UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington, D.C.
20549
  
 FORM 10-Q /A Amendment
No. 1
 
 [ X ]
              QUARTERLY REPORT UNDER SECTION
      13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
  For the quarterly period ended June
30,
2008
  [   
      ]
              TRANSITION REPORT UNDER SECTION
      13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
  For the
transition period from __________to__________
  Commission file number 333-139312
  MAKEUP.COM
      LIMITED(Exact
      name of
      registrant as specifiedin its
charter)
  Nevada
                (State
      or other jurisdiction
                of
      incorporation or organization)
              43-2041643
                (I.R.S.
      Employer
                Identification
      No.)3416 Via Lido, Suite
      F, Newport Beach, California,
      92663-3976
                (Address
      of principal executive offices)866-347-5057
                (Issuer’s
      telephone number)(Former
      name, former address andformer
      fiscal year,
                if
      changed since last report)
 
 Indicate by
checkmarkwhether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during thepreceding 12months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. [ X ] Yes  [   ]
No
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
 Large
      accelerated filer
                o
                Accelerated
      filer
                oNon-accelerated
      filer
                o(Do not check if
      a smaller reporting company)
                Smaller
      reporting company
                x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [   ] Yes  [ X ]
No
  Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.  As of November 13 ,
2008 the registrant had 9,733,442 shares of common stock
outstanding.
  
 EXPLANATORY
NOTE
 
 On
August 14, 2008 Makeup.com Ltd. filed its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008 (the “Original Filing”).  On November 14,
2008, management determined that our financial statements for the quarterly
period ended June 30, 2008 can no longer be relied upon.  This
determination was based on the following:
 
 We
inadvertently posted returned inventory to sales in the amount of approximately
$85,000.  This resulted in an overstatement of sales by approximately
$85,000, an overstatement of cost of goods sold by approximately $71,000 and an
overstatement of inventory of approximately $14,000.  We also
discovered (and resolved) a minor issue with our accounting software which
resulted in an additional overstatement in inventory and an understatement in
cost of goods sold of approximately $2,000.  The overall effect of the
above adjustments decreased inventory by $15,690, cost of goods sold by $69,543
and revenue by $85,234.
 
 Due to
this determination, the following items on our financial statements have been
changed as indicated:
 
 Consolidated
Balance Sheets
 
 ·
                    Inventory,
      net decreased from $382,033 to
$366,343;
 
 ·
                    Total
      current assets decreased from $425,357 to
  $409,667;
 
 ·
                    Additional
      paid in capital increased from $(4,486,246) to
      $(4,501,936);
 
 ·
                    Total
      stockholders’ deficit increased from $(1,232,659) to $(1,248,349);
      and
 
 ·
                    Total
      liabilities and stockholders’ deficit decreased from $856,246 to
      $840,556.
 
 Consolidated
Statements of Operations
 
 ·
                    Sales
      decreased to $175,718 from $260,952 for the 3 month period and to $351,763
      from $436,997 for the 6 month
period;
 
 ·
                    Cost
      of goods sold decreased to $117,136 from $186,679 for the 3 month period
      and to $226,333 from $295,876 for the 6 month
  period;
 
 ·
                    Gross
      profit decreased to $58,582 from $74,273 for the 3 month period and to
      $125,430 from $141,121 for the 6 month
  period;
 
 ·
                    Net
      loss from continuing operations before interest expense and discontinued
      operations increased to $(322,426) from $(306,736) for the 3 month period
      and to $(621,486) from $(605,796) for the 6 month period;
      and
 
 ·
                    Net
      loss from continuing operations and net loss increased to $(369,410) from
      $(353,720) for the 3 month period and to $(744,756) from $(729,066) for
      the 6 month period.
 
 Consolidated
Statements of Cash Flows
 
 ·
                    Net
      loss increased to $(744,756) from $(729,066);
  and
 
 ·
                    Net
      cash used for inventory was reduced to $(25,447) from
      $(41,137).
 
 We
have also revised our discussion in Item 2, Management’s Discussion and Analysis
or Plan of Operation to reflect these changes.
 
 Information
in this Amendment is as of the date of the Original Filing and does not reflect
any subsequent information or events occurring after the date of the Original
Filing, except to reflect the changes noted above.  Accordingly, the
Amendment should be read in conjunction with our filings made with the
Securities and Exchange Commission subsequent to the Original
Filing.  The filing of this Amendment to our Quarterly Report on Form
10-Q shall not be deemed an admission that the Original Filing or any subsequent
amendment, when made, included any untrue statement of a material fact or
omitted to state a material fact necessary to make a statement not
misleading.
 1




PART
I - FINANCIAL INFORMATION
 
 Item 1. Financial
Statements.






MAKEUP.COM
LIMITED CONSOLIDATED
BALANCE SHEETS




June
      30,
              
              
              December
      31,2008
              
              
              2007ASSETS
              
              (Unaudited)Current
      assets:Cash
              
              $
              19,620
              
              
              $
              42,443Accounts
      receivable, net of $85,369 and $250 in allowances
              
              
              9,697
              
              
              
              2,503Inventory,
      net
              
              
              366,343
              
              
              
              340,896Prepaid
      expenses and deposits
              
              
              14,007
              
              
              
              22,291Total
      current assets
              
              
              409,667
              
              
              
              408,133Fixed
      assets, net of $146,332 and $127,830accumulated
      depreciation
              
              
              27,555
              
              
              
              46,056Deposit
              
              
              70,000
              
              
              
              70,000Intangible
      assets
              
              
              333,334
              
              
              
              333,334Total
      assets
              
              $
              840,556
              
              
              $
              857,523LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
              
              $
              369,632
              
              
              $
              303,572Accrued
      liabilities
              
              
              6,904
              
              
              
              8,351Accrued
      advertising fees
              
              
              6,600
              
              
              
              8,991Accrued
      consulting fees
              
              
              27,998
              
              
              
              15,000Accrued
      professional fees
              
              
              31,563
              
              
              
              76,488Advances
       payable
              
              
              16,815
              
              
              
              6,901Note
      payable
              
              
              372,852
              
              
              
              359,573Convertible
      notes payable
              
              
              1,246,570
              
              
              
              3,805,208Due
      to related parties
              
              
              9,971
              
              
              
              9,850Deferred
      assets
              
              
              -
              
              
              
              2,652Total
      current liabilities
              
              
              2,088,905
              
              
              
              4,596,586Commitments
      and contingenciesStockholders'
      deficit:Common
      stock $0.001 par value, 200,000,000 authorized;194,668,748
      issued and outstanding at June 30, 2008 and 44,831,250issued
      and outstanding at December, 31 2007
              
              
              194,668
              
              
              
              44,831Additional
      paid in capital
              
              
              3,086,653
              
              
              
              -Accumulated
      deficit
              
              
              (4,501,936
              )
              
              
              (3,757,180
              )Accumulated
      other comprehensive loss
              
              
              (27,734
              )
              
              
              (26,714
              )Total
      stockholders' deficit
              
              
              (1,248,349
              )
              
              
              (3,739,063
              )Total
      liabilities and stockholders' deficit
              
              $
              840,556
              
              
              $
              857,523


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




2


MAKEUP.COM
LIMITED
 CONSOLIDATED
STATEMENTS OF OPERATIONS FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 and 2007 (UNAUDITED)
  Three
      Months Ended June 30,
                    
                    
                    Six
      Months Ended June 30,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Sales
                    
                    
                    175,718
                    
                    
                    
                    104,364
                    
                    
                    $
                    351,763
                    
                    
                    $
                    213,958Cost
      of goods sold
                    
                    
                    117,136
                    
                    
                    
                    73,717
                    
                    
                    
                    226,333
                    
                    
                    
                    151,722Gross
      profit
                    
                    
                    58,582
                    
                    
                    
                    30,647
                    
                    
                    
                    125,430
                    
                    
                    
                    62,236Operating
      expenses:Selling,
      general and administrative
                    
                    
                    381,008
                    
                    
                    
                    268,872
                    
                    
                    
                    746,916
                    
                    
                    
                    482,204Net
      loss from continuing operations  before interest
    expenseand
      discontinued operations
                    
                    
                    (322,426
                    )
                    
                    
                    (238,225
                    )
                    
                    
                    (621,486
                    )
                    
                    
                    (419,968
                    )Interest
      expense
                    
                    
                    (46,984
                    )
                    
                    
                    (58,976
                    )
                    
                    
                    (123,270
                    )
                    
                    
                    (65,551
                    )Net
      loss from continuing operations before discontinued
    operations
                    
                    
                    (369,410
                    )
                    
                    
                    (297,201
                    )
                    
                    
                    (744,756
                    )
                    
                    
                    (485,519
                    )Loss
      from discontinued operations
                    
                    
                    -
                    
                    
                    
                    (54,767
                    )
                    
                    
                    -
                    
                    
                    
                    (125,024
                    )Net
      loss
                    
                    $
                    (369,410
                    )
                    
                    $
                    (351,968
                    )
                    
                    $
                    (744,756
                    )
                    
                    $
                    (610,543
                    )Net
      loss per share - basic and diluted:Continuing
      operations
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )Discontinued
      operations
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      loss per share
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )Weighted
      average number of shares outstanding -basic
      and diluted
                    
                    
                    138,685,507
                    
                    
                    
                    44,831,250
                    
                    
                    
                    91,758,378
                    
                    
                    
                    44,831,250


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




3




MAKEUP.COM
LIMITED CONSOLIDATED
STATEMENT OF STOCKHOLDERS' DEFICIT AND COMPREHENSIVE LOSS FOR
THE SIX MONTHS ENDED JUNE 30, 2008 and 2007 (UNAUDITED)


AccumulatedCommon
      Stock Issued
                
                
                Additional
                
                
                
                
                
                OtherNumber
      of
                
                
                
                
                
                Paid-in
                
                
                Accumulated
                
                
                ComprehensiveShares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                Income
      (Loss)
                
                
                TotalBalance
      at January 1, 2007
                
                
                44,831,250
                
                
                $
                44,831
                
                
                $
                -
                
                
                $
                (2,287,035
                )
                
                $
                (10,017
                )
                
                $
                (2,252,221
                )Net
      loss for the six monthsended
      June 30, 2007
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (610,543
                )
                
                
                -
                
                
                
                (610,543
                )Foreign
      currency exchange loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (8,659
                )
                
                
                (8,659
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (619,202
                )Balance
      at June 30, 2007
                
                
                44,831,250
                
                
                
                44,831
                
                
                
                -
                
                
                
                (2,897,578
                )
                
                
                (18,676
                )
                
                
                (2,871,423
                )Net
      loss for the six monthsended
      December 31,  2007
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (859,602
                )
                
                
                -
                
                
                
                (859,602
                )Foreign
      currency exchange loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (8,038
                )
                
                
                (8,038
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (867,640
                )Balance
      at December 31, 2007
                
                
                44,831,250
                
                
                
                44,831
                
                
                
                -
                
                
                
                (3,757,180
                )
                
                
                (26,714
                )
                
                
                (3,739,063
                )Shares
      issued for debt
                
                
                149,837,498
                
                
                
                149,837
                
                
                
                3,086,653
                
                
                
                -
                
                
                
                -
                
                
                
                3,236,490(502,573
                )Net
      loss for the six monthsended
      June 30, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (744,756
                )
                
                
                -
                
                
                
                (744,756
                )Foreign
      currency exchange loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,020
                )
                
                
                (1,020
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (745,776
                )Balance
      at June 30, 2008
                
                
                194,668,748
                
                
                $
                194,668
                
                
                $
                3,086,653
                
                
                $
                (4,501,936
                )
                
                $
                (27,734
                )
                
                $
                (1,248,349
                )
  The
accompanying notes are an integral part of these consolidated financial
statements




4




MAKEUP.COM
LIMITED CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 2008 and 2007 (UNAUDITED)
  2008
                      
                      
                      2007Cash
      flows from operating activities:Net
      loss
                      
                      $
                      (744,756
                      )
                      
                      $
                      (610,543
                      )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
                      
                      
                      18,501
                      
                      
                      
                      43,064Loss
      on disposal of fixed assets
                      
                      
                      -
                      
                      
                      
                      6,418Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      (7,194
                      )
                      
                      
                      3,095Inventory
                      
                      
                      (25,447
                      )
                      
                      
                      (100,170
                      )Prepaid
      expenses and deposits
                      
                      
                      8,284
                      
                      
                      
                      8,183Accounts
      payable
                      
                      
                      66,060
                      
                      
                      
                      2,042Accrued
      liabilities
                      
                      
                      (1,447
                      )
                      
                      
                      (5,924
                      )Accrued
      advertising fees
                      
                      
                      (2,391
                      )
                      
                      
                      1,539Accrued
      consulting fees
                      
                      
                      12,998
                      
                      
                      
                      -Accrued
      professional fees
                      
                      
                      (44,925
                      )
                      
                      
                      (44,277
                      )Interest
      on convertible notes payable
                      
                      
                      109,885
                      
                      
                      
                      52,458Interest
      on note payable
                      
                      
                      13,279
                      
                      
                      
                      13,223Due
      to related parties
                      
                      
                      121
                      
                      
                      
                      9,032Deferred
      assets
                      
                      
                      (2,652
                      )
                      
                      
                      3,273Net
      cash (used in) provided by operating activities
                      
                      
                      (599,684
                      )
                      
                      
                      (618,587
                      )Cash
      flows from investing activities:Proceeds
      on disposal of fixed assets
                      
                      
                      -
                      
                      
                      
                      1,321Acquisition
      of fixed assets
                      
                      
                      -
                      
                      
                      
                      (13,644
                      )Net
      cash (used in) investing activities
                      
                      
                      -
                      
                      
                      
                      (12,323
                      )Cash
      flows from financing activities:Acquisition
      of domain name
                      
                      
                      -
                      
                      
                      
                      (1
                      )Increase
      in convertible notes payable
                      
                      
                      567,967
                      
                      
                      
                      310,000Increase
      in advances payable
                      
                      
                      9,914
                      
                      
                      
                      299,934Net
      cash provided by financing activities
                      
                      
                      577,881
                      
                      
                      
                      609,933Effects
      of foreign currency exchange
                      
                      
                      (1,020
                      )
                      
                      
                      (8,659
                      )Net
      (decrease) increase in cash
                      
                      
                      (22,823
                      )
                      
                      
                      (29,636
                      )Cash,
      beginning of the period
                      
                      
                      42,443
                      
                      
                      
                      62,611Cash,
      end of the period
                      
                      $
                      19,620
                      
                      
                      $
                      32,975Supplemental
      disclosure of non-cash investing and financing activities:Cash
      paid during the period:Taxes
                      
                      $
                      -
                      
                      
                      $
                      -Interest
                      
                      $
                      -
                      
                      
                      $
                      -Non-cash
      changes in assets and liabilitiesAdvances
      payable converted to convertible notes payable
                      
                      $
                      -
                      
                      
                      $
                      2,843,138Account
      receivable offset against interest payable
                      
                      $
                      -
                      
                      
                      $
                      6,271Conversion
      of convertible notes payable into common stock of the
    Company
                      
                      $
                      (3,034,122
                      )
                      
                      $
                      -Conversion
      of interest on convertible notes payable into common stock of the
      Company
                      
                      $
                      (202,368
                      )
                      
                      $
                      -Issuance
      of common stock of the Company for debt
                      
                      $
                      3,236,490
                      
                      
                      $
                      -


The
accompanying notes are an integral part of these consolidated financial
statements
  5




MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008
 (UNAUDITED)
   1.  ORGANIZATION
AND PRINCIPAL ACTIVITIES
 
 Makeup.com
Limited (Makeup.com) was incorporated on July 14, 2003 in the state of Nevada as
Tora Technologies Inc. and is based in Newport Beach, California.  The
Company’s principal business was marketing custom embroidery products and
services through the Internet until July 6, 2006, when the Company cancelled its
Service Contract and discontinued the business. On October 20, 2006, Makeup.com
acquired Makeup Incorporated (Makeup), a Nevada company incorporated on February
12, 2004.  Makeup is in the business of selling beauty products such
as makeup and perfume on the Makeup.com website.  Makeup’s wholly
owned subsidiary, Online Makeup Inc. (Online), was incorporated under the laws
of the Province of British Columbia in Canada on September 17,
2004.  Online was in the business of warehousing and managing Makeup’s
inventory until March 2007 when Makeup moved the inventory to an independent
fulfillment warehouse in the United States.  Since March 2007, Online
has been inactive.
 
 The
acquisition of Makeup by Makeup.com was treated as a reverse acquisition whereby
Makeup was treated as the acquirer and Makeup.com as the acquiree because of a
change of control in the controlling shareholder of Makeup.com and Makeup being
the larger corporation.  As a result of the reverse merger
Makeup.com’s operations have been included in the Company’s consolidated
financial statements from October 20, 2006 (date of acquisition). In these
notes, the terms “Company”, “we”, “us” or “our” mean Makeup.com.
 
 Basis
of Presentation
 
 The
unaudited consolidated financial statements included herein have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X.  They do not include all information and
notes required by generally accepted accounting principles for complete
financial statements.  However, except as disclosed herein, there has
been no material change in the information disclosed in the notes to the
consolidated financial statements included in the Annual Report on Form 10-KSB
of Makeup.com Limited for the year ended December 31, 2007. In the opinion of
management, all adjustments (including normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating
results for the three and six months ended June 30, 2008 are not necessarily
indicative of the results that may be expected for any other interim period or
the entire year.  For further information, these consolidated
unaudited financial statements and the related notes should be read in
conjunction with the Company’s consolidated audited financial statements for the
year ended December 31, 2007 included in the Company’s report on Form
10-KSB.
 
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 Reclassifications
 
 Certain
prior period amounts in the accompanying consolidated financial statements have
been reclassified to conform to the current period’s presentation. These
reclassifications had no effect on the consolidated results of operations or
financial position for any period presented.
 
 Inventories
 
 Inventories
are stated at the lower of cost or market under the first-in, first-out
method. During the six months ended June 30, 2008 and 2007, we wrote-off
$1,265 and $12,906, respectively, in obsolete inventory. At June 30, 2008
and December 31, 2007 we had a $10,000 reserve for slow moving or obsolete
inventory.
 
 We have
arrangements with certain drop shippers whereby we do not purchase or pay for
merchandise until the merchandise is ultimately sold and shipped to our
customer.
  6
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008
 (UNAUDITED)
 2.  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
 
 Concentration
of Credit Risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable and
payable.
 
 At June
30, 2008 and December 31, 2007 the Company had approximately $20,000 and
$42,000, respectively in cash that was not insured.  This cash is on
deposit with a major chartered Canadian bank.  As part of its cash
management process, the Company performs periodic evaluations of the relative
credit standing of this financial institution.  The Company has not
experienced any losses in cash balances and does not believe it is exposed to
any significant credit risk on its cash.
 
 Receivables
arising from sales to customers are generally not significant individually and
are not collateralized.  Management continually monitors the financial
condition of its customers to reduce the risk of loss.  None of the
Company’s end-user customers account for more than 10% of net revenues.
 Substantially, all customers remit payment for their purchases through
credit cards.  At June 30, 2008 and December 31, 2007, the Company had
$6,176 and $1,898, respectively in trade accounts receivable from major credit
card companies.
 
 During
the six months ended June 30, 2008, purchases from one vendor totaled
approximately $127,345 or 21% of net sales. During the six months ended June 30,
2008, the Company returned $85,273 in product to this vendor, all of which has
been recorded in the allowance for doubtful accounts.  (Note
11)  During the six months ended June 30, 2007, all of the Company’s
purchases from vendors were less than 10% of net sales.
 
 Recent
Accounting Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157 (SFAS 157),
Fair Value
Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value measures required
under other accounting pronouncements, but does not change existing guidance as
to whether or not an instrument is carried at fair value. SFAS 157 was effective
for the Company on January 1, 2008. The adoption of SFAS 157 did not have a
significant impact on our consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be recognized in earnings at each subsequent reporting date. SFAS 159 was
effective for the Company on January 1, 2008. The adoption of SFAS 159 did
not have a material impact on the Company’s consolidated financial statements as
the Company did not elect the fair value option for any of its financial assets
or liabilities.
  In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. As the related goods are delivered or the services are performed,
or when the goods or services are no longer expected to be provided, the
deferred amounts would be recognized as an expense. This Issue is effective for
financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective
date.  EITF 07-03 was effective for the Company on January 1,
2008.  The pronouncement did not have a material effect on our
consolidated financial statements.
  7
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008
 (UNAUDITED)
   2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In
February 2008 the FASB staff issued Staff Position No. 157-2 (FSP FAS 157-2)
Effective date of FASB
Statement No.157.FSP FAS 157-2 delayed the effective date of
SFAS 157 for non-financial assets and non-financial liabilities, except for
items that are recognized or disclosed at fair value in the financial statements
on a recurring basis.  The provisions of FSP FAS 157-2 will be
effective for the Company on January 1, 2009.
 
 In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for the
Company on January 1, 2009.  The Company is currently evaluating the
impact adoption of SFAS 161 may have on its consolidated financial statement
disclosures.
  In May,
2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). SFAS 162 is effective 60 days following
the U.S. Securities and Exchange Commission’s (SEC's) approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company is
currently reviewing the effect, if any; the proposed guidance will have on its
consolidated financial statement disclosures.
  In May,
2008, FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60”.  Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprises under FASB Statement No.
60, Accounting and Reporting
by Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies.
This Statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. We do not expect the adoption of SFAS 163 to have
a significant impact on our consolidated financial statements.
  8
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008
 (UNAUDITED)
 3.  GOING
CONCERN
  From the
date of inception, February 12, 2004 until June 2005, we were developing our
website, Makeup.com, sourcing beauty products and establishing our warehouse and
corporate operations.  During the first quarter of 2005, we began
selling our beauty products on our website and subsequent to launching our
website have been focused on increasing traffic to our website, increasing our
product lines and generating sales.   We have accumulated a deficit of
approximately $4.5 million to date and will require additional financing to
support our operations until such time as we achieve positive cash flows from
operations.  These factors raise substantial doubt about our ability
to continue as a going concern.  Our ability to achieve and maintain
profitability and positive cash flow is dependent upon increasing traffic to our
website, increasing our sales, increasing our product lines, globally expanding
our sales market and controlling operating costs.  Based upon current
plans, we expect to incur operating losses in future periods.  We plan
to mitigate these operating losses through increasing traffic to our website,
increasing sales, increasing our product lines and globally expanding our
market.  We plan to obtain sufficient working capital through
additional debt or equity financing, private loans and product
sales.  There is no assurance that we will be able to increase traffic
to our website, increase sales, increase product lines, globally expand our
market or obtain working capital through additional debt or equity financing,
private loans or product sales in the future.  The accompanying
consolidated financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
 
 4.  BALANCE
SHEET DETAIL
 
 Inventories
                
                June
      30,
                  2008
                
                
                December
      31,
                  2007Goods
      for resale
                
                $
                363,121
                
                
                $
                334,608Promotional
      inventory
                
                
                9,865
                
                
                
                15,555Goods
      in transit
                
                
                3,357
                
                
                
                733Less:  Reserve
      for slow moving or obsolete inventory
                
                
                (10,000)
                
                
                
                (10,000)$
                366,343
                
                
                $
                340,896
  Prepaid
      expenses and deposits
                
                June
      30,
                  2008
                
                
                December
      31,
                  2007Other
      prepaid deposits
                
                $
                2,528
                
                
                $
                1,852Prepaid
      marketing
                
                
                11,479
                
                
                
                20,439$
                14,007
                
                
                $
                22,291
 
 Fixed
      assets
                
                June
      30,
                  2008
                
                
                December
      31,
                  2007Computer
      equipment and software
                
                $
                173,887
                
                
                $
                173,886Book
      value
                
                
                173,887
                
                
                
                173,886Less:
      accumulated depreciation
                
                
                (146,332
                )
                
                
                (127,830
                )$
                27,555
                
                
                $
                46,056
  9
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008
 (UNAUDITED)
   5. 
ADVANCES PAYABLE
 
 At June
30, 2008 and December 31, 2007, the Company had advances payable totaling
$16,815 and $6,901, respectively, from third parties.  These advances
are non-interest bearing, have no fixed terms of repayment and are
unsecured.  At June 30, 2008 and December 31, 2007, the Company
reclassified $0 and $2,843,138 respectively, in advances payable through the
issuance of convertible notes payable.  (Note 7)
  6. 
NOTE PAYABLE
  At June
30, 2008 and December 31, 2007, the Company had a note payable in the amount of
$333,333.  This note is payable on demand, unsecured and bears
interest at 8% per annum.  At June 30, 2008 and December 31, 2007,
$39,519 and $26,240, respectively, in interest had been accrued on this
note.
 
 7. 
CONVERTIBLE NOTES PAYABLE
 
 At June
30, 2008 and December 31, 2007, the Company had convertible notes payable
totaling $1,246,570 and $3,805,208 respectively, including convertible accrued
interest of $83,160 and $175,643 respectively.  These notes are
payable on demand, unsecured, bear interest at 7% and are convertible into
restricted shares of the Company’s common stock at the discretion of the lender
at a conversion price of the lesser of (1) $0.50 per share and (2) a 20%
discount to the closing market price of the Company’s common
stock.   (Note 5)
 
 On May 5,
2008 the Company converted $3,236,490 in convertible notes payable, including
$202,368 in accrued interest into 149,837,498 shares of the Company’s common
stock.  (Note 8)
 
 8.  COMMON
STOCK
 
 On May 5,
2008, the Company issued 149,837,498 shares of common stock at $0.02160 per
share on the conversion of $3,236,490 in convertible debt.  The shares
were issued at a discount of 20% to the closing market price of the Company’s
common stock on May 5, 2008, which was the date the borrower and lender agreed
on the conversion.  (Notes 7 and 11)
 
 9. 
DUE TO RELATED PARTIES
  At June
30, 2008 and December 31, 2007, the Company was indebted to a director in the
amount of $9,850.
 
 At June
30, 2008 and December 31, 2007, the Company was indebted to one of its directors
in the amounts of $121 and $0, respectively.
 
 10.  COMMITMENTS
 
 Commitments
 
 On August
31, 2007, the Company entered into a contract for services, whereby the Company
has agreed to pay up to $112,900 (CDN$115,000) for one year for buyer, customer
care management and administrative services.  The contract can be
cancelled by either party upon thirty days written notice.
 
 At June
30, 2008, the payments under the above agreements are as follows:
 
 For
      the year ended June 30,
                
                Amount2009
                
                $
                18,817
  10
 
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008
 (UNAUDITED)
 10.  COMMITMENTS,
continued
 
 Lease
Commitment
 
 On March
1, 2007, the Company entered into an agreement with an independent warehouse in
the United States whereby the warehouse will store, receive, relieve and ship
inventory on behalf of the Company.  The agreement was for one year
commencing March 1, 2007, renewable automatically on a yearly basis and requires
a minimum storage fee of $3,400 per month.  In accordance with the
agreement shipping and receiving services are charged on a per item
basis.  On March 1, 2008 the agreement was automatically renewed for
one year.
 
 At June
30, 2008, the minimum future lease payments under our warehouse operating lease
are as follows:
 For
      the year ended June 30,
                  
                  Amount2009
                  
                  $
                  27,200
 11.  SUBSEQUENT
EVENT
 
 On July
18, 2008 the Company approved a 1 for 20 reverse split of their issued and
outstanding common.  This split was effective on August 4, 2008 and
upon completion approximately 9,733,437 shares of the Company’s common stock
were issued and outstanding.  (Note 8)
 
 On July
30, 2008 the Company initiated a lawsuit of approximately $86,000 plus costs
against a supplier for breach of contract and fraud arising out of the sale of imitation
cosmeticsto the Company.  (Note 2)


11


Item
2.  Management’s Discussion and Analysis or Plan of
Operation
 
 FORWARD-LOOKING
STATEMENTS
 
 The
information in this quarterly report on Form 10-Q contains forward-looking
statements.  These forward-looking statements involve risks and
uncertainties, including statements regarding our capital needs, business
strategy and expectations.  Any statements contained herein that are
not statements of historical facts may be deemed to be forward-looking
statements.  In some cases, you can identify forward-looking
statements by terminology such as may, will, should, expect, plan, intend, anticipate, believe, estimate, predict, potential or continue, the negative of
such terms or other comparable terminology.  Actual events or results
may differ materially from those events or results included in the
forward-looking statements.  In evaluating these statements, you
should consider various factors, including the risks outlined from time to time
in the reports we file with the Securities and Exchange
Commission.  Some, but not all, of these risks include, among other
things:
 
 ·
              our
      inability to obtain the financing we need to continue our
      operations;
 
 ·
              changes
      in regulatory requirements that adversely affect our
    business;
 
 ·
              loss
      of our key personnel;
 
 ·
              loss
      of our relationships with suppliers and strategic partners;
      and
 
 ·
              risks
      over which we have no control, such as a general downturn in the economy
      which may adversely affect discretionary spending by
      consumers.
 
 We do not
intend to update forward-looking statements.  You should refer to and
carefully review the information in future documents we file with the Securities
and Exchange Commission.
 
 GENERAL
  This
discussion and analysis should be read in conjunction with our interim unaudited
consolidated financial statements and related notes included in this Form 10-Q
and the audited consolidated financial statements and related notes thereto
included in our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2007.  The inclusion of supplementary analytical and related
information herein may require us to make estimates and assumptions to enable us
to fairly present, in all material respects, our analysis of trends and
expectations with respect to our results of operations and financial position
taken as a whole.  Actual results may vary from the estimates and
assumptions we make.
  When we
use the words “we”, “us” or “our” in this report, we are referring to Makeup.com
Limited and its subsidiaries, which we sometimes refer to in this report as
“Makeup” and “Online”.
  12
  RESTATEMENT
OF PERIOD
 
 On
November 14, 2008, management concluded that we had inadvertently posted
returned inventory to sales in the amount of approximately
$85,000.  This resulted in an overstatement of sales by approximately
$85,000, an overstatement of cost of goods sold by approximately $71,000 and an
overstatement of inventory of approximately $14,000.  We also
discovered (and resolved) a minor issue with our accounting software which
resulted in an additional overstatement in inventory and an understatement in
cost of goods sold of approximately $2,000.  The overall effect of the
above adjustments decreased inventory by $15,690, cost of goods sold by $69,543
and revenue by $85,234.
 
 The
following table shows the changes made to our consolidated balance sheet to
reflect this correction.
 
 As
      Reported
                
                
                As
      RestatedConsolidated
      Balance SheetsInventory,
      net
                
                $
                382,033
                
                
                $
                366,343Total
      current assets
                
                $
                425,357
                
                
                $
                409,667Additional
      paid in capital
                
                $
                (4,486,246
                )
                
                $
                (4,501,936
                )Total
      stockholders’ deficit
                
                $
                (1,232,659
                )
                
                $
                (1,248,349
                )Total
      liabilities and stockholders’ deficit
                
                $
                856,246
                
                
                $
                840,556
 
 The
following table shows the changes made to our consolidated statements of
operations to reflect this correction.
 
 Three
      Month Period
                
                
                Six
      Month PeriodAs
      Reported
                
                
                As
      Restated
                
                
                As
      Reported
                
                
                As
      RestatedStatements
      of OperationsSales
                
                $
                260,952
                
                
                $
                175,718
                
                
                $
                436,997
                
                
                $
                351,763Cost
      of goods sold
                
                $
                186,679
                
                
                $
                117,136
                
                
                $
                295,876
                
                
                $
                226,333Gross
      profit
                
                $
                74,273
                
                
                $
                58,582
                
                
                $
                141,121
                
                
                $
                125,430Net
      loss from continuing operations before interest expense and discontinued
      operations
                
                $
                (306,736
                )
                
                $
                (322,426
                )
                
                $
                (605,796
                )
                
                $
                (621,486
                )Net
      loss from continuing operations
                
                $
                (353,720
                )
                
                $
                369,410
                )
                
                $
                (729,066
                )
                
                $
                (744,756
                )Net
      loss
                
                $
                (353,720
                )
                
                $
                369,410
                )
                
                $
                (729,066
                )
                
                $
                (744,756
                )
 
 The
following table shows the changes made to our consolidated statements of cash
flows to reflect this correction.
 
 As
      Reported
                
                
                As
      RestatedConsolidated
      Statements of Cash FlowsNet
      loss
                
                $
                729,066
                
                
                $
                744,756Inventory
                
                $
                41,137
                
                
                $
                25,447
 
 13
  OVERVIEW
  We were
incorporated on July 14, 2003 in the state of Nevada as Tora Technologies Inc.
and are based in Newport Beach, California.  We are in the business of
selling beauty products on our websites, www.makeup.com and
www.discount.makeup.com,
to customers residing in the United States.  Our plans include
expanding our market to other countries such as Canada, Germany and the United
Kingdom over the next few years.  Our ultimate goal is to sell
cosmetics worldwide.
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The reported
financial results and disclosures were determined using the significant
accounting policies, practices and estimates described below.  These
policies, practices and estimates require the Company to make its most difficult
and subjective judgments. Actual results may differ significantly from these
estimates.
  Inventories
  Inventories
are stated at the lower of cost or market under the first-in, first-out
method. At June 30, 2008 and June 30, 2007, we wrote-off $1,265 and $12,906
respectively, in slow moving and obsolete inventory.  Our June 30,
2008 and December 31, 2007, we had a $10,000 reserve for slow moving or obsolete
inventory.
  We have
arrangements with certain drop shippers whereby we do not purchase or pay for
merchandise until the merchandise is ultimately sold and shipped to our
customer.
  Concentration
of Credit Risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash, trade accounts receivable and
payables.
  At June
30, 2008 and December 31, 2007, we had approximately $20,000 and $42,000,
respectively in cash that was not insured.  This cash is on deposit
with a large chartered Canadian bank.  As part of our cash management
process, we perform periodic evaluations of the relative credit standing of this
financial institution.  We have not experienced any losses in cash
balances and do not believe we are exposed to any significant credit risk on our
cash.
 
 Receivables
arising from sales to customers are generally not significant individually and
are not collateralized.  We continually monitor the financial condition of
our customers to reduce the risk of loss.  None of our end-user customers
account for more than 10% of net revenues.  Substantially, all of our
customers remit payment for their purchases through credit cards.  At June
30, 2008 and December 31, 2007, we had $6,176 and $1,898, respectively in trade
accounts receivable from major credit card companies.
 
 During
the six months ended June 30, 2008, purchases from one vendor totaled
approximately $127,345 or 21% of net sales. During the six months ended June 30,
2008, we returned $85,273 in product to this vendor, all of which has been
recorded in the allowance for doubtful accounts.  We also initiated a
lawsuit of approximately $86,000 plus costs against this supplier for breach of
contract and fraud arising out of the sale of imitationcosmetics.  Because our industry is based on personal taste and
fashion trends, the popularity of brands or products within a brand rises and
falls.  As a result, we expect our vendors, and the amount of product
we purchase from them, to change frequently.
 
 Advertising
 
 Advertising costs consist
primarily of online advertising including an affiliate marketingprogram,
e-mail campaigns and other initiatives.  We pay commissions to
participants in our affiliate marketing program when their customer referrals
result in product sales.
 
 Advertising
expenses also consist of public relations expenditures to third parties, and to
a lesser extent, traditional advertising such as advertisements in
magazines.
  14
 
 Advertising
and other promotional costs are expensed as incurred to selling, general and
administrative expenses and amounted to approximately $102,000 and $89,000
during the six months ended June 30, 2008 and 2007, respectively.
  We
include some inventory items in our free gift bags.  The cost of these
items is charged to advertising and promotion expense at the time the gift bags
are committed as promotional items.  During the six months ended June
30, 2008 and 2007 $5,691 and $0, respectively, in free gift bags were expensed
to advertising and promotion.
  Revenue
Recognition
  We
recognize revenue when goods are shipped to the customer.  Revenue is
recorded net of allowances for customer sales incentives and
rebates.  The allowances are accrued concurrently with the recognition
of revenue and are determined based primarily upon customer arrangements and
historical data.  We account for these incentives in accordance with
Emerging Issues Task Force (EITF) No. 01-09 (EITF 01-09), Accounting for Consideration Given
by a Vendor to a Customer or a Reseller of the Vendor’s Products,which
affirms that the payment of consideration by a vendor to a customer should not
be recognized as an asset of the vendor and further affirms that the payment
should be accounted for as a reduction of revenues.
  We
account for customer incentives for free products and services in accordance
with EITF 00-21, Accounting
for Revenue Arrangements with Multiple Deliverables,which affirms that
items to be delivered at a future date should be deferred and recorded as a
current liability.
 
 Product
returns are estimated in accordance with SFAS No. 48 (SFAS 48), Revenue Recognition when Right of
Return Exists.  We also ensure that the following other
criteria in SFAS 48 have been met prior to recognition of revenue:
 ·
                the
      price is fixed or
determinable;
 
 ·
                the
      customer is obligated to pay and there are no contingencies surrounding
      the obligation or the
payment;
 
 ·
                the
      customer’s obligation would not change in the event of theft or damage to
      the product;
 
 ·
                the
      customer has economic
substance;
 
 ·
                the
      amount of returns can be reasonably estimated;
  and
 ·
                  we
      do not have significant obligations for future performance in order to
      bring about resale of the product by the
    customer.
 We have
inventory risk, therefore we do not act as an agent and recognize revenues on a
gross basis, in accordance with EITF 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent.
  We also
offer coupons for replacement orders and discount programs.  Discounts
and coupons for “free products” are only redeemable on purchases made or on
products offered on our websites. Discounts are included as a reduction in sales
whereas coupons for free products are recorded in cost of goods
sold.
 
 Amounts
billed to a customer in a sale transaction related to shipping are classified as
revenue.
 
 During
the six months ended June 30, 2008 and 2007 our purchase discounts were $30,353
and $10,769, respectively, that as a percentage of sales represents 7% and 5%
for the six months ended June 30, 2008 and 2007,
respectively.   This increase was primarily due to promotional
discounts offered during the six months of 2008.
  15
  During
the six months ended June 30, 2008 and 2007 our product returns amounted to
$8,207 and $6,875 respectively, which as a percentage of sales was a decrease of
1%.
  Cost
of Sales
  Cost of
sales includes freight-in, the actual cost of merchandise sold, cost of shipping
billed to customers, inventory shrinkage, obsolete inventory write-offs, and
warehouse inventory receiving costs.
  Shipping
costs in excess of those billed to customers and handling costs are included in
our selling, general and administrative costs. During the six months ended
June 30, 2008 and 2007 we had excess shipping costs of $27,854 and $32,234
respectively, which as a percentage of sales represent a 9%
decrease.  The decrease in excess shipping costs is due to shipping
efficiencies on moving our warehouse from Canada to the United States and
increasing our minimum free shipping threshold from $40 to
$60.
  Recent
Accounting Pronouncements
  Refer to
Note 2 of our Notes to Consolidated Financial Statements included in our Form
10-KSB for the fiscal year ended December 31, 2007 for a discussion of recent
accounting standards and pronouncements.  Accounting pronouncements
that have been issued or adopted subsequent to December 31, 2007 are described
below:
  In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157 (SFAS 157),
Fair Value
Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value measures required
under other accounting pronouncements, but does not change existing guidance as
to whether or not an instrument is carried at fair value. SFAS 157 was effective
for us on January 1, 2008. The adoption of SFAS 157 did not have a
significant impact on our consolidated financial statements.
  In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be recognized in earnings at each subsequent reporting date. SFAS 159 was
effective for us on January 1, 2008. The adoption of SFAS 159 did not have
a material impact on our consolidated financial statements as we did not
elect the fair value option for any of our financial assets or
liabilities.
  In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. As the related goods are delivered or the services are performed,
or when the goods or services are no longer expected to be provided, the
deferred amounts would be recognized as an expense. This Issue is effective for
financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective
date.  EITF 07-03 was effective for us on January 1,
2008.  The pronouncement did not have a material effect on our
consolidated financial statements.
  In
February 2008 the FASB staff issued Staff Position No. 157-2 (FSP FAS 157-2)
Effective date of FASB
Statement No.157.FSP FAS 157-2 delayed the effective date of
SFAS 157 for non-financial assets and non-financial liabilities, except for
items that are recognized or disclosed at fair value in the financial statements
on a recurring basis.  The provisions of FSP FAS 157-2 will be
effective for us on January 1, 2009.
  16
  In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for us
on January 1, 2009.  We are currently evaluating the impact that
adoption of SFAS 161 may have on our financial statement
disclosures.
  In May,
2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). SFAS 162 is effective 60 days following
the U.S. Securities and Exchange Commission’s approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. We are
currently reviewing the effect, if any; the proposed guidance will have on our
consolidated financial statement disclosures.
  In May,
2008, FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60”.  Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprises under FASB Statement No.
60, Accounting and Reporting
by Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies.
This Statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. We do not expect the adoption of SFAS 163 to have
a significant impact on our consolidated financial statements.
  OUR
OBJECTIVES AND AREAS OF FOCUS
  During
the six months ended June 30, 2008, we continued with the implementation of new
and different marketing and website initiatives with the ultimate goal of
increasing sales. These initiatives included:
  (a)
              Providing
      free gifts and samples with every order,(b)
              Continuing
      to improve the capacity and speed of order fulfillment and implementing
      cost saving shipping methods,(c)
              Expanding
      our website layout and design to allow for new marketing techniques,
      improved navigation, and additional product offerings,(d)
              Working
      with and sourcing out additional content providers, whereby the content
      providers direct additional traffic to our websites as well as provide
      communication to our customers about beauty
  products,
 (e)
              Expanding
      the number of brands we offer; we now offer in excess of 70 brands
      and,(f)
              Offering
      percentage based discounts on higher dollar order sizes, aimed to increase
      average order sizes.
  17
  We
believe these initiatives accompanied with our continuing efforts to improve our
websites appear to be succeeding.  We have reported an increase in
sales for three consecutive quarters.  We have also developed a solid
base of loyal customers; 28% and 23% of our customers were repeat customers
during the six months ended June 30, 2008 and 2007 respectively.
  We have
increased our sales by implementing the following measures and we intend to
continue their use:
  (a)
              We
      plan to continue expanding our line of boutique products, top of the line
      products and the most sought after brands,(b)
              Continuing
      to work with existing vendors to update and enhance brand pages with brand
      background, articles, press, product information, and exclusive tips and
      tricks,(c)
              We
      plan to continue to include samples in each order to provide customers
      with an opportunity to experience new brands,(d)
              We
      plan to continue to offer limited edition promotional gifts with customer
      purchases,(e)
              One-stop
      beauty shopping destination –We continually monitor consumer demand and
      changing tastes in our quest to meet our customer’s beauty regimen
      expectations,(f)
              Beauty
      related information – Through our contract with LifeTips, we plan to
      continue adding both beauty tips and beauty article content on our website
      under our Beauty Tips section. This information is targeted as a value
      added proposition as well as a marketing strategy,(g)
              Tips
      section of the website. The Google AdSense program allows text and banner
      advertising to be integrated into content on a given page. We will receive
      revenue when an ad is clicked,(h)
              Expand
      our affiliate program by forming contracts with high-traffic beauty
      content providers,(i)
              Advertising
      in established and niche magazine publications,(j)
              Increasing
      brand exposure on radio stations and within the beauty vertical by
      offering gift certificates and product prizing options
  and,(k)
              Exploring
      e-mail marketing programs and
opportunities.
  In an
effort to expand and retain our current customer base we intend to continue to
implement and expand marketing, branding and customer loyalty programs, such
as:
  (a)
              Rewarding
      top purchasing customers with special offers and
    incentives,(b)
              Introducing
      customer incentive/loyalty programs to reward our customers for new
      referrals as well as current purchases,(c)
              Creating
      a customer ‘wish list’ (gift registry),(d)
              Introducing
      value added contents over and above our current beauty tips
      section,
 (e)
              Offering
      more shipping options,(f)
              Creating
      a makeup and beauty related blog section and,(g)
              Enhancing
      the presentation and packaging or
orders.
  As
a result of these efforts, for the six months ended June 30, 2008 our sales
increased to $436,997, an increase of $223,039 or 104%, compared to $213,958 at
June 30, 2007.
  18
  Our sales
are directly related to traffic to our websites and the ability to convert such
traffic to sales.  At June 30, 2008 and 2007, our paid conversion
rates were 2.1% and 1.8% respectively.  At June 30, 2008 and 2007, our
conversion rates for all traffic and sales on our websites were 0.77% and 0.74%,
respectively.  Our promotional plans and programs, which include free
and discounted shipping charges for large orders, product discounts of up to
50%, free gifts with purchases, and customer coupons and credits, are designed
to increase sales.  As a result of these programs, during the six
months ended June 30, 2008 we were able to increase sales, and more importantly,
increase the size of the average sales order, from $57.67 for the six months
ended June 30, 2007 to $65.56 for the six monthsended June 30, 2008.  Additionally, we continue to perform
market research to gain a better understanding of trends.  This
research will enable us to determine the optimum quantity and best mix of
products to inventory.  Once we have determined our optimum product
mix we expect to increase our inventory turnover and reduce write-offs due to
slow moving and obsolete inventory.  This may also result in less
reliance on the promotional plans and programs we now depend on to increase our
sales, thus increasing the dollar amount of net sales.
  In order
to offer a wider range of products and easier website navigation, during 2007 we
launched a separate website for our classic brand products. Our boutique brands
will remain on the current makeup.com website,
whereas our classic brands are now offered on discount.makeup.com.  This
change should improve customer website navigation, brand recognition, our
relationship with vendors, and allow for additional flexibility with shipping
and promotional offers.
  Over the
next year we remain focused on growth, maintenance, and increasing sales and the
overall customer experience by:
  (a)
              Maintaining
      our relationships with existing vendors,(b)
              Specifically
      targeting  key cornerstone brands that we have determined will have a
      significant impact on our sales,
 (c)
              Based
      on the high customer demand for natural, organic and mineral based
      products, continuing to source out and develop relationships with new
      boutique brands in the natural, organic and mineral
      makeup niches,(d)
              Researching
      appropriate brand additions to increase choice in the color cosmetics
      segment of our websites,
 (e)
              Coordinating
      with new and existing brands to facilitate expansion of our existing
      customer base,(f)
              Continuing
      to work on effective merchandising techniques and brand development on our
      websites,
 (g)
              Researching related
      niche expansion areas (natural additions to a beauty site) that may
      have the potential to both increase sales and add to customer
      satisfaction,(h)
              Continuing
      to monitor inventory levels to ensure product is being sold within
      freshness time frames, and creating targeted promotions to sell slow
      moving product, and
 (i)
              Continuing
      to ensure that customers are satisfied with their overall experience on
      our websites as a one-stop shopping destination for beauty
      products.
  We intend
to develop new advertising strategies and enter new advertising mediums that
will provide greater exposure to our websites, therefore we expect to increase
our advertising budget.
  19
  CHALLENGES
AND RISKS
 
 From the
date of inception, February 12, 2004 until June 2005, we were developing our
makeup.com
website, sourcing beauty products and establishing our warehouse and corporate
operations.  During the first quarter of 2005, we began selling beauty
products on our website.  We have accumulated a deficit of
approximately $4.5 million from inception to June 30, 2008.  Our
expenses exceed our revenues, and we anticipate that this will continue during
the next 12 months.  Therefore, we will require additional capital to
support our operations while we attempt to increase our sales, increase our
product lines and expand our sales outside the United States.  We have
no committed sources of capital.  We plan to continue to fund our
expansion and operations for at least the next twelve months primarily through
debt or equity financings, although we cannot guarantee you that we will be
successful in raising funds.  We expect to reduce our reliance on
these sources of financing if our sales revenues increase.  We plan to
mitigate our operating losses through increasing traffic to our websites,
increasing sales, controlling our operating costs and expanding our market
outside of the United States.  However, failure to generate sufficient
revenues or raise working capital will adversely affect our ability to achieve
these objectives.  Our financial statements do not include any
adjustments that might result from the outcome of these uncertainties or be
necessary if we are unable to continue as a going concern.
 
 Many of
the larger and more popular brands we offer are also offered through the
websites of the manufacturers.  Consumers may be more likely to look
for a brand on the manufacturer’s website rather than to search generically for
“makeup” or “beauty products”.  This will likely have an effect on our
sales of those products.
 
 OPERATIONS
REVIEW
  For the
six month period ended June 30, 2008, we had a net loss of
$729,066.  As of June 30, 2008, our current assets consisted of a cash
balance of $19,620, accounts receivable of $9,697, inventory of $382,033, and
prepaid expenses and deposits of $14,007.  When these current assets
are offset against our current obligations of $369,632 in accounts payable,
$6,904 in accrued liabilities, $6,600 in accrued advertising fees, $27,998 in
accrued consulting fees, $31,563 in accrued professional fees, $16,815 in
advances payable, a note payable on demand in the amount of $372,852 including
accrued interest of $39,519, convertible notes payable on demand in the amount
of $1,246,570 including accrued interest of $83,160 and $9,971 due to related
parties, we are left with a working capital deficit of $1,663,548.
  While our
cash position as of the date of this report is inadequate to satisfy our working
capital needs, over the next twelve months we anticipate that our expenditures
will stabilize because we have completed our warehouse move, decreased our
shipping costs, cleared out the majority of our slow moving inventory and
increased our free shipping charge threshold from $40 to $60.
  Over the
next twelve months we expect sales to increase in light of our current and
proposed marketing initiatives.  Our marketing plans focus on
increasing traffic to our websites and on programs designed to encourage
customers to return to our websites.  Our marketing plans include
improving all aspects of customer service, including more delivery options,
improved product selection and availability, expanded product and beauty tips
information, improved ease in web site navigation, gift bags with purchases and
customer loyalty programs. In order to offer a wider range of products and
easier website navigation, during 2007 we launched a separate website, www.discount.makeup.com,
for the sale of our classic brands. Moving the classic brands from the makeup.com website
has enabled us to acquire a wider range of products directly from manufacturers
as well as to maximize discounts from suppliers. We plan on continuing to
increase our boutique product lines because these products have a higher gross
margin and are not as readily available to consumers as the classic
brands.
 
 Over the
next twelve months we expect our gross margin to increase because we will not
have the logistical and technical problems that arose during our warehouse move,
we expect our sales to continue to grow at a steady rate and we do not
anticipate having to manage a significant amount of slow moving or obsolete
inventory. During the six months ended June 30, 2008 our gross profit as a
percentage of sales increased by 3% from 29% for the six months ended June 30,
2007 to 32% for the six months ended June 30, 2008.  Over the next
twelve months we anticipate that our gross margin will be below our targeted
objective because we are still focusing on growing our business and determining
our optimum product mix.  Due to better monitoring, changes in product
mix and changes in our purchasing policies we expect to have a minimal amount of
slow moving or obsolete inventory in the future.
  20
 
 Over the
next twelve months we expect our operating expenses to increase, primarily in
the advertising and promotion, consulting, professional and warehousing areas
due to sourcing out new product lines, implementing new marketing programs,
making improvements to our websites, complying with regulatory requirements and,
as our sales and the amount of inventoried products increase, we expect our
warehouse rent and handling costs to increase.
 
 We expect
to continue to invest in several areas of technology and website content,
including web services expansion, enhanced editorial beauty content, search
engine optimization, merchandising selection, and technology infrastructure to
enhance the customer experience and improve our website navigation
process.  We believe that by enhancing our customer’s experience and
providing more up to date information we will generate increased traffic and
customer loyalty. Our challenge is to continue to build and improve innovative
and efficient websites that will enable us to continue to gain market share in
the competitive online beauty industry.
 
 Over the
next twelve months, our marketing plans include online and offline advertising
campaigns.
  Offline
marketing plans include paid and co-op magazine advertising, television
advertising, and sweepstakes. On January 16, 2007 we signed a contract with PTG
Studios for Television advertising with the Great Taste television show which
provides national coverage on E1 Entertainment and Style Channels.  We
anticipate this television advertisement will run later this year.
 
 Online
marketing plans include pay-per-click and cost-per-acquisition adverting with
Google, Yahoo/Overture, Yahoo Paid Inclusion, MSN, and MSN Shopping. Interactive
marketing campaigns are planned for social networking sites such as Facebook. We
plan to continue our affiliate programs with companies such as Commission
Junction. We also plan to explore cross-promotional advertising opportunities
with online websites in the beauty and fashion industry.
 
 While we
focus on the continual growth and development of our customer base and expansion
of our product offerings, we expect our web based cosmetic revenues will be
insufficient to satisfy our operational and working capital
requirements.  In order to meet our working capital requirements over
the next year, we plan to continue to raise funds through private loans and
private placements of our debt or equity securities, and to seek partnerships
with larger, well-known suppliers.
 
 On May 5,
2008, we converted $3,236,490 in convertible notes and accrued interest into
149,837,498 restricted shares of our common stock at a price of $0.0216 per
share.  The price per share of $0.0216 was calculated at a discount of
20% of the market price for our stock on May 5, 2008.  The issuance of
additional shares will result in dilution to our existing
shareholders.
  We are
not involved in conducting any research and development activities.
 
 Related-Party
Transactions
 
 At June
30, 2008, we were indebted to two of our directors in the amount of $9,971 for
expenses they incurred on our behalf.  Other than the foregoing, we do
not have any loans or advances payable to any of our directors or officers and
we do not have any commitments in place to pay administrative or directors’ fees
to any related parties. To date our directors and officers have performed their
services without compensation and to date we have not determined how our
officers will be compensated.
 
 Other
Trends, Events or Uncertainties that may Impact Results of Operations or
Liquidity
 
 We sell
products that are purchased with discretionary income.  Due to the
downturn in the U.S. economy, consumers may have less discretionary income to
spend on non-essential items.  The economic downturn may also make it
harder for us to raise capital if we need it.  Therefore, in the
future, the economic downturn may have a material adverse effect on our ability
to raise operating capital as well as on our revenues and results of
operations.  Other than as discussed in this quarterly report, we know
of no other trends, events or uncertainties that have or are reasonably likely
to have a material impact on our short-term or long-term liquidity.
  21
  COMPARISON
OF THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
  Overall
Results of Operations
 
 During
the six months ended June 30, 2008, we incurred a net loss of $729,066 which is
an increase of $118,523 from our net loss of $610,543 for the six months ended
June 30, 2007.
  The
increased loss was primarily due to increases in administrative expenses,
consulting fees and bad debts.
 
 Revenues
 
 Our sales
increased by $156,588 or 150% from $104,364 for the three months ended June 30,
2007 to $260,952 for the three months ended June 30, 2008.
 
 Our sales
increased by $223,039 or 104% from $213,958 for the six months ended June 30,
2007 to $436,997 for the six months ended June 30, 2008.
 
 Our
revenues were from sales made on our websites.  The products offered
on our websites include merchandise we have purchased for resale from vendors
and third party distributors.  The increase in our sales was primarily
due to increased traffic to our websites and promotional sales.
 
 We expect
our revenues to steadily increase over the next year due to increased customer
traffic through search engine optimization, entering into strategic advertising
contracts with companies such as LifeTips, increases in our web related
advertising, offering a broader range of products and product lines,
implementing customer purchasing incentives, adding informative beauty tips and
bi-monthly customer newsletters, moving our classic brands to the www.discount.makeup.com
website and offering customers a wider variety of payment
options.  However, in order to become profitable we will need to
exercise tight control over our expenses, which have continued to rise along
with our revenues.  We cannot guarantee that our efforts to control
our expenses will be successful.
 
 Cost
of Goods Sold and Gross Profit
 
 Our cost
of goods sold increased by $112,962 or 153% from $73,717 for the three months
ended June 30, 2007 to $186,679 for the three months ended June 30, 2008. The
increase in cost of goods sold was primarily attributable to the 150% increase
in our sales.
 
 Our cost
of goods sold increased by $144,154 or 95% from $151,722 for the six months
ended June 30, 2007 to $295,876 for the six months ended June 30, 2008. The
increase in cost of goods sold was primarily attributable to the 104% increase
in our sales.
 
 Our gross
profit increased by $43,626 or 142% from $30,647 for the three months ended June
30, 2007 to $74,273 for the three months ended June 30, 2008. This increase in
gross profit was primarily due to the increase in our sales.
 
 Our gross
profit increased by $78,885 or 127% from $62,236 for the six months ended June
30, 2007 to $141,121 for the six months ended June 30, 2008. This increase in
gross profit was due to the increase in our sales.
  22
 
 Over the
next year we expect our gross profit to increase, however we anticipate it will
still be below our targeted objectives because we will still be offering our
customers incentives in an effort to reward repeat customers and increase
traffic to our websites.  We anticipate improving our gross margin
through:
  (1)
              eliminating
      or reducing costly incentive programs such as free or reduced shipping
      costs,(2)
              using
      alternative shipping options to reduce shipping costs,(3)
              increasing
      market share by increasing traffic to our websites,(4)
              determining
      optimum product mix in an effort to alleviate slow moving and
      obsolete  inventory problems and to maximize inventory turns,
      and
 (5)
              increasing product
      sourcing directly from the manufacturersin an effort to obtain
      more competitive purchase pricing.
  Operating
Expenses
 
 Our
operating expenses increased by $112,137 or 42% from $268,872 for the three
months ended June 30, 2007 to $381,009 for the three months ended June 30,
2008.  This increase was primarily due to increases in the following
categories: we recorded approximately $85,000 in bad debts due to the return of
counterfeit cosmetics to the vendor; approximately $21,000 in consulting fees
primarily due to fulfilling our contracts with LifeTips and Savvy; approximately
$15,000 in administrative expenses associated with accounting services and
regulatory compliance; and approximately $6,000 in advertising and promotions
due to the free gift bags created for customer promotions, advertising and
promotion costs associated with advertising products on our website and programs
aimed at increasing traffic to our website.  These increases were
primarily offset by an approximate decrease of $13,000 in depreciation because
the majority of our fixed assets have been fully depreciated.
 
 Our
operating expenses increased by $264,713 or 55% from $482,204 for the six months
ended June 30, 2007 to $746,917 for the six months ended June 30,
2008.  This increase was primarily due to approximate increases in the
following categories: we recorded approximately $84,000 in bad debts due to the
return of counterfeit cosmetics to the vendor; approximately $86,000 in
consulting fees primarily due to fulfilling our contracts with LifeTips and
Savvy; approximately $85,000 in administrative expenses associated with
accounting services and regulatory compliance; approximately $13,000 in
advertising and promotions due to the free gift bags created for customer
promotions, advertising and promotion costs associated with advertising products
on our website and programs aimed at increasing traffic to our website;
approximately $8,000 in bank charges and interest due to an increase in credit
card fees associated with the increase in our sales; and our warehouse rent by
approximately $12,000 and warehouse handling fees and warehousing expenses by a
total of approximately $15,000 because all of our warehousing rent and expenses
for the six months ended June 30, 2007 were reclassified to discontinued
operations when we closed down Online.   These increases were
primarily offset by decreases in the following
categories:  approximately $23,000 in depreciation because the
majority of our fixed assets have been fully depreciated; approximately $12,000
in travel due to travel costs associated with moving the warehouse in the prior
year; and approximately $7,000 in computer expenses due to maintaining and
monitoring an additional back up server in the prior year.
 
 Interest
Expense
 
 During
the three months ended June 30, 2008 and 2007 we recorded interest expense of
$46,984 and $58,976 respectively.  The decrease of $11,992 in interest
expense was due to the conversion of $3,236,490 in convertible notes payable
including accrued interest of $200,368 into shares of our common
stock.
 
 During
the six months ended June 30, 2008 and 2007 we recorded interest expense of
$123,270 and $65,551 respectively.  The increase of $57,719 in
interest expense was due to an increase in convertible notes payable between
June 30, 2007 and May 5, 2008 which was offset by the conversion of convertible
notes payable into shares of our common stock on May 5, 2008.
  23
 
 Loss
from Discontinued Operations
 
 Until
March 2007, our subsidiary, Online, was in the business of warehousing and
managing our inventory. In March 2007, we moved our inventory to an independent
fulfillment warehouse in the United States and we wound-up Online’s business
operations.  As a result of the wind up we reclassified Online’s net
losses of $54,767 and $125,024 for the three and six months ended June 30, 2007,
to net loss from discontinued operations.
  OFF
BALANCE SHEET ARRANGEMENTS
 
 We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our consolidated financial condition, changes in
consolidated financial condition, revenue or expenses, results of operations,
liquidity, capital expenditures or capital resources that would be material to
investors.  We do not have any non-consolidated, special-purpose
entities.
 
 LIQUIDITY,
CAPITAL RESOURCES AND FINANCIAL POSITION
 
 At June
30, 2008, we had a cash balance of $19,620 and negative cash flows from
operations of $599,684.  During the six months ended June 30, 2008, we
primarily funded our operations through sales and the issuance of convertible
notes payable.
  The notes
to our consolidated financial statements at June 30, 2008 disclose our uncertain
ability to continue as a going concern.  We have insufficient revenues
to cover our expenses while we are establishing and expanding our customer and
product base and as a result have accumulated a deficit (including accumulated
other comprehensive loss) of $4,513,980 since inception.  As of June
30, 2008 we had $2,088,905 in current liabilities.  When our current
liabilities are offset against our current assets of $425,357 we are left with a
working capital deficit of $1,663,548.  While we have successfully
generated sufficient working capital and liquidity through web sales, advances,
and convertible notes payable to the date of this filing and we believe that we
can continue to do so for the next year, there are no assurances that we will
succeed in developing our business plan and achieving a profitable level of
operations sufficient to meet our ongoing cash needs.
 
 The
following table summarizes our sources and uses of cash for the six months
ended:
 
 June
      30,Sources
      and Uses of Cash
              
              2008
              
              
              2007Net
      cash used in operating activities
              
              $
              (599,684
              )
              
              $
              (618,587
              )Net
      cash used in investing activities
              
              
              -
              
              
              
              (12,323
              )Net
      cash provided by financing activities
              
              
              577,881
              
              
              
              609,933Effects
      of foreign currency exchange
              
              
              (1,020
              )
              
              
              (8,659
              )Net
      decrease in cash
              
              $
              (22,823
              )
              
              $
              (29,636
              )
 
 Net
Cash Used In Operating Activities
 
 Net cash
used in operating activities during the six months ended June 30, 2008 was
$599,684.  We used cash of $41,137 to increase our inventory; our
accounts receivable increased by $7,194 due to an increase in amounts receivable
from credit card companies; we reduced our accrued liabilities by $1,447, our
accrued advertising fees by $2,391 and accrued professional fees by
$44,925.  Our deferred assets decreased by $2,652 due to our warehouse
lease.  These uses of cash were offset by a reduction of $8,284 in
prepaid expenses and deposits; net increases in accounts payable of $66,060 and
accrued professional fees of $109,865; an increase in interest on our
convertible notes payable of $109,885 and on our note payable of $13,279; an
increase in the amount due to related parties of $121; and depreciation in the
amount of $18,501.
  24
 
 Net
Cash from Investing Activities
 
 During
the six months ended June 30, 2008, we did not have any investing
activities.
 
 Net
Cash Provided By Financing Activities
 
 During
the six months ended June 30, 2008, we received cash of $567,967 on the issuance
of convertible notes payable and we received cash of $9,914 in advances
payable.
 
 CONTINGENCIES
AND COMMITMENTS
 
 Contingent
Liability
 
 On July
30, 2008 we initiated a lawsuit for approximately $86,000 plus costs against a
supplier for breach of contract and fraud arising out of the sale of counterfeit
cosmetics to the Company. At June 30, 2008 we set up an allowance for doubtful
accounts for approximately $86,000 and in August of 2008 we received a payment
of $10,000 from the supplier.
 
 Contractual
Obligations
  Our long
term contractual obligations and commitments are a lease commitment with our
warehouse in Sumner, Washington and a consulting contract with Savvy Office
Solutions for customer care management and administrative services.
  INTERNAL
AND EXTERNAL SOURCES OF LIQUIDITY
 
 We have
funded our operations principally from the sale of cosmetics on our web site,
through advances payable, a note payable and convertible notes
payable.
 
 FOREIGN
EXCHANGE
 
 We are
subject to foreign exchange risk for sales and purchases denominated in foreign
currencies.  Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.  We do not believe that we have any material
risk due to foreign currency exchange because we prepay for the majority of our
inventory that is denominated in a foreign currency and because all of our sales
are made in United States dollars.
 
 Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.
 
 As a
smaller reporting company, we are not required to include this
information.
 
 Item
4.  Controls and Procedures.
 
 Disclosure
Controls and Procedures
 
 Our chief
executive officer and our chief financial officer, have evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined
in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the
“Exchange Act”)) as of the end of the period covered by this quarterly report
(the “Evaluation Date”).  Based on such evaluation, our chief
executive officer and our chief financial officer have concluded that, as of the
Evaluation Date, our disclosure controls and procedures were not
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.   Specifically,
our chief executive officer and our chief financial officer determined that our
control over inventory reporting was not effective. We have
resolved our inventory reporting issues subsequent to the Evaluation Date and
prior to the filing date of this report.We intend to further
monitor this failure by engaging more frequently in training exercises and
by implementing review policies that begin prior to and continue during the
various stages of our financial statement preparation.
 Changes
in Internal Controls
 
 During
the quarter of the fiscal year covered by this report, there were no changes to
our internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
 25
  PART
II - OTHER INFORMATION
 
 Item
1.  Legal Proceedings.
 
 Not
applicable
 
 Item
1A.  Risk Factors.
 
 Not
applicable
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
 
 On May
20, 2008 we issued a total of 149,837,498 shares of our common stock to a total
of four persons (the “Lenders”).  The common stock was issued in
payment of certain promissory notes that were issued at various times during the
2007 and 2008 fiscal years by our subsidiaries, Makeup Incorporated or Online
Makeup Inc. (the “Subsidiaries”)  The promissory notes totaled
$3,034,122 in principal amount and $202,368 in accrued
interest.  According to the loan agreements signed by the
Subsidiaries, us and the Lenders, the Lenders are entitled to demand payment of
the loans with our common stock at a conversion price which was the lesser of
(1) $0.50 per share or (2) a 20% discount to the closing market price of our
common stock on the day that the Subsidiaries received the demand for payment
from the Lenders.  On the date that the Subsidiaries received the
demand, the closing price of our common stock was $0.027 per share.  
We relied on section 3(9) of the Securities Act of 1933 to issue the securities
inasmuch as the common stock was issued by us to our existing security holders
exclusively, and no commission or other remuneration was paid or given directly
or indirectly for soliciting the exchange.
 
 Item
3.  Defaults Upon Senior Securities.
 
 Not
applicable
 
 Item
4.  Submission of Matters to a Vote of Security Holders.
 
 Not
applicable
 
 Item 5. Other Information
 
 Not
applicable
 
 Item
6. Exhibits
 
 Exhibit
      No.
              Title3.1
              Articles
      of Incorporation(1)3.2
              Bylaws(1)3.3
              Certificate of Amendment to
      Articles of Incorporation(2)31.1
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*31.2
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*32.1
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002*32.2
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002*
 (1)
Incorporated by reference from the registrant’s registration statement on Form
SB-2, SEC File No. 333-113333, filed with the Securities and Exchange Commission
on March 5, 2004.
 (2)
Incorporated by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on November 21,2006.
 *Filed
herewith.
  26
 
 SIGNATURES
 
 In
accordance with the requirements of the Securities Exchange Act of 1934,
Makeup.com Limited has caused this report to be signed on its behalf by the
undersigned duly authorized person.
  MAKEUP.COM
      LIMITEDDate:
      November 19, 2008
                By:
                /s/ Robert
      E. RookRobert
      E. Rook,
                  Chief
      Executive Officerand
      President
 By:
                /s/ Munjit
      JohalMunjit
      Johal
                  Chief Financial Officer