UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended ~~June~~September 30, 2012 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to

Commission file number- 333-170578

YELLOW7, INC.

(Exact name of registrant as specified in the charter)

Texas		61-155055
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

104 Hardwicke Lane, Little Elm, Texas		75068
(Address of principal executive office)		(Zip Code)

(972) 731-6720 ~~ext 305~~

(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 requirement for the past 90 days. Yes ý 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 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 x

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). YES o NO ý

As of ~~August~~November 3015, 2012, there were 185,400,000 shares of the Registrant's common stock, $.0001 par value outstanding.

Table of Contents

Yellow7, Inc.

Index

		Page No.
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Balance Sheets (unaudited) at June 30, 2012 and December 31, 2011	5
	Balance Sheets (unaudited) at September 30, 2012 and December 31, 2011	5
	Statements of Operations (unaudited) for the six months ended June 30, 2011 and 2012	6
	Statements of Operations (unaudited) for the nine months ended September 30, 2011 and 2012	6
	Statement of Stockholders Equity (deficit) for June 30, 2012	7
	Statement of Stockholders Equity (deficit) for September 30, 2012	7
	Statements of Cash Flows (unaudited) for the six months ended June 30, 2011 and 2012	8
	Statements of Cash Flows (unaudited) for the nine months ended September 30, 2011 and 2012	8
	Notes to Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1817
Item 4.	Controls and Procedures	1817
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	1918
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1918
Item 3.	Default Upon Senior Securities	1918
Item 4.	Submission of Matters to a Vote of Security Shareholders	1918
Item 5.	Other Information	1918
Item 6.	Exhibits	1918
Signature		2019

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the Securities and Exchange Commission, or SEC, or in connection with oral statements made to the press, potential investors or others. All statements, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "expect," "estimate," "anticipate," "predict," "believe," "think," "plan," "will," "should," "intend," "seek," "potential" and similar expressions and variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements in this report are subject to a number of known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those described in the forward-looking statements, including, but not limited to, the risks and uncertainties described in the section entitled "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on March 31, 2012, in this report as well as in the other documents we file with the SEC from time to time, and such risks and uncertainties are specifically incorporated herein by reference.

Forward-looking statements speak only as of the date the statements are made. Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no obligation to update or revise forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. We caution you not to unduly rely on the forward-looking statements when evaluating the information presented in this report.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The financial statements of Yellow7, Inc. ("Yellow7" or the "Company") as of ~~June~~September 30, 2012 and December 31, 2011 and for the ~~six~~nine months ended ~~June~~ September 30, 2012 included herein have been prepared by the Company, without audit, pursuant to U.S. generally accepted accounting principles and the rules and regulations of the SEC. In addition, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the SEC, on March 31, 2012.

Yellow7, Inc.
(Formerly Yellow7, LLC)
Condensed Balance Sheets
June 30, 2012 and December 31, 2011
September 30, 2012 and December 31, 2011
ASSETS
	June 30, 2012			December 31, 2011
	September 30, 2012			December 31, 2011
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	2135,~~527~~547		$	4,612
Accounts receivable, net of allowance of $7,000 and $3,500, respectively		56,781			40,846
Accounts receivable, net of allowance of $15,000 and $3,500, respectively		25,306			40,846
Deferred tax asset		4,375			5,000
Prepaid expenses		758			-
Total current assets		82,683			50,458
Deferred tax asset-current		4,000			5,000
Furniture and Equipment, net		140,122			153,326
Total current assets		65,611			50,458
Furniture and Equipment, net		132,393			153,326
Deferred tax asset - non-current		2,000			2,000
	$	~~224~~200,~~805~~004		$	205,784
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Liabilities:
Accounts payable and accrued expenses	$	~~101~~81,~~088~~222		$	83,140
Loans payable - stockholders		16,000			8,000
Loans payable - current portion		2320,~~129~~195			22,136
Total current liabilities		~~140~~117,~~217~~417			113,276
Non-current Liabilities
Loans payable - net of current portion		~~109~~105,~~577~~854			119,759
Total non-current liabilities		~~109~~105,~~577~~854			119,759
Total liabilities		223,271			233,035
Stockholders' Equity (Deficiency):
Common stock, $0.0001 par value; 250,000,000 shares authorized,
185,400,000 shares issued and outstanding		18,540			18,540
Additional paid in capital		(10,576	)		(7,076	)
Treasury stock, at cost		-			(3,500	)
Retained Earnings (Deficiency)		(3231,~~953~~231	)		(35,215	)
		(24,989	)		(27,251	)
		(23,237	)		(27,251	)
	$	~~224~~200,~~805~~004		$	205,784

Yellow7, Inc.
(Formerly Yellow7, LLC)
Condensed Statements of Operations
For the Six Months Ended June 30, 2012 and 2011
For the Nine Months Ended September 30, 2012 and 2011
(Unaudited)
	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2012		2011			2012			2011
Revenue, net	$	~~216~~221,~~694~~002	$	~~238~~253,~~313~~934		$	~~422~~635,~~402~~877		$	~~414~~668,~~875~~809
Cost of sales
Contract labor		118,~~253~~857		118,~~977~~479			2531,~~086~~197			2230,~~340~~819
Other costs of sales		74,~~457~~954		863,~~207~~497			1119,~~624~~532			1478,~~578~~075
Total cost of sales		1813,~~710~~811		2071,~~184~~976			3650,~~710~~729			36108,~~918~~894
Gross profit		~~197~~207,~~984~~191		~~218~~181,~~129~~958			~~385~~585,~~692~~148			~~377~~559,~~957~~915
Operating expenses:
Advertising		810,~~922~~123		514,~~555~~289			1619,~~086~~109			823,~~986~~275
Provision for bad debts		311,500		-			311,500			-
Depreciation		7,~~729~~176		6,~~879~~889			1320,~~204~~933			1320,~~757~~646
Rent		109,~~739~~139		10,~~979~~950			2131,~~589~~573			2233,~~434~~384
Salaries		91,015		96,873			201,445			202,919
Officers’ compensation		57,302		80,950			177,502			199,200
Telephone		3,467		5,079			7,412			8,720
Salaries		62,362		16,213			145,081			100,882
Other		64,120		54,322			119,569			96,294
Telephone		2,470		3,361			11,190			12,351
		189,492		179,687			382,805			353,110
Other		63,360		69,842			150,979			157,461
Net income before other income and expenses		8,492		38,442			2,887			24,847
		223,432		202,764			567,867			547,199
Net(loss) income before other income and expenses		(16,241)		(20,806)			17,281			12,716
Other income and (expenses)
Derivative (expense)/income		-		-			-			-
Interest income		-		2,536			-			2,536
Income tax benefit (expense)		-4,000		(73,000	)		(~~625~~1000	)		(52,000	)
Interest income		-		-			-			-
Interest expense		(3,622)		(913)			(12,297)			(9,588)
Interest expense		-		-			-			-
Net (loss)/income	$	(15,863)	$	(16,183	)	$	3,984		$	3,664
Loss on disposal of fixed assets		-		-			-			-
Net (loss)/income per common share - Basic and fully diluted	$	0.00	$	0.00		$	0.00		$	0.00
		-		(7,000	)		(625	)		(5,000	)
Weighted average number of shares outstanding - Basic and fully diluted		76,805,836		43,212,192			113,474,959			43,212,192
Net (loss)/income	$	8,492	$	31,442		$	2,262		$	19,847
Net (loss)/income per common share - Basic and
fully diluted	$	0.00	$	0.00		$	0.00		$	0.00
Weighted average number of shares
outstanding - Basic and fully diluted		112,188,579		40,210,000			112,188,579			40,210,000

Yellow7, Inc.
(Formerly Yellow7, LLC)
Statement of Stockholders' Equity (Deficit)
June 30, 2012
September 30, 2012
(Unaudited)
							Additional									Retained			Total
	Common Stock						Paid in			Treasury Stock						Earnings			Stockholders'
	Shares			Amount			Capital			Shares			Amount			(Deficiency)			Deficiency
Balance - January 1, 2011		212,900,000		$	21,290		$	(9,826	)		-		$	-		$	(58,881	)	$	(47,417	)
Cancellation of stock		(27,500,000	)		(2,750	)		2,750			-			-			-			-
Purchase of treasury stock, at cost		-			-			-			350,000			(3,500	)		-			(3,500	)
Net income		-			-			-			-			-			23,666			23,666
Balance - December 31, 2011		185,400,000			18,540			(7,076	)		350,000			(3,500	)		(35,215	)		(27,251	)
Cancellation of treasury stock		-			-			(3,500	)		(350,000	)		3,500			-			-
Net income		-			-			-			-			-			23,~~262~~984			23,~~262~~984
Balance - June 30, 2012		185,400,000		$	18,540		$	(10,576	)		-		$	-		$	(32,953	)	$	(24,989	)
Balance - September 30, 2012		185,400,000		$	18,540		$	(10,576	)		-		$	-		$	(31,231	)	$	(23,267	)

Yellow7, Inc.
(Formerly Yellow7, LLC)
Condensed Statements of Cash Flows
For the Six Months Ended June 30, 2012 and 2011
For the Nine Months Ended September 30, 2012 and 2011
(Unaudited)
	2012			2011
Cash flows from operating activities:
Net income	$	23,~~262~~984		$	193,~~847~~664
Adjustments to reconcile net loss to net cash used
Adjustments to reconcile net loss to net cash used by operating activities:
by operating activities:
Depreciation expense		20,933			20,646
Depreciation expense		13,204			13,757
Provision for doubtful accounts		11,500			-
Provision for doubtful accounts		3,500			-
Accounts receivable		4,040			(16,053	)
Accounts receivable		(19,435	)		(12,818	)
Deferred tax asset - current		(758)			-
Deferred tax asset - current		625			5,000
Accounts payable and accrued expenses		(1,918)			2,765
Accounts payable and accrued expenses		17,948			(5,408	)
Net cash used by operating activities		38,781			13,022
Net cash used by operating activities		18,104			20,378
Cash flows from financing activities:
Purchase of treasury stock, at cost		-			(3,500)
Shareholder loans		8,000			-
Loans payable		(915,~~189~~846	)		(1217,~~968~~621	)
Net cash provided by financing activities		(17,~~189~~846)	)		(1221,~~968~~121)	)
Net increase in cash		16,915			7,410
Net increase (decrease) in cash		30,935			(8,099)
Cash at beginning of period		4,612			12,021
Cash at end of period	$	2135,~~527~~547		$	193,~~431~~922
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	12,~~280~~297		$	89,~~675~~588
Income taxes	$	-		$	-

Yellow7, Inc. (Formerly Yellow7 , LLC) Notes to Condensed Financial Statements ~~June~~September 30, 2012

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Yellow7, 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.

Basis of Presentation

The accompanying 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, 2011.

The balance sheet at ~~June~~September 30, 2012 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, 2011.

Concentration of Credit Risk

Financial 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

An allowance 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 ~~June~~September 30, 2012 and December 31, 2011 was $715,000 and $3,500, respectively.

Yellow7, Inc. (Formerly Yellow7 , LLC) Notes to Condensed Financial Statements ~~June~~September 30, 2012

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Furniture and Equipment

Furniture 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.

The estimated useful lives for computing depreciation are:

Equipment and vehicles	5 - 10 years
Furniture and fixtures	5 - 7 years

Use of Estimates

The preparation 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.

Segment Information

The Company 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.

Income Taxes

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.

ASC 740, 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.

Yellow7, Inc. (Formerly Yellow7 , LLC) Notes to Condensed Financial Statements ~~June~~September 30, 2012

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Net Income (Loss) per Common Share

Basic net 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 ~~June~~September 30, 2012.

Financial Instruments

The carrying value of the Company’s 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.

Cash and Cash Equivalents

For purposes 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.

Stock Split

On March 20, 2012, the Board of Directors authorized a three-for-one stock split of the Company's common shares for all stockholders of record on March 30, 2012. The dividend was distributed on April 3, 2012. All references to share and per share amounts in the condensed financial statements and accompanying notes to the condensed financial statements have been retroactively restated to reflect the three-for-one stock split.

Advertising

Advertising 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 Company’s consolidated financial position or results of operations.

Yellow7, Inc. (Formerly Yellow7 , LLC) Notes to Condensed Financial Statements ~~June~~September 30, 2012

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

In June 2011, the FASB issued guidance regarding the presentation of comprehensive income. The new standard requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. The updated guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Company adopted this standard effective January 1, 2012 and it did not affect our results of operations, financial condition or liquidity.

In August 2011, the FASB approved a revised accounting standard update intended to simplify how an entity tests goodwill for impairment. The amendment will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2013 and early adoption is permitted.

Note 2. FURNITURE AND EQUIPMENT

	June 30, 2012			December 31, 2011
	September 30, 2012			December 31, 2011
Vehicles	$	158,523		$	158,523
Equipment		21,154			21,154
Furniture and fixtures		9,070			9,070
		188,747			188,747
Accumulated depreciation		(4856,~~625~~354	)		(35,421	)
	$	~~140~~132,~~122~~393		$	153,326

Depreciation expense was $1320,~~204~~933 and $1320,~~757~~646 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively.

Yellow7, Inc. (Formerly Yellow7 , LLC) Notes to Condensed Financial Statements ~~June~~September 30, 2012

Note 3. LOANS PAYABLE

At ~~June~~September 30, 2012 and December 31, 2011, the Company was obligated for the following loans:

	June 30, 2012			December 31, 2011
	September 30, 2012			December 31, 2011
4.90% Loan payable due in 60 equal monthly installments of $1,068 through December 2016; secured by vehicle	$	5249,~~164~~058		$	56,602
4.90% Loan payable due in 60 equal monthly installments of $1,031 through December 2016; secured by vehicle		5047,~~346~~351			54,630
8.00% Loan payable due in 144 equal monthly installments of $383 through October 2020; secured by motor home		3029,~~196~~640			30,663
		132,706			141,895
		126,049			141,895
Less current portion		(2320,~~129~~195	)		(22,136	)
	$	~~109~~105,~~577~~854		$	119,759

Note 4. STOCKHOLDERS' EQUITY

On March 20, 2012, the Board of Directors increased the authorized number of common shares to 250,000,000.

Note 5. RELATED PARTY TRANSACTIONS

In November 2011, the Company signed a five year lease for its offices with a managing member of the Company. The lease, which terminates in October 2016, calls for monthly rental payments of $3,337. Rent expense for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011 was $2131,~~589~~573 and $2233,~~434~~384, respectively.

~~Future~~Note ~~minimum~~6. SUBSEQUENT ~~annual rentals under the terms of this lease are as follows:~~EVENTS

Year	Amount
2012	$	20,022
2013		40,044
2014		40,044
2015		40,044
2016		33,370
	$	173,524

On January 10, 2013, QED Connect, Inc. (“QED” or “Buyer”) purchased 110,874,240 shares of the common stock of Yellow7, Inc. (the “Company”), representing approximately 59% of the Company’s issued and outstanding stock from, the Company’s directors and officers (Jason Burgess and Jon Burgess, the “Sellers”)

On January 10, 2013, M. Thomas Makmann was appointed President, Chief Executive Officer and director of the Company. Mr. Makmann was appointed as a director of the Company pursuant to QED’s purchase and sale agreement with the Sellers.

On January 11, 2013, Jason Burgess resigned as President, Chief Executive Officer and director of the Company. His resignation was not the result of any disagreement with the Company.

On January 11, 2013, Jon Burgess resigned as Chief Financial Officer and director of the Company. His resignation was not the result of any disagreement with the Company.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with (i) our financial statements for the years ended December 31, 2011 and December 31, 2010 together with the notes to these financial statements; and (ii) the section entitled “Business” that appears elsewhere in this 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 report. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

The statements in this report include forward-looking statements. These forward-looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as “may”, “will”, “believes”, “anticipates”, “estimates”, “expects”, “continues”, “should”, “seeks”, “intends”, “plans”, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers; and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates and conditions in the advertising industry in particular; and, the continued employment of our key personnel and other risks associated with competition.

For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements see the “Liquidity and Capital Resources” section under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this item of this report and the other risks and uncertainties that are set forth elsewhere in this report or detailed in our other Securities and Exchange Commission reports and filings. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are an operational company, incorporated as a limited liability company on February 26, 2007 and converted to a corporation on July 13, 2010. We have generated revenues and expect to generate increased revenues in the foreseeable future.

Our Officers and Directors are responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, they will be responsible for the administration of the controls. Should they not have sufficient experience, they may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the Securities and Exchange Commission which ultimately could cause you to lose your investment.

Since incorporation, the Company has financed its operations through private investment or shareholder loans. AsFor ofthe ~~June~~nine months and three months ended September 30, 2012, we had revenues of $~~422~~635,~~402~~877 and $221,002, respectively and had total expenses of $~~382~~618,~~805~~596 and $23724 as compared to revenues of $~~414~~668,~~875~~809 and $253,934 and total expenses of $~~353~~656,~~100~~093 and $274,740 for the ~~period~~nine ~~June~~months and three months ended September 30, 2011, respectively. AsFor ofthe ~~June~~nine months ended September 30, 2012 we had net ~~loss~~income of $23,~~262~~984 as compared to net ~~loss~~income of $243,~~847~~664 for the period ended ~~June~~September 30, 2011.

Results of Operations

As of ~~June~~September 30, 2012, the Company reported ana ~~increase~~decrease in revenues compared to the period ended ~~March~~September 3130, 2011.

As of ~~June~~September 30, 2012 we have experienced ana ~~increase~~decrease in business;. ~~however,~~We we have ~~experienced~~continued to experience slower payment of accounts receivables from our clients based on the economic environment. Management expects that slow payments on accounts receivables will decrease as the economy continues to strengthen as indicated by a recent increase in corporate profits. We further expect our business to grow as corporate profits increase based on the fact that many businesses’ profits are advertising driven.

To date, the Company has successfully implemented its business plan and is attempting to secure additional funding to continue the expansion process into the medical and mobile industries. The Company intends to continue developing its own internet properties including lead generation websites, social communities, and directory services targeting specific industries. Management believes there is a current trend for increased advertising and web development related services based upon recent increased corporate profits. Most businesses rely on advertising of some sort to increase their respective revenue models. Web development and on-line marketing services are the Company’s primary sources of revenue and management expects these numbers to increase as economic growth increases. The following represents the approximate percentage of revenue attributed to each service provided by the Company for the ~~period~~nine months ended ~~March~~September 3130, 2012.

·	Web Design (15%)

·	Web Development (15%)

·	Mobile Design/Development (5%)

·	Mobile Application Development (5%)

·	Website Application Development (10%)

·	Paid Search Marketing (5%)

·	Media Planning/Buying (2%)

·	Banner Advertising / Rich Media Advertising (5%)

·	Social media Marketing (5%)

·	Search Engine Optimization (20%)

·	Email Marketing (5%)

·	Reputation management (1%)

·	Mobile Marketing (2%)

·	Flash Design/Development (5%)

The Company’s ability to expand operations is somewhat dependent upon capital to hire additional sales representatives without additional capital. If Yellow7 does not produce sufficient cash flow to support its operations over the next 12 months, the Company will need to raise additional capital by issuing capital stock in exchange for cash in order to continue as a going concern. There are no formal or informal agreements to attain such financing. Yellow7 can not assure any investor that, if needed, sufficient financing can be obtained or, if obtained, that it will be on reasonable terms.

Yellow7 management may incur software development costs within the next 12 months.

Yellow7 currently does not own any significant plant or equipment that it would seek to sell in the near future.

Yellow7 management anticipates hiring employees or independent contractors over the next 12 months as needed. Currently, the Company believes the services provided by its officers and directors appear sufficient at this time.

The Company has no plans to seek a business combination with another entity in the foreseeable future, however, may entertain strategic acquisitions in the marketing and advertising sector which compliment its business plan.

Impact of Inflation

We believe that the rate of inflation has had negligible effect on us. We believe we can absorb most, if not all, increased non-controlled operating costs by operating our Company in the most efficient manner possible.

Liquidity and Capital Resources

Cash Flows from Operating Activities

We have generated positive cash flows from operating activities for the ~~period~~nine months ended ~~June~~September 30, 2012. Operating expenditures during the period covered by this report include general and administrative costs (See “Financial Statements).

Cash Flows from Investing Activities

We made no investments as of ~~June~~September 30, 2012.

Cash Flows from Financing Activities

~~We have financed our operations from the issuance of equity securities.~~ Net cash ~~provided~~used by financing activities for the ~~period~~nine ~~June~~months ended September 30, ~~2011~~2012 ~~through~~and ~~June~~September 30, ~~2012~~2011 was $8,000 and $21,121, respectively, which ~~relates~~related mainly to repayment of shareholder loans.

Intangible Assets

There were no intangible assets during the ~~period~~periods ~~June~~ended September 30, ~~2011~~2012 and ~~through~~September ~~June~~ 30, ~~2012~~2011, respectively.

Material Commitments

There were no material commitments for the ~~period~~at ~~June~~September 30, ~~2011~~2012 ~~through~~and ~~June~~September 30, ~~2012~~2011, respectively.

Off-Balance Sheet Arrangements

We do not have any 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 are material to investors.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. 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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. We have no cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Intangible Assets

We evaluate the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. There was no impairment loss for the ~~period~~nine ~~from~~months ~~March~~ended 31September 30, ~~2011~~2012 ~~through~~and ~~March 31~~2011, ~~2012~~respectively.

Income Taxes

The Company accounts for income taxes as outlined in ASC 740 “Income Taxes”, which was previously Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Fair Value of Financial Instruments

The Company considers that the carrying amount of financial instruments, including accounts payable, approximates fair value because of the short maturity of these instruments.

Share Based Payments

(included in ASC 718 “Compensation-Stock Compensation”)

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees or independent contractors are required to provide services. Share-based compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or “SAB 107”. SAB 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS 123.

The Company has fully adopted the provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant as the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the share-based payments.

Recent Accounting Pronouncements

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this item 3.

ITEM 4. CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file are under the Securities Exchange Act of 1934 (the “Exchange Act”) 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 Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our first fiscal quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

1817

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company has or is not currently involved in any legal proceedings.

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

There have been no sales of unregistered securities during this quarter ended ~~June~~September 30, 2012.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

Not applicable.

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

There have been no matters submitted to a vote of the Company’s shareholders.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

No.		Exhibit
31.1		Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

1918

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.

	Yellow7, Inc.
	(Registrant)
August 30, 2012	By:	/s/ Jason Burgess
March 7, 3013	By:	/s/ Thomas Makmann
		Jason Burgess
		Thomas Makmann
		President and Chief Executive Officer
August 30, 2012	By:	/s/ Jon Burgess
		Jon Burgess
		Chief Financial Officer

2019

INDEX TO EXHIBITS

No.		Exhibit
31.1		Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~-21-~~20

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