10-Q/A 1 form10qa.htm Filed by sedaredgar.com - YzApp International Inc. - Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 1

(Mark One)

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

For the quarterly period ended April 30, 2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period

Commission file number 333-111696

YzApp International Inc.
(Exact name of registrant as specified in its charter)

Nevada N/A
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

Suite 500-666 Burrard Street
Vancouver, British Columbia CANADA V6C 3P6
(Address of principal executive offices)

604-868-0264
(Issuer's telephone number)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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 [ ]

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

Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [ X ]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

There were 11,746,041 shares of common stock issued and outstanding as of June 23, 2008.

EXPLANTORY NOTE

This Amendment No. 1 to the Quarterly Report for the period ended April 30, 2008 is being filed to correct several typographical errors in the officer certifications. No other part of the Quarterly Report is being amended.

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PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying interim balance sheets of YzApp International Inc. at April 30, 2008 and the interim statement of operations and interim statement of cash flow for the three months ended April 30, 2008 and 2007 have been prepared by our management in conformity with United States accounting principles generally accepted.

It is the opinion of management that the interim financial statements for the quarter ended April 30, 2008 include all adjustments necessary in order to ensure that the interim financial statements are not misleading.


YzApp International Inc.
(A Development Stage Company)
 
April 30, 2008

Index  
   
Consolidated Balance Sheets F–2
Consolidated Statements of Operations F–3
Consolidated Statements of Cash Flows F–4
Notes to the Consolidated Financial Statements F–5


YzApp International Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(expressed in U.S. dollars)

    April 30,     July 31,  
    2008     2007  
  $    $   
    (unaudited)        
ASSETS            
Current Assets            
   Cash   5,933     467  
Total Assets   5,933     467  
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT            
Current Liabilities            
   Accounts payable   47,472     26,318  
   Accrued liabilities   4,651     449  
   Loans payable (Note 3)   65,469     46,706  
   Current liabilities of discontinued operations   33,056     31,394  
Total Current Liabilities   150,648     104,867  
Going Concern (Note 1)            
STOCKHOLDERS’ DEFICIT            
   Preferred Stock:            
   1,000,000 authorized, $0.001 par value;            
   Nil shares issued and outstanding   –     –  
   Common Stock:            
   50,000,000 shares authorized, $0.001 par value;            
   11,746,041 shares issued and outstanding   11,746     11,746  
   Additional Paid-in Capital   788,959     788,959  
   Donated Capital (Note 4)   183,549     179,799  
   Deficit Accumulated During the Development Stage   (1,068,169 )   (1,025,766 )
   Accumulated Other Comprehensive Loss   (60,800 )   (59,138 )
Total Stockholders’ Deficit   (144,715 )   (104,400 )
Total Liabilities and Stockholders’ Deficit   5,933     467  

(The accompanying notes are an integral part of these consolidated financial statements)

F–2


YzApp International Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(expressed in U.S. dollars)
(Unaudited)

                            Accumulated  
                            from  
                            August 24,  
                            2000  
                            (Date of  
    Nine Months Ended     Three Months Ended     Inception) to  
    April 30,         April 30,     April 30,  
    2008     2007     2008     2007       2008  
  $    $    $    $    $   
Revenue   –     –     –     –     –  
                               
Expenses                              
   General and administrative (Note 4)   40,331     44,558     7,093     8,239     569,308  
Total Expenses   40,331     44,558     7,093     8,239     569,308  
Loss before Other Income (Expense)   (40,331 )   (44,558 )   (7,093 )   (8,239 )   (569,308 )
Other Income (Expense)                              
                               
   Gain on debt forgiveness/settlements   –     244,016     –     –     201,726  
   Interest expense   (2,072 )   (392 )   (738 )   (265 )   (5,129 )
   Interest income   –     –     –     –     2,789  
   Loss on disposal of property and equipment   –     –     –     –     (2,017 )
Income (Loss) from Continuing Operations   (42,403 )   199,066     (7,831 )   (8,504 )   (371,939 )
Loss from Discontinued Operations   –     (37,559 )   –     (8,504 )   (696,230 )
Loss for the Period   (42,403 )   161,507     (7,831 )   (8,504 )   (1,068,169 )
Comprehensive Income (Loss)                              
   Foreign currency translation adjustment   (1,662 )   3,174     546     (726 )   (60,800 )
Comprehensive Loss (Income)   (44,065 )   164,681     (7,285 )   (9,230 )   (1,128,969 )
Net Earnings (Loss) Per Share                              
   Continuing Operations – Basic and Diluted   (0.00 )   0.01     (0.00     (0.00 )      
   Discontinued Operations – Basic and Diluted   –     –     –     –        
    (0.00 )   0.01     (0.00     –        
Weighted Average Common Shares                              
Outstanding   11,746,041     11,667,653     11,746,041     11,746,041          

(The accompanying notes are an integral part of these consolidated financial statements)

F–3


YzApp International Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)

    Nine Months Ended  
    April 30,        
    2008     2007  
  $    $   
Operating Activities            
Net income (loss)   (42,403 )   161,507  
Adjustments to reconcile net loss to net cash used in operating activities:            
Depreciation   –     693  
Donated services   3,750     5,000  
Gain on settlement of debt   –     (244,016 )
Impairment of property and equipment   –     8,807  
Impairment of software development costs   –     37,559  
Changes in operating assets and liabilities:            
Amounts receivable   –     (42 )
Accounts payable and accrued liabilities   25,392     (6,548 )
Net Cash Used In Operating Activities   (13,261 )   (37,040 )
Financing Activities            
Proceeds from loans payable   19,832     23,278  
Net Cash Provided By Financing Activities   19,832     23,278  
Effect of Exchange Rate Changes on Cash   (1,105 )   (931 )
Increase (Decrease) In Cash   5,466     (14,693 )
Cash – Beginning Of Period   467     14,979  
Cash – End Of Period   5,933     286  
Non-cash Investing and Financing Activities            
   Common shares issued for to settle debt   –     20,000  
Supplemental Disclosures            
   Interest paid   –     –  
   Income taxes paid   –     –  

(The accompanying notes are an integral part of these consolidated financial statements)

F–4


YzApp International Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
April 30, 2008

1.

Nature of Operations and Continuance of Business
     

YzApp International Inc. (the "Company") was incorporated in the State of Nevada on December 26, 2002. Effective October 15, 2003, the Company acquired all the outstanding common stock of YzApp Solutions Inc. ("Solutions"), a company under common control, by issuing 9,520,000 common shares on a one share for two shares owned basis. Solutions was incorporated under the Company Act of British Columbia on August 24, 2000 and continued into federal jurisdiction under the Canada Business Corporations Act on October 15, 2001. The principal business of Solutions is operating as an application service provider acting as a conduit between retailers and financial institutions. Prior to the reverse acquisition, the Company was a non-operating shell company with nominal net assets. Therefore, this acquisition was a capital transaction in substance, rather than a business combination, and was accounted for as a reverse acquisition using the purchase method of accounting. Because Solutions was deemed to be the acquirer for accounting purposes, the financial statements are presented as a continuation of Solutions and include the results of operations of Solutions since its incorporation on August 24, 2000, except that all share issuances of Solutions were adjusted to reflect the 1 for 2 share exchange on the acquisition.
     

The Company is based in Vancouver, British Columbia, Canada and prior to January 31, 2007 its principal business was the development of software allowing the Company to act as an application service provider acting as a conduit between retailers and financial institutions. As at January 31, 2007, the Company decided to discontinue its business of developing software.
     

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated minimal revenue since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations. As at April 30, 2008, the Company had a working capital deficiency of $144,715 and has accumulated losses of $1,068,169 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
     

The Company estimates that it needs approximately $41,500 to fund its’ operations and approximately $140,000 to fund its working capital deficiency for the next twelve months. Management's intention is to generate sufficient financing through the sale of common stock. There is no certainty that these sources will provide the additional funds required for the next twelve months.
     
2.

Summary of Significant Accounting Policies
     

(a)

Basis of Presentation
     

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in U.S. dollars. All significant inter- company transactions and balances have been eliminated. The Company has not produced significant revenue from its principal business and is a development stage company as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage Enterprises”.
     

(b)

Interim Financial Statements
     

These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

F–5


YzApp International Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
April 30, 2008

2.

Summary of Significant Accounting Policies (continued)
     
(c)

Use of Estimates
     

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. The Company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets, donated expenses and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
     
(d)

Cash and Cash Equivalents
     

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
     
(e)

Earnings Per Share
     

The Company computes net earnings (loss) per share in accordance with SFAS No. 128, “Earnings per Share”, which requires presentation of both basic and diluted earnings per shares (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
     
(f)

Foreign Currency Translation
     

The Company's reporting and functional currency is the U.S. dollar. The operations of the Company's subsidiaries are located in Canada and their functional currency is the Canadian dollar. The financial statements of these operations have been translated into U.S. dollars using the current rate method whereby the assets and liabilities are translated at the rates of exchange in effect at the balance sheet date and revenue and expenses are translated at the average rates of exchange during the year. The effect of this translation is recorded in a separate component of stockholders' equity.
     

Cumulative translation adjustments of $60,800 and $59,138 as at April 30, 2008 and July 31, 2007 has been included in accumulated other comprehensive loss in the accompanying consolidated balance sheets. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
     
(g)

Comprehensive Loss
     

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at January 31, 2008 and 2007, the only component of comprehensive loss was foreign currency translation adjustments.

F–6


YzApp International Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
April 30, 2008

2.

Summary of Significant Accounting Policies (continued)
     
(h)

Financial Instruments and Concentrations of Risk
     

The fair values of financial instruments, which include cash, amounts receivable, accounts payable, accrued liabilities, loans payable, current liabilities of discontinued operations, and due to related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
     
(i)

Income Taxes
     

The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
     
(j)

Stock-based Compensation
     

The Company records stock-based compensation in accordance with SFAS No. 123R, “Share Based Payments”, using the fair value method.
     

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
     
(k)

Recent Accounting Pronouncements
     

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised 2007), “Business Combinations”. SFAS No. 141 (revised 2007) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (revised 2007) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
     

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51”. SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

F–7


YzApp International Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
April 30, 2008

2.

Summary of Significant Accounting Policies (continued)
     
(k)

Recent Accounting Pronouncements (continued)
     

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
     

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
     

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement did not have a material effect on the Company’s reported financial position or results of operations
     
(l)

Reclassifications
     

Certain of the prior period figures have been reclassified to conform to the current period’s presentation.
     
3.

Loans Payable
     
(a)

As at April 30, 2008, the Company owed $24,801 (Cdn$25,125) (July 31, 2007 - $19,803) to shareholders for cash advances which are non-interest bearing, unsecured and due on demand.
     
(b)

As at April 30, 2008, the Company owed $18,952 (Cdn$19,200) (July 31, 2007 – $15,654) to an unrelated party which bears interest at 5% per annum, is unsecured, of which $16,485 was due on January 8, 2008 and the remaining balance of $2,468 is due on October 30, 2008.
     
(c)

As at April 30, 2008, the Company owed $21,716 (Cdn$22,000) (July 31, 2007 – $11,249) to an unrelated party which bears interest at 10% per annum, is unsecured, of which $11,845 was due on October 4, 2007 and $9,871 was due December 15, 2007.

F–8


YzApp International Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
April 30, 2008

4.

Related Party Transactions
   

During the nine months ended April 30, 2008, the Company incurred management fees for ongoing management of the Company's affairs to the President of the Company of $3,750 (2007 - $5,000), all of which was waived and recognized as donated services.

F–9

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Financial information contained in this quarterly report and in our unaudited interim financial statements is stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our unaudited interim financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled "Risk Factors".

As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "YzApp International" means YzApp International Inc.

Corporate History

YzApp International Inc. was originally incorporated in the State of Nevada on December 26, 2002. Effective October 15, 2003, we acquired all the outstanding common stock of YzApp Solutions Inc., a company under common control. Prior to the acquisition, our company was a non-operating shell corporation with nominal net assets. The acquisition was a capital transaction in substance and therefore was accounted for as a reverse acquisition.

Business Overview

Our company is based in Vancouver, British Columbia, Canada. Following incorporation, we commenced business as a company engaged in developing software which allowed us to act as an application service provider acting as a conduit between retailers and financial institutions.

We were not successful in implementing our business plan as an application service provider. As management of our company investigated opportunities and challenges in the business of being an application service provider, management realized that the business did not present the best opportunity for our company to realize value for our shareholders. Although we have not abandoned our current business as an application service provider, we are focused on the identification of suitable businesses with which to enter into a business opportunity or business combination.

PLAN OF OPERATION

You should read the following discussion of our financial condition and plan of operations together with the unaudited financial statements and the notes thereto included elsewhere in this report. This discussion contains

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forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include those discussed in this report, particularly in the section entitled “Risk Factors”.

As of April 30, 2008, our company had cash of $5,933 and a working capital deficit of $144,715. We estimate our operating expenses and working capital requirements for the next twelve month period to be as follows:

Estimated Expenses for the Next Twelve Month Period   
Operating Expenses      
                   Professional Fees $  20,000  
                   Employee and Consultant Compensation $  15,000  
                   General and Administrative Expenses $  6,500  
Total $  41,500  

Professional Fees

We expect to incur on-going legal expenses to comply with our reporting responsibilities as public company under the United States Securities Exchange Act of 1934, as amended. We estimate our legal and accounting expenses for the next fiscal year to be approximately $20,000.

Employee and Consultant Compensation

Given the uncertainties related to our future business, we intend to continue to outsource our professional and personnel requirements by retaining consultants on an as needed basis. We estimate that our consultant and related professional compensation expenses for the next twelve month period will be approximately $15,000. As of January 31, 2008, Brian Jaggard and Douglas Dunn were our sole employees. However, our company did not pay salaries or bonuses to such individuals during this time.

General and Administrative Expenses

We anticipate spending $6,500 on general and administrative costs in the next twelve month period. These costs primarily consist of expenses such as office supplies and office equipment.

Liquidity and Capital Resources

Our company’s principal cash requirements are for operating expenses which we anticipate will rise as we proceed to conduct due diligence on suitable entities with which to enter into a business opportunity or combination.

Capital Resources

As of April 30, 2008, we had $5,933 in cash and a working capital deficit of $144,715. We have suffered recurring losses from inception. The ability of our company to meet our financial liabilities and commitments is primarily dependent upon the continued financial support of our directors and shareholders, the continued issuance of equity to new shareholders, and our ability to enter into a suitable and successful business opportunity or combination.

Management believes that our company’s cash and cash equivalents and cash will not be sufficient to meet our working capital requirements for the next twelve month period. We estimate that we will require $180,000 over the next twelve month period to fund our plan of operations and eliminate our working capital deficiency. Our company plans to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through the private placement of our equity securities. There is no assurance that our company will be able to obtain further funds required for our continued working capital requirements.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further long-term financing, successful identification and consummation of a business

- 5 -

opportunity or combination and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our audited consolidated financial statements for the period ended July 31, 2007, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Capital Expenditures

As of April 30, 2008, our company did not have any material commitments for capital expenditures and management does not anticipate that our company will spend additional material amounts on capital expenditures in the near future.

Off-Balance Sheet Arrangements

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

SIGNIFICANT ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles 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.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory reserves and income taxes. These policies require that we make estimates in the preparation of our financial statements as of a given date.

Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ended July 31, 2007, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further financing. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations or to locate and consummation a suitable business opportunity or combination. We are pursuing various financing

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alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due.

Stock-based Compensation

Our company records stock-based compensation in accordance with SFAS No. 123R "Share Based Payments", using the fair value method.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115". This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements". Our company is evaluating the impact of this statement on our company's future reported financial position or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. Our company’s adoption of this statement did not have a material effect on our reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on our company's future reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. Our company is evaluating the impact of this statement on our company's future reported financial position or results of operations.

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In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on de-recognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Our company is evaluating the impact of this statement on our company's future reported financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. Our company is evaluating the impact of this statement on our company's future reported financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of Long-Lived Assets", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. Our company is evaluating the impact of this statement on our company's future reported financial position or results of operations.

ITEM 3. QUANTITAVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Because we do not intend to pay any dividends on our common shares, investors seeking dividend income or liquidity should not purchase shares.

We do not currently anticipate declaring and paying dividends to our shareholders in the near future. It is our current intention to apply net earnings, if any, in the foreseeable future to increasing our working capital. Prospective investors seeking or needing dividend income or liquidity should, therefore, not purchase our common stock. We currently have no revenues and a history of losses, so there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of our shares, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors, who currently do not intend to pay any dividends on our common shares for the foreseeable future.

Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions

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with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

ITEM 4T. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer, principal financial and accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of January 31, 2008 and of the first quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended April 30, 2008 that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

RISK FACTORS

Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". Prospective investors should consider carefully the risk factors set out below.

We have not generated revenues to date and if we are not able to obtain further financing we may be forced to cease operations and our business operations may fail.

To date we have not generated any revenues from operations and we have been dependent on sales of our equity securities to meet the majority of our cash requirements. As at April 30, 2008, we had cash of $5,933 and a working capital deficiency of $144,715. We do not expect to generate any revenues in the near future until we locate and enter into a suitable business opportunity or combination with another viable pre-existing business. We estimate that we will require approximately $3,500 per month to fund our operations for the next twelve month period. Because we cannot anticipate when or if we will enter into a suitable business opportunity or combination with another entity, we will need to raise additional funds to continue to fund our operations. If we are not able to raise such funds, we may be forced to cease operations and our business may fail.

We have a limited operating history. If we cannot successfully manage the risks normally faced by start-up companies, we may not achieve profitable operations and ultimately our business may fail.

We have a limited operating history. Our operating activities since our incorporation have not met with much success. As a result, we are seeking business opportunities with other viable businesses. Our prospects are subject to the risks and expenses encountered by start up companies, such as uncertainties regarding our level of future revenues and our inability to budget expenses and manage growth accordingly and our inability to access sources of financing when required and at rates favorable to us. Our limited operating history makes it difficult or impossible to predict future results of our operations which may result in the loss of some or all of your investment in our common stock.

The fact that we have not succeeded in our business plan raises substantial doubt about our ability to continue as a going concern, as indicated in our independent auditors’ report in connection with our audited consolidated financial statements.

Due in part to the lack of our operating history at April 30, our independent auditors’ report includes an explanatory paragraph about our ability to continue as a going concern. We will, in all likelihood, continue to incur operating expenses without revenues until we succeed at our current business or we determine to enter into a business opportunity or combination with a pre-existing business entity. Our primary source of funds has been the sale of our common stock. We cannot assure that we will be able to generate enough interest in our company. If we are unable to raise funds to cover our operating costs, or obtain adequate future financing, our business will fail and you may

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lose some or all of your investment in our common stock. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors’ report on the financial statements for the period ended July 31, 2007.

We will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to scale back or cease operations or discontinue our business.

We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing when such funding is required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our business model. Furthermore, there is no assurance that we will not incur further debt in the future, that we will have sufficient funds to repay our future indebtedness or that we will not default on our future debts, thereby jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to maintain our operations, which might result in the loss of some or all of your investment in our common stock. Our company anticipates that our funds will not be sufficient to satisfy our cash requirements for the next twelve month period. Also, there is no assurance that actual cash requirements will not exceed our estimates.

We will depend almost exclusively on outside capital to pay for the continued operation of our business. Such outside capital may include the sale of additional stock, shareholder advances and/or commercial borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us will result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Our officers are engaged in other business activities and accordingly may not devote sufficient time to our business affairs, which may affect our ability to conduct operations and generate revenues.

Our officers are involved in other business activities. Brian Jaggard, our president, chief executive officer, chief financial officer and director spends approximately 25 hours a month, or 15%, of his business time on the management of our company and Douglas Dunn, our chief operations officer, Secretary and director, spends approximately 12 hours, or 10%, of his business time on the management of our company. As a result of their other business endeavours, Mr. Jaggard and Mr. Dunn may not be able to devote sufficient time to our business affairs, which may negatively affect our ability to conduct our ongoing operations and our ability to generate revenues. In addition, the management of our company may be periodically interrupted or delayed as a result of Mr. Jaggard’s or Mr. Dunn’s other business interests.

All of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.

Because our officers, directors and principal shareholders control a large percentage of our common stock, such insiders have the ability to influence matters affecting our shareholders.

Our officers and directors, in the aggregate, beneficially own 53% of the issued and outstanding shares of our common stock. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because

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our officers, directors and principal shareholders control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and may experience further dilution.

We are authorized to issue up to 50,000,000 common shares and 1,000,000 preferred shares, of which 11,746,041 common shares and no preferred shares are issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience more dilution in their ownership of our company in the future.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5 OTHER INFORMATION

None.

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ITEM 6 EXHIBITS

 

Exhibit

 
 

Number

Description
 

3.1

Articles of Incorporation(1)
 

3.2

Bylaws(1)
 

4.1

Form of Common Stock Certificate(1)
 

10.1

Agreement and Plan of Reorganization(1)
 

10.2

Inglenet Professional Services Agreement(1)
 

10.3

Sawka Group Agreement(2)
 

10.4

Waiver of Compensation by Brian Jaggard(4)
 

10.5

Subscription Agreement(3)
 

14.1

Code of Ethics(5)
 

31.1*

Section 302 Certification of Brian Jaggard
 

32.1*

Section 906 Certification of Brian Jaggard

* Filed herewith

 

(1)

Previously filed with Form SB-2 on January 2, 2004

 

(2)

Previously filed with Form SB-2 Amendment No. 2 on July 8, 2004

 

(3)

Previously filed with Form SB-2 Amendment No. 4 on January 28, 2005

 

(4)

Previously filed with Form SB-2 Amendment No 5 on April 26, 2005

 

(5)

Previously filed with Form 10-KSB on November 20, 2007


SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

YZAPP INTERNATIONAL INC.

/s/ Brian Jaggard
By: Brian Jaggard, President, Chief Executive Officer
Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
Dated: June 23, 2008