate grant date fair value calculated in accordance with the
      Financial Accounting Standards Board (“FASB”) Statement of Financial
      Accounting Standard (“FAS”) No. 123R, Share Based Payment.  Our
      policy and assumptions made in valuation of share based payments are
      contained in Note 2 to our December 31, 2006 financial
      statements.
 
 The compensation of each of our
directors is fully furnished in the Summary Compensation Table
above.
 
 Our
Directors who are also employees do not receive cash compensation for their
services as directors or members of the committees of the board of
directors.  All directors may be reimbursed for their reasonable
expenses incurred in connection with attending meetings of the board of
directors or management committees.
  17
 
 Outstanding Equity Awards at
Fiscal Year-End
 
 The following table sets forth certain
information concerning outstanding stock awards held by the Named Executive
Officers as of December 31, 2007:
 
 Option
      Awards
              Stock
      AwardsName
              Number
      of Securities Underlying Unexercised Options
                (#)
                Exercisable
              Number
      of Securities Underlying Unexercised Options
                (#)
                Unexercisable
              Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options
                (#)
              Option
      Exercise Price
                ($)
              Option
      Expiration Date
              Number
      of Shares or Units of Stock That Have Not Vested
                (#)
              Market
      Value of Shares or Units of Stock That Have Not Vested
                ($)
              Equity
      Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
      That Have Not Vested
                (#)
              Equity
      Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
      Other Rights That Have Not Vested
                ($)Zhiguang
      Zhang
              -0-
              -0-
              -0-
              N/A
              N/A
              -0-
              -0-
              -0-
              -0-Hong
      Zhao
              -0-
              -0-
              -0-
              N/A
              N/A
              -0-
              -0-
              -0-
              -0-
 
 ITEM
11 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
 
 The
following table sets forth, as of April 14, 2008, certain information with
respect to our equity securities owned of record or beneficially by (i) each of
our Officers and Directors; (ii) each person who owns beneficially more than 5%
of each class of our outstanding equity securities; and (iii) all Directors and
Executive Officers as a group.
 
 Name
      and Address
              
              Nature
      of Affiliation
              
              Common
      Stock Ownership
              
              Percentage
      of Common Stock Ownership (1)Hong
      Zhao (2)
                22
      Berkshire Way, East Brunswick, NJ 08816
              
              President,
      Secretary, Chief Financial Officer, and Chairwoman of the Board of
      Directors
              
              -0-
              
              0%Zhiguang
      Zhang (3)
                2
      Apache Court,
                East
      Brunswick, NJ 08816
              
              Chief
      Executive Officer and Director
              
              500,000
              
              5.0%Columbia
      China Capital Group, Inc.
                P.O.
      Box 936
                East
      Brunswick, NJ 08816
              
              5%
      Owner
              
              5,370,374
              
              53.7%Andrew
      Han
                32
      Independence Drive
                New
      Hyde Park, NY  11040
              
              5%
      Owner
              
              1,296,296
              
              13.0%CH
      Capital, LLC (4)
                18101
      Von Karman Ave.,
                Suite
      330
                Irvine,
      CA 92612
              
              5%
      Owner
              
              500,000
              
              5.0%Jie
      Geng (3)
                2
      Apache Court,
                East
      Brunswick, NJ 08816
              
              5%
      Owner
              
              500,000
              
              5.0%All
      Officers and Directors as a Group (2 Persons)
              
              
              
              500,000
              
              5.0%
  18
  (1)
              Unless
      otherwise indicated, based on 10,000,000 shares of common stock issued and
      outstanding.  Shares of common stock subject to options or
      warrants currently exercisable, or exercisable within 60 days, are deemed
      outstanding for purposes of computing the percentage of the person holding
      such options or warrants, but are not deemed outstanding for purposes of
      computing the percentage of any other
person.
 
 (2)
              Hong Zhao, our President,
      Secretary, Chief Financial Officer, and Chairwoman of the Board of
      Directors, is a vice president with Columbia China Capital Group,
      Inc.  She is the wife of James Tie Li, president of
      Columbia China Capital Group, Inc.
 
 (3)
              Zhiguang Zhang, our Chief
      Executive Officer and Director, is married to Jie
      Geng.  Consequently, the shares owned by each are attributed to
      the other.  Together, they are the beneficial owners of
      1,000,000 shares or 10.0% of the
Company.
 
 (4)
              Mark
      Stewart, the managing member of CH Capital, LLC, exercises voting and/or
      dispositive power over the securities held by CH Capital,
      LLC.  In addition, Mark Stewart is the president of Mark Stewart
      Securities, Inc., a registered broker-dealer.  CH Capital, LLC
      is an underwriter, and any profit on the sale of common stock by CH
      Capital, LLC and any discounts, concessions or commissions received by CH
      Capital, LLC will be considered underwriting discounts and commissions
      under the Securities Act of 1933.
 
 The
issuer is not aware of any person who owns of record, or is known to own
beneficially, five percent or more of the outstanding securities of any class of
the issuer, other than as set forth above.  The Company does not have
an investment advisor.  There are no current arrangements which will
result in a change in control.
 
 ITEM
12 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 
 Certain
Relationships and Related Transactions
 
 Other
than as set forth below, during the last two fiscal years there have not been
any relationships, transactions or proposed transactions to which the Company
was or is to be a party, in which any of the directors, officers, or 5% or
greater stockholders (or any immediate family thereof) had or is to have a
direct or indirect material interest.
 
 (a)             Zhiguang
Zhang, our Chief Executive Officer and Director, is married to Jie Geng, our
consultant.  Together, they are the beneficial owners of 1,000,000
shares or 10.14% of the Company.
 
 (b)             On
July 5, 2006, we issued an aggregate of 6,500,000 shares of our common stock to
our founders as follows: Columbia China Capital Group, Inc., of which Hong Zhao,
our President, Secretary, Chief Financial Officer, and Chairwoman of the Board
of Directors, is a vice president.  Additionally, Hong Zhao is married
to James Tie Li, who is the president of Columbia China Capital Group, Inc.
(5,500,000); The Lebrecht Group, APLC (500,000); and CH Capital, LLC (500,000),
in exchange for aggregate cash consideration of $6,500.
  19
  (c)             During
the year ended December 31, 2006, we borrowed $16,099 from Columbia China
Capital Group, Inc., our majority shareholder, to pay for costs incurred
relating to a private placement offering and our SB-2 filing.  The
terms of the loan were at least as favorable to us as they would have been with
an unrelated third party.  During the quarterly period ended September
30, 2007, we repaid this loan in full.
 
 (d)           During
the year ended December 31, 2007, the Company borrowed $6,094 from a shareholder
to pay for certain professional costs. The balance of the related party payable
as of December 31, 2007 was $6,094.  The note is due on demand and
interest free.
 For each
of the transactions noted above, the transaction was negotiated, on our part, on
the basis of what is in the best interests of the Company and its
stockholders.  In addition, in each case the interested affiliate did
not vote in favor of the transaction; however, the full board of directors did
make the determination that the terms in each case were as favorable as could
have been obtained from non-affiliated parties.
 
 Certain
of our officers and directors are engaged in other businesses, either
individually or through partnerships and corporations in which they have an
interest, hold an office or serve on a board of directors.  As a
result, certain conflicts of interest may arise between us and such officers and
directors.  We will attempt to resolve such conflicts of interest in
our favor.
 
 Director
Independence
 
 We do not
have a nominating committee, audit committee, compensation committee or
executive committee of the board of directors, stock plan committee or any other
committees.
 
 ITEM
13 — EXHIBITS
 
 (a)           Exhibits
 
 2.1
      (1)
              
              Reorganization
      and Stock Purchase Agreement dated as of July 31, 2006, between the
      Company and YaFarm Group, LLC3.1
      (1)
              
              Certificate
      of Incorporation of YaFarm Technologies, Inc., filed on June 16,
      20063.2
      (1)
              
              Certificate
      of Amendment of Certificate of Incorporation of YaFarm Technologies, Inc.,
      filed on June 28, 20063.3
      (1)
              
              Bylaws
      of YaFarm Technologies, Inc.31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer32.1
              
              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
  20
  ITEM
14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Audit
Fees
 
 The aggregate fees billed in each of
the fiscal years ended December 31, 2007 and 2006 for professional services
rendered by the principal accountant for the audit of our annual financial
statements and review of the financial statements included in our Form 10-KSB or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years were
$10,108 and $0.00, respectively.
 
 Audit
– Related Fees
 
 The aggregate fees billed in the fiscal
year ended December 31, 2007 for professional services rendered by the principal
accountant for the review of the financial statements included in our Forms
10-QSB for the quarterly periods ended June 30, 2007 and September 30, 2007 were
$7,390.
 
 The aggregate fees billed in the fiscal
year ended December 31, 2007 for professional services rendered by the principal
accountant for the audit of our financial statements and review of the financial
statements included in our Registration Statement on Forms SB-2/A were
$3,459.
 
 Tax
Fees
 
 For the fiscal years ended December 31,
2007 and 2006, our principal accountants did not render any services for tax
compliance, tax advice, and tax planning work.
 
 All
Other Fees
 
 None.
 
 Audit
Committee
 
 We do not
have an audit committee
  21
  
 SIGNATURES
 
 In accordance with Section 13 or 15(d)
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:  April 14,
      2008
                By:
                /s/ Zhiguang
      ZhangZhiguang
      ZhangIts:
                Chief
      Executive Officer and
      Director
 In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
 
 Dated:  April 14,
      2008
                  By:
                  /s/ Zhiguang
      ZhangZhiguang
      ZhangIts:
                  Chief
      Executive Officer and
      Director
  Dated:  April 14,
      2008
                  By:
                  /s/ Hong
      ZhaoHong
      ZhaoIts:
                  President,
      Secretary, Chief Financial
      Officer and Chairwoman of
      the Board of Directors
    22
 
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 The Board
of Directors and Shareholders
 YaFarm
Technologies, Inc.
 
 We have
audited the accompanying consolidated balance sheets of YaFarm Technologies,
Inc. and its wholly owned subsidiary YaFarm Group, LLC as of December 31, 2007
and 2006, and the related statements of operations, stockholders’ equity, and
cash flows for the years ended December 31, 2007 and 2006.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform an audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Company’s internal controls over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audit
provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of YaFarm Technologies, Inc. and its
wholly owned subsidiary YaFarm Group, LLC as of December 31, 2007 and 2006, and
the results of operations and cash flows for the years ended December 31, 2007
and 2006, in conformity with accounting principles generally accepted in the
United States of America.
 
 The
accompanying financial statements have been prepared assuming YaFarm
Technologies, Inc. will continue as a going concern.  As discussed in
Note F to the financial statements, the Company has accumulated losses and
negative cash flow from operations and a deficit in working
capital.  These issues raise substantial doubt about its ability to
continue as a going concern.  Management’s plans in regard to these
matters are also described in Note F.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 
 
 Mantyla
McReynolds, LLC
 
 Salt Lake
City, Utah
 April 11,
2008
  F-1
  YAFARM TECHNOLOGIES,
INC.
 Consolidated
Balance Sheet
 As
of December 31, 2007 and 2006
  12/31/2007
              
              
              12/31/2006ASSETSCurrent
      AssetsCash
      and cash equivalents
              
              $
              1,971
              
              
              $
              35,716Account
      receivable, net
              
              
              5,000
              
              
              
              -Prepaid
      expenses
              
              
              -
              
              
              
              14,300Deferred
      tax asset
              
              
              -
              
              
              
              146Total
      Current Assets
              
              
              6,971
              
              
              
              50,162Fixed
      AssetsComputer
      equipment
              
              
              3,308
              
              
              
              2,124Accumulated
      depreciation
              
              
              (2,150
              )
              
              
              (1,682
              )Total
      Fixed Assets
              
              
              1,158
              
              
              
              442Total
      Assets
              
              $
              8,129
              
              
              $
              50,604LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)LiabilitiesCurrent
      LiabilitiesAccrued
      expenses and other payables
              
              $
              9,974
              
              
              $
              2,944Related
      party payable
              
              
              6,094
              
              
              
              16,099Total
      Current Liabilities
              
              
              16,068
              
              
              
              19,043Long
      Term LiabilitiesDeferred
      tax liability
              
              
              -
              
              
              
              33Total
      Long Term Liabilities
              
              
              -
              
              
              
              33Total
      Liabilities
              
              
              16,068
              
              
              
              19,076Stockholders'
      Equity (Deficit)Preferred
      stock -- 10,000,000 shares authorized having
                a
      par value of $.001 per share; 0 shares issued andoutstanding
              
              
              -
              
              
              
              -Common
      stock -- 100,000,000 shares authorized having
                a
      par value of $.001 per share; 10,000,000 and
                8,419,896
      shares issued and outstanding as ofDecember
      31, 2007 and 2006, respectively
              
              
              10,000
              
              
              
              8,420Additional
      paid-in capital
              
              
              26,188
              
              
              
              24,235Accumulated
      deficit
              
              
              (44,127
              )
              
              
              (1,127
              )Total
      Stockholders' Equity (Deficit)
              
              
              (7,939
              )
              
              
              31,528Total
      Liabilities and Stockholders' Equity (Deficit)
              
              $
              8,129
              
              
              $
              50,604
    F-2
  YAFARM TECHNOLOGIES, INC.
 Consolidated
Statements of Operations
 For
the years ended December 31, 2007 and 2006
  For
      the Year
              
              
              For
      the YearEnded
              
              
              EndedDecember
      31,
              
              
              December
      31,2007
              
              
              2006Revenues,
      net of discounts
              
              $
              9,807
              
              
              $
              19,302Operating
      Expenses
              
              
              52,115
              
              
              
              13,702Net
      Income (Loss) from Operations
              
              
              (42,308
              )
              
              
              5,600Other
      Income (Expense)Total
      Other Income (Expense)
              
              
              94
              
              
              
              -Net
      Income (Loss) before taxes
              
              
              (42,214
              )
              
              
              5,600Provision
      for Income Taxes
              
              
              786
              
              
              
              387Net
      Income (Loss)
              
              $
              (43,000
              )
              
              $
              5,213Income
      (Loss) Per Share Basic and
                Diluted
              
              $
              (0.01
              )
              
              $
              0.00Weighted
      Average Shares Outstanding
                Basic
      and Diluted
              
              
              9,901,856
              
              
              
              3,811,258
 
 
  F-3
 YAFARM TECHNOLOGIES, INC.
 Consolidated
Statements of Stockholders' Equity
 For
the Years Ended December 31, 2007 and 2006
 Number
      of
              
              
              Common
              
              
              Additional
              
              
              Retained
              
              
              NetCommon
              
              
              Stocks
              
              
              Paid-in
              
              
              Earnings
              
              
              Stockholders'Preferred
                Shares
              
              
              Preferred
                Stock
              
              
              Stocks
              
              
              
              
              
              Capital
              
              
              (Deficit)
              
              
              EquityBalance,
      January 1, 2006
              
              
              -
              
              
              $
              -
              
              
              
              1,000,000
              
              
              $
              1,000
              
              
              $
              11,044
              
              
              $
              (1,883
              )
              
              $
              10,161Common
      stock issued at $.001 per  share
              
              
              
              
              
              
              
              
              
              
              6,500,000
              
              
              
              6,500
              
              
              
              
              
              
              
              
              
              
              
              6,500Reclassification
      of undistributed income as of the reverse merger on July 31,
      2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,457
              
              
              
              (4,457
              )
              
              
              -Common
      stock issued at $0.03 per share, net of commissions
              
              
              
              
              
              
              
              
              
              
              919,896
              
              
              
              920
              
              
              
              25,737
              
              
              
              
              
              
              
              26,657Professional
      fees incurred directly related to stock offering
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (8,326
              )
              
              
              
              
              
              
              (8,326
              )Distributions
      to shareholders
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (8,677
              )
              
              
              
              
              
              
              (8,677
              )Net
      income for the year ended December 31, 2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4
              
              
              
              5,213
              
              
              
              5,213Balance,
      December 31, 2006
              
              
              
              
              
              
              
              
              
              
              8,419,896
              
              
              
              8,420
              
              
              
              24,235
              
              
              
              (1,127
              )
              
              
              31,528Common
      stock issued at $0.03 pershare
      in exchange for cash, netof
      commissions
              
              
              
              
              
              
              
              
              
              
              1,580,104
              
              
              
              1,580
              
              
              
              38,820
              
              
              
              
              
              
              
              40,400Professional
      fees incurreddirectly
      related to the stockoffering
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (36,867
              )
              
              
              
              
              
              
              (36,867
              )Net
      loss for 2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (43,000
              )
              
              
              (43,000
              )Balance,
      December 31, 2007
              
              
              
              
              
              
              
              
              
              
              10,000,000
              
              
              $
              10,000
              
              
              $
              26,188
              
              
              $
              (44,127
              )
              
              $
              (7,939
              )
 
 See
Accompanying notes to financial statements.
  F-4
  YAFARM TECHNOLOGIES, INC.
 Consolidated
Statements of Cash Flows
 For
the years ended December 31, 2007 and 2006
 For
      the Year
              
              
              For
      the YearEnded
              
              
              EndedDecember
      31,
              
              
              December
      31,2007
              
              
              2006Cash
      Flows From Operating ActivitiesNet
      Income (Loss)
              
              $
              (43,000
              )
              
              $
              5,213Adjustments
      to reconcile net income (loss)to
      net cash from operating activities:Depreciation
      and Amortization
              
              
              468
              
              
              
              294(Increase)/Decrease-Receivables
              
              
              (5,000
              )
              
              
              -(Increase)/Decrease-Prepaid
      Expenses
              
              
              14,300
              
              
              
              (14,300
              )(Increase)/Decrease-Deferred
      Taxes
              
              
              113
              
              
              
              (113
              )Increase/(Decrease)-Accrued
      Expenses
              
              
              7,029
              
              
              
              2,944Increase/(Decrease)-Related
      Party Payables
              
              
              (10,005
              )
              
              
              16,099Net
      Cash Flow From Operating Activities
              
              
              (36,095
              )
              
              
              10,137Cash
      Flow From Investing ActivitiesPurchase
      of Property and Equipment
              
              
              (1,183
              )
              
              
              -Net
      Cash Flow From Investing Activities
              
              
              (1,183
              )
              
              
              -Cash
      Flow From Financing ActivitiesProceeds
      from issuance of Common Stock
              
              
              40,400
              
              
              
              33,157Professional
      Fees related to stock offering
              
              
              (36,867
              )
              
              
              (8,326
              )Distributions
      to shareholders
              
              
              -
              
              
              
              (8,677
              )Net
      Cash From Financing Activities
              
              
              3,533
              
              
              
              16,154Net
      Increase (Decrease) in Cash
              
              
              (33,745
              )
              
              
              26,291Beginning
      Cash Balance
              
              
              35,716
              
              
              
              9,425Ending
      Cash Balance
              
              $
              1,971
              
              
              $
              35,716Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the year for interest
              
              
              -
              
              
              
              -Cash
      paid during the year for income taxes
              
              
              -
              
              
              
              -
 
 
 F-5
  YAFARM TECHNOLOGIES, INC.
 Notes
to the Condensed Consolidated Financial Statements
 December
31, 2007
 
 NOTE
A Summary of Significant Accounting Policies
 
 Company
Background
 
 YaFarm
Technologies, Inc. (the “Company”) 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.
 
 YaFarm
Group, LLC is a New Jersey-based web development and web hosting company
offering a broad range of business-class website development and web hosting
products and services for small and medium-sized businesses. The Company is
offering one-stop shopping web solutions for small and medium sized companies,
including web development, web hosting, website maintenance and business image
consulting services. The Company’s goal is to help many traditional businesses
go online to tap into the market potential offered by the Internet.
 
 The
financial statements of the Company have been prepared in accordance with U. S.
generally accepted accounting principles. The following summarizes the more
significant of such policies:
 
 Principles of
Consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, YaFarm Group, LLC. All significant intercompany
accounts and transactions are eliminated in consolidation.
 
 Cash and Cash
Equivalents
 
 For
purposes of the statement of cash flows, cash and cash equivalents are comprised
of cash on hand or on deposit in banks and all highly liquid debt instruments
purchased with a maturity of three months or less. The Company had a cash
balance of $1,971 as of December 31, 2007.
 
 Income
Taxes
 
 The
Company was organized as a limited liability company through July 31, 2006 and
as a C corporation since July 31, 2006. Income taxes were imposed on the
Company’s members prior to July 31, 2006. After July 31, 2006, the Company
applies the provision of Statements of Financial Accounting Standards No. 109,
“Accounting for Income Taxes.” This statement requires an asset and liability
approach for financial accounting and reporting of income taxes, and the
recognition of deferred tax assets and liabilities for the temporary differences
between the financial reporting basis and tax basis of the Company’s assets and
liabilities at enacted tax rates expected to be in effect when such amounts are
realized or settled.
  F-6
  YAFARM TECHNOLOGIES, INC.
 Notes
to the Condensed Consolidated Financial Statements
 December
31, 2007
  In July
2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
Uncertainty in Income Taxes.” This interpretation requires recognition and
measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. The Company adopted the provisions of FIN 48, “Accounting for Uncertainty
in Income Taxes –an Interpretation of FASB Statement No. 109” on January 1,
2007. FIN 48 requires the recognition and measurement of uncertain tax positions
taken or expected to be taken in a tax return. Adoption of this new standard did
not have a material impact on our financial position, results of operations or
cash flows.
  Use of Estimates in
Preparation of Financial Statements
 
 The
preparation of financial statements in conformity with U. S. 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 amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
 
 Revenue
Recognition
 
 The
Company recognizes revenues in accordance with the Securities and Exchange
Commission, Staff Accounting Bulletin (SAB) number 104, "Revenue Recognition."
SAB 104 clarifies application of U. S. generally accepted accounting principles
to revenue transactions.
 
 Fees for
development of web sites are negotiated based on the level of detail and
features desired by the customer. Half of the fee is generally billed when the
contract is entered. The remaining fee is due upon completion of the customers
working web site. There were no unfinished projects in progress as of December
31, 2007. Historically, maintenance work and the associated costs have been
minimal. Deposits received prior to the commencement of the projects are
recorded as deferred revenues. As of December 31, 2007, deferred revenues were
$0.
 
 Bad Debt and allowance for
doubtful accounts
 
 The
allowance for doubtful accounts is maintained at a level sufficient to provide
for estimated credit losses based on evaluating known and inherent risks in the
receivables portfolio. The Company provides an allowance for doubtful accounts
which, based upon management’s evaluation of numerous factors, including
economic conditions, a predictive analysis of the outcome of the current
portfolio and prior credit loss experience, is deemed adequate to cover
reasonably expected losses inherent in outstanding receivables. The allowance
was $0 as of December 31, 2007.
  F-7
  YAFARM TECHNOLOGIES, INC.
 Notes
to the Condensed Consolidated Financial Statements
 December
31, 2007
 Impact of New Accounting
Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value
Measurements,which defines fair value, establishes a framework for
measuring fair value in U.S. generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS No. 157 does not
require any new fair value measurements, but provides guidance on how to measure
fair value by providing a fair value hierarchy used to classify the source of
the information. This statement is effective for the Company beginning
January 1, 2008. The Company is currently assessing the potential impact
that adoption of SFAS No. 157 will have on its financial
statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment of SFAS No. 115.
SFAS No. 159 permits entities to choose to measure many financial instruments
and certain other items at fair value. Most of the provisions of this statement
apply only to entities that elect the fair value option. This statement is
effective for the Company beginning January 1, 2008. The Company is
currently assessing the potential impact that adoption of SFAS No. 159 will
have on its financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141R, Business Combinations,the
purpose of which is to improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. SFAS No. 141R
retains the fundamental provisions of SFAS No. 141, which it replaces, but is
broader in scope than SFAS No. 141. This statement is effective for the Company
beginning January 1, 2009. Earlier application is prohibited. The Company
is currently assessing the potential impact that adoption of SFAS No. 141R
will have on its financial statements.
 
 Fixed
Assets
 
 Property
and equipment are stated at cost. Depreciation is provided using the
double-declining balance method over the useful lives of the related assets. See
Note C. Expenditures for maintenance and repairs are charged to expense as
incurred.
 
 Basic and Diluted Income
(Loss) Per Share
 
 Basic and
diluted net income (loss) per common share has been calculated by dividing the
net income (loss) for the year by the basic and diluted weighted average number
of shares outstanding assuming that the capital structure in place subsequent to
the reverse merger had occurred as of the beginning of the first period
presented. There are no dilutive investments outstanding as of the balance sheet
date. Therefore, basic and diluted weighted average shares are the same for the
years ended December 31, 2007 and 2006.
 
 Advertising
Costs
 All
advertising costs are expensed when incurred. The advertising expense for the
years ended December 31, 2007 and 2006 was $0 and $1,080,
respectively.
  F-8
  YAFARM TECHNOLOGIES, INC.
 Notes
to the Condensed Consolidated Financial Statements
 December
31, 2007
  NOTE
B Accounting for Income Taxes
 
 The
provision for income taxes consists of the following:
 
 12/31/2007
              
              
              12/31/2006Provision
      for Income TaxesCurrent Taxes
              
              $
              500
              
              
              $
              500Deferred Taxes
              
              
              286
              
              
              
              (113
              )Total Provision for Income
      Taxes
              
              $
              786
              
              
              $
              387
 
 YaFarm
Technologies, Inc uses the asset/liability method, where deferred tax assets and
liabilities are determined based on the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for
financial and income tax reporting purposes. The net deferred tax asset
generated by the loss carry-forward has been fully reserved.  The
cumulative net operating loss carry-forward is approximately $43,171 at December
31, 2007, and will expire in the years 2026 through 2027.
 
 At
December 31, 2007, deferred taxes consisted of the following:
 
 Current
              
              
              NoncurrentDeferred
      tax assetsNet operating
    losses
              
              $
              -
              
              
              $
              9,252Valuation
    allowance
              
              
              -
              
              
              
              (9,252
              )Net deferred tax
      asset
              
              
              -
              
              
              
              -Deferred
      tax liabilities
              
              
              -
              
              
              
              -Net
      deferred taxes
              
              $
              -
              
              
              $
              -
 
 A
valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized.  Because of
the lack of visibility as to the Company’s earning ability in the near future,
the Company has established a valuation allowance for all future deductible net
operating loss carry forwards. The valuation allowance has increased $9,252 from
$0, as of December 31, 2007.
 
 Net
operating loss (“NOL”) carryforwards expire according to the
following:
 
 Year of NOL
              
              NOL
              
              Expires2007
              
              $
              42,196
              
              20272006
              
              
              975
              
              2026Total
              
              $
              43,171
  F-9
  YAFARM TECHNOLOGIES, INC.
 Notes
to the Condensed Consolidated Financial Statements
 December
31, 2007
 
 A
reconciliation between income taxes at statutory tax rates (15%) and the actual
income tax provision for continuing operations as of December 31, 2007 and 2006
follows:
 
 12/31/2007
              
              
              12/31/2006Expected
      Provision(Benefit) (based on statutory rate)
              
              $
              (6,332
              )
              
              $
              840Effect
      of:State
      taxes, net of federal benefit
              
              
              (2,199
              )
              
              
              425Permanent
      Differences
              
              
              65
              
              
              
              73Income
      taxed to members of LLC prior to reverse merger
              
              
              -
              
              
              
              (951
              )Increase/(decrease)
      in valuation allowance
              
              
              9,252
              
              
              
              -Total
      actual provision
              
              $
              786
              
              
              $
              387
 
 The
Company adopted the provisions of FIN 48 on January 1, 2007.  As a
result of this adoption, we have not made any adjustments to deferred tax assets
or liabilities.  We did not identify any material uncertain tax
positions of the Company on returns that have been filed or that will be
filed.  The Company continues to incur net operating losses as
disclosed above.  Since it is not thought that these net operating
loss carry forwards will ever produce a tax benefit, even if examined by taxing
authorities and disallowed entirely, there would be no effect on the financial
statements.  A reconciliation of our unrecognized tax benefits for
2007 is presented as follows:
 
 Balance
      as of January 1, 2007
              
              $
              146Additions
      based on tax positions related to the current year
              
              
              —Additions
      based on tax positions related to prior years
              
              
              —Reductions
      for tax positions of prior years
              
              
              146Reductions
      due to expiration of statute of limitations
              
              
              —Settlements
      with taxing authorities
              
              
              —Balance
      as of December 31, 2007
              
              $
              —
 
 The
Company has filed income tax returns in the U.S. federal jurisdiction and
Delaware state jurisdictions.  The Company is subject to U.S. federal
tax examinations of all tax returns since inception on June 16,
2006.
 
 The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in operating expenses.  During the
years ended December 31, 2007, 2006, and 2005, the Company recognized no
interest and penalties.  The Company had no payments of interest and
penalties accrued at December 31, 2007, and 2006, respectively.
 
 NOTE
C Fixed Assets
 
 As of
December 31, 2007, the Company had a net balance of fixed assets in the amount
of $1,158. The fixed assets consist of computer and photo equipment.
Depreciation expense was $468 and $294, for the years ended December 31, 2007
and 2006, respectively. The Company has adopted a double declining methodology
to calculating the depreciation amount related to its fixed assets.
 
 NOTE
D Related Party Payable
 
 During
the year ended December 31, 2007, the Company borrowed $6,094 from a shareholder
to pay for certain professional costs. The balance of the related party payable
as of December 31, 2007 was $6,094. The note is due on demand and interest
free.
  F-10
  YAFARM TECHNOLOGIES, INC.
 Notes
to the Condensed Consolidated Financial Statements
 December
31, 2007
 NOTE
E Common Stock
  During
the year ended December 31, 2006, we borrowed $16,099 from Columbia China
Capital Group, Inc., our majority shareholder, to pay for costs incurred
relating to a private placement offering and our SB-2 filing.  The
terms of the loan were at least as favorable to us as they would have been with
an unrelated third party.  During the quarterly period ended September
30, 2007, we repaid this loan in full.
  NOTE
F 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 December 31, 2007, the Company had an
accumulated deficit of ($44,127), negative working capital of $9,097 and
negative cash flows from operations of $36,095 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
G Operating Leases
 
 We
lease our principal executive and administrative offices located at 197 Route 18
South, Suite 3000, PMB 4157, East Brunswick, NJ 08816.  On February 1,
2007, we entered into a 12-month lease with Ragus Management Group,
LLC.  Under the lease, we pay $118 per month as base rent and pay the
office and shared space expenses based on actual usage.  The typical
office is about 100 square feet and the total office space at 197 Route 18 South
is about 1,000 square feet.
 
 NOTE
H Subsequent Event
 
 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.