UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington, D.C.
20549
  
 FORM 10-Q
 
 [ X ]
              QUARTERLY REPORT UNDER SECTION
      13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
  For the quarterly period ended September30,
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
                (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 November13,2008 the
registrant had 9,733,442shares of common
stock outstanding.




PART
I - FINANCIAL INFORMATION
 
 Item 1. Financial
Statements.
  MAKEUP.COM
LIMITED CONSOLIDATED
BALANCE SHEETS
 September 30,

                2008
              
              
              December 31,

                2007(Unaudited)ASSETSCurrent
      assets:Cash
              
              $
              13,233
              
              
              $
              42,443Accounts
      receivable, net of $75,488 and $250 in allowances
              
              
              9,342
              
              
              
              2,503Inventory,
      net
              
              
              354,893
              
              
              
              340,896Prepaid
      expenses and deposits
              
              
              25,845
              
              
              
              22,291Total
      current assets
              
              
              403,313
              
              
              
              408,133Fixed
      assets, net of $153,869 and $127,830 accumulated
    depreciation
              
              
              20,018
              
              
              
              46,056Deposit
              
              
              70,000
              
              
              
              70,000Intangible
      assets
              
              
              333,334
              
              
              
              333,334Total
      assets
              
              $
              826,665
              
              
              $
              857,523LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
              
              $
              403,940
              
              
              $
              297,849Accrued
      liabilities
              
              
              5,996
              
              
              
              8,351Accrued
      advertising fees
              
              
              6,300
              
              
              
              8,991Accrued
      consulting fees
              
              
              26,998
              
              
              
              15,000Accrued
      professional fees
              
              
              33,724
              
              
              
              76,488Advances
       payable
              
              
              6,897
              
              
              
              6,901Convertible
      notes payable
              
              
              1,186,849
              
              
              
              3,805,208Convertible
      notes payable to related parties
              
              
              278,830
              
              
              
              -Note
      payable to related party
              
              
              379,482
              
              
              
              359,573Due
      to related parties
              
              
              15,689
              
              
              
              15,573Deferred
      assets
              
              
              -
              
              
              
              2,652Total
      current liabilities
              
              
              2,344,705
              
              
              
              4,596,586Commitments
      and contingenciesStockholders'
      deficit:Common
      stock $0.001 par value, 200,000,000 authorized;9,733,442
      and 2,241,563 issued and outstanding atSeptember
      30, 2008 and December 31, 2007,  respectively
              
              
              9,733
              
              
              
              2,242Additional
      paid in capital
              
              
              3,271,588
              
              
              
              42,589Accumulated
      deficit
              
              
              (4,746,422
              )
              
              
              (3,757,180
              )Accumulated
      other comprehensive loss
              
              
              (52,939
              )
              
              
              (26,714
              )Total
      stockholders' deficit
              
              
              (1,518,040
              )
              
              
              (3,739,063
              )Total
      liabilities and stockholders' deficit
              
              $
              826,665
              
              
              $
              857,523
  The
accompanying notes are an integral part of these consolidated financial
statements
  1




MAKEUP.COM
LIMITED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 and 2007 (UNAUDITED)




Three
      Months Ended
                September
      30,
              
              
              Nine
      Months Ended
                September
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Sales
              $
              171,529
              
              
              $
              159,214
              
              
              $
              523,292
              
              
              $
              373,172Cost
      of goods sold
              
              103,381
              
              
              
              143,438
              
              
              
              329,714
              
              
              
              295,160Gross
      profit
              
              68,148
              
              
              
              15,776
              
              
              
              193,578
              
              
              
              78,012Operating
      expenses:Selling,
      general and administrative
              
              281,935
              
              
              
              341,250
              
              
              
              1,028,851
              
              
              
              823,454Net
      loss from continuing operations before interestexpense
      and discontinued operations
              
              (213,787
              )
              
              
              (325,474
              )
              
              
              (835,273
              )
              
              
              (745,442
              )Interest
      expense
              
              (30,699
              )
              
              
              (72,314
              )
              
              
              (153,969
              )
              
              
              (137,865
              )Net
      loss from continuing operations beforediscontinued
      operations
              
              (244,486
              )
              
              
              (397,788
              )
              
              
              (989,242
              )
              
              
              (883,307
              )Gain
      (loss) from discontinued operations
              
              -
              
              
              
              3,274
              
              
              
              -
              
              
              
              (121,750
              )Net
      loss
              $
              (244,486
              )
              
              $
              (394,514
              )
              
              $
              (989,242
              )
              
              $
              (1,005,057
              )Net
      loss per share - basic and diluted:Continuing
      operations
              $
              (0.03
              )
              
              $
              (0.18
              )
              
              $
              (0.16
              )
              
              $
              (0.39
              )Discontinued
      operations
              
              -
              
              
              
              0.00
              
              
              
              -
              
              
              
              (0.05
              )Net
      loss per share
              $
              (0.03
              )
              
              $
              (0.18
              )
              
              $
              (0.16
              )
              
              $
              (0.45
              )Weighted
      average number of sharesoutstanding
      - basic and diluted
              
              9,733,442
              
              
              
              2,241,563
              
              
              
              6,288,271
              
              
              
              2,241,563




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




2




MAKEUP.COM
LIMITED CONSOLIDATED
STATEMENT OF STOCKHOLDERS' DEFICIT AND COMPREHENSIVE LOSS FOR
THE NINE MONTHS ENDED SEPTEMBER 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
              
              
              2,241,563
              
              
              $
              2,242
              
              
              $
              42,589
              
              
              $
              (2,287,035
              )
              
              $
              (10,017
              )
              
              $
              (2,252,221
              )Net
      loss for the nine months endedSeptember
      30, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,005,057
              )
              
              
              -
              
              
              
              (1,005,057
              )Foreign
      currency exchange loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (17,197
              )
              
              
              (17,197
              )Comprehensive
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,022,254
              )Balance
      at September 30, 2007
              
              
              2,241,563
              
              
              
              2,242
              
              
              
              42,589
              
              
              
              (3,292,092
              )
              
              
              (27,214
              )
              
              
              (3,274,475
              )Net
      loss for the three months endedDecember
      31, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (465,088
              )
              
              
              -
              
              
              
              (465,088
              )Foreign
      currency exchange loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              500
              
              
              
              500Comprehensive
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (464,588
              )Balance
      at December 31, 2007
              
              
              2,241,563
              
              
              
              2,242
              
              
              
              42,589
              
              
              
              (3,757,180
              )
              
              
              (26,714
              )
              
              
              (3,739,063
              )Shares
      issued for debt
              
              
              7,491,879
              
              
              
              7,491
              
              
              
              3,228,999
              
              
              
              -
              
              
              
              -
              
              
              
              3,236,490(502,573
              )Net
      loss for the nine monthsended
      September 30, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (989,242
              )
              
              
              -
              
              
              
              (989,242
              )Foreign
      currency exchange loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (26,225
              )
              
              
              (26,225
              )Comprehensive
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (1,015,467
              )Balance
      at September 30, 2008
              
              
              9,733,442
              
              
              $
              9,733
              
              
              $
              3,271,588
              
              
              $
              (4,746,422
              )
              
              $
              (52,939
              )
              
              $
              (1,518,040
              )


On July
18, 2008, the shareholders approved a 1 for 20 share reverse stock split of
their issued and outstanding common stock.   All share amounts
have been retroactively adjusted for all periods presented.


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




3




MAKEUP.COM
LIMITED CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 and 2007 (UNAUDITED)


2008
              
              
              2007Cash
      flows from operating activities:Net
      loss
              
              $
              (989,242
              )
              
              $
              (1,005,057
              )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
              
              
              26,038
              
              
              
              58,993Loss
      on disposal of fixed assets
              
              
              -
              
              
              
              6,418Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (6,839
              )
              
              
              10,727Inventory
              
              
              (13,997
              )
              
              
              (25,792
              )Prepaid
      expenses and deposits
              
              
              (3,554
              )
              
              
              (12,430
              )Accounts
      payable
              
              
              106,091
              
              
              
              20,121Accrued
      liabilities
              
              
              (2,355
              )
              
              
              (2,843
              )Accrued
      advertising fees
              
              
              (2,691
              )
              
              
              617Accrued
      consulting fees
              
              
              11,998
              
              
              
              -Accrued
      professional fees
              
              
              (42,764
              )
              
              
              (43,222
              )Interest
      on convertible notes payable
              
              
              130,169
              
              
              
              111,429Interest
      on convertible notes payable to related parties
              
              
              3,830
              
              
              
              -Interest
      on note payable to related party
              
              
              19,909
              
              
              
              19,945Due
      to related parties
              
              
              116
              
              
              
              7,558Deferred
      assets
              
              
              (2,652
              )
              
              
              1,417Net
      cash used in operating activities
              
              
              (765,943
              )
              
              
              (852,119
              )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 advances payable
              
              
              (4
              )
              
              
              299,937Increase
      in convertible notes payable
              
              
              487,962
              
              
              
              540,882Increase
      in convertible notes payable to related parties
              
              
              275,000
              
              
              
              -Net
      cash provided
      by financing activities
              
              
              762,958
              
              
              
              840,818Effects
      of foreign currency exchange
              
              
              (26,225
              )
              
              
              (17,197
              )Net
      decrease in cash
              
              
              (29,210
              )
              
              
              (40,821
              )Cash,
      beginning of the period
              
              
              42,443
              
              
              
              62,611Cash,
      end of the period
              
              $
              13,233
              
              
              $
              21,790Supplemental
      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
              
              $
              7,491
              
              
              $
              -




The
accompanying notes are an integral part of these consolidated financial
statements
  4
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
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 nine months ended September 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.
  5
 
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Inventories
 
 Inventories
are stated at the lower of cost or market under the first-in, first-out
method. During the nine months ended September 30, 2008 and 2007, we
wrote-off $1,959 and $23,043, respectively, in obsolete inventory. At
September 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 and trade accounts receivable and
payable.
 
 At
September 30, 2008 and December 31, 2007 the Company had approximately $13,000
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 September 30, 2008 and December 31, 2007, the Company had
$5,691 and $1,898, respectively in trade accounts receivable from major credit
card companies.
 
 During
the nine months ended September 30, 2008, purchases from one vendor totaled
approximately $55,000 or 11% of net sales and purchases from a second vendor
totaled approximately $127,000 or 24% of net sales.  During the nine
months ended September 30, 2008, the Company returned approximately $80,000 in
product to this second vendor, approximately $70,000 of which has been recorded
in the allowance for doubtful accounts.  During the nine months ended
September 30, 2007, all of the Company’s purchases from vendors were less than
10% of net sales.  (Note 11)
  6
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements
  On
January 1, 2008, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 157 (SFAS 157), Fair Value
Measurements.  SFAS 157 relates to financial assets and
financial liabilities. In February 2008, the Financial Accounting Standards
Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on at least an
annual basis, until January 1, 2009 for calendar year-end entities. Also in
February 2008, the FASB issued FSP No. FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13, which states that SFAS No. 13, Accounting for Leases, (SFAS
13) and other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under SFAS 13 are excluded from
the provisions of SFAS 157, except for assets and liabilities related to leases
assumed in a business combination that are required to be measured at fair value
under SFAS No. 141, Business Combinations, (SFAS
141) or SFAS No. 141 (revised 2007), Business Combinations, (SFAS
141(R)).
  SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited exceptions.
The adoption of SFAS 157, as it relates to financial assets and financial
liabilities, had no impact on the Company’s financial statements.
 
 SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and
(2) an entity’s own assumptions, about market participant assumptions, that
are developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS 157 are described below:
  •
                
                Level
      1 - Unadjusted quoted prices in active markets that are accessible at the
      measurement date for identical, unrestricted assets or
      liabilities.
  •
                
                Level
      2 - Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or indirectly,
      including quoted prices for similar assets or liabilities in active
      markets; quoted prices for identical or similar assets or liabilities in
      markets that are not active; inputs other than quoted prices that are
      observable for the asset or liability (e.g., interest rates); and inputs
      that are derived principally from or corroborated by observable market
      data by correlation or other means.
  •
                
                Level
      3 - Inputs that are both significant to the fair value measurement and
      unobservable.
  7
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 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 measurement of certain
financial assets and financial liabilities at fair value.  If the fair
value option is elected, the unrealized gains and losses are reported in
earnings at each reporting date.  Generally, the fair value option may
be elected on an instrument-by-instrument basis, as long as it is applied to the
instrument in its entirety.  The fair value option election is
irrevocable, unless a new election date occurs.  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.
 
 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.  Early adoption of this provision is
prohibited.  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 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.
  8
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
  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.
 
 On May 9,
2008, the FASB issued FASB Staff Position No. APB 14-1 (FSP APB 14-1), Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement)
are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.  Additionally, FSP
APB 14-1 specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the
entity's nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. The Company has not yet evaluated the impact that FSP APB 14-1
will have on its consolidated results of operations or consolidated financial
position.
 
 On June
16, 2008, the FASB issued FASB Staff Position No. EITF 03-6-1 (FSP No. EITF
03-6-1), Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities, to address the question of whether instruments granted in
share-based payment transactions are participating securities prior to vesting.
FSP EITF 03-6-1 indicates that unvested share-based payment awards that contain
rights to dividend payments should be included in earnings per share
calculations. The guidance will be effective for fiscal years beginning after
December 15, 2008. The Company is currently evaluating the requirements of FSP
No. EITF 03-6-1 and the impact that its adoption will have on the consolidated
results of operations or consolidated financial position.
  9
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In June
2008, the FASB issued EITF Issue 07-5 (EITF 07-5), Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application is not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company’s own stock and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  The Company is currently evaluating the impact that
adoption of EITF 07-5 will have on its consolidated financial
statements.
  In June
2008, FASB released a proposed SFAS, Disclosure of Certain Loss
Contingencies, an amendment of FASB Statements No. 5 and 141) (the
proposed Statement),
for a comment period that ended during August 2008. The proposed Statement would
(a) expand the population of loss contingencies that are required to be
disclosed, (b) require disclosure of specific quantitative and qualitative
information about those loss contingencies, (c) require a tabular
reconciliation of recognized loss contingencies and (d) provide an
exemption from disclosing certain required information if disclosing that
information would be prejudicial to an entity's position in a dispute. The
proposed Statement would be effective for financial statements issued for fiscal
years ending after December 15, 2008, and for interim and annual periods in
subsequent fiscal years. When and if the proposed Statement is approved in final
form by FASB, the Company will evaluate whether the adoption of the proposed
Statement will have any material impact on its financial position or results of
operations.
  In June
2008, the FASB issued EITF Issue 07-5 (EITF 07-5), Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application is not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company’s own stock and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  The Company is currently evaluating the impact that
adoption of EITF 07-5 will have on its financial statements.
  10
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 3.  GOING
CONCERN
  From the
date of inception, February 12, 2004 until June 2005, we were developing our
websites, Makeup.com, and discount.makeup.comsourcing beauty
products and establishing our warehouse and corporate
operations.  During the first quarter of 2005, we began selling our
beauty products on our websites and subsequent to launching our
websites  have been focused on increasing traffic to our websites,
increasing our product lines and generating sales.   We have
accumulated a deficit of approximately $4.7 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 websites, 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 websites, 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 websites, 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
                
                September
      30,
                  2008
                
                
                December
      31,
                  2007Goods
      for resale
                
                $
                352,005
                
                
                $
                334,608Promotional
      inventory
                
                
                9,865
                
                
                
                15,555Goods
      in transit
                
                
                3,023
                
                
                
                733Less:  Reserve
      for slow moving or obsolete inventory
                
                
                (10,000
                )
                
                
                (10,000
                )$
                354,893
                
                
                $
                340,896
  Prepaid
      expenses and deposits
                
                September
      30,
                  2008
                
                
                December
      31,
                  2007Other
      prepaid deposits
                
                $
                2,484
                
                
                $
                1,852Prepaid
      marketing
                
                
                23,361
                
                
                
                20,439$
                25,845
                
                
                $
                22,291
 
 11
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 4.  BALANCE
SHEET DETAIL, continued
 
 Fixed
      assets
                
                September
      30,
                  2008
                
                
                December
      31,
                  2007Computer
      equipment and software
                
                $
                173,886
                
                
                $
                173,886Book
      value
                
                
                173,886
                
                
                
                173,886Less:
      accumulated depreciation
                
                
                (153,868
                )
                
                
                (127,830
                )$
                20,018
                
                
                $
                46,056
 
 5. 
ADVANCES PAYABLE
 
 At
September 30, 2008 and December 31, 2007, the Company had advances payable
totaling $6,897 and $6,901, respectively, from third parties.  These
advances are non-interest bearing, have no fixed terms of repayment and are
unsecured.  At September 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 6)
 
 6. 
CONVERTIBLE NOTES PAYABLE
 
 At
September 30, 2008 and December 31, 2007, the Company had convertible notes
payable totaling $1,186,849 and $3,805,208 respectively, including accrued
interest of $103,439 and $175,643 respectively.  The convertible notes
are payable on demand, are 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 7,491,879(post reverse stock
split) shares of the Company’s common stock.  (Note 7)
 
 7.  COMMON
STOCK
  On July
18, 2008 the Company’s shareholders approved a 1 for 20 share reverse stock
split of their issued and outstanding common stock.  All common stock
amounts have been retroactively adjusted for all periods presented.
  On May 5,
2008, the Company issued 7,491,879 (post reverse stock split) shares of common
stock at $0.4320 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.  (Note
6)
  12
 
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (UNAUDITED)
 8. 
CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES
 
 At
September 30, 2008 and December 31, 2007, the Company had convertible notes
payable to related parties totaling $278,830 and $0 respectively, including
convertible accrued interest of $3,830 and $0 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.
 
 9. 
NOTE PAYABLE TO RELATED PARTY
  At
September 30, 2008 and December 31, 2007, the Company had a note payable to a
company controlled by a major shareholder in the amount of
$333,333.  This note is payable on demand, unsecured and bears
interest at 8% per annum.  At September 30, 2008 and December 31,
2007, $46,149 and $26,240, respectively, in interest had been accrued on this
note.
 
 10. 
DUE TO RELATED PARTIES
  At
September 30, 2008 and December 31, 2007, the Company was indebted to a director
in the amount of $9,850.
 
 At
September 30, 2008 and December 31, 2007, the Company was indebted to one of its
directors in the amounts of $116 and $0, respectively.
 
 At
September 30, 2008 and December 31, 2007, the Company was indebted to a major
shareholder in the amount of $5,723.
 
 11.  COMMITMENTS
 
 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
September 30, 2008, the minimum future lease payments under our warehouse
operating lease are as follows:
 
 For
      the year ended September 30,
                
                Amount2009
                
                $
                17,000
 
 Contingency
 
 The
Company initiated a lawsuit of approximately $70,000 plus costs against a
supplier for breach of contract and fraud arising out of the sale of counterfeit
cosmetics to the Company. (Note 2)


13
 
 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 the current economic crisis in the
      United States 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”.
 
 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.
 
 Results
of Operations
 
 Our
operating results for the three and nine months ended September 30, 2008 and
2007 and the changes between those periods are summarized as
follows:
  14
 
  For
      the Three Months Ended
                September
      30,
              
              
              Changes
                Between theThree Months Ended
                September
      30,
              
              
              For
      the NineMonths
      Ended
                September
      30,
              
              
              Changes
                Between
      the
                NineMonths
                Ended
                September
      30,2008
              
              
              2007
              
              
              2008
      and  2007
              
              
              2008
              
              
              2007
              
              
              2008
      and 2007Sales
              
              $
              171,529
              
              
              $
              159,214
              
              
              $
              12,315
              
              
              $
              523,292
              
              
              $
              373,172
              
              
              $
              150,120Cost
      of sales
              
              
              (103,381
              )
              
              
              (143,438
              )
              
              
              40,057
              
              
              
              (329,714
              )
              
              
              (295,160
              )
              
              
              (34,554
              )Gross
      profit
              
              
              68,148
              
              
              
              15,776
              
              
              
              52,372
              
              
              
              193,578
              
              
              
              78,012
              
              
              
              115,566Selling,
      general and administrative
              
              
              (281,935
              )
              
              
              (341,250
              )
              
              
              59,315
              
              
              
              (1,028,851
              )
              
              
              (823,454
              )
              
              
              (205,397
              )Interest
      expense
              
              
              (30,699
              )
              
              
              (72,314
              )
              
              
              41,615
              
              
              
              (153,969
              )
              
              
              (137,865
              )
              
              
              (16,104
              )Gain
      (loss) from discontinued operations
              
              
              -
              
              
              
              3,274
              
              
              
              (3,274
              )
              
              
              -
              
              
              
              (121,750
              )
              
              
              121,750Net
      loss
              
              $
              (244,486
              )
              
              $
              (394,514
              )
              
              $
              (150,028
              )
              
              $
              (989,242
              )
              
              $
              (1,005,057
              )
              
              $
              15,815
 
 Revenues
 
 Our sales
increased by $12,315 or 8% from $159,214 for the three months ended September
30, 2007 to $171,529 for the three months ended September 30, 2008. The reason
for the small increase in sales during the three months ended September 30, 2008
as compared with the three months ended September 30, 2007 was a sales promotion
in July 2007 which caused a substantial increase in sales during the third
quarter of 2007.  However the margin on the sales made during the
three months ended September 30, 2007 was much lower than the margin during the
three months ended September 30, 2008.
 
 Our sales
increased by $150,120 or 40% from $373,172 for the nine months ended September
30, 2007 to $523,292 for the nine months ended September 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.
 
 Prior to
the economic crisis
in the United States we expected our revenues to steadily increase over the next
year due to search engine optimization, which should increase customer traffic
to our website, 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 discount.makeup.com
website and offering customers a wider variety of payment options. Furthermore,
the economic crisis has resulted in less discretionary spending by consumers,
which may adversely affect our revenues. Furthermore, 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.
  15
 
 Cost
of Goods Sold and Gross Profit
 
 Our cost
of goods sold decreased by $40,057 or 28% from $143,438 for the three months
ended September 30, 2007 to $103,381 for the three months ended September 30,
2008. The decrease in cost of goods sold was primarily due to obtaining higher
margin on our sales and a reduction in slow moving and obsolete inventory
write-offs during the three months ended September 30, 2008.
 
 Our cost
of goods sold increased by $34,554 or 12% from $295,160 for the nine months
ended September 30, 2007 to $329,714 for the nine months ended September 30,
2008. The increase in cost of goods sold was primarily attributable to the 40%
increase in our sales.
 
 Our gross
profit increased by $52,372 or 332% from $15,776 for the three months ended
September 30, 2007 to $68,148 for the three months ended September 30, 2008.
This increase in gross profit was primarily due to reducing the number of
promotional discounts on our product sales during the three months ended
September 30, 2008 as compared to the three months ended September 30,
2007.
 
 Our gross
profit increased by $115,566 or 148% from $78,012 for the nine months ended
September 30, 2007 to $193,578 for the nine months ended September 30, 2008. The
increase in gross profit was primarily due to a reduction in slow moving and
obsolete inventory write-offs, obtaining higher margins on our sales and an
increase in our sales.
 
 Assuming
that the economic crisis in the United States does not have a significant
adverse affect on our sales, 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)
              using
      alternative shipping options to reduce shipping costs,(2)
              increasing
      market share by increasing traffic to our websites,(3)
              determining
      optimum product mix in an effort to alleviate slow moving and
      obsolete inventory problems and to maximize inventory turns,
      and(4)
              increasing
      product sourcing directly from the manufacturers in an effort to obtain
      more competitive purchase pricing.
  Selling,
General and Administrative Expenses
 
 Our
operating expenses decreased by $59,315 or 17% from $341,250 for the three
months ended September 30, 2007 to $281,935 for the three months ended September
30, 2008.  This decrease was primarily due to approximate decreases in
the following categories: $12,000 in bad debts due to partial collection of a
bad debt write-off on the counterfeit cosmetics we returned to a vendor; $8,000
in consulting fees primarily due to a reduction in payments to LifeTips; $5,000
in administrative expenses due to strengthening of the US dollar; $28,000 in
advertising and promotions due to the removal of ineffective online advertising
channels; $9,000 in warehouse handling costs due to the expenses associated with
the warehouse move in July 2007; $8,000 in depreciation because the majority of
our fixed assets have been fully depreciated and a foreign exchange gain of
$25,000 due to the strengthening of the US dollar.  These decreases
were primarily offset by an approximate increase of $23,000 in professional fees
primarily due to regulatory compliance.
 
 Our
operating expenses increased by $205,397 or 25% from $823,454 for the nine
months ended September, 30, 2007 to $1,028,851 for the nine months ended
September 30, 2008.  This increase was primarily due to approximate
increases in the following categories: we recorded $72,000 in bad debts due to
the return of counterfeit cosmetics to a vendor; $78,000 in consulting fees
primarily due to fulfilling our contract with LifeTips; $80,000 in
administrative expenses associated with accounting services and regulatory
compliance; $28,000 in professional fees associated with regulatory compliance;
$9,000 in bank charges and interest due to an increase in credit card fees
associated with the increase in our sales; and $17,000 in warehouse rent,
handling fees and warehousing expenses because all of our warehousing rent and
expenses for the nine months ended September 30, 2007 were reclassified to
discontinued operations when we discontinued Online’s
operations.   These increases were primarily offset by
approximate decreases in the following categories:  $31,000 in
depreciation because the majority of our fixed assets have been fully
depreciated; $15,000 in advertising and promotion due to the removal of
ineffective online advertising channels; $11,000 in travel due to travel costs
associated with moving the warehouse in the prior year; and $6,000 in computer
expenses due to maintaining and monitoring an additional back up server in the
prior year.
  16
 
 Interest
Expense
 
 During
the three months ended September 30, 2008 and 2007 we recorded interest expense
of $30,699 and $72,314 respectively.  The decrease of $41,615 in
interest expense was due to the conversion of $3,034,122 in convertible notes
payable including accrued interest of $202,368 into shares of our common
stock.
 
 During
the nine months ended September 30, 2008 and 2007 we recorded interest expense
of $153,969 and $137,865 respectively.  The increase of $16,104 in
interest expense was due to an increase in convertible notes payable between
September 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 and of
new notes payable issued since May 5, 2008.
 
 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
gain (loss) of $3,274 and $(121,750) for the three and nine months ended
September 30, 2007, to net loss from discontinued operations.
 
 Our
objectives over the next year are to continue to increase product sales,
generate advertising revenues, expand our customer base, retain our current
customers and expand our marketing, branding and customer loyalty programs with
the following initiatives:
  (a)
              Including
      samples in each order to provide customers with an opportunity to
      experience new brands,(b)
              Improving
      the speed of order fulfillment and offering customers a range of shipping
      options,(c)
              Continually
      updating, changing , modifying and improving our website layout and design
      to allow for new marketing techniques, improved navigation, and additional
      product offerings,(d)
              Advertising
      in established and niche magazines,(e)
              Continuing
      to expand the number of brands we offer,(f)
              Rewarding
      new customers and top purchasing customers with special offers,
      incentives, percentage discounts and/or free shipping,(g)
              Enhancing
      the presentation and packaging of orders,(h)
              Working
      with new and existing vendors to update and enhance their brand pages with
      brand background, articles, press, product information, and makeup tips
      and tricks,(i)
              Continually
      monitoring consumer demands and changing tastes in our quest to meet our
      customer’s beauty regimen expectations,(j)
              Expanding
      our makeup and beauty related blog section,(k)
              Where
      applicable, introducing Google Adsense to gain revenue through clicks on
      the ads shown on these pages,(l)
              Continuing
      to offer customers the opportunity to create and save items on their ‘wish
      list’ (gift registry),(m)
              Expanding
      our marketing and branding efforts through paid and unpaid mediums
      including e-mail marketing, radio and by hosting or participating in
      sweepstakes,(n)
              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.  We have
      formed a relationship with at least one content provider and we intend to
      continue to form such relationships in an effort to further expand our
      affiliate program, and(o)
              We
      have added, and we will continue to
      add, other applicable beauty related information through contracted
      parties including LifeTips, which will include tips, advice and articles.
      This valued information is aimed at increasing the credibility of our
      brand and establishing our site as a trusted beauty
      source.
 
 17
  Our plans
for the next year include:
  (a)
              Specifically
      targeting  key cornerstone brands that will have a significant impact
      on our sales,(b)
              Continuing
      to source out and add boutique products that are natural, organic and
      mineral based,
 (c)
              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,(d)
              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(e)
              Continuing
      to ensure that customers are satisfied with their overall experience on
      our websites as a one-stop shopping destination for beauty
      products.
 
 We have
also developed a solid base of loyal customers; 21% and 22% of our customers
were repeat customers during the nine months ended September 30, 2008 and 2007
respectively.  Our sales are directly related to traffic to our
websites and the ability to convert such traffic to sales.  At
September 30, 2008 and 2007, our paid conversion rates were 3.3% and 1.5%
respectively.  At September 30, 2008 and 2007, our conversion rates
for all traffic and sales on our websites were 1.22% and 0.55%
respectively.  The 2008 conversion rates exclude the 123greetings
limited time promotion that we engaged in from September 20, 2008 to October 10,
2008.  This promotion allowed customers to redeem a coupon for makeup
purchases above $60 after either sending or receiving a 123greetings card. Had
we included the 123greetings promotion in our September 30, 2008 calculation our
paid conversion rate would have been 0.69% and our conversion rate for all
traffic and sales on our websites would be 0.71%.
 
 Our
promotional plans and programs, which include free and discounted shipping
charges for large orders, product discounts of up to 20%, free gifts with
purchases, free samples with purchases and customer coupons and credits, are
designed to increase sales.  During the nine months ended September
30, 2008 we were not only able to increase sales but, more importantly, we
increased the size of the average sales order from $55.04 for the nine months
ended September 30, 2007 to $65.08 for the nine months ended September 30,
2008.
 
 Our goal
is to determine the optimum quantity and best mix of products to inventory so
that we can increase our inventory turnover and reduce write-offs due to slow
moving and obsolete inventory.  During the nine months ended September
30, 2008 our write-off for slow moving and obsolete inventory decreased by
$21,084 from $23,043 during the nine months ended September 30, 2007 to $1,959
during the nine months ended September 30, 2008.
 
 Operations
Review
  Assuming that the economic
crisis in the United States does not have a significant adverse affect on our
sales, over the next twelve months we expect sales to increase in light of our
current and proposed marketing initiatives.  Our marketing plans focus
on increasingtraffic 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, 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.
  18
 
 Assuming that the economic
crisis in the United States does not have a significant adverse affect on our
sales, overthe 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 nine months ended September 30, 2008 our
gross profit as a percentage of sales increased by 16% from 21% for the nine
months ended September 30, 2007 to 37% for the nine months ended September 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.
  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. Our 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 are not sure when this television advertisement will
run.  Our online marketing programs 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.
 
 Liquidity
and Capital Resources
 
 Going
Concern
 
 The notes
to our consolidated financial statements at September 30, 2008 disclose our
uncertain ability to continue as a 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 $4.7 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.
  19
  For the
nine month period ended September 30, 2008, we had a net loss of
$989,242.  As of September 30, 2008, our current assets consisted of a
cash balance of $13,233, accounts receivable of $9,342, inventory of $354,893,
and prepaid expenses and deposits of $25,845.  When these current
assets are offset against our current obligations of $403,940 in accounts
payable, $5,996 in accrued liabilities, $6,300 in accrued advertising fees,
$26,998 in accrued consulting fees, $33,724 in accrued professional fees, $6,897
in advances payable, convertible notes payable on demand in the amount of
$1,186,849 including accrued interest of $103,439, convertible notes payable on
demand due to related parties in the amount of $278,830 including accrued
interest of $3,830, a note payable on demand to a related party in the amount of
$379,482 including accrued interest of $46,149, and $15,689 due to related
parties, we are left with a working capital deficit of $1,941,392.
 
 At
September 30, 2008, we had a cash balance of $13,233 and negative cash flows
from operations of $765,943.  During the nine months ended September
30, 2008, we primarily funded our operations through sales and the issuance of
convertible notes payable.  We believe that our cash as of the date of
this filing is inadequate to satisfy our working capital needs for the next
year.  We anticipate funding our working capital needs for the next
twelve months through product sales, debt or equity financing or private
loans.  Although the foregoing actions are expected to cover our
anticipated cash needs for working capital and capital expenditures for at least
the next twelve months, no assurance can be given that we will be able to raise
sufficient cash to meet our cash requirements.
 
 The
following table summarizes our sources and uses of cash for the nine months
ended:
 
 September
      30,Sources and Uses of
      Cash
              
              2008
              
              
              2007Net
      cash used in operating activities
              
              $
              (765,943
              )
              
              $
              (852,119
              )Net
      cash used in investing activities
              
              
              -
              
              
              
              (12,323
              )Net
      cash provided by financing activities
              
              
              762,958
              
              
              
              840,818Effects
      of foreign currency exchange
              
              
              (26,225
              )
              
              
              (17,197
              )Net
      decrease in cash
              
              $
              (29,210
              )
              
              $
              (40,821
              )
 
 Net
Cash Used In Operating Activities
 
 Net cash
used in operating activities during the nine months ended September 30, 2008 was
$765,943.  We used cash of $13,997 to increase our inventory; our
accounts receivable increased by $6,839 due to an increase in amounts receivable
from credit card companies; prepaid expenses and deposits increased by $3,554
due to implementing new marketing programs; we reduced our accrued liabilities
by $2,355, our accrued advertising fees by $2,691 and accrued professional fees
by $42,764; our deferred assets decreased by $2,652 due to our warehouse
lease.  These uses of cash were offset by net increases in accounts
payable of $106,091 and accrued consulting fees of $11,998; an increase in
interest on our convertible notes payable of $130,169; an increase in interest
on our convertible notes payable to related parties of $3,830 and on our note
payable to a related party of $19,909; an increase in the amount due to related
parties of $116; and depreciation in the amount of $26,038.
 
 Net cash
used in operating activities during the nine months ended September 30, 2007 was
$852,119.  We used cash of $25,792 on the acquisition of additional
inventory, $12,430 on prepaid expenses and deposits,  $2,843 on
reducing our accrued liabilities and $43,222 on paying down our accrued
professional fees.  These uses of cash were funded through collection
of accounts receivable of $10,727, increases in accounts payable of $20,121,
accrued advertising fees of $617, an increase in the interest accrued on the
note payable to a related party of $19,945, interest accrued on our convertible
notes payable of $111,429, an increase in the amounts due to our directors of
$7,558 for expenses they paid on our behalf,  an increase in deferred
rent of $1,417 due to our new warehouse lease, depreciation expense of $58,993
and a loss on disposal of fixed assets of $6,418 due to closing our warehouse in
Canada.
  20
 
 Net
Cash from Investing Activities
 
 During
the nine months ended September 30, 2008, we did not have any investing
activities.
 
 During
the nine months ended September 30, 2007, we spent $13,644 on the acquisition of
fixed assets and received $1,321 in proceeds from of the disposition of fixed
assets.
 
 Currently
we do not have any plans for large investment expenditures.
 
 Net
Cash Provided By Financing Activities
 
 During
the nine months ended September 30, 2008, we received cash of $487,962 on the
issuance of convertible notes payable, $275,000 from the issuance of convertible
notes payable to related parties and advances payable were reduced by $4 due to
foreign exchange differences.
 
 During
the nine months ended September 30, 2007, we received $299,937 in cash advances
from private investors. These advances combined with advances received in the
prior periods were converted to convertible notes payable during the
period.  During this period we also issued convertible notes payable
in exchange for $540,882 in cash and we acquired the domain name www.makeupinvestor.com
for the nominal amount of $1.
 
 Debt
Conversion
 
 On May 5,
2008, we converted $3,236,490 in convertible notes and accrued interest into
7,491,879 (post reverse stock split) restricted shares of our common stock at a
price of $0.4320 per share (post reverse stock split). The price per share of
$0.4320 was calculated at a discount of 20% of the market price for our stock on
May 5, 2008.  The issuance of these additional shares resulted in
dilution to our existing shareholders.
 
 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 $4.7 million from inception to September 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. Finally, please see the
discussion titled "Other Trends, Events or Uncertainties that may Impact Results
of Operations or Liquidity" for a discussion of the possible effects of the
economic crisis in the United States on our operations and
revenues.
  21
 
 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.
 
 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.
 
 Contingencies
and Commitments
 
 Contingent
Liability
 
 We have
initiated a lawsuit for approximately $70,000 plus costs against a supplier for
breach of contract and fraud arising out of the sale of counterfeit cosmetics to
us. We also set up an allowance of $70,000 against this receivable.
 
 Contractual
Obligations
  Our only
long term contractual obligation and commitment is a lease commitment with our
warehouse in Sumner, Washington.
 
 Critical
Accounting Judgments
  An
appreciation of our critical accounting judgments is necessary to understand our
financial results.  These policies may require that we make difficult
and subjective judgments regarding uncertainties, and as a result, such
estimates may significantly impact our financial results.  The
precision of these estimates and the likelihood of future changes depend on a
number of underlying variables and a range of possible
outcomes.  Other than our accounting for slow moving and obsolete
inventory, accrued accounts payable and collection of our contingent liability,
our critical accounting policies do not involve the choice between alternative
methods of accounting.  We have applied our critical accounting
judgments consistently.
 
 A summary
of our significant accounting policies is included in our Annual Report on Form
10-KSB for the year ended December 31, 2007.  Significant accounting
policies which either affect us or have been developed since February 29, 2008,
are summarized below.
 
 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 nine months ended September 30, 2008 and 2007, we
wrote-off $1,959 and $23,043 respectively, in slow moving and obsolete
inventory.  At September 30, 2008 and December 31, 2007, we had a
$10,000 reserve for slow moving or obsolete inventory.
  22
 
 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
September 30, 2008 and December 31, 2007, we had approximately $13,000 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 September 30,
2008 and December 31, 2007, we had $5,691 and $1,898, respectively in trade
accounts receivable from major credit card companies.
 
 During
the nine months ended September 30, 2008, purchases from one vendor totaled
approximately $55,000 or 11% of net sales and purchases from a second vendor
totaled approximately $127,000 or 24% of net sales.  During the nine
months ended September 30, 2008, we returned approximately $80,000 in product to
this second vendor, approximately $70,000 of which has been recorded in the
allowance for doubtful accounts.  We also initiated a lawsuit of
approximately $70,000 plus costs against this supplier for breach of contract
and fraud arising out of the sale of counterfeit cosmetics.  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.
  Recently
Adopted and Recently Issued Accounting Standards
  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:
 
 On
January 1, 2008, we adopted Statement of Financial Accounting Standards
(SFAS) No. 157 (SFAS 157), Fair Value
Measurements.  SFAS 157 relates to financial assets and
financial liabilities. In February 2008, the Financial Accounting Standards
Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on at least an
annual basis, until January 1, 2009 for calendar year-end entities. Also in
February 2008, the FASB issued FSP No. FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13, which states that SFAS No. 13, Accounting for Leases, (SFAS
13) and other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under SFAS 13 are excluded from
the provisions of SFAS 157, except for assets and liabilities related to leases
assumed in a business combination that are required to be measured at fair value
under SFAS No. 141, Business Combinations, (SFAS
141) or SFAS No. 141 (revised 2007), Business Combinations, (SFAS
141(R)).
  23
 
 SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited exceptions.
The adoption of SFAS 157, as it relates to financial assets and financial
liabilities had no impact on our financial statements.
 
 SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and
(2) an entity’s own assumptions, about market participant assumptions, that
are developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS 157 are described below:
  •
              
              Level
      1 - Unadjusted quoted prices in active markets that are accessible at the
      measurement date for identical, unrestricted assets or
      liabilities.
  •
              
              Level
      2 - Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or indirectly,
      including quoted prices for similar assets or liabilities in active
      markets; quoted prices for identical or similar assets or liabilities in
      markets that are not active; inputs other than quoted prices that are
      observable for the asset or liability (e.g., interest rates); and inputs
      that are derived principally from or corroborated by observable market
      data by correlation or other means.
  •
              
              Level
      3 - Inputs that are both significant to the fair value measurement and
      unobservable.
 
 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 measurement of certain
financial assets and financial liabilities at fair value.  If the fair
value option is elected, the unrealized gains and losses are reported in
earnings at each reporting date.  Generally, the fair value option may
be elected on an instrument-by-instrument basis, as long as it is applied to the
instrument in its entirety.  The fair value option election is
irrevocable, unless a new election date occurs.  SFAS 159 was
effective for us on January 1, 2008. The adoption of SFAS 159 did not have
a material impact 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.
  24
 
 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.  Early adoption of this provision is
prohibited.  We are currently evaluating the impact adoption of SFAS
161 may have on our 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 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.
 
 On May 9,
2008, the FASB issued FASB Staff Position No. APB 14-1 (FSP APB 14-1), Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement)
are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.  Additionally, FSP
APB 14-1 specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the
entity's nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. We have not yet evaluated the impact that FSP APB 14-1 will have
on our consolidated results of operations or consolidated financial
position.
 
 On June
16, 2008, the FASB issued FASB Staff Position No. EITF 03-6-1 (FSP No. EITF
03-6-1), Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities, to address the question of whether instruments granted in
share-based payment transactions are participating securities prior to vesting.
FSP EITF 03-6-1 indicates that unvested share-based payment awards that contain
rights to dividend payments should be included in earnings per share
calculations. The guidance will be effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the requirements of FSP No. EITF
03-6-1 and the impact that its adoption will have on our consolidated results of
operations or consolidated financial position.
  25
 
 In June
2008, the FASB issued EITF Issue 07-5 (EITF 07-5), Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application is not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company’s own stock and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  We are currently evaluating the impact that adoption of
EITF 07-5 will have on our consolidated financial statements.
 
 In June
2008, FASB released a proposed SFAS, Disclosure of Certain Loss
Contingencies, an amendment of FASB Statements No. 5 and 141) (the
proposed Statement),
for a comment period that ended during August 2008. The proposed Statement would
(a) expand the population of loss contingencies that are required to be
disclosed, (b) require disclosure of specific quantitative and qualitative
information about those loss contingencies, (c) require a tabular
reconciliation of recognized loss contingencies and (d) provide an
exemption from disclosing certain required information if disclosing that
information would be prejudicial to an entity's position in a dispute. The
proposed Statement would be effective for financial statements issued for fiscal
years ending after December 15, 2008, and for interim and annual periods in
subsequent fiscal years. When and if the proposed Statement is approved in final
form by FASB, we will evaluate whether the adoption of the proposed Statement
will have any material impact on our financial position and results of
operations.
 
 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
 
 Robert
Rook, our chief executive officer and Munjit Johal, 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,
Mr. Rook and Mr. Johal have concluded that, as of the Evaluation Date, our
disclosure controls and procedures are 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.
 
 Item
4 (T).  Controls and Procedures
 
 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.
  26
  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.
 
 Not
applicable
 
 Item
3.  Defaults Upon Senior Securities.
 
 Not
applicable
 
 Item
4.  Submission of Matters to a Vote of Security Holders.
 
 On July
18, 2008 we held a special meeting of our shareholders for the purpose of
approving a proposal to reverse split the outstanding shares of our common stock
so that each shareholder will receive 1 share for every 20 shares
owned.  There were represented in person or by proxy at the meeting a
total of 137,615,437 shares of common stock representing approximately 71% of
our issued and outstanding common stock.  The result of the voting was
as follows:
 
 FOR
              AGAINST
              WITHHELD137,544,735
              42,369
              28,333
 
 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.
 
 27
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
caused this report to be signed on its behalf by the undersigned duly
authorized.
  MAKEUP.COM
    LIMITEDDate:  November
      14, 2008
                By:
                /s/ Robert
      E. RookRobert
      E. Rook
                  Chief
      Executive Officer and President
  Date:  November
      14, 2008
                  By:
                  /s/ Munjit
      JohalMunjit
      Johal
                    Chief
      Financial Officer