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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For Quarter Ended:  March 31, 2014
 
Commission File Number 000-54888
 
YUMMY FLIES, INC.
(Exact name of registrant as specified in its charter)
 
Colorado
 
20-8496798
(State or other jurisdiction
 
(I.R.S. Employer
of incorporation or organization)
 
Identification No.)
 
1848 South Lamar Ct.
Lakewood, CO 80232
 (Address of principal executive offices) (Zip Code)
 
(303) 619-2503
 (Registrant's telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes þ   No o.
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes þ   No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o
Accelerated filer  o
   
Non-accelerated filer  o (Do not check if a
smaller reporting company)
Smaller reporting company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   o Yes  þ  No

The number of shares of the registrant’s only class of common stock issued and outstanding as of May 12, 2014, was 10,278,000 shares.


 
 

 
 
TABLE OF CONTENTS

 
   
Page No.
     
 
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
3
 
  Condensed Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013 (audited)
4
 
  Unaudited Condensed Statements of Operations for the Three Month Periods Ended March 31, 2014 and 2013 and the
    Period from December 26, 2005 (inception) Through March 31, 2014
 
5
 
      Unaudited Condensed Statements of Changes in Stockholders' Equity (Deficit) for the Period from December 26, 2005 (inception)
    Through March 31, 2014
 6
 
  Unaudited Condensed Statements of Cash Flows for the for the Three Month Periods Ended March 31, 2014 and 2013 and
    the Period from December 26, 2005 (inception) Through March 31, 2014
 
7
 
  Notes to Unaudited Financial Statements
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations/Plan of Operation.
12
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
14
Item 4.
Controls and Procedures.
14
     
 
PART II
 
 
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
15
Item 1A.
Risk Factors
15
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
15
Item 3.
Defaults Upon Senior Securities
15
Item 4.
Mine Safety Disclosures
15
Item 5.
Other Information
15
Item 6.
Exhibits
16
 
Signatures
17
 

 
- 2 -

 
 
PART I - FINANCIAL INFORMATION
 
Item 1.     Financial Statements
 
 
 

 

Yummy Flies, Inc.
(A Development Stage Company)

UNAUDITED FINANCIAL STATEMENTS

For The Three Month Interim Periods Ended March 31, 2014 and 2013
and the Period from December 26, 2005 (Inception) to March 31, 2014
 (Unaudited)
 
 
 



 
- 3 -

 
 
Yummy Flies, Inc.
 
(A Development Stage Company)
 
Condensed Balance Sheets
 
 
   
Unaudited
   
Audited
 
   
March 31,
   
December 31,
 
   
2014
   
2013
 
ASSETS
 
Current Assets
           
  Cash & Cash Equivalents
  $ 84     $ 1,257  
   Inventory
    886       714  
                 
      TOTAL CURRENT ASSETS
    970       1,971  
                 
Property & Equipment
               
   Equipment (net of Accumulated Depreciation $2,593, $2,593 respectively)
    -       -  
                 
      TOTAL ASSETS
  $ 970     $ 1,971  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
Current Liabilities
               
   Accounts Payable
  $ 40,794     $ 28,842  
   Advances From Shareholders
    19,741       17,194  
      TOTAL CURRENT LIABILITIES
    60,535       46,036  
                 
      TOTAL LIABILITIES
    60,535       46,036  
                 
Stockholders' Deficit
               
   Common Stock (par value $0.001;  Authorized 100,000,000 shares;
               
    issued and outstanding 10,278,000
    10,278       10,278  
   Additional Paid-in-Capital
    32,447       32,447  
   Deficit Accumulated During the Development Stage
    (102,290 )     (86,790 )
                 
     TOTAL STOCKHOLDERS' DEFICIT
    (59,565 )     (44,065 )
                 
     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 970     $ 1,971  
 
See accompanying notes to financial statements

 
- 4 -

 
 
Yummy Flies, Inc.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
 
                   
               
December 26,
 
               
2005 (Inception)
 
   
Three months ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2014
   
2013
   
2014
 
                   
REVENUE
  $ 59     $ 422     $ 2,691  
                         
COST OF GOODS SOLD
    23       -       985  
                         
Gross Profit
    36       422       1,706  
OPERATING EXPENSES
                       
                       
   Accounting
    3,750       600       35,745  
   Depreciation
    -       35       2,593  
   General and administrative
    84       610       12,114  
   Legal
    11,702       -       44,071  
   Writeoffs - inventory
    -       -       9,473  
     Operating Expenses
    15,536       1,245       103,996  
                         
(Loss) from Operations
    (15,500 )     (823 )     (102,290 )
                         
Provision for Taxes
    -       -       -  
                         
     Net (Loss)
  $ (15,500 )   $ (823 )   $ (102,290 )
                         
Basic Earnings (Loss) Per Share:
                       
Basic and Diluted
  $ (0.00 ) *   $ (0.00 )        
                         
 Weighted Average Number of Common Shares Outstanding:
                       
Basic and Diluted
    10,278,000       10,278,000          
                         
 * denotes a loss of less than $(0.01) per share.
                       
 
See accompanying notes to financial statements

 
- 5 -

 
 
Yummy Flies, Inc.
 
(A Development Stage Company)
 
Condensed Statements of Changes in Stockholders' Equity (Deficit)
 
                               
   
Number Of
         
Capital Paid
   
Retained
       
   
Common
   
Common
   
in Excess
   
Earnings
       
   
Shares Issued
   
Stock
   
of Par Value
   
(Deficit)
   
Total
 
                               
Balance At December 26, 2005 - Inception - audited
    -     $ -     $ -     $ -     $ -  
                                         
January 1, 2007 975,000 shares of
                                       
 common stock issued for services valued
                                       
 at $975 or $.001 per share
    8,775,000       8,775       (7,800 )     -       975  
                                         
March  2007 57,000 shares of
                                       
common stock issued for cash of
                                       
$14,250 or $0.25 per share
    513,000       513       13,737       -       14,250  
                                         
April  2007 46,000 shares of
                                       
common stock issued for cash of
                                       
$11,500 or $0.25 per share
    414,000       414       11,086       -       11,500  
                                         
May  2007 4,000 shares of
                                       
common stock issued for cash of
                                       
$1,000 or $0.25 per share
    36,000       36       964       -       1,000  
                                         
December  2007 14,000 shares of
                                       
common stock issued for cash of
                                       
$3,500 or $0.25 per share
    126,000       126       3,374       -       3,500  
                                         
Net (loss)
    -       -       -       (14,962 )     (14,962 )
                                         
Balance at December 31, 2007  - audited
    9,864,000       9,864       21,361       (14,962 )     16,263  
                                         
April 2008 39,000 shares of
                                       
common stock issued for cash of
                                       
$9,750 or $0.25 per share
    351,000       351       9,399       -       9,750  
                                         
May 2008 1,000 shares of
                                       
common stock issued for cash of
                                       
$250 or $0.25 per share
    9,000       9       241       -       250  
                                         
June 2008 2,000 shares of
                                       
common stock issued for cash of
                                       
$500 or $0.25 per share
    18,000       18       482       -       500  
                                         
August 2008 4,000 shares of
                                       
common stock issued for cash of
                                       
$1,000 or $0.25 per share
    36,000       36       964       -       1,000  
                                         
Net (loss)
    -       -       -       (3,628 )     (3,628 )
                                         
Balance at December 31, 2008 - audited
    10,278,000       10,278       32,447       (18,590 )     24,135  
                                         
Net (loss)
    -       -       -       (4,289 )     (4,289 )
                                         
Balance at December 31, 2009 - audited
    10,278,000       10,278       32,447       (22,879 )     19,846  
                                         
Net (loss)
    -       -       -       (12,169 )     (12,169 )
                                         
Balance at December 31, 2010 - audited
    10,278,000       10,278       32,447       (35,048 )     7,677  
                                         
Net (loss)
    -       -       -       (9,097 )     (9,097 )
                                         
Balance at December 31, 2011 - audited
    10,278,000       10,278       32,447       (44,145 )     (1,420 )
                                         
Net (loss)
    -       -       -       (19,838 )     (19,838 )
                                         
Balance at December 31, 2012 - audited
    10,278,000       10,278       32,447       (63,983 )     (21,258 )
                                         
Net (loss)
    -       -       -       (22,807 )     (22,807 )
                                         
Balance at December 31, 2013 - audited
    10,278,000       10,278       32,447       (86,790 )     (44,065 )
                                         
Net (loss) - unaudited
    -       -       -       (15,500 )     (15,500 )
                                         
Balance at March 31, 2014 - unaudited
    10,278,000     $ 10,278     $ 32,447     $ (102,290 )   $ (59,565 )
                                         
* - As retroactively restated for  a 9 to 1 forward stock split effective September 20, 2010
                         
 
See accompanying notes to financial statements
 
 
- 6 -

 
 
Yummy Flies, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
 
                   
               
December 26,
 
               
2005 (inception)
 
   
Three months ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2014
   
2013
   
2014
 
                   
Net (loss)
  $ (15,500 )   $ (823 )   $ (102,290 )
Adjustments to reconcile decrease in net loss to net cash used in operating activities:
                       
                       
   Issuance of stock for services
    -       -       975  
   Depreciation expense
    -       35       2,593  
   Movement in operating assets and liabilities:
                       
   (Increase) decrease in inventory
    (172 )     -       (886 )
   Increase (decrease) in current liabilities
    11,952       -       40,794  
Net cash (used) in operation activities
    (3,720 )     (788 )     (58,814 )
                         
Cash flows from investing activities
                       
   Purchase equipment
    -       -       (2,593 )
Net cash provided by investing activities
    -       -       (2,593 )
                         
Cash flows from financing activities
                       
  Advances from shareholder - borrowings
    2,547       1,180       23,051  
  Advances from shareholder - payments
                    (3,310 )
  Issuance of common stock
            -       1,503  
  Capital paid in excess of par
    -       -       40,247  
Net cash provided by financing activities
    2,547       1,180       61,491  
                         
Net increase in cash
    (1,173 )     392       84  
                         
Cash at beginning of period
    1,257       454       -  
                         
Cash at end of period
  $ 84     $ 846     $ 84  
                         
Supplemental information:
                       
   Non-cash issuance of common stock
  $ -     $ -     $ 975  
   Issuance of common stock for debt retirement
  $ -     $ -     $ 3,500  
   Cash paid for interest
  $ -     $ -     $ -  
   Cash paid for income taxes
  $ -     $ -     $ -  
 
See accompanying notes to financial statements

 
- 7 -

 
 
Yummy Flies, Inc.
(A Development Stage Company)
Notes to Unaudited Financial Statements
For the Three Month Periods Ended March 31, 2014 and 2013 and the
Period from December 26, 2005 (Inception) to March 31, 2014

Note 1 - Organization and Summary of Significant Accounting Policies

ORGANIZATION

Yummy Flies, Inc. (the “Company”), was incorporated in the State of Colorado on December 26, 2005 ("Inception"). The Company was formed to produce and distribute flies and other fishing supplies, as well as instructional DVD’s. The Company may also engage in any business that is permitted by law, as designated by the board of directors of the Company.
 
BASIS OF PRESENTATION
 
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In our opinion the financial statements include all adjustments (consisting of normal and recurring accruals) necessary in order to make the financial statements not misleading.  The result of operations for the three month interim period ended March 31, 2014 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2014.
 
For a complete set of footnotes, reference is made to the Company’s Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission and the audited financial statements included therein.
 
DEPRECIATION AND AMORTIZATION

Furniture, fixtures and equipment are stated at cost and are depreciated over their estimated economic lives ranging from 5 to 7 years.  Depreciation is computed using the straight-line method.

USE OF ESTIMATES

The preparation of financial statements in conformity with 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.

CASH AND CASH EQUIVALENTS
 
The Company considered demand deposits and highly liquid-debt instruments purchased with maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market (first-in, first-out method).

 
- 8 -

 

Yummy Flies, Inc.
(A Development Stage Company)
Notes to Unaudited Financial Statements
For the Three Month Periods Ended March 31, 2014 and 2013 and the
Period from December 26, 2005 (Inception) to March 31, 2014


Note 1 - Organization and Summary of Significant Accounting Policies (Continued)
 
EARNINGS PER SHARE

The Company computes loss per share in accordance with ASC 105.  "Earnings per Share" which required presentation of both basic and diluted earnings per share on the face of the statement of operations.  Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period.  Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period.  Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
 
The Company had no potentially dilutive debt or equity instruments issued and outstanding during the three month periods ended March 31, 2014 or 2013.
 
REVENUE RECOGNITION

The Company produces custom flies and instructional DVD’s related to sport and recreational fishing. The revenue is recognized when a sale is made to a customer and the goods are delivered by the Company.
 
DEVELOPMENT STAGE COMPANY
 
The Company is a development stage company in accordance with Financial Accounting Standards Codification (“ASC”) 915 "Development Stage Entities".    Among  the disclosures required as a development stage company are that our financial statements are identified as those of a development stage company, and that the statements of operations, changes in stockholders' deficit and cash flows  disclose activity since the date of our Inception (December 26, 2005) as a development stage company.
 
INCOME TAXES

The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At March 31, 2014, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations.
 
 
- 9 -

 

Yummy Flies, Inc.
(A Development Stage Company)
Notes to Unaudited Financial Statements
For the Three Month Periods Ended March 31, 2014 and 2013 and the
Period from December 26, 2005 (Inception) to March 31, 2014
 
 
 
Note 1 - Organization and Summary of Significant Accounting Policies (Continued)
 

STOCK BASED COMPENSATION

The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. To date, the Company has not adopted a stock option plan and has not granted any stock options.

FINANCIAL INSTRUMENTS

The carrying value of the Company’s financial instruments, as reported in the accompanying balance sheets, including accounts receivable, accounts payable, related party note payable and note payable approximate their fair value due to the short maturities of these financial instruments.

 
Note 2 – Going Concern
 
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  As at March 31, 2014, the Company had current assets, comprising of cash and inventory of $970 and current liabilities of $60,535 resulting in a working capital deficit of $59,656.  The Company has experienced losses since Inception (December 26, 2005) and has an accumulated deficit of $102,290 as at March 31, 2014.   This raises substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 
Note 3 – Stockholders’ Deficit

The Company is authorized to issue 100,000,000 shares of $.001 par value common stock.
 
On January 2007 the Company issued 8,775,000 shares of $.001 par value common stock for services valued at $975 or $.001 per share.

On March 2007 the Company issued 513,000 shares of $.001 par value common stock for $14,250 in cash or $0.25 per share.

On April 2007 the Company issued 414,000 shares of $.001 par value common stock for $11,500 in cash or $0.25 per share.

On May 2007 the Company issued 36,000 shares of $.001 par value common stock for $1,000 in cash or $0.25 per share.

On December 2007 the Company issued 126,000 shares of $.001 par value common stock for the conversion of $3,500 in notes payable at $0.25 per share.

On April 2008 the Company issued 351,000 shares of $.001 par value common stock for $9,750 in cash or $0.25 per share.
 
 
- 10 -

 

Yummy Flies, Inc.
(A Development Stage Company)
Notes to Unaudited Financial Statements
For the Three Month Periods Ended March 31, 2014 and 2013 and the
Period from December 26, 2005 (Inception) to March 31, 2014


On May 2008 the Company issued 9,000 shares of $.001 par value common stock for $250 in cash or $0.25 per share.

On June 2008 the Company issued 18,000 shares of $.001 par value common stock for $500 in cash or $0.25 per share.

On August 2008 the Company issued 364,000 shares of $.001 par value common stock for $1,000 in cash or $0.25 per share.
 
The Company completed a 9 for one forward stock split effective September 20, 2010 and all share numbers have been restated retrospectively.
 
As at March 31, 2014 the Company had 10,278,000 shares of common stock issued and outstanding.

The Company has declared no dividends through March 31, 2014.

Note 4 -  Related Party Activity

An officer/shareholder of the Company has advanced monies to pay expenses on behalf of the Company. The balance due the officer/shareholder was $19,742 and $17,194 for March 31, 2014, and December 31, 2013, respectively.  The loan does not accrue interest, is unsecured and is due upon demand.

Note 5 – Subsequent Events

In preparing these financial statements, the Company has analyzed its operations subsequent to March 31, 2014 to the date these financial statements were available to be issued on May 12, 2014 and has determined that it does not have any material subsequent event to disclose in these financial statements.
 
 
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Item  2.
 Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion should be read in conjunction with our financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

Overview and History

Yummy Flies, Inc., (“we,” “our” or the “Company”) was incorporated on December 26, 2005, in the State of Colorado under the name “Yummieflies.com Inc.”  In March 2010 we filed an amendment to our Articles of Incorporation changing our name to “Yummy Flies, Inc.”  In September 2010, we engaged in a forward split of our issued and outstanding Common Stock whereby nine (9) shares of Common Stock were issued in exchange for every one (1) share then issued and outstanding.  All references to our issued and outstanding Common Stock in this Report are presented on a post-forward split basis unless otherwise indicated.
 
Since inception our business has been to establish an on-line fly fishing company, specializing in marketing trout flies.  We also plan to market a series of fly tying DVD’s.  Our principal marketing efforts are directed to the post-war “Baby Boomers.”
 
We have never been subject to any bankruptcy proceeding.
 
Our executive offices are located at 1848 South Lamar Ct., Lakewood, CO 80232, telephone (303) 619-2503.
 
Results of Operations

Comparison of Results of Operations for the three months ended March 31, 2014 and 2013

During the three months ended March 31, 2014 we generated revenues of $59, compared to revenues of $422 generated during the three months ended March 31, 2013.  Cost of sales for the three months ended March 31, 2014 was $23 (2013-$0) and consequently our gross profit was $36 for the three months ended March 31, 2014 (2013-$422).
 
General and administrative expense during the three months ended March 31, 2014 were $15,536, compared to $1,245 during the three months ended March 31, 2013, an increase of $14,291.  This increase was as a result of increased legal fees associated with our reporting requirements now that we are a reporting company, as well as legal fees relating to our attempts to have our common stock approved for trading on the OTCQM.

As a result, we incurred a net loss of $15,500 during the three months ended March 31, 2014 ($0.00 per share) compared to a net loss of $823 during the three months ended March 31, 2013.
 
Because we have generated nominal revenues, following is our Plan of Operation.
 
 
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Plan of Operation  
 
We are currently marketing a series of fly fishing flies under the titles of “Yummy Tandem Flies,” “Natural Selection” and “Canyon Magic.” We attempt to create our flies with a degree of realism.  Specifically, most flies are tied with thread, dubbing and feathers and fur.  Our “Natural Selection” flies are tied with latex and microfibetts to form a smooth, translucent body, with realistic wings and legs.  The Tandem Flies are tied with two and even three bodies of nymphs and/or larva flies on the same hook shank.  Traditional flies are tied one fly body at a time on the hook.  Each series is tied by one of our founders.  In addition, we have produced a series of five fly tying DVDs entitled “The Natural Selections Series” which demonstrates how to tie our line of realistic Midges; Mysis Shrimp, Caddis, Baetis, and Scud patterns.  A DVD was initially produced on a limited run basis by Mr. Yamauchi to test the viability of marketing a series of Fly Tying DVD’s that showed how to tie his signature patterns.  This was marketed at the International Sportsman Expo in Denver, Colorado in 2006 and at the West Denver Trout Unlimited annual Fly Tying Clinic held in 2007.   We intend to place all of our videos in area fly shops once we receive additional funding to allow us to deliver these videos in sufficient quantity and quality.  However, as of the date of this report we have no arrangement with any area fly shops to sell our DVD’s.
 
We estimate we will require up to $500,000 in additional capital in order to fully implement our business plan.  These funds are proposed to be utilized for our development and expansion from just a retail web based business to a retail and wholesale operation, including the following proposed use of proceeds: (i) approximately $100,000 to purchase raw materials that we utilize in the manufacturing of our flies in bulk, including hooks, latex gloves and other related materials. Included in this category would be the identification of a manufacturer who can produce our custom made ties in bulk by developing and utilizing injection molding with soft polyurethane plastics and polmers, in order to establish an expanded inventory of our ties.  We currently do not have the capacity to fill a large order that we might receive from a large retail fishing business; (ii) $50,000 for the development and marketing of additional DVD’s; (iii) approximately $100,000 to increase our inventory of custom ties, including the development of relationships with other established ties designers and retention of additional employees to assist in these expanded operations. It is anticipated that these new employees will have accounting experience, as well as sales and marketing experience; (iv) approximately $25,000 for expansion of our existing website from a retail based marketing vehicle into a retail and wholesale marketing operation; and (v) approximately $100,000 to accomplish the acquisition of related businesses and provide working capital to these business upon acquisition.  The balance of funds ($125,000) would be utilized for working capital.  If we can raise only between $100,000 and $200,000, we believe we can successfully accomplish the objectives outlined in (i) and (iii) and become profitable.  Once profitable, we believe there are opportunities that will arise to expand our business without this additional capital, but over a longer period of time.  This includes acquiring competitors in exchange for issuance of our securities.    However, there can be no assurances that we will be able to raise the capital required to accomplish these objectives, or if we are so successful in raising such capital, that we will be able to implement our business plan. 
 
We estimate that it will take approximately 3 years for us to accomplish all of the objectives described in the preceding paragraph, provided that we are able to raise $500,000.  We believe the most time consuming aspect of our business plan is the identification of a manufacturing entity, either in the US or overseas, that can develop the molds and then begin manufacturing our ties to our specifications.  We estimate that this will take a minimum of two years.  Following this development we also estimate that it will take another year in which to develop the sales and marketing to sell these products.  As previously stated, there are no assurances that our estimates are accurate, or that we will be able to raise the funds necessary to accomplish these objectives.
 
Because of our relatively low cost of operations we believe that if we are only able to raise between $100,000 and $200.000, we will continue to be a retail web based business, but we will not be able to afford expanding into the wholesale market.  While no assurances can be provided, with an additional $100,000 in equity capital we believe we would be able to successfully increase our inventory of fishing flies and as a result, we believe that the revenues generated from the sale of these flies will be sufficient to allow us to break even or generate nominal profits.   There can be no assurances that this will occur.

Liquidity and Capital Resources
 
As of March 31, 2014, we had $84 in cash.
 
At March 31, 2014, we had current assets, comprising of cash and inventory, of $970 and current liabilities of $60,535 resulting in a working capital deficit of $59,565.   We have experienced losses since our  Inception (December 26, 2005) and had an accumulated deficit of $102,290 at March 31, 2014.   This raises substantial doubt about our ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
Net cash used in operating activities was $3,720 during the three months ended March 31, 2014, compared to $788 during the three months ended March 31, 2013.  We anticipate that overhead costs in current operations will increase in the future as a result of our anticipated increased marketing activities.
 
 
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Cash flows provided or used in investing activities were $0 during the three months ended March 31, 2014 and 2013.  
 
Cash flows provided or used by financing activities were $2,547 and $1,180 during the three months ended March 31, 2014 and 2013 and related to funds advanced to us by our sole officer and principle sharholder.. 
 
To date, our operations have been limited and we have only generated nominal revenues. We believe that our principal difficulty has been the lack of available capital to operate and expand our business.  We believe we need a minimum of approximately $100,000 in additional working capital to be utilized for marketing and sales of our existing products, including hiring a marketing/sales person, advertising brochures and a presence at fly shows (booth space) (estimated cost of $35,000), generate an inventory of DVD’s and flies ($35,000) and develop a marketing kit for distribution ($20,000), with the balance for working capital and general and administrative expense.  As described above under “Plan of Operation” we also believe we will require a total of up to $500,000 in additional capital to fully implement our business plan, as described herein.    While no assurances can be provided, we believe that if we are only able to raise $100,000 we should be able to successfully increase our inventory of fishing flies and as a result, we believe that the revenues generated from the sale of these flies will be sufficient to allow us to continue to grow.    We lack a market presence that is needed in order for us to succeed.   As of the date of this Report we have no commitment from any investor or investment-banking firm to provide us with the necessary funding and there can be no assurances we will obtain such funding in the future.  Failure to obtain this additional financing will have a material negative impact on our ability to generate profits in the future.  We will not receive any proceeds from the sale of the securities offered herein. 
 
Inflation
 
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three-month period ended March 31, 2014.
 
Critical Accounting Estimates
 
The 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 amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based 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. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
 
ITEM 4.  CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures  Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Report.
 
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO to allow timely decisions regarding required disclosure.
 
Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of March 31, 2014, at the reasonable assurance level.  We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
 
 
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Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
 
Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during our three month period ended March 31, 2014, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION
 

 ITEM 1.  LEGAL PROCEEDINGS
 
None
  
ITEM 1A.  RISK FACTORS
 
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
We did not issue any of our securities during the three months ended March 31, 2014.
  
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
None
  
ITEM 4.  MINE SAFETY DISCLOSURES
 
Not applicable
 
 ITEM 5.  OTHER INFORMATION

None
  
 
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 ITEM 6.  EXHIBITS
   
EXHIBIT
   
NUMBER
 
DESCRIPTION
     
31.1
 
Certification pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1
 
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS
 
XBRL Instance Document*
     
101.SCH
 
XBRL Taxonomy Extension Schema Document*
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document*
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document*
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document*              
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document*
 
 
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SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 13, 2014.
 
 
YUMMY FLIES, INC.
 
     
     
 By:   
/s/ Gary Okizaki    
 
Gary Okizaki , Principal Executive Officer
 
 
     
 By:  
/s/ Brian Yamauchi   
 
 Brian Yamauchi , Principal Financial Officer and Principal Accounting Officer
 
     
     
 
 
 
 
 
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