**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**




x
            Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934




for
      the
      quarterly period ended October 28, 2006




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  0-50187




KUHLMAN
      COMPANY, INC.


(Exact
      name of issuer as specified in its charter)




Nevada
              (State
                or other jurisdiction of incorporation or organization)
            86-0883289
              (IRS
                Employer Identification No.)701
                North Third Street, Suite B-1,
              Minneapolis,
                Minnesota
              (Address
                of Principal Executive Offices)
            55401
              (Zip
                Code)




(612)
      338-5752


(Issuer’s
      telephone number)




Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the issuer was required to file such reports), and
      (2)
      has been subject to such filing requirements for the past 90 days. Yes x No o




As
      of
      December 12, 2006 there were 25,980,402 outstanding shares of common stock,
      par
      value $0.001 per share. As of December 12, 2006 there were no outstanding shares
      of Series A Convertible Preferred Stock, par value $0.001 per
      share.












TABLE
      OF CONTENTS




**Page****PART
                I**
            **Financial
                Information**Item
                1
            Financial
                Statements (Unaudited):Condensed
                Consolidated Balance Sheets as of October 28, 2006 and January 28,
                2006
            3Condensed
                Consolidated Statements of Operations for the thirteen and thirty
                nine
                weeks ended October 28, 2006 and October 29, 2005
            4Condensed
                Consolidated Statements of Cash Flows for the thirty nine weeks ended
                October 28, 2006 and October 29, 2005
            5Notes
                to Condensed Consolidated Financial Statements at October 28, 2006
                and
                October 29, 2005
            6Item
                2
            Management’s
                Discussion and Analysis or Plan of Operation
            16Item
                3
            Controls
                and Procedures
            23**PART
                II**
            **Other
                Information**Item
                1
            Legal
                Proceedings
            24Item
                6
            Exhibits
            24CertificationsRule
                13a-14(a)/15d-14(a) Certification of Principal Executive
                Officer
              Rule
                13a-14(a)/15d-14(a) Certification of Principal Accounting
                Officer
              Section
                1350 Certification of Chief Executive Officer
              Section
                1350 Certification of Chief Financial Officer





2
          of 25





**Kuhlman
      Company, Inc.**


**Condensed
      Consolidated Balance Sheets**


**(UNAUDITED)**









October
                28, 2006
            
            January
                28, 2006ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            157,579
            
            $
            3,604,075Accounts
                receivable - net of allowance for doubtful accounts of $0and
                $2,000, respectively
            
            
            45,578
            
            
            66,800Inventories
            
            
            2,236,302
            
            
            5,157,023Prepaid
                expenses
            
            
            102,081
            
            
            409,044Lease
                deposits, current portion
            
            
            33,000
            
            
            33,000Other
                current assets
            
            
            20,593
            
            
            94,732Total
                current assets
            
            
            2,595,133
            
            
            9,364,674Furniture,
                fixtures and leasehold improvements
            
            
            3,144,120
            
            
            2,690,575Less
                accumulated depreciation and amortization
            
            
            (580,453
            )
            
            (337,856
            )Furniture,
                fixtures and leasehold improvements - net
            
            
            2,563,667
            
            
            2,352,719Capitalized
                finance costs
            
            
            122,500
            
            
            -Other
                assets - lease deposits, net of current portion
            
            
            219,060
            
            
            319,256Total
                assets
            
            $
            5,500,360
            
            $
            12,036,649LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            3,805,774
            
            $
            3,808,790Accrued
                expenses
            
            
            947,700
            
            
            522,840Line
                of credit
            
            
            400,000Notes
                payable
            
            
            186,040
            
            
            462,757Total
                current liabilities
            
            
            5,339,514
            
            
            4,794,387Convertible
                Debt
            
            
            361,000
            
            
            -Deferred
                rent
            
            
            326,898
            
            
            310,750Total
                liabilities
            
            
            6,027,412
            
            
            5,105,137Stockholders'
                equity:Common
                stock ($0.001 par value: 138,000,000 shares authorized;25,980,402
                and 21,197,374 shares, respectively issued andoutstanding)
                and preferred stock ($0.001 par value: 22,000,000shares
                authorized; 0 and 3,741,528 shares, respectively, issuedand
                outstanding)
            
            
            25,980
            
            
            24,939Additional
                paid-in capital
            
            
            23,135,854
            
            
            18,614,537Accumulated
                deficit
            
            
            (23,688,886
            )
            
            (11,707,964
            )Total
                stockholders' equity
            
            
            (527,052
            )
            
            6,931,512Total
                liabilities and stockholders' equity
            
            $
            5,500,360
            
            $
            12,036,649





See
      notes
      to condensed consolidated financial statements




3
          of 25





**Kuhlman
      Company, Inc.**


**Condensed
      Consolidated Statements of Operations**


**For
      the Thirteen and Thirty Nine Weeks ended October 28, 2006 and October 29,
      2005**


**(UNAUDITED)**




Thirteen
                  Weeks Ending
              
              Thirty
                  Nine Weeks EndingOctober
                  28, 2006
              
              October
                  29, 2005
              
              October
                  28, 2006
              
              October
                  29, 2005Sales
              
              $
              1,970,094
              
              $
              1,325,549
              
              $
              6,976,456
              
              $
              4,035,472Cost
                  of sales
              
              
              2,098,126
              
              
              813,000
              
              
              6,553,422
              
              
              2,283,522Gross
                  profit
              
              
              (128,032
              )
              
              512,549
              
              
              423,034
              
              
              1,751,950General,
                  administrative and store operatingexpenses
              
              
              2,865,312
              
              
              2,501,081
              
              
              11,687,762
              
              
              5,861,181Depreciation
                  and amortization
              
              
              89,812
              
              
              93,317
              
              
              378,593
              
              
              204,606Loss
                  on disposal of property and equipment
              
              
              105,607
              
              
              -
              
              
              324,994
              
              
              -Loss
                  from operations
              
              
              (3,188,763
              )
              
              (2,081,849
              )
              
              (11,968,315
              )
              
              (4,313,837
              )Interest
                  expense, net
              
              
              (17,149
              )
              
              (36,583
              )
              
              (12,607
              )
              
              (116,893
              )Net
                  loss
              
              $
              (3,205,912
              )
              $
              (2,118,432
              )
              $
              (11,980,922
              )
              $
              (4,430,730
              )Basic
                  and diluted loss per share
              
              $
              (0.12
              )
              $
              (0.09
              )
              $
              (0.46
              )
              $
              (0.22
              )Weighted
                  average number of sharesoutstanding
                  - basic and diluted
              
              
              26,012,357
              
              
              22,543,744
              
              
              25,877,049
              
              
              19,977,181




See
      notes
      to condensed and consolidated financial statements





4
          of 25





**Kuhlman
      Company, Inc.**


**Condensed
      Consolidated Statements of Cash Flows**


**For
      the Thirty Nine Weeks ended October 28, 2006 and October 29,
      2005**


**(UNAUDITED)**




October
                28, 2006
            
            October
                29, 2005Cash
                flows from operating activities:Net
                loss
            
            $
            (11,980,922
            )
            $
            (4,430,730
            )Adjustments
                to reconcile net loss to net cash used in operatingactivities:Stock
                based compensation
            
            
            1,354,362
            
            
            -Non-cash
                interest charges
            
            
            -
            
            
            46,427Warrants
                issued for services
            
            
            67,250
            
            
            48,400Loss
                on disposal of property and equipment
            
            
            324,994
            
            
            -Depreciation
                and amortization
            
            
            378,593
            
            
            204,606(Increase)
                decrease in:Accounts
                receivable, net
            
            
            21,222
            
            
            75,802Inventories
            
            
            2,920,722
            
            
            (4,283,649
            )Prepaid
                expenses
            
            
            306,963
            
            
            (437,383
            )Lease
                deposits
            
            
            100,196
            
            
            (333,925
            )Other
                current assets
            
            
            74,139
            
            
            (15,604
            )-Increase
                (decrease) in:Accounts
                payable
            
            
            (3,016
            )
            
            1,169,602Accrued
                expenses
            
            
            424,861
            
            
            (56,732
            )Deferred
                rent
            
            
            16,148
            
            
            -Net
                cash used in operating activities
            
            
            (5,994,488
            )
            
            (8,013,186
            )Cash
                flows used in investing activities, purchase of propertyand
                equipment
            
            
            (914,537
            )
            
            (1,252,054
            )Cash
                flows from financing activities:Net
                  proceeds from issuance of stock
            
            
            2,461,746
            
            
            11,027,746Net
                  proceeds from convertible debt
            
            
            877,500
            
            
            -Net
                  proceeds from line of credit
            
            
            400,000
            
            
            -Net
                  payments on notes payable
            
            
            (276,717
            )
            
            (127,920
            )Net
                  cash provided by financing activities
            
            
            3,462,529
            
            
            10,899,826(Decrease)
                increase in cash and cash equivalents
            
            
            (3,446,496
            )
            
            1,634,586Cash
                and cash equivalents beginning of period
            
            
            3,604,075
            
            
            208,148Cash
                and cash equivalents end of period
            
            $
            157,579
            
            $
            1,842,735Supplemental
                disclosure of non-cash financing activitiesWarrants
                    issued for services
            
            $
            67,250
            
            $
            48,400Value
                of beneficial conversion feature and warrants issued to convertible
                debt
                holders
            
            $
            639,000
            
            $
            -Finance
                costs associated with convertible debt issued
            
            $
            122,500
            
            $
            -Common
                stock and options issued to employees.
            
            $
            1,354,362
            
            $
            -




See
      notes
      to condensed consolidated financial statements





5
          of 25




**KUHLMAN
      COMPANY, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**October
      28, 2006 and October 29, 2005**


**(UNAUDITED)**





**A.**
            **Summary
                of Significant Accounting
                Policies**





***Change
      in Fiscal Year End***





The
      Company has elected to change its fiscal year end from the Saturday closest
      to
      December 31 to the Saturday closest to January 31. We are presenting the
      unaudited condensed consolidated financial statements for the thirteen and
      thirty-nine weeks ending October 28, 2006 and October 29, 2005. We presented
      the
      unaudited condensed consolidated financial statements for the four weeks ended
      January 28, 2006 and January 29, 2005, along with the unaudited condensed
      consolidated financial statements for the thirteen weeks ending April 29, 2006
      and April 30, 2005, with our first quarter Form 10-QSB. We will present the
      audited financial statements as of the four weeks ended January 28, 2006, with
      the Form 10-KSB for the period ending February 3, 2007.





***Basis
      of Presentation***





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial statements and the instructions to Form 10-QSB and Item
      310(b) of Regulation S-B. They do not include all of the information and
      footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statements. Operating results for
      the
      thirty-nine and thirteen weeks ended October 28, 2006 and October 29, 2005,
      are
      not necessarily indicative of the results that may be expected for the fiscal
      year ending February 3, 2007. The balance sheet at January 28, 2006, has
      been derived from the unaudited condensed consolidated financial statements
      at
      that date, but does not include all of the information and notes required by
      generally accepted accounting principles for complete financial statements.
      Certain information and note disclosures normally included in the Company's
      annual financial statements have been condensed or omitted. These condensed
      financial statements should be read in conjunction with the financial statements
      and notes thereto included in the Company's Form 10-KSB, filed with the
      Securities and Exchange Commission on March 31, 2006.  The Form 10-KSB
      provides additional financial information which in turn contains a more
      comprehensive description of the Company's businesses and
      operations.





In
      the
      opinion of management, the financial statements reflect all adjustments (which
      include only normal recurring adjustments) necessary for a fair presentation
      of
      the financial position, results of operations, and cash flows for the periods
      presented.





***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 certain 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 expenses during the
      reporting period. Actual results could differ from those estimates. The
      financial statements are presented on the accrual basis. Material estimates
      that
      are particularly susceptible to significant change relate to the determination
      of the inventory allowance and lease termination costs.





6
          of 25





***Change
      in Capitalization and Change in Reporting Entity***





Kuhlman
      Company, Inc., was previously known as SK2, Inc.





On
      June
      10, 2005, SK2, Inc. merged with Gaming Venture Corp., U.S.A., a Nevada
      corporation (sometimes referred to as “GVUS”), and its wholly owned Delaware
      subsidiary, GV Acquisition Co. (“GV Acquisition”). Immediately prior to the
      merger, GVUS changed its name to “Kuhlman Company, Inc.” Pursuant to the terms
      of the Merger Agreement (Merger), GV Acquisition merged with and into SK2,
      Inc.,
      with SK2, Inc.  remaining
      as the surviving corporation and a wholly owned subsidiary of Kuhlman Company,
      Inc. In the Merger, and in exchange for all of their shares of common stock
      in
      SK2, Inc., SK2, Inc. stockholders received a number of shares of Series A
      Preferred Stock, such that they held a majority of the outstanding shares of
      capital stock of Kuhlman Company, Inc. For accounting purposes this was
      accounted for as a reverse acquisition of a public shell and was reflected
      as a
      recapitalization of SK2, Inc., the operating company. The Company amended its
      articles of incorporation to increase the total number of shares authorized
      for
      issuance to 50,000,000 shares of common stock and 22,000,000 shares of Preferred
      Stock, and effected a reverse stock split on a 1-for-5 basis on outstanding
      common shares. **** Each
      share of Series A Preferred Stock will automatically convert into one share
      of
      Company common stock upon the earlier of the effectiveness of a registration
      statement under the Securities Act covering the conversion of the Series A
      Preferred Stock into Company common stock, or the expiration of the one-year
      period following the Merger. The Preferred Stock has no liquidation preference
      or senior rights typically associated with a preferred stock, other than voting
      rights on an as-if-converted basis.





On
      November 13, 2006, the Company amended its articles of incorporation to increase
      the total shares authorized for issuance to 160,000,000 shares of capital stock.
      The Company has no preferred stock authorized and outstanding.





For
      2005,
      the financial statements reflect the activity as though Kuhlman Company, Inc.
      was the 100% owner of SK2, Inc. and SK2, Inc. was the 100% owner of A3,
      LLC.





***Cash
      Concentrations***





Bank
      balances exceeded federally insured levels as of January 28 and October 28,
      2006. Generally, these balances may be redeemed upon demand and therefore bear
      minimal risk.





***Accounts
      Receivable, credit risk and allowance for doubtful
      accounts***





In
      addition to its retailing operations, the Company generates revenue by providing
      product design and contract manufacturing for department store retailers seeking
      to augment their in-house expertise, which results in trade receivables. The
      Company reviews customers' credit history before extending unsecured credit
      and
      may establish an allowance for doubtful accounts based upon factors surrounding
      the credit risk of specific customers and other information.





The
      Company does not accrue interest on past due accounts receivable. Unless
      specific arrangements have been made, accounts receivable over 30 days are
      considered past due. The Company writes off accounts receivable when they are
      deemed uncollectible. Accounts receivable are shown net of an allowance for
      doubtful accounts of $0 at October 28, 2006 and $2,000 at January 28, 2006.
      Due
      to uncertainties in the collection process, however, it is at least reasonably
      possible that management's estimate will change during the next
      year.





7
          of 25




***Valuation
      of Inventories***





Our
      inventories are stated at the lower of cost or market. Cost is determined by
      the
      first-in, first-out ("FIFO") method. The Company's success is largely dependent
      upon its ability to forecast the tastes of its customers and to provide
      merchandise that satisfies customer demand in a timely manner. The Company's
      failure to anticipate, identify, or react appropriately to changes in fashion
      trends could lead to excess inventories and markdowns. Sudden or continuing
      changes in the Company's product markets could directly impact our gross profit
      performance and may cause variability in gross profit results from reporting
      period to reporting period.





Provisions
      to reduce inventories to the lower of cost or market are made based on a review
      of excess and obsolete inventories through an examination of historical
      inventory consumption, current market demands and shifting market trends.
      Significant assumptions with respect to market trends and customer product
      acceptance are utilized to formulate our provision methods. Sudden or continuing
      downward changes in the Company's product markets may cause us to record
      additional inventory revaluation charges in future periods.





The
      Company’s ending inventory was made up of the following components:





October
                28,
              2006
            
            January
                28,
              2006Finished
                goods
            
            $
            1,217,956
            
            $
            5,294,728Raw
                materials
            
            
            1,168,346
            
            
            485,848Inventory
                allowance
            
            
            (150,000
            )
            
            (623,553
            )Total
                inventories
            
            $
            2,236,302
            
            $
            5,157,023




***Revenue
      Recognition***





Retail
      revenue is recognized at the time of register receipt. The Company accrues
      for
      estimated returns in accordance with Statement of Financial Accounting
      Standards, (SFAS) No. 48, "Revenue Recognition When Right of Return Exists,"
      based on historical return levels. For private label sales, revenue is
      recognized upon transfer of title at time of shipment as long as there was
      evidence of an arrangement, the price was fixed or determinable, and
      collectibility was probable.





***Income
      Taxes***





Differences
      between accounting rules and tax laws cause differences between the basis of
      certain assets and liabilities for financial reporting purposes and tax
      purposes. The tax effects of these differences, to the extent they are
      temporary, are recorded as deferred tax assets and liabilities under Statement
      of Financial Accounting Standards (SFAS) No.109, Accounting for Income Taxes.
      Temporary differences relate primarily to: allowances for doubtful accounts;
      inventory valuation allowances; accumulated depreciation; and accrued expenses
      not currently deductible. No income tax expense is recorded in the statement
      of
      operations since the Company has fully reserved for all tax benefits relating
      to
      net operating loss carryforwards at this time, and will continue to assess
      its
      tax situation on a going forward basis.





8
          of 25




***Segment
      Reporting***





A
      business segment is a distinguishable component of an enterprise that is engaged
      in providing an individual product or service or a group of related products
      or
      services and that is subject to risks and returns that are different from those
      of other business segments. The Company's segments have similar economic
      characteristics and are similar in the nature of the products sold, type of
      customers and methods used to distribute the Company's products. Management
      believes that the Company meets the criteria for aggregating its operating
      segments into a single reporting segment.





***Stock-Based
      Compensation***




On
      December 15, 2004, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 123 (revised 2004) (“SFAS 123(R)”), *Share-Based
      Payment* , which
      is a revision of SFAS No. 123, *Accounting
      for Stock-Based Compensation.* SFAS
      123(R) supersedes Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      amends SFAS No. 95, *Statement
      of Cash Flows* .
      Generally, SFAS 123(R) requires all share-based payments to employees, including
      grants of employee stock options, to be recognized in the income statement
      based
      on their fair values determined at the date of grant. On April 14, 2005, the
      Securities and Exchange Commission adopted a new rule that amended the
      compliance dates for SFAS 123(R). The Company adopted SFAS 123(R) using the
      modified prospective method effective January 1, 2006.





In
      all
      periods prior to January 1, 2006, the Company accounted for stock-based
      compensation awards to employees using the intrinsic value method prescribed
      by
      APB Opinion No. 25 and, as such, generally recognized no compensation cost
      for
      employee stock options. The Company did recognize $249,200 in stock based
      compensation expense in the fourth quarter of 2005 as a result of accelerated
      vesting of stock options with a fair market value greater than the exercise
      price at the time of the acceleration. Accordingly, the adoption of SFAS
      123(R)’s fair value method affects the Company’s results of operations, although
      it does not affect the Company’s overall financial position. If the Company had
      been accounting for stock based compensation under SFAS 123(R) during the
      thirteen and thirty-nine weeks ended October 29, 2005, the impact of that
      standard would have approximated the impact of SFAS 123 as described in the
      pro
      forma disclosure set forth below:





Thirteen
                  Weeks
                EndedOctober
                29, 2005
            
            Thirty-nine
                  Weeks EndedOctober 29, 2005As
                reported
            
            $
            (2,118,432
            )
            $
            (4,430,730
            )Less:
                Total stock-based employeecompensation
                expense determined underfair
                value based method for all awards,Net
                of related tax effects
            
            $
            (278,454
            )
            $
            (278,454
            )Pro
                forma
            
            $
            (2,396,886
            )
            $
            (4,709,184
            )Basic
                and diluted as reported
            
            $
            (0.09
            )
            $
            (0.22
            )Basic
                and diluted pro forma
            
            $
            (0.11
            )
            $
            (0.24
            )




9
          of 25







During
      the thirty-nine weeks ended October 28, 2006, the Company granted options for
      1,447,000 shares, granted 544,000 shares of restricted stock to employees and
      the Chairman sold stock at a discount to the CEO as part of his employment
      agreement. The fair values of the stock grants were computed based on the fair
      value of the stock on the grant date. The stock price on the grant dates ranged
      from $2.40 to $2.46. The vesting of the stock grants ranges from 0 to 2.5 years.
      The fair values of the options were calculated using the Black-Scholes option
      pricing model with the following assumptions: (a) no dividend yield, (b) 98.73%
      expected volatility, (c) expected life of five years and (d) a risk-free rate
      of
      return of 4.99%. On February 3, 2006, Scott Kuhlman, the Chairman of the Board,
      sold 500,000 shares of common stock to Luis Padilla, the CEO, for $1.00 per
      share. The $1.00 per share price was discounted to $0.92 per share because
      the
      agreement between the CEO and the Chairman of the Board called for 5 equal
      interest free payments. The market price on that day was $2.75. The Company
      recognized the difference between the market price and the discounted sale
      price
      as expense, under fair value recognition provisions of SFAS 123(R) and SAB
      Topic
      5-T, “Accounting for Expenses or Liabilities Paid by Principal Stockholders(s).”
The Company recorded expense of $72,162 for the options granted, $367,200 for
      the stock grants and $915,000 for the discounted sale, for the thirty-nine
      weeks
      ended October 28, 2006. For additional information on the stock option plan
      see
      Note D.




***Earnings
      per Share***




Basic
      and
      diluted loss per share is computed by dividing net loss by the weighted average
      number of common and preferred shares outstanding during the period. Diluted
      loss per share is computed the same as the basic loss per share due to the
      continuing operating loss which makes the impact of stock options and warrants
      anti-dilutive. Preferred shares are included in the calculation along with
      common shares since the preferred shares are similar to common shares and were
      convertible into one share of common stock each as a result of the Company’s
      filing of its Registration Statement on Form SB-2. In addition, all outstanding
      preferred shares automatically converted into common shares on June 10, 2006,
      the one-year anniversary of the Merger.





Following
      is a computation of basic and diluted earnings per share for the thirty-nine
      weeks ended October 28, 2006, and October 29, 2005:





The
                Thirty-nine
              Weeks
                Ended
            
            The
                Thirty-nine
              Weeks
                EndedOctober
                28, 2006
            
            October
                29, 2005Net
                loss
            
            $
            (11,980,922
            )
            $
            (4,430,730
            )Weighted
                average shares outstanding
            
            
            25,877,049
            
            
            19,977,181Net
                loss per share -- basic and diluted
            
            $
            (0.46
            )
            $
            (0.22
            )




Had
      operating losses not been continuing, the Company would have used the treasury
      method for calculating the dilutive effect of the stock options and warrants
      (using the average market price).





10
          of 25







***Reclassifications***





The
      Company has elected to reclassify store occupancy and design and merchandise
      payroll and benefit costs from cost of goods sold to general, administrative
      and
      store operating expenses. The Company has made this change to make the reporting
      comparable to other retailers and only affects reporting for periods ending
      in
      2005.





The
      following illustrates the primary costs classified in each major expense
      category:





Cost
                of sales
            
            General,
                Administrative, and Store Operating ExpensesMerchandise
            
            Store
              payroll and benefitsFreight
                - in
            
            OccupancyFreight
                - out
            
            Store
              operatingInventory
                shrinkage
            
            Design
              and merchandise payroll and benefitsOther
              administrative





This
      change has no impact on the net loss, the loss from operations, or the loss
      per
      share of the Company, but the change does impact how the gross profit is
      reported.





**B.**
            **Notes
                Payable**





The
      Company entered into a Credit Agreement with Cananwill, Inc. on June 8, 2005.
      Under the Credit Agreement, the Company borrowed $111,999 at 7.5% interest.
      The
      loan called for nine equal monthly installments of $12,836. This loan was paid
      in full on February 10, 2006. The loan was secured by any sums payable under
      certain insurance policies.





On
      March
      2, 2006, the Company also obtained a $1.0 million line of revolving credit
      from
      Venture Bank, based in Minneapolis, MN. On March 2, 2006, Opportunity Finance,
      a
      company controlled by Jon Sabes, one of the Company’s directors at the time,
      subordinated its security interest in the business assets of the Company to
      Venture Bank. This working capital line carries a rate at prime plus 1% and
      is
      secured by all of the Company’s business assets. The line is subject to the
      following covenants: Borrowing on the line of credit may not exceed 25% of
      the
      value of the Company’s inventory and the Company must maintain $6,000,000 in
      equity. As of October 28, 2006, the Company has borrowed $400,000 under the
      line
      of credit. Venture Bank is currently not allowing the Company to borrow
      additional funds under the line of credit because the Company is not in
      compliance with the equity covenant of the line of credit agreement. In
      October 2006, Venture Bank obtained the personal guarantee up to $400,000 of
      Scott Kuhlman, Chief Executive Officer of the Company and his spouse, Susan
      Kuhlman, also an employee of the Company.Although the Company’s equity
      has been below $6,000,000 since the end of the month of May 2006, Venture Bank
      has continued to allow the Company to use the working capital line according
      to
      its terms up to $400,000.





11
          of 25


The
      Company entered into a Credit Agreement with AICCO, Inc. on March 31, 2006.
      Under the Credit Agreement the Company borrowed $127,369 at 7.34% interest.
      The
      loan calls for 11 monthly payments of $12,011. The balance as of October 28,
      2006, was $47,290.





On
      June
      8, 2006, the Company entered into a finance agreement with Cananwill, Inc.
      Under
      this agreement the Company borrowed $69,725 at 9.11% interest. The loan calls
      for 11 equal payments of $6,631 per month. The balance as of October 28, 2006,
      was $38,750.





On
      August
      31, 2006 the Company entered into a Credit Agreement with Opportunity Finance,
      a
      related party. Under the Credit Agreement the Company borrowed $100,000 which
      is
      secured by the business assets of the Company but its security interest is
      subordinated to Venture Bank. The Credit Agreement calls for interest in an
      amount equal to $5,000. The principal and interest were due on September 30,
      2006. The Company has paid interest through September 30, 2006 but not the
      principal. Opportunity Finance has demanded payment on such note.




On
        September 22, 2006, we entered into an agreement with an investment partnership
        pursuant to which such investor agreed to provide an aggregate of $1.75 million
        in financing to the Company through the issuance of 8% secured convertible
        debentures and warrants. On such date we issued to such investment partnership
        8% secured convertible debentures in the principal amount of $1,000,000 and
        warrants to acquire 2,000,000 shares of the Company’s common stock. The net
        proceeds of such issuance was $877,500. The debentures are due September
        22,
        2009 and are secured by the business assets of the Company and its subsidiaries,
        and a pledge of an aggregate of 3,032,500 shares of the Company’s common stock
        beneficially owned by Scott Kuhlman, CEO and a director of the Company, and
        Jon
        Sabes, a former director of the Company.
 
 The
        debentures convert, at the option of the holder, into the Company’s common stock
        at the lower of (a) $0.3178 or (b) ninety (90%) of the lowest volume weighted
        average price (“VWAP”) of the common stock during the twenty (20) days
        immediately preceding the conversion date (the “Market Conversion Price”). No
        more than $250,000 principal amount can be converted in any 30 day period.
        In
        the case of an Event of Default (as defined in the debenture), the conversion
        price shall be reduced to the lower of twenty percent (20%) of VWAP on the
        Closing Date or twenty-five percent (25%) on the then Market Conversion Price.
 
 The
        warrants have a five-year term. Warrants to acquire 1,000,000 shares of common
        stock have an exercise price of $0.32 per share and warrants to acquire
        1,000,000 shares of the common stock have an exercise price of $0.35 per
        share.
        In addition, the warrants have a cashless exercise provision that would result
        in a net share settlement if this provision were invoked and there is no
        provision for a net cash settlement of such warrants.
  The
        Company accounted for the borrowing and issuance of warrants in accordance
        with
        APB Opinion No. 14, “ *Accounting
        for Convertible Debt and Debt Issued with Stock Purchase Warrants”.* The face
        value of $1,750,000 was allocated based upon the relative fair market
        values of the total debt issued. The amount allocated to the warrants is
        $357,000 and as of October 28, 2006 the amount allocated to debt is $643,000
        prior to the application of the beneficial conversion feature described in
        the
        following paragraph. The Company received the remainder of the total proceeds
        of
        $750,000, before deduction of finance costs, in November 2006. The portion
        of
        the proceeds allocated to warrants was accounted for as additional paid-in
        capital. The fair value of the warrants was calculated using the Black-Scholes
        pricing model based on the assumptions used by the Company for stock based
        compensation. The discount for warrants will be amortized to interest expense
        over the life of the convertible debt. The Company also recorded $122,500
        as
        capitalized finance costs for the fees paid in this transaction.
 In
          addition, the Company recorded a beneficial conversion feature for the
          intrinsic
          value of the debt holders’ ability to set the conversion price at 90% of the
          market price for a share of common stock (a 10% beneficial conversion feature)
          of approximately $282,000 at the commitment date in accordance with Emerging
          Issues Task Force (EITF), No. 98-5, *“Accounting
          for Convertible Securities with Beneficial Conversion Features or Adjustable
          Conversion Ratios.”* The
          portion of the proceeds allocated to the beneficial conversion feature
          was
          accounted for as additional paid-in capital. The resulting convertible
          debt
          balance is $361,000 ($643,000-$282,000).
  In
        connection with this transaction, the Company granted a security interest
        in all
        of its assets as collateral for the debentures. This security interest is
        subordinate to certain existing permitted liens, including, but not limited
        to
        the Company’s security interest granted to Venture Bank in connection with the
        Company’s secured line of credit of $1,000,000 of which $400,000 principal
        amount is outstanding on October 28, 2006.


**C.**
            **Commitments
                and Contingencies**





Legal
      Proceedings





The
      Company settled an accounts payable vendor claim after an uncontested judgment
      in the amount of $75,000 was rendered against the Company in November 2006.
      In
      November 2006, the Company received a summons and complaint from another vendor
      claiming an approximate amount of $150,000, which the Company intends to contest
      if the proceedings continue.




Leases





The
      Company closed nine underperforming stores during the fiscal quarter ended
      October 28, 2006. As of the October 28, 2006, there are 25 leases outstanding
      in
      locations with no store operations. The lease terms extend from two to over
      one
      hundred months. As a result, we have recorded an estimated liability of $670,500
      to settle these leases in accordance with SFAS No. 146, *“Accounting
      for Costs Associated with Exit or Disposal Activities”* .
      This
      represents a $500,000 increase from the previous quarter ended July 29, 2006.
      The Company did not accrue for lease termination costs prior to the fiscal
      quarter ended July 29, 2006. The cost of closing the stores and relocating
      merchandise is included in general, administrative, and store operating expense.
      The Company estimates the payroll costs paid after the store is closed to manage
      the relocation of merchandise and other activities averages approximately $1,100
      per store. These costs are part of the payroll expense at the time of closing
      but amount to approximately $10,000 and $26,000 for the thirteen and thirty-nine
      weeks ended October 28, 2006, respectively.




12
          of 25





During
      the thirty-nine weeks ended October 28, 2006, the Company did not enter into
      any
      additional lease agreements for retail space. The base rent expense for all
      leases has been computed on a straight-line basis. Most of the leases require
      the Company to pay base rent, contingent rent based on sales, real estate taxes
      and common area expenses.





**D.**
            **Stock
                Options, Stock Grants and
                Warrants**





The
      board
      of directors and shareholders of SK2, Inc. adopted the SK2, Inc. Stock Option
      Plan for directors, employees and consultants in May 2005 (the “Stock Option
      Plan”). The Stock Option Plan was assumed by the Company upon the Merger.
      Currently, an aggregate of 3,500,000 shares of our common stock are
      reserved for issuance under the Stock Option Plan. The plan is administered
      by
      the compensation committee of the board of directors, which has the discretion
      to determine the number and purchase price of shares subject to stock options,
      the term of each option, and the time or times during its term when each option
      becomes exercisable.





On
      March
      15, 2006, the Company granted options for 450,000 shares to employees. On May
      25, 2006, the Company granted options for 200,000 shares to employees. On July
      26, 2006, the Company granted options for 107,000 shares to employees. On August
      2, October 16 and October 19, 2006, the Company granted additional options
      for
      80,000, 360,000, and 250,000 shares, respectively to employees. The options
      have
      a life of 10 years and a vesting period of 3 years.


On
        October 24, 2006, Company entered into a Retainer Agreement (the “CFO Retainer
        Agreement”) with Charles Walensky. Pursuant to the CFO Retainer Agreement, Mr.
        Walensky agreed to serve as Interim Chief Financial Officer for a period
        of
        three months, and thereafter on a monthly basis. The Company agreed to
        compensate Mr. Walensky for his services with a grant of 35,000 shares of
        Company common stock, which will be restricted until after the expiration
        of the
        initial three-month term in the CFO Retainer Agreement. After any lapse of
        such
        restrictions, the shares granted to Mr. Walensky will be free of contractual
        restrictions under the Company’s 2005 Stock Incentive Plan, but will remain
        subject to applicable restrictions under the Securities Act of
        1933.
 
 In
        addition, on October 24, 2006 the Company entered into another Retainer
        Agreement (the (COO Retainer Agreement”) with Charles Walensky. Pursuant to the
        COO Retainer Agreement, Mr. Walensky agreed to serve as Acting Chief Operating
        Officer for a period of one year, and thereafter on a monthly basis. The
        Company
        agreed to compensate Mr. Walensky for his services with an issuance of a
        warrant
        to purchase up to 750,000 shares of Company common stock at an exercise price
        of
        $0.35 per share, The Company granted demand and piggyback registration rights
        for the resale of the common shares issuable upon the exercise of the warrant.
        The warrant has a cashless-exercise provision that would result in a net
        share
        settlement if this provision were invoked and there is no provision for a
        net
        cash settlement of such warrants.
 
 On
        October 24, 2006 the Company’s Board of Directors approved and ratified the
        Company’s engagement letter with Manchester Companies, Inc. (“Manchester”) dated
        effective as of October 16, 2006. In addition to the monthly pay per month,
        the
        Company issued a warrant to purchase up to 100,000 shares of Company common
        stock at an exercise price of $0.35 per share, The Company granted piggyback
        registration rights for the resale of the common shares issuable upon the
        exercise of the warrant. The warrant has a cashless-exercise provision that
        would result in a net share settlement if this provision were invoked and
        there
        is no provision for a net cash settlement of such warrants.


13
          of 25




A
      summary
      of the status of the Company’s stock options as of October 28, 2006, is
      presented below:




Fixed
                Options
            
            Shares
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining
              Contractual
                LifeOutstanding
                at January 28, 2006
            
            
            837,500
            
            $
            1.86
            
            
            8.8
                yearsGranted
            
            
            1,447,000
            
            
            1.08
            
            
            9.8
                yearsExercised
            
            
            0Forfeited
            
            
            (664,500
            )
            
            1.98
            
            
            9.3
                yearsOutstanding
                at October 28, 2006
            
            
            1,620,000
            
            $
            1.11
            
            
            9.5
                yearsOptions
                exercisable at January 28, 2006
            
            
            837,500
            
            $
            1.86
            
            
            8.8
                yearsOptions
                exercisable at October 28, 2006
            
            
            600,000
            
            $
            1.85
            
            
            8.8
                yearsWeighted-average
                fair value of optionsgranted
                during the thirty-nine weeks
            
            $
            1.08





As
      of
      October 28, 2006, there was approximately $381,000 of total unrecognized
      compensation cost related to unvested share-based compensation arrangements,
      of
      which $37,000 is expected to be recognized during the remainder of the fiscal
      year ended February 3, 2007, $150,000 in the fiscal year ended February 2,
      2008,
      $150,000 and in the fiscal year ended January 31, 2009, $44,000 in the fiscal
      year ended January 30, 2010.





**E.**
            **Equity
                Financing**





On
      June
      23, 2005, the Company closed on the sale in a private placement of 1,085,956
      shares of Preferred Stock for an aggregate purchase price of $2,092,209. A
      second closing was held on July 14, 2005, when the Company closed on a private
      placement of 3,455,267 shares of Preferred Stock for an aggregate purchase
      price
      of $6,392,244. The Company relied on the exemption from federal registration
      under Section 4(2) of the Securities Act, and/or Rule 506 promulgated hereunder.
      The Company relied on this exemption and/or the safe harbor rule thereunder
      based on the fact that (i) all of the investors were accredited investors and
      either alone or through a purchaser representative, had knowledge and experience
      in finance and business matters such that each was capable of evaluating the
      risks of the investment, and (ii) the Company has obtained subscription
      agreements from the investors indicating that the investors are purchasing
      for
      investment purposes only.





The
      offers and sales of the Preferred Stock made on June 23, 2005 and July 14,
      2005
      were not registered under the Securities Act at the time, however, on October
      11, 2005 the Company filed a Registration Statement on Form SB-2 with the
      Securities and Exchange Commission pursuant to which the common shares
      underlying the Preferred Stock were registered for resale.





In
      January of 2006, the Company closed on the sale of 1,950,000 shares of common
      stock at $2.25 per share. The purchasers also received warrants to purchase
      20%
      of the number of shares that they purchased with an exercise price of $2.75
      per
      share. Net proceeds of this transaction were $4,378,250.








14
          of 25


The
        offers and sales of the Preferred Stock made on June 23, 2005 and July 14,
        2005
        were not registered under the Securities Act at the time, however, on October
        11, 2005 the Company filed a Registration Statement on Form SB-2 with the
        Securities and Exchange Commission pursuant to which the common shares
        underlying the Preferred Stock were registered for resale.
 
 In
        January of 2006, the Company closed on the sale of 1,950,000 shares of common
        stock at $2.25 per share. The purchasers also received warrants to purchase
        20%
        of the number of shares that they purchased with an exercise price of $2.75
        per
        share. Net proceeds of this transaction were $4,378,250.




In
      March
      of 2006, the Company closed on the sale of 1,125,000 shares of common stock
      at
      $2.25 per share. The purchasers also received warrants to purchase 20% of the
      number of shares that they purchased with an exercise price of $2.75 per share.
      Net proceeds from this transaction were $2,518,900.





**F.**
            **Subsequent
                Events**





The
      Company closed nine underperforming stores between October 28 and December
      18,
      2006. The estimated costs to settle these leases will be approximately $300,000.
      The cost of closing the stores and relocating merchandise will be included
      in
      general, administrative, and store operating expense.





On
      November 14 and November 16, 2006 the Company issued an additional $400,000
      and
      $350,000, respectively in convertible debt to Cornell Capital Partners. This
      debt, maturing three years from date of issuance, carries an interest rate
      at 8%
      and accrues interest through the life of the loan(s) and is secured under same
      terms as the September 22, 2006 issuance. The Company paid fees of $75,000
      and
      received combined net proceeds of $675,000. No additional warrants were issued
      in connection with these loans.


**G.**
              **Recent
                  Pronouncements**
 
 In
        July
        2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
        Income Taxes - An interpretation of FASB Statement No. 109, (“FIN 48”), which
        clarifies the accounting and disclosure requirements for uncertainty in tax
        positions. This Interpretation requires financial statement recognition of
        the
        impact of a tax position if that position is more likely than not of being
        sustained on audit, based on the technical merits of the position. Additionally,
        FIN 48 provides guidance on measurement, derecognition, classification,
        accounting in interim periods and disclosure requirements for uncertain tax
        positions. The provisions of FIN 48 will be effective as of the beginning
        of the
        Company’s fiscal year 2007, with the cumulative effect of the change in
        accounting principle, if any, recorded as an adjustment to opening retained
        earnings. The Company is currently evaluating the provisions of FIN
        48.
 
 In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”)
        Considering the Effects of Prior Year Misstatements when Quantifying
        Misstatements in Current Year Financial Statements, that provides interpretive
        guidance on how the effects of the carryover or reversal of prior year
        misstatements should be considered in quantifying a current year misstatement.
        The SEC staff believes that registrants should quantify errors using both
        a
        balance sheet and an income statement approach and evaluate whether either
        approach results in quantifying a misstatement that, when all relevant
        quantitative and qualitative factors are considered, is material. This
        pronouncement is effective for fiscal years ending after November 15, 2006.
        The
        Company is currently evaluating the provisions of SAB 108.
 
 In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No.
        157”). This statement provides a single definition of fair value, a framework
        for measuring fair value, and expanded disclosures concerning fair value.
        Previously, different definitions of fair value were contained in various
        accounting pronouncements creating inconsistencies in measurement and
        disclosures. SFAS No. 157 applies under those previously issued pronouncements
        that prescribe fair value as the relevant measure of value, except SFAS No.
        123(R) and related interpretations and pronouncements that require or permit
        measurement similar to fair value but are not intended to measure fair value.
        This pronouncement is effective for fiscal years beginning after November
        15,
        2007. The Company does not believe that this standard will significantly
        affect
        the Company’s financial position or results of
        operations.


15
          of 25





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




**Overview:**





Kuhlman
      Company, Inc. is a specialty retailer and wholesale provider of exclusively
      designed, distinctive, high-quality apparel and accessories. The clothing
      products are designed to appeal to buyers who value self expression and
      individuality in their apparel purchases.





Our
      merchandise is offered under the Kuhlman brand through our own retail stores
      and
      under private labels of large retailers. Since opening our first store in August
      2003, our dedicated and experienced management team has helped us increase
      our
      national presence. As of October 28, 2006, we have 30 locations in 18 states.
      As
      of December 12, 2006, we have 21 stores open in 15 states.





On
      April 14, 2005, we (then known as Gaming Venture Corp., U.S.A., a Nevada
      corporation) entered into an Agreement and Plan of Merger (the “Merger
      Agreement”) among SK2, Inc. (SK2), the Delaware corporation that owns the
      Kuhlman retail stores, and GV Acquisition Corp., a Delaware corporation and
      our
      wholly owned subsidiary formed solely for the purpose of engaging in the merger
      transaction contemplated by the Merger Agreement (such merger transaction is
      referred to herein as the “Merger”). We entered into the Merger Agreement in
      order to acquire the Kuhlman retail business then owned by SK2. At and after
      our
      inception in 1995, we were engaged in the business of publishing and
      distributing industry reports and newsletters to the gaming and hospitality
      industries as well as providing consulting and advisory services to the gaming
      and hospitality industries. Prior to the Merger, however, we wound down and
      ceased operating these businesses. The Merger was effected June 10, 2005. As
      a
      result of the Merger, SK2 became our wholly owned operating subsidiary.
      Immediately prior to the Merger we changed our name to Kuhlman Company, Inc.,
      and effected a reverse stock split on a one-for-five share basis, all pursuant
      to the terms of the Merger Agreement. Also prior to the Merger, our common
      stock
      was quoted on the over-the-counter bulletin board under the trading symbol
      “GVUS.OB.” After the merger, our common stock traded under the symbol “KHLM.OB.”
Effective March 27, 2006, our stock traded under the symbol “KUL” on the
      American Stock Exchange. On November 20, 2006 we began being quoted on the
      over-the-counter bulletin board under the trading symbol “KUHM.OB after
      delisting from the American Stock Exchange at the end of the previous trading
      day.





In
      the
      Merger and in exchange for all of their shares of SK2 common stock, the
      stockholders of SK2 received a number of shares of our capital stock such that
      they owned approximately 91% of the outstanding shares of our capital stock
      on a
      fully diluted basis immediately after the Merger. As of June 10, 2005, the
      Company had issued and outstanding 16,052,835 shares of capital stock, including
      14,749,950 shares of preferred stock issued to former holders of SK2 common
      stock in the Merger and 1,302,606 shares of our common stock that were
      outstanding prior to the Merger (adjusted for the one-for-five reverse stock
      split). For accounting purposes, the Merger was treated as the reverse
      acquisition of a public shell whereby SK2 was treated as the
      acquirer.





Management
      believes that focusing on the following key areas could lead to improved
      results:




·
            Contract
                the number of stores to those stores that are performing below average
                in
                store sales to increase productivity per square foot.·
            Focus
                product purchases on the best selling products and reduce the number
                of
                SKU’s per product category.


·
            Improve
                existing retail productivity by establishing clear performance goals
                and
                objectives and providing related compensation
                incentives.·
            Expansion
                of wholesale and design-assist
                business.


·
            Reduction
                in corporate expense.·
            Exiting
                under-performing stores.




16
          of 25




**Results
      of Operations:**





Revenue


For
      the
      thirteen weeks ended October 28, 2006 and October 29, 2005, total Company’s
      revenues were approximately $1,970,000 and $1,325,500, respectively which
      represents an average $60,300 and $42,800, respectively per open store.
      Wholesale revenue was approximately $110,000 for the thirty-nine weeks ended
      October, 28, 2006 compared to $269,000 for the thirty-nine weeks ended October
      29, 2005. Retail sales were approximately $6,900,000 and $3,800,000 for the
      thirty-nine weeks ended October 28, 2006 and October 29, 2005, respectively
      which represents an average $164,700 and $138,900, respectively per open store.
      For the thirty-nine weeks ended October 28, 2006 retail sales increased 82%
      over
      the prior thirty-nine weeks ended October 29, 2005 and increased 43% in the
      fiscal quarter over the prior year’s fiscal quarter. Based on the average stores
      open, retail sales for the thirteen weeks ended October 28, 2006 compared to
      the
      same period in 2005 increased 41% and, retail sales for the thirty-nine weeks
      ended October 28, 2006 compared to the same period in 2005 increased 18%.
      Kuhlman operated 30 and 41 stores as of October 28, 2006 and October 29, 2005,
      respectively. During the thirty-nine weeks ending October 28, 2006 the Company
      opened four and closed twenty-four stores. As of December 12, 2006, we had
      21
      stores open in 15 states.





The
      following illustrates the sales by type of store for the thirty-nine weeks
      ended
      October 28, 2006 and October 29, 2005, respectively.







Gross
      Profit


Gross
      profit represents net sales less cost of sales. The Company has elected to
      change the way cost of sales is presented in the financial statements in order
      to better reflect the true cost of the merchandise sold. Cost of sales includes
      cost of merchandise and freight from vendors, duty, costs incurred for shipping
      and handling, and inventory shrinkage. Overall gross profit as a percent of
      sales in the retail business was 6.6% before the inventory valuation adjustment
      for the thirty-nine weeks ended October 28, 2006, compared to 45.9% for the
      thirty-nine weeks ended October 29, 2005.





The
      following chart shows the trend in gross profit since January 28,
      2006:










17
          of 25




The
      gross
      profit margin for the thirty-nine weeks ended October 28, 2006, exclusive of
      valuation reserves and sales in Outlet Stores, was 26% compared to 47% in the
      prior thirty-nine weeks ended October 29, 2005. The lower gross profit margin
      in
      the current thirty-nine weeks ended October 28, 2006 is primarily related to
      actions taken in connection with the expansion and subsequent contraction of
      the
      number of retail stores. We have opened over 60 stores and abandoned plans
      to
      open additional stores while as of December 12, 2006 we are operating 21 stores.
      The effect of opening and closing these stores coupled with now abandoned plans
      to open additional stores has resulted in ordering too much merchandise which
      upon delivery was in excess of our needs. We also used promotional merchandise
      sales to develop customer traffic in our newly opened stores which was in lieu
      of other forms of new store advertising and promotion costs. In addition, we
      have moved to a model of taking markdowns on a more frequent basis. Throughout
      the spring-summer season we reviewed markdowns weekly and began taking clearance
      markdowns in June. We have sold a significant portion of this excess and
      promotional inventory as of October 28, 2006 with inventory balances before
      the
      valuation allowance of approximately $2.4 million compared to approximately
      $5.8
      million as of January 28, 2006. The valuation reserve for anticipated losses
      on
      merchandise as of October 28, 2006 is $150,000 compared to $623,553 as of
      January 28, 2006.





Currently,
      we are actively counter sourcing products for increased product margins and
      this
      activity is reflected in the recent increase in product margins shown in the
      above chart. This is being done in a way that will allow us to maintain our
      high
      quality standards and that will also allow us to generate higher initial gross
      profit and maintain gross profit if the goods are sold at clearance
      prices.





General,
      Administrative and Store Operating Costs


General,
      administrative and store operating costs were 168% (or 148% before the non-cash
      expense of stock based compensation) and 145% of total revenue for the
      thirty-nine weeks ended October 28, 2006 and October 29, 2005, respectively.
      General, administrative and store operating expenses include $1,354,362 in
      non-cash expense related to stock based compensation for the thirty-nine weeks
      ended October 28, 2006, compared to $0 for the thirty-nine weeks ended October
      29, 2005. The stock based compensation is made up of three components. $72,162
      is expense related to stock options under the new accounting rules, $367,200
      is
      expense related to restricted stock grants to employees and $915,000 is related
      to a discounted sale of stock from Scott Kuhlman, the Chairman of the Board,
      to
      Luis Padilla, then the CEO. The Company expects to expense an additional $37,000
      in stock based compensation expense for the remainder of the fiscal year ended
      February 3, 2007. The Company has adopted SFAS 123(R) using the prospective
      method effective January 1, 2006





In
      the
      thirteen weeks ended October 28, 2006 general, administrative and store
      operating costs before stock based compensation were 154% of total revenue
      compared to 189% in the thirteen weeks ended October 29, 2005.





Payroll
      and benefits before stock based compensation make up 38% for the year-to-date
      and 36% for the quarter-to-date of the total general, administrative and store
      operating costs. Store operations before stock based compensation represent
      63%
      of the payroll and benefits for the year-to-date and 64% for the
      quarter-to-date. During the first quarter, we initiated a payroll process based
      on store productivity and this productivity effort is evident in the average
      store payroll year-to-date which is registering a 0.7% increase compared to
      the
      comparable prior year.





Lease
      expense makes up 28% of the total general, administrative and store operating
      costs or 47% of revenue for the year-to-date period. The corporate office and
      warehouse lease cost makes up 4% of the total lease expense. The Company has
      recognized accelerated rent of $670,500 (an increase of $500,000 in the current
      fiscal quarter) to estimate the cost of settling leases on unoccupied store
      locations. During the past twelve months the Company has opened stores in major
      metropolitan areas of New York, Washington D.C, Boston and Philadelphia. These
      cities typically have higher rent structures.





Professional
      fees for the thirty-nine weeks ended October 28, 2006, were 14% of sales. These
      expenses included the December 31, 2005, audit, registration statements filed
      with the SEC, and the listing of the Company’s stock on the American Stock
      exchange.





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          of 25





Net
      Loss





The
      Company incurred a net loss of approximately $11,980,000 which was 172% of
      revenues compared to approximately $4,430,000 or 110% of revenues for the
      thirty-nine weeks ended October 28, 2006 and October 29, 2005,
      respectively.




**Liquidity
      and Capital Resources:**




Cash




The
      Company has experienced negative cash flows from operations of $5,994,488 for
      the thirty-nine weeks ended October 28, 2006. The Company’s cash and cash
      equivalents were $157,579 at October 28, 2006, representing a decrease of 96%
      from the cash of $3,604,075 at January 28, 2006. As of December 12, 2006, the
      Company had cash and cash equivalents of approximately $110,000 and availability
      under the line of credit from Venture Bank of approximately $130,000 of the
      $400,000 current limit and checks outstanding of approximately $140,000. The
      Company is considering a number of action steps to deal with its limited cash
      reserves, including (a) obtaining third-party financing, (b) closing additional
      under-productive stores, and (c) lowering administrative costs.





As
      of the
      date of this filing in the event the Company is unable to obtain third-party
      financing within the next 20 to 30 days, the Company will have to consider
      a
      number of strategic options, including but not limited to liquidating some
      or
      all of the Company’s assets or discontinuing operations and bankruptcy. Even if
      we obtain third-party financing, the Company’s ability to continue operations
      for the short and long-term future are dependant on our ability to continue
      to
      raise working capital in the equity and or debt markets.





There
      can
      be no assurance that the Company will be successful in obtaining additional
      short-term financing or any additional financing on terms acceptable to the
      Company. The Company believes that any such short-term or long-term financing
      would be on terms that would be substantially dilutive to the Company’s existing
      shareholders.





Failure
      to obtain short-term or additional financing would have a material adverse
      effect on the Company, and the Company would have to consider liquidating all
      or
      part of the Company’s assets and potentially discontinuing operations.





As
      of
      October 28, 2006, we have funded our operations and satisfied capital
      expenditure requirements primarily through proceeds received from the sale
      of
      equity in private placements. In January and March of 2006, the Company raised
      a
      total of $6,897,150 in cash through a private placement of 3,075,000 shares
      of
      common stock. On March 2, 2006, the Company entered in a credit agreement with
      Venture Bank. This agreement provides for a $1,000,000 line of credit. We have
      borrowed $400,000 on the line of credit. Since September 6, 2006 the bank has
      not allowed any borrowings beyond $400,000 on the line credit due to the fact
      that we are not in compliance with the equity covenants in the
      agreement.





On
      September 22, 2006, we entered into an agreement with an investment partnership
      pursuant to which such investor agreed to provide an aggregate of $1.75 million
      in financing to the Company through the issuance of 8% secured convertible
      debentures and warrants. On such date we issued to such investment partnership
      8% secured convertible debentures in the principal amount of $1,000,000 and
      warrants to acquire 2,000,000 shares of the Company’s common stock. The net
      proceeds of such issuance were $877,500. The debentures are due September 22,
      2009 and are secured by the business assets of the Company and its subsidiaries,
      and a pledge of an aggregate of 3,032,500 shares of the Company’s common stock
      beneficially owned by Scott Kuhlman, CEO and a director of the Company, and
      Jon
      Sabes, a former director of the Company.





The
      debentures convert, at the option of the holder, into the Company’s common stock
      at the lower of (a) $0.3178 or (b) ninety (90%) of the lowest volume weighted
      average price (“VWAP”) of the common stock during the twenty (20) days
      immediately preceding the conversion date (the “Market Conversion Price”). No
      more than $250,000 principal amount can be converted in any 30 day period.
      In
      the case of an Event of Default (as defined in the debenture), the conversion
      price shall be reduced to the lower of twenty percent (20%) of VWAP on the
      Closing Date or twenty-five percent (25%) on the then Market Conversion Price.




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          of 25




The
      warrants have a five-year term. Warrants to acquire 1,000,000 shares of common
      stock have an exercise price of $0.32 per share and warrants to acquire
      1,000,000 shares of the common stock have an exercise price of $0.35 per share.
      In
      addition, the warrants have a cashless exercise provision that would result
      in a
      net share settlement if this provision were invoked upon
      exercise.





In
      connection with this transaction, the Company granted a security interest in
      all
      of its assets as collateral for the debentures. This security interest is
      subordinate to certain existing permitted liens, including, but not limited
      to
      the Company’s security interest granted to Venture Bank in connection with the
      Company’s secured line of credit of $1,000,000 of which $400,000 principal
      amount is outstanding on October 28, 2006.





The
      remaining $750,000 of this commitment was funded November 14 and November 16,
      2006, following stockholder approval of an amendment to our articles of
      incorporation increasing the number of authorized shares to 160,000,000. The
      net
      proceeds of these November 2006 issuances were $675,000.





The
      Company is permitted to redeem the debentures at a 20% redemption premium.
      This
      investment partnership was also granted a right of first refusal on future
      financings for an 18 month period following closing.





We
      are a
      Company with limited operating history upon which to evaluate our business
      model
      and prospects. As of December 31, 2003, we had five retail stores open.
      Currently, we have 21 stores. The Company has opened four and closed twenty-four
      stores in the thirty-nine weeks ending October 28, 2006. Our limited operating
      history limits the ability to evaluate the long-term viability of our business
      and the success of our contraction in the number of open stores. As a relatively
      new business, we are subject to all the risks inherent in commercial operations,
      including unforeseen difficulties and obstacles. There can be no assurance
      that
      we will be successful at developing a profitable chain of Kuhlman retail apparel
      stores.





We
      have a
      history of losses and expect to incur substantial expenses associated with
      increased store development and subsequent contraction and general and
      administrative expenses related to our contraction and operating as a public
      company. As a result, we expect to continue to incur net losses through at
      least
      fiscal year February 3, 2007.


The
      Company’s ability to continue operations for the short and long-term future are
      dependant on our ability to continue to raise working capital in the equity
      and
      or debt markets.





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          of 25





Inventory


We
      began
      the thirty-nine weeks ended October 28, 2006, with a net inventory value of
      $5,157,023. The cost of merchandise sold plus shrinkage totaled $6,553,422.
      We
      ended the thirty-nine week period with inventories of $2,386,302 and an
      inventory valuation allowance of $150,000 for net inventory of $2,236,302.
      The
      reserve represents expected discounts below our original cost that will be
      required to sell the inventory on hand as of October 28, 2006.





The
      inventory is made up of the following components.




December
                2005
            
            January
                2006
            
            April
                2006
            
            July
                2006
            
            October
                2006Regular
                Stores
            
            
            3,760,075
            
            
            3,707,037
            
            
            2,875,634
            
            
            2,265,878
            
            
            968,836Outlet
                Stores
            
            
            799,276
            
            
            653,380
            
            
            1,442,871
            
            
            953,470
            
            
            249,120Warehouse
            
            
            1,386,018
            
            
            934,310
            
            
            859,806
            
            
            201,700
            
            
            114,804Raw
                Materials
            
            
            304,953
            
            
            485,849
            
            
            653,188
            
            
            976,853
            
            
            1,053,542Valuation
                Allowance
            
            
            (600,784
            )
            
            (623,553
            )
            
            (546,536
            )
            
            (816,008
            )
            
            (150,000
            )Total
            
            
            5,649,538
            
            
            5,157,023
            
            
            5,284,963
            
            
            3,581,893
            
            
            2,236,302




**Safe
      Harbor Statement:**





The
      Private Securities Litigation Reform Act of 1995 provides “safe harbor” for
      forward-looking statements. Certain information included in this Form 10-QSB
      and
      other materials filed or to be filed by the Company with the Securities and
      Exchange Commission (as well as information included in oral statements or
      other
      written statements made or to be made by the Company) contain statements that
      are forward-looking, such as statements relating to the Company’s ability to
      raise short and long term financing, anticipated business plans and strategies,
      projected or anticipated benefits or other consequences of market conditions
      and
      opportunities, business plans or strategies, projections involving anticipated
      sales and revenues, expenses, projected future earnings and other aspects of
      operational results. All phases of the Company’s operations are subject to a
      number of uncertainties, risks and other influences, most of which are outside
      the Company’s control, and any one or combination of which could materially and
      adversely affect the results of the Company’s operations, and also, could affect
      whether any such forward-looking statements contained in this Form 10-QSB
      ultimately prove to be accurate. Important factors that could cause actual
      results to differ materially from the Company’s expectations include, but are
      not limited to, the factors summarized below:





·
            Our
                continued viability depends on our ability to operate stores on a
                profitable basis and on management’s ability to maintain a senior
                management team, close underperforming stores, negotiate satisfactory
                termination of certain leases, and otherwise manage our expenses
                and
                accounts payable.





·
            Factors
                beyond our control may also affect our ability to increase same store
                revenues, including general economic and business conditions affecting
                consumer spending.





·
            Our
                attempts to become cash flow positive will place an increasing strain
                on
                our resources and we could experience difficulties relating to a
                variety
                of operational matters, including hiring, retaining, training and
                managing
                our employees, obtaining sufficient quantities of merchandise from
                vendors, obtaining sufficient material and contract manufacturers
                to
                produce our products, and enhancing our financial and operating
                systems.




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          of 25




·
            Our
                business is seasonal by nature, with the third and fourth quarters
                accounting for the largest percentage of annual net sales. It is
                therefore
                important that we successfully execute our business plan and operate
                our
                business during that time. Outside of the holiday season, monthly
                sales
                generally do not fluctuate widely within each store given our one
                price
                strategy. Nonetheless, our quarterly results of operations in the
                future
                may fluctuate significantly as a result of a variety of factors,
                the
                amount of revenue contributed by our newer stores, changes in the
                mix of
                products sold, overstocking or under-stocking of merchandise, the
                timing
                and level of markdowns, the timing of store closings, expansions
                and
                relocations, competitive factors and general economic
                conditions.





·
            Substantially
                all of our merchandise is manufactured and sourced outside the United
                States, principally in Italy and Turkey. As a result, our operations
                are
                subject to the risks generally associated with doing business abroad,
                such
                as foreign government regulations, political instability, regulations
                relating to imports, the imposition of duties, taxes and other charges
                on
                imports, significant fluctuations in the value of the dollar against
                foreign currencies or restrictions on the transfer of
                funds.





·
            We
                have experienced delays in receipt of merchandise due to import
                regulations. The inability of a contract manufacturer to ship orders
                in a
                timely manner or the inability of us to receive or purchase orders
                in a
                timely manner could cause us to fail to meet the merchandise requirements
                of its stores for those items, which could result in lost sales and
                dissatisfied customers. Any significant interruption in our foreign
                sourcing would have a material adverse effect on our business, financial
                condition and results of
                operations.





·
            Our
                convertible debentures issued in September and November 2006 are
                subject
                to a number of covenants and restrictions. These debentures are secured
                by
                substantially all of the assets of the Company. An event of default
                by the
                Company under such convertible debentures could have a material adverse
                impact on the Company.








**Off-Balance
      Sheet Arrangements**





We
      have
      not entered into any off-balance sheet arrangements.





**Critical
      Accounting Policies and Estimates**





Our
      discussion and analysis or plan of operation is based upon our financial
      statements, which have been prepared in accordance with accounting principles
      generally accepted in the United States of America. The preparation of these
      financial statements requires us to make estimates and assumptions that affect
      the reported amounts of assets and liabilities at the date of the financial
      statements, the reported amounts of revenues and expenses during the reporting
      period, and related disclosures of contingent assets and liabilities for the
      periods indicated. The notes to the financial statements contained herein
      describe our significant accounting policies used in the preparation of the
      financial statements. On an on-going basis, we evaluate our estimates,
      including, but not limited to, those related to our allowance for doubtful
      accounts, inventory valuations, the lives and continued usefulness of furniture,
      fixtures and leasehold improvements, lease termination costs and
      contingencies. Due to uncertainties, however, it is at least reasonably possible
      that management's estimates will change during the next year, which cannot
      be
      estimated. We base our estimates on historical experience and on various other
      assumptions that we believe 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 could differ from these estimates under different assumptions
      or
      conditions.




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          of 25




Retail
      revenue is recognized at the time of register receipt. The Company accrues
      for
      estimated returns in accordance with statement of Financial Accounting
      Standards, (SFAS) No. 48, "Revenue Recognition When Right of Return Exists,"
      based on historical return levels. For private label sales, revenue is
      recognized upon transfer of title at time of shipment as long as there was
      evidence of an arrangement, the price was fixed or determinable, and
      collectibility was probable.




**ITEM
      3.      CONTROLS AND PROCEDURES**





We
      maintain a system of disclosure controls and procedures that is designed to
      provide reasonable assurance that information, which is required to be
      disclosed, is accumulated and communicated to management on a timely basis.
      At
      the end of the period covered by this report, 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 pursuant to
      Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive
      Officer and our Chief Financial Officer concluded that the Company had a
      material weakness in the Corporation’s internal control over financial reporting
      because of ineffective controls related to the review of computations and
      methodology pertaining to one non-routine transaction which could potentially
      cause a material misstatement in financial reporting. In addition, the current
      Chief Executive Officer and our Chief Financial Officer concluded that the
      Company had a second material weakness in the Corporation’s internal control
      over financial reporting because of a recent change in individuals holding
      the
      senior officer positions including a new Chief Executive Officer and Chief
      Financial Officer.





This
      first deficiency in our internal controls related to improper recognition of
      expense related to the stock transaction between the Company’s Chairman of the
      Board and the new Chief Executive Officer. The accounting for such transactions
      required that the discount in the sale price be recognized as compensation
      expense on the books of the Company. This expense is also recorded as an
      increase in additional paid in capital. The improper expense recognition was
      detected in the review process and correcting adjustments were recorded to
      properly state our expenses and was disclosed to our Audit Committee and to
      our
      auditors. We are in the process of improving our internal controls over
      financial reporting regarding these non-routine transactions. The Company is
      implementing policies requiring that all equity transactions by officers and
      directors of the Company be reviewed by management including the CFO, discussed
      with the Board of Directors and Audit Committee, and that the management should
      document the financial effects of the transaction, whether or not there is
      any
      accounting effect.





This
      second deficiency is related to the resignations of the previous Chief Executive
      Officer on October 3, 2006 and the previous Chief Financial Officer on October
      4, 2006. The Company replaced the Chief Executive Officer immediately and hired
      a new Chief Financial Officer in early October 2006. The new CEO is the Company
      founder and has previously held the CEO position. The new CFO had not previously
      worked for the Company. We had insufficient time to effect a careful transition
      to new senior officers. As a result we believe there was a lapse in the
      operation of our disclosure controls and procedures while the new senior
      officers re-established such controls and procedures especially as related
      to
      non-routine transactions. The Board of Directors and principal officers have
      acted to restrict such transactions during this transition period and the
      Company is not aware of any misstatements in financial reporting during this
      transition period.





During
      our most recent fiscal quarter, there have been no other changes in our internal
      controls over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)
      under the Exchange Act) that have materially affected, or that are reasonably
      likely to materially affect, our internal controls over financial
      reporting.





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          of 25





**PART
      II. OTHER INFORMATION**




**ITEM
      1.      LEGAL PROCEEDINGS**





In
      November 2006, the Company received a summons and complaint from a vendor
      claiming an approximate amount of $150,000, which the Company intends to contest
      if the proceedings continue.





**ITEM
      4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




A
      Special
      Meeting of Stockholders of the Company was held on November 13, 2006. The only
      proposal voted upon was the proposal to amend the Company's Articles of
      Incorporation to increase the number of shares of capital stock authorized
      for
      issuance to 160,000,000. The total number of shares voted was 16,069,315 or
      61.9% of the eligible votes and the results were as follows:


For
              
              Against
              
              Abstain
              
              Total15,639,738
              
              369,067
              
              60,510
              
              16,069,315


**ITEM
      6.      EXHIBITS**





The
      following exhibits are filed as part of this quarterly report:




**Exhibit
                No.**
            **Description**31.1
            Rule
                13a-14(a)/15d-14(a) certification of principal executive
                officer31.2
            Rule
                13a - 14(a)/15d-14(a) certification of principal accounting
                officer32.1
            Section
                1350 certification of Chief Executive Officer32.2
            Section
                1350 certification of
                Chief Financial Officer





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          of 25





**SIGNATURES**





Pursuant
      to the registration requirements of the Securities Exchange Act of 1934, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.






KUHLMAN
                COMPANY, INC.Date: December
              22, 2006
            By:
            /s/
                Scott KuhlmanTitle:
                  Chief Executive Officer


Date: December
              22, 2006
            By:
            /s/ Charles
              WalenskyTitle:Interim Chief Financial Officer(Principal
                Accounting Officer)


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