Inc. (the "Company") was organized in Texas in January 2008 as a limited liability company. Prior to that date the Company
was organized as a general partnership. On July 13, 2010 the Company's' equity structure was converted to that of a corporation.
The Company provides software development and web development services to the general public.
unaudited financial statements of Yellow7 have been prepared in accordance with U.S. generally accepted accounting principles
for interim financial information. Certain information and footnote disclosures normally included in annual financial statements
prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such principles
and regulations of the Securities and Exchange Commission for Form 10-Q. All adjustments, consisting of normal recurring adjustments,
have been made which, in the opinion of management, are necessary for a fair presentation of the results of interim periods. The
results of operations for such interim periods are not necessarily indicative of the results that may be expected for a full year.
The unaudited financial statements contained herein should be read in conjunction with the audited financial statements and notes
thereto for the fiscal year ended December 31, 2010.
sheet at September 30, 2011 has been derived from the audited financial statements at that date but does not include all of the
information and notes required by U.S. generally accepted accounting principles for complete financial statements. For further
information, refer to the financial statements and notes thereto for the fiscal year ended December 31, 2010.
statements of operations include pro-forma information that shows the tax benefit/(expense) for all periods shown as if the Company's
equity structure had been that of a corporation as of January 1, 2009. Pro-forma information has also been included for (loss)
income per common share (basic and fully diluted) and for the weighted average number of shares outstanding (basic and fully diluted)
as if the Company had issued the initial 40,200,000 shares on January 1, 2009.
of Credit Risk
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of trade accounts
receivable. The Company minimizes its credit risk by performing credit evaluations of its customers' financial condition. The
Company maintains an allowance for doubtful accounts based upon expected collectability.
Accounts Receivable and Allowance for Doubtful Accounts
for uncollectible accounts is estimated and recorded based on the Company's historical bad debt experience and on management's
judgment. The allowance for uncollectible accounts at September 30, 2011 and December 31, 2010 was $3,500 and $3,500, respectively.
and equipment are stated at cost. Maintenance, repairs and minor renewals are expensed as incurred. Furniture and equipment that
is retired or sold, and the related gain or loss, if any, is taken into income currently. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
useful lives for computing depreciation are:
|Equipment and vehicles
||5 - 10 years|
|Furniture and fixtures
||5 - 7 years|
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
follows Accounting Standards Codification ("ASC") 280, "Segment Reporting". The Company currently operates in
a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
12, 2010 the Company was a limited liability company, and therefore was not subject to income tax, as any income or loss was included
in the personal returns of the individual members. Accordingly, no provision was made for income taxes in the financial statements
through that date. On July 13, 2010 the Company converted its equity structure to that of a corporation at which time it became
subject to income tax.
Income Taxes (continued)
to July 12, 2010, deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year end, based
on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable
income. A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely
than not that all, or some portion, of the deferred tax assets will not be realized. Income tax expense is the sum of current
income tax plus the change in deferred tax assets and liabilities.
Income Taxes, requires a company to first determine whether it is more likely than not (defined as a likelihood of more than fifty
percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities
will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not
threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized
upon effective settlement with a taxing authority.
(Loss) per Common Share
income (loss) per common share is calculated using the weighted average common shares outstanding during each reporting period.
Diluted net income (loss) per common share adjusts the weighted average common shares outstanding for the potential dilution that
could occur if common stock equivalents (convertible debt and preferred stock, warrants, stock options, and restricted stock shares
and units) were exercised or converted into common stock. There were no common stock equivalents at September 30, 2011.
value of the Companys financial instruments, including cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities approximate fair value because of the short maturities of those instruments.
and Cash Equivalents
of the statement of cash flows, the Company considers all highly liquid equity instruments with a maturity of three months or
less to be cash equivalents.
costs are charged to operations as incurred.
Recent Accounting Pronouncements
In May 2011,
the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS).
This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and
disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles
and enhances the disclosure requirements particularly for level three fair value measurements. This pronouncement is effective
for reporting periods beginning on or after December 15, 2011. The adoption of ASU 2011-04 is not expected to have a significant
impact on the Companys consolidated financial position or results of operations.
2011, the FASB issued guidance on the presentation of comprehensive income. This guidance eliminates the current option to report
other comprehensive income and its components in the statement of changes in equity. The guidance allows two presentation alternatives;
present items of net income and other comprehensive income in (1) one continuous statement, referred to as the statement of comprehensive
income, or (2) in two separate, but consecutive, statements of net income and other comprehensive income. This guidance is effective
as of the beginning of a fiscal year that begins after December 15, 2011. Early adoption is permitted, but full retrospective
application is required under both sets of accounting standards. The Company is currently evaluating which presentation alternative
it will utilize.