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 March 31,
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 000-51225
  MAKEUP.COM
      LIMITED(Exact
      name of
      registrant as specifiedin its
charter)
  Nevada
                (State
      or other jurisdiction
                of
      incorporation or organization)
              43-2041643
                (I.R.S.
      Employer
                Identification
      No.)3416 Via Lido, Suite
      F, Newport Beach, California,
      92663-3976
                (Address
      of principal executive offices)1-866-347-5057
                (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 May 15, 2008 the
registrant had 44,831,250 shares of common stock outstanding.
  1
 
 PART
I - FINANCIAL INFORMATION
 
 Item 1. Financial
Statements.
  MAKEUP.COM
LIMITED
 CONSOLIDATED
BALANCE SHEETS
 March
      31,
                  
                  
                  December
      31,2008
                  
                  
                  2007(Unaudited)ASSETSCurrent
      assets:Cash
                  
                  $
                  21,422
                  
                  
                  $
                  42,443Accounts
      receivable, net of $0 and $250 in allowances
                  
                  
                  6,763
                  
                  
                  
                  2,503Inventory,
      net
                  
                  
                  397,750
                  
                  
                  
                  340,896Prepaid
      expenses and deposits
                  
                  
                  68,277
                  
                  
                  
                  22,291Total
      current assets
                  
                  
                  494,212
                  
                  
                  
                  408,133Fixed
      assets, net of $138,118 and $127,830accumulated
      depreciation
                  
                  
                  35,768
                  
                  
                  
                  46,056Deposit
                  
                  
                  70,000
                  
                  
                  
                  70,000Intangible
      assets
                  
                  
                  333,334
                  
                  
                  
                  333,334Total
      assets
                  
                  $
                  933,314
                  
                  
                  $
                  857,523LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
                  
                  $
                  349,100
                  
                  
                  $
                  303,572Accrued
      liabilities
                  
                  
                  9,769
                  
                  
                  
                  8,351Accrued
      advertising fees
                  
                  
                  14,000
                  
                  
                  
                  8,991Accrued
      consulting fees
                  
                  
                  45,240
                  
                  
                  
                  15,000Accrued
      professional fees
                  
                  
                  51,884
                  
                  
                  
                  76,488Advances
       payable
                  
                  
                  6,899
                  
                  
                  
                  6,901Note
      payable
                  
                  
                  366,221
                  
                  
                  
                  359,573Convertible
      notes payable
                  
                  
                  4,191,236
                  
                  
                  
                  3,805,208Due
      to related parties
                  
                  
                  9,850
                  
                  
                  
                  9,850Deferred
      assets
                  
                  
                  568
                  
                  
                  
                  2,652Total
      current liabilities
                  
                  
                  5,044,767
                  
                  
                  
                  4,596,586Commitments
      and contingenciesStockholders'
      deficit:Common
      stock $0.001 par value, 200,000,000 authorized;44,831,250
      issued and outstanding at March 31, 2008 andDecember
      31, 2007
                  
                  
                  44,831
                  
                  
                  
                  44,831Accumulated
      deficit
                  
                  
                  (4,132,526
                  )
                  
                  
                  (3,757,180
                  )Accumulated
      other comprehensive loss
                  
                  
                  (23,758
                  )
                  
                  
                  (26,714
                  )Total
      stockholders' deficit
                  
                  
                  (4,111,453
                  )
                  
                  
                  (3,739,063
                  )Total
      liabilities and stockholders' deficit
                  
                  $
                  933,314
                  
                  
                  $
                  857,523
 The
accompanying notes are an integral part of these consolidated financial
statements
 2
 MAKEUP.COM
LIMITED
 CONSOLIDATED
STATEMENTS OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 2008 and 2007 (UNAUDITED)
 2008
                  
                  
                  2007Sales
                  
                  $
                  176,045
                  
                  
                  $
                  109,594Cost
      of goods sold
                  
                  
                  109,197
                  
                  
                  
                  78,005Gross
      profit
                  
                  
                  66,848
                  
                  
                  
                  31,589Operating
      expenses:Selling,
      general and administrative
                  
                  
                  365,908
                  
                  
                  
                  213,332Net
      loss from continuing operations  before interest
      expenseand
      discontinued operations
                  
                  
                  (299,060
                  )
                  
                  
                  (181,743
                  )Interest
      expense
                  
                  
                  (76,286
                  )
                  
                  
                  (6,575
                  )Net
      loss from continuing operations before discontinued
    operations
                  
                  
                  (375,346
                  )
                  
                  
                  (188,318
                  )Loss
      from discontinued operations
                  
                  
                  -
                  
                  
                  
                  (70,257
                  )Net
      loss
                  
                  $
                  (375,346
                  )
                  
                  $
                  (258,575
                  )Net
      loss per share - basic and diluted:Continuing
      operations
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.01
                  )Discontinued
      operations
                  
                  
                  -
                  
                  
                  
                  (0.00
                  )Net
      loss per share
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.01
                  )Weighted
      average number of shares outstanding -basic
      and diluted
                  
                  
                  44,831,250
                  
                  
                  
                  44,831,250
  The
accompanying notes are an integral part of these consolidated financial
statements
 3
  MAKEUP.COM
LIMITED CONSOLIDATED
STATEMENT OF STOCKHOLDERS' DEFICIT AND COMPREHENSIVE LOSS FOR
THE THREE MONTHS ENDED MARCH 31, 2008 and 2007
  AccumulatedCommon
      Stock Issued
                  
                  
                  
                  
                  
                  OtherNumber
      of
                  
                  
                  
                  
                  
                  Accumulated
                  
                  
                  ComprehensiveShares
                  
                  
                  Amount
                  
                  
                  Deficit
                  
                  
                  Income
      (Loss)
                  
                  
                  TotalBalance
      at January 1, 2007 (Audited)
                  
                  
                  44,831,250
                  
                  
                  $
                  44,831
                  
                  
                  $
                  (2,287,035
                  )
                  
                  $
                  (10,017
                  )
                  
                  $
                  (2,252,221
                  )Net
      loss for the three monthsended
      March 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (258,575
                  )
                  
                  
                  -
                  
                  
                  
                  (258,575
                  )Foreign
      currency exchange gain
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,474
                  
                  
                  
                  3,474Comprehensive
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (255,101
                  )Balance
      at March 31, 2007 (Unaudited)
                  
                  
                  44,831,250
                  
                  
                  
                  44,831
                  
                  
                  
                  (2,545,610
                  )
                  
                  
                  (6,543
                  )
                  
                  
                  (2,507,322
                  )Net
      loss for the nine monthsended
      December 31,  2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,211,570
                  )
                  
                  
                  -
                  
                  
                  
                  (1,211,570
                  )Foreign
      currency exchange loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (20,171
                  )
                  
                  
                  (20,171
                  )Comprehensive
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,231,741
                  )Balance
      December 31, 2007 (Audited)
                  
                  
                  44,831,250
                  
                  
                  
                  44,831
                  
                  
                  
                  (3,757,180
                  )
                  
                  
                  (26,714
                  )
                  
                  
                  (3,739,063
                  )Net
      loss for the three monthsended
      March 31, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (375,346
                  )
                  
                  
                  -
                  
                  
                  
                  (375,346
                  )Foreign
      currency exchange gain
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,956
                  
                  
                  
                  2,956Comprehensive
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (372,390
                  )Balance
      at March 31, 2008 (Unaudited)
                  
                  
                  44,831,250
                  
                  
                  $
                  44,831
                  
                  
                  $
                  (4,132,526
                  )
                  
                  $
                  (23,758
                  )
                  
                  $
                  (4,111,453
                  )
   The
accompanying notes are an integral part of these consolidated financial
statements
  4
 MAKEUP.COM
LIMITED
 CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 2008 and 2007 (UNAUDITED)
 2008
                  
                  
                  2007Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (375,346
                  )
                  
                  $
                  (258,575
                  )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
                  
                  
                  10,288
                  
                  
                  
                  21,578Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (4,260
                  )
                  
                  
                  16,028Inventory
                  
                  
                  (56,854
                  )
                  
                  
                  (43,326
                  )Prepaid
      expenses and deposits
                  
                  
                  (45,986
                  )
                  
                  
                  (21,995
                  )Accounts
      payable
                  
                  
                  45,528
                  
                  
                  
                  (129
                  )Accrued
      liabilities
                  
                  
                  1,418
                  
                  
                  
                  713Accrued
      advertising fees
                  
                  
                  5,009
                  
                  
                  
                  909Accrued
      consulting fees
                  
                  
                  30,240
                  
                  
                  
                  -Accrued
      professional fees
                  
                  
                  (24,604
                  )
                  
                  
                  (3,423
                  )Interest
      on convertible notes payable
                  
                  
                  69,638
                  
                  
                  
                  -Interest
      on note payable
                  
                  
                  6,648
                  
                  
                  
                  304Due
      to related parties
                  
                  
                  -
                  
                  
                  
                  9,253Deferred
      assets
                  
                  
                  (2,084
                  )
                  
                  
                  4,673Net
      cash (used in) provided by operating activities
                  
                  
                  (340,365
                  )
                  
                  
                  (273,990
                  )Cash
      flows from investing activities:Acquisition
      of fixed assets
                  
                  
                  -
                  
                  
                  
                  (12,477
                  )Net
      cash (used in)
      investing activities
                  
                  
                  -
                  
                  
                  
                  (12,477
                  )Cash
      flows from financing activities:Acquisition
      of domain name
                  
                  
                  -
                  
                  
                  
                  (1
                  )Increase
      in convertible notes payable
                  
                  
                  316,390
                  
                  
                  
                  -(Decrease)
      increase in advances payable
                  
                  
                  (2
                  )
                  
                  
                  295,837Net
      cash provided by financing activities
                  
                  
                  316,388
                  
                  
                  
                  295,836Effects
      of foreign currency exchange
                  
                  
                  2,956
                  
                  
                  
                  3,474Net
      (decrease) increase in cash
                  
                  
                  (21,021
                  )
                  
                  
                  12,843Cash,
      beginning of the period
                  
                  
                  42,443
                  
                  
                  
                  62,611Cash,
      end of the period
                  
                  $
                  21,422
                  
                  
                  $
                  75,454Supplemental
      disclosure of non-cash investing and financing activities:Cash
      paid during the period:Taxes
                  
                  $
                  -
                  
                  
                  $
                  -Interest
                  
                  $
                  -
                  
                  
                  $
                  -
 The
accompanying notes are an integral part of these consolidated financial
statements
  5
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 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
their 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 their 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 changes 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 months ended March 31, 2008 are not necessarily indicative
of the results that may be expected for any other interim period or the entire
year.  For further information, these consolidated unaudited financial
statements and the related notes should be read in conjunction with the
Company’s consolidated audited financial statements for the year ended December
31, 2007 included in the Company’s report on Form 10-KSB.
 
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 Reclassifications
 
 Certain
prior period amounts in the accompanying consolidated financial statements have
been reclassified to conform to the current period’s presentation. These
reclassifications had no effect on the consolidated results of operations or
financial position for any period presented.
 
 Inventories
 
 Inventories
are stated at the lower of cost or market under the first-in, first-out
method. At March 31, 2008 and December 31, 2007, we wrote-off $0 and
$34,203, respectively, in obsolete inventory. At March 31, 2008 and
December 31, 2007 we had a $10,000 reserve for slow moving or obsolete
inventory.
 
 We have
arrangements with certain drop shippers whereby we do not purchase or pay for
merchandise until the merchandise is ultimately sold and shipped to our
customer.
  6
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Concentration
of Credit Risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable and
payable.
 
 At March
31, 2008 and December 31, 2007 the Company had approximately $21,000 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 March 31, 2008 and December 31, 2007, the Company had
$6,145 and $1,898, respectively in trade accounts receivable from major credit
card companies.
 
 During
the three month period ended March 31, 2008, purchases from one vendor totaled
approximately $56,000 or 32% of net sales. During the year ended December 31,
2007, all of the Company’s purchases from vendors were less than 10% of net
sales.
 
 Recent
Accounting Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157 (SFAS 157),
Fair Value
Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value measures required
under other accounting pronouncements, but does not change existing guidance as
to whether or not an instrument is carried at fair value. SFAS 157 was effective
for the Company on January 1, 2008. The adoption of SFAS 157 did not have a
significant impact on our consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be recognized in earnings at each subsequent reporting date. SFAS 159 was
effective for the Company on January 1, 2008. The adoption of SFAS 159 did
not have a material impact on the Company’s consolidated financial statements as
the Company did not elect the fair value option for any of its financial assets
or liabilities.
  In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. As the related goods are delivered or the services are performed,
or when the goods or services are no longer expected to be provided, the
deferred amounts would be recognized as an expense. This Issue is effective for
financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective
date.  EITF 07-03 was effective for the Company on January 1,
2008.  The pronouncement did not have a material effect on our
consolidated financial statements.
  7
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2008
 (UNAUDITED)
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In
February 2008 the FASB staff issued Staff Position No. 157-2 (FSP FAS 157-2) Effectivedate of
FASB Statement No.157.FSP FAS 157-2 delayed the effective
date of SFAS 157 for non-financial assets and non-financial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis.  The provisions of FSP FAS 157-2 will
be effective for the Company on January 1, 2009.
 
 In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No.
133(SFAS
133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for the
Company on January 1, 2009.  The Company is currently evaluating the
impact adoption of SFAS 161 may have on its financial statement
disclosures.
 
 3.  GOING
CONCERN
  From the
date of inception, February 12, 2004 until June 2005, we were developing our
website, Makeup.com, sourcing beauty products and establishing our warehouse and
corporate operations.  During the first quarter of 2005, we began
selling our beauty products on our website and subsequent to launching our
website have been focused on increasing traffic to our website, increasing our
product lines and generating sales.   We have accumulated a deficit of
approximately $4.1 million to date and will require additional financing to
support our operations until such time as we achieve positive cash flows from
operations.  These factors raise substantial doubt about our ability
to continue as a going concern.  Our ability to achieve and maintain
profitability and positive cash flow is dependent upon increasing traffic to our
website, increasing our sales, increasing our product lines, globally expanding
our sales market and controlling operating costs.  Based upon current
plans, we expect to incur operating losses in future periods.  We plan
to mitigate these operating losses through increasing traffic to our website,
increasing sales, increasing our product lines and globally expanding our
market.  We plan to obtain sufficient working capital through
additional debt or equity financing, private loans and product
sales.  There is no assurance that we will be able to increase traffic
to our website, increase sales, increase product lines, globally expand our
market or obtain working capital through additional debt or equity financing,
private loans or product sales in the future.  The accompanying
consolidated financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
 
 4.  BALANCE
SHEET DETAIL
 
 Inventories
                  
                  March
      31,
                    2008
                  
                  
                  December
      31,
                    2007Goods
      for resale
                  
                  $
                  355,428
                  
                  
                  $
                  334,608Promotional
      inventory
                  
                  
                  12,795
                  
                  
                  
                  15,555Goods
      in transit
                  
                  
                  39,527
                  
                  
                  
                  733Less:  Reserve
      for slow moving or obsolete inventory
                  
                  
                  (10,000)
                  
                  
                  
                  (10,000)$
                  397,750
                  
                  
                  $
                  340,896
  8
  MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2008
 (UNAUDITED)
 4.  BALANCE
SHEET DETAIL, continued
 
 Prepaid
      expenses and deposits
                  
                  March
      31,
                    2008
                  
                  
                  December
      31,
                    2007Other
      prepaid deposits
                  
                  $
                  54,627
                  
                  
                  $
                  1,852Prepaid
      marketing
                  
                  
                  13,650
                  
                  
                  
                  20,439$
                  68,277,
                  
                  
                  $
                  22,291
 
 Fixed
      assets
                  
                  March
      31,
                    2008
                  
                  
                  December
      31,
                    2007Computer
      equipment and software
                  
                  $
                  173,866
                  
                  
                  $
                  173,886Book
      value
                  
                  
                  173,886
                  
                  
                  
                  173,886Less:
      accumulated depreciation
                  
                  
                  (138,118
                  )
                  
                  
                  (127,830
                  )$
                  35,768
                  
                  
                  $
                  46,056
 
 During
the year ended December 31, 2007, the Company recorded a loss on disposition of
fixed assets of $7,996 due to closing Online’s warehouse in Canada and
terminating the lease.
  5. 
ADVANCES PAYABLE
 
 At March
31, 2008 and December 31, 2007, the Company had advances payable totaling $6,899
and $6,901, respectively, from third parties.  These advances are
non-interest bearing, have no fixed terms of repayment and are
unsecured.  During the year ended December 31, 2007, the Company
reclassified $2,843,138 of advances payable through the issuance of convertible
notes payable.  (Note 7)
  6. 
NOTE PAYABLE
  At March
31, 2008 and December 31, 2007, the Company had a note payable in the amount of
$333,333.  This note is payable on demand, unsecured and bears
interest at 8% per annum.  At March 31, 2008 and December 31, 2007,
$32,888 and $26,240, respectively, in interest had been accrued on this
note.
 
 7. 
CONVERTIBLE NOTES PAYABLE
 
 At March
31, 2008 and December 31, 2007, the Company had convertible notes payable
totaling $4,191,236 and $3,805,208 respectively, including convertible accrued
interest of $245,281 and $175,643 respectively.  These notes are
payable on demand, unsecured, bear interest at 7% and are convertible into
restricted shares of the Company’s common stock at the discretion of the lender
at a conversion price of the lesser of (1) $0.50 per share and (2) a 20%
discount to the closing market price of the Company’s common
stock.   (Note 5)
  9
 MAKEUP.COM
LIMITED
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2008
 (UNAUDITED)
 8. 
DUE TO RELATED PARTIES
  At March
31, 2008 and December 31, 2007, the Company was indebted to one of its directors
in the amount of $9,850.
 
 9.  COMMITMENTS
 
 Commitments
 
 On August
13, 2007, the Company entered into a letter agreement for consulting and
advertising services.  This agreement was for one year, commenced
September 1, 2007 and required a total of $65,795 be paid over a six month
period.   On October 1, 2007, the Company amended this agreement and
agreed to pay a total of $124,895 over a nine month period. The agreement is
cancellable at the option of the Company.
 
 On August
31, 2007, the Company entered into a contract for services, whereby the Company
has agreed to pay up to $116,380 (CDN$115,000) for one year for buyer, customer
care management and administrative services.  The contract can be
cancelled by either party upon thirty days written notice.
 
 At March
31, 2008, the payments under the above agreements are as follows:
 
 For the year ended March
31,
                  
                  Amount2009
                  
                  $
                  58,614
 
 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 March
31, 2008, the minimum future lease payments under our warehouse operating lease
are as follows:
  For the year ended March
31,
                  
                  Amount2009
                  
                  $
                  37,400
  10.  SUBSEQUENT
EVENT
 
 On May 5,
2008, the Company
agreed to convert $3,236,490in convertible notes and accrued interest
into 149,837,498 restricted shares of the Company’s common stock at a price of
$0.0216 per share.  The per share
price of $0.0216 was calculated at a discount of 20% of the market price for the
Company’s stock on May 5, 2008.
  10
  Item
2.  Management’s Discussion and Analysis or Plan of
Operation
 
 FORWARD-LOOKING
STATEMENTS
 
 The
information in this quarterly report on Form 10-Q contains forward-looking
statements.  These forward-looking statements involve risks and
uncertainties, including statements regarding our capital needs, business
strategy and expectations.  Any statements contained herein that are
not statements of historical facts may be deemed to be forward-looking
statements.  In some cases, you can identify forward-looking
statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of
such terms or other comparable terminology.  Actual events or results
may differ materially from those events or results included in the
forward-looking statements.  In evaluating these statements, you
should consider various factors, including the risks, outlined from time to time
in the reports we file with the Securities and Exchange
Commission.  Some, but not all, of these risks include, among other
things:
 
 ·
                our
      inability to obtain the financing we need to continue our
      operations;
 
 ·
                changes
      in regulatory requirements that adversely affect our
    business;
 
 ·
                loss
      of our key personnel;
 
 ·
                loss
      of our relationships with suppliers and strategic partners;
      and
 
 ·
                risks
      over which we have no control, such as a general downturn in the economy
      which may adversely affect discretionary spending by
      consumers.
 
 We do not
intend to update forward-looking statements.  You should refer to and
carefully review the information in future documents we file with the Securities
and Exchange Commission.
 
 GENERAL
  This
discussion and analysis should be read in conjunction with our interim unaudited
consolidated financial statements and related notes included in this Form 10-Q
and the audited consolidated financial statements and related notes thereto
included in our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2007.  The inclusion of supplementary analytical and related
information herein may require us to make estimates and assumptions to enable us
to fairly present, in all material respects, our analysis of trends and
expectations with respect to our results of operations and financial position
taken as a whole.  Actual results may vary from the estimates and
assumptions we make.
  When we
use the words “we”, “us” or “our” in this report, we are referring to Makeup.com
Limited and its subsidiaries, which we sometimes refer to in this report as
“Makeup” and “Online”.
 
 OVERVIEW
  We were
incorporated on July 14, 2003 in the state of Nevada as Tora Technologies Inc.
and are based in Newport Beach, California.  We are in the business of
selling beauty products on our websites, www.makeup.com and
www.discount.makeup.com,
to customers residing in the United States.  Our plans include
expanding our market to other countries such as Canada, Germany and the United
Kingdom over the next few years.  Our ultimate goal is to sell
cosmetics worldwide.
  11
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The reported
financial results and disclosures were determined using the significant
accounting policies, practices and estimates described below.  These
policies, practices and estimates require the Company to make its most difficult
and subjective judgments. Actual results may differ significantly from these
estimates.
  Inventories
  Inventories
are stated at the lower of cost or market under the first-in, first-out
method. At March 31, 2008 and December 31, 2007, we wrote-off $0 and
$34,203 respectively, in slow moving and obsolete inventory.  Our
March 31, 2008 inventory includes a $10,000 reserve for slow moving or obsolete
inventory.
  We have
arrangements with certain drop shippers whereby we do not purchase or pay for
merchandise until the merchandise is ultimately sold and shipped to our
customer.
  Concentration
of Credit Risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash, trade accounts receivable and
payables.
  At March
31, 2008 and December 31, 2007, we had approximately $21,000 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 March
31, 2008 and December 31, 2007 we had $6,145 and $1,898, respectively in trade
accounts receivable from major credit card companies.
 
 During
the three month period ended March 31, 2008, purchases from one vendor totaled
approximately $56,000 or 32% of net sales.  The product purchased from
this vendor was a one time special purchase; we do not plan on purchasing this
quantity of product from this vendor again.  During the year ended
December 31, 2007, all of the Company’s purchases from vendors were less than
10% of net sales. Because our industry is based on personal taste and
fashion trends, the popularity of brands or products within a brand rises and
falls.  As a result, we expect our vendors, and the amount of product
we purchase from them, to change frequently.
 
 Advertising
 
 Advertising
costs consist primarily of online advertising including affiliate marketing
program, e-mail campaigns and other initiatives.  We pay commissions
to participants in our affiliate marketing program when their customer referrals
result in product sales.
 
 Advertising
expenses also consist of public relations expenditures to third parties, and to
a lesser extent, traditional advertising such as advertisements in
magazines.
 
 Advertising
and other promotional costs are expensed as incurred to selling, general and
administrative expenses and amounted to approximately $57,428 and $50,330 for
the three months ended March 31, 2008 and 2007, respectively.
  12
  We
include some inventory items in our free gift bags.  The cost of these
items is charged to advertising and promotion expense at the time the gift bags
are committed as promotional items.  During the three months ended
March 31, 2008 and 2007 $2,760 and $0 respectively, in free gift bags were
expensed to advertising and promotion.
  Revenue
Recognition
  We
recognize revenue when goods are shipped to the customer and upon transfer of
title and risk of loss of the related products to the
customer.  Revenue is recorded net of allowances for customer sales
incentives and rebates.  The allowances are accrued concurrently with
the recognition of revenue and are determined based primarily upon customer
arrangements and historical data.  We account for these incentives in
accordance with Emerging Issues Task Force (EITF) No. 01-09 (EITF 01-09), Accounting for Consideration Given
by a Vendor to a Customer or a Reseller of the Vendor’s Products,which
affirms that the payment of consideration by a vendor to a customer should not
be recognized as an asset of the vendor and further affirms that the payment
should be accounted for as a reduction of revenues.
  We
account for customer incentives for free products and services in accordance
with EITF 00-21, Accounting
for Revenue Arrangements with Multiple Deliverables,which affirms that
items to be delivered at a future date should be deferred and recorded as a
current liability.
 
 Product
returns are estimated in accordance with SFAS No. 48 (SFAS 48), Revenue Recognition when Right of
Return Exists.  We also ensure that the following other
criteria in SFAS 48 have been met prior to recognition of revenue:
  ·
                the
      price is fixed or determinable;·
                the
      customer is obligated to pay and there are no contingencies surrounding
      the obligation or the payment;
  ·
                the
      customer’s obligation would not change in the event of theft or damage to
      the product;·
                the
      customer has economic substance;
  ·
                the
      amount of returns can be reasonably estimated; and·
                we
      do not have significant obligations for future performance in order to
      bring about resale of the product by the
  customer.
  We have
inventory risk, therefore we do not act as an agent and recognize revenues on a
gross basis, in accordance with EITF 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent.
  We also
offer coupons for replacement orders and discount programs.  Discounts
and coupons for “free products” are only redeemable on purchases made or on
products offered on our websites. Discounts are included as a reduction in sales
whereas coupons for free products are recorded in cost of sales.
 
 Amounts
billed to a customer in a sale transaction related to shipping are classified as
revenue.
 
 During
the three months ended March 31, 2008 and 2007 our purchase discounts were
$15,277 and $4,139, respectively, that as a percentage of sales was an increase
of 5%.  This increase was primarily due to promotional discounts
offered during the first quarter of 2008.
  During
the three months ended March 31, 2008 and 2007 our product returns amounted to
$4,076 and $4,249 respectively, which as a percentage of sales was a decrease of
2%.
  13
  Cost
of Sales
  Cost of
sales includes freight-in, the actual cost of merchandise sold, cost of shipping
billed to customers, inventory shrinkage, obsolete inventory write-offs, and
warehouse inventory receiving costs.
  Shipping
costs in excess of those billed to customers and handling costs are included in
our selling, general and administrative costs.  During the three
months ended March 31, 2008 and 2007 we had excess shipping costs of $15,504 and
$21,927.  We did not have handling costs until we moved our warehouse
in March of 2007.  Our handling costs for the three months ended March
31, 2008 and from March 7, 2007, the date of our warehouse move, to March 31,
2007 were $11,753 and $1,368, respectively.
  Recent
Accounting Pronouncements
  Refer to
Note 2 of our Notes to Consolidated Financial Statements included in our Form
10-KSB for the fiscal year ended December 31, 2007 for a discussion of recent
accounting standards and pronouncements.  Accounting pronouncements
that have been issued or adopted subsequent to December 31, 2007 are described
below:
  In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157 (SFAS 157),
Fair Value
Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value measures required
under other accounting pronouncements, but does not change existing guidance as
to whether or not an instrument is carried at fair value. SFAS 157 was effective
for us on January 1, 2008. The adoption of SFAS 157 did not have a
significant impact on our consolidated financial statements.
  In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be recognized in earnings at each subsequent reporting date. SFAS 159 was
effective for us on January 1, 2008. The adoption of SFAS 159 did not have
a material impact on our consolidated financial statements as  we did
not elect the fair value option for any of our financial assets or
liabilities.
  In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. As the related goods are delivered or the services are performed,
or when the goods or services are no longer expected to be provided, the
deferred amounts would be recognized as an expense. This Issue is effective for
financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective
date.  EITF 07-03 was effective for us on January 1,
2008.  The pronouncement did not have a material effect on our
consolidated financial statements.
  In
February 2008 the FASB staff issued Staff Position No. 157-2 (FSP FAS 157-2) Effectivedate of FASB Statement No.157.FSP FAS 157-2 delayed
the effective date of SFAS 157 for non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis.  The provisions of FSP
FAS 157-2 will be effective for us on January 1, 2009.
  14
  In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for us
on January 1, 2009.  We are currently evaluating the impact that
adoption of SFAS 161 may have our financial statement
disclosures.
 
 OUR
OBJECTIVES AND AREAS OF FOCUS
 
 During
the three months ended March 31, 2008, we continued with the implementation of
many new and different marketing and website initiatives with the ultimate goal
of increasing sales.  These initiatives included:
  (a)
                Providing
      free gifts and samples with every order,(b)
                Implementing
      a makeup.com online forum,
 (c)
                Continuing
      to improve the capacity and speed of order fulfillment and implement cost
      saving shipping methods,(d)
                Implementing
      Pay Pal and Google checkout payment processing
  systems,
 (e)
                Expanding
      our website layout and design to allow for new marketing techniques,
      improved navigation, and additional product offerings,(f)
                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,
 (g)
                Implementing
      a new discount website called discount.makeup.com and(h)
                Expanding
      the number of brands we offer; we now offer in excess of 70
      brands.
  As part
of our continuing efforts to improve our websites, on August 13, 2007, we signed
a one year agreement with LifeTips, Inc. Under the terms of the contract
LifeTips agreed to design and deliver a fully functional tips and advice center
for our websites as well as on the LifeTips website under the sub-domain www.make-up.lifetips.com.  The
agreement was for one year, commencing September 1, 2007 and required a payment
of $65,795 to be made over a six month period.  On October 1, 2007,
this agreement was amended to include computer consulting work in the areas of
search engine optimization, content and link strategy to improve visibility,
brand recognition, conversion rates and sales.  As a result of these
changes we agreed to pay $124,895 to LifeTips over a nine month
period.  At March 31, 2008 we had paid or had payable $112,897 on this
contract. The agreement is cancellable at our option.
  On August
31, 2007, we entered into a contract for services with Savvy Office Solutions,
whereby we agreed to pay up to$111,878(CDN$115,000) for one year of buyer, customer care management and
administrative services.  This contract can be cancelled by either
party upon thirty days written notice.
 
 We have
been focusing on refining our customer service policies, enhancing our existing
website, and improving our product selection with the goal of increasing sales
and the overall customer experience by:
  (a)
                  Continuing
      to source and engage new boutique brands (BOD, Besame, NVEY
      Eco),(b)
                  Continuing
      to work with existing vendors to update and enhance brand pages with brand
      background, articles, press, product information, and exclusive tips and
      tricks,
 (c)
                  Continuing
      to work with existing vendors to secure ongoing gift with purchase and
      sampling program participation,(d)
                  Participating
      in new product launches from existing brands in order to maintain and
      ensure the best and most current ongoing product mix on our
      websites,
 (e)
                  Attempting
      to improve existing vendor rapport through regular contact, collaboration,
      and reporting,(f)
                  Researching
      market trends and emerging brands
and,
 (g)
                  Revamping
      the returns policy to disallow returns of opened and/or used products in
      an effort to cut down on costs and reduce return
    rates.
  15
  As a
result of these efforts, for the three months ended March 31, 2008 our sales
increased to $176,045, an increase of $66,451 or 61%, compared to $109,594 at
March 31, 2007.
 
 In order
to offer a wider range of products and easier website navigation, during 2007,
we launched a separate website for our classic brand products. Our boutique
brands will remain on the current makeup.com website,
whereas our classic brands are now offered on discount.makeup.com.  This
change should
improvecustomer website navigation, brand recognition, our relationship
with vendors, and allow for additional flexibility with shipping and promotional
offers.
 
 During
2008 we will continue to focus our attention on increasing sales. We hope to
accomplish this by implementing the following:
  (a)
                    Brand
      expansion – We plan to continue expanding our line of boutique products,
      top of the line products and the most sought after
      brands.(b)
                    Continuing
      to work with existing vendors to update and enhance brand pages with brand
      background, articles, press, product information, and exclusive tips and
      tricks,
 (c)
                    Samples
      – We plan to continue to include samples in each order to provide
      customers with an opportunity to experience new
      brands.(d)
                    Gift
      with purchase – We plan to continue to offer limited edition promotional
      gifts with customer
purchases.
 (e)
                    One-stop
      beauty shopping destination –We continually monitor consumer demand and
      changing tastes in our quest to meet our customer’s beauty regimen
      expectations,.(f)
                    Beauty
      related information – Through our contract with LifeTips, we plan to
      continue adding both beauty tips and beauty article content on our website
      under our Beauty Tips section. This information is targeted as a value
      added proposition as well as a marketing
    strategy.
 (g)
                    Click
      advertising - We plan to test and implement a Google AdSense program
      within the Beauty Tips section of the website. The Google AdSense program
      allows text and banner advertising to be integrated into content on a
      given page. We will receive revenue when an ad is
      clicked.
 In an
effort to expand and retain our current customer base we intend to continue to
implement and expand marketing, branding and customer loyalty programs, such
as:
  (a)
                Offering
      gift certificates,(b)
                Introducing
      customer incentive/loyalty programs to reward our customers for new
      referrals as well as current
purchases,
 (c)
                Creating
      a customer ‘wish list’ (“gift registry”),(d)
                Introducing
      value added contents over and above our current beauty tips section,
      and
 (e)
                Offering
      more shipping options.
 
 Our sales
are directly related to traffic to our websites and the ability to convert such
traffic to sales.  At March 31, 2008 and 2007, our paid conversion
rates were 2.14% and 1.36% respectively.  At March 31, 2008 and 2007,
our conversion rates for all traffic and sales on our websites were 0.81% and
0.56%, respectively.  Our promotional plans and programs, which
include free and discounted shipping charges for large orders, product discounts
of up to 50%, free gifts with purchases, a no hassle return policy, and customer
coupons and credits, are designed to increase sales.  As a result of
these programs, during the first quarter of 2008 we were able to increase sales,
and more importantly, increase the size of the average sales order, from $54.85
for the three months ended March 31, 2007 to $59.27 for the three months ended
March 31, 2008.  Additionally, we continue to perform market research
to gain a better understanding of trends.  This research will enable
us to determine the optimum quantity and best mix of products to
inventory.  Once we have determined our optimum product mix we expect
to increase our inventory turnover and reduce write-offs due to slow moving and
obsolete inventory.  This may also result in less reliance on the
promotional plans and programs we now depend on to increase our sales, thus
increasing the dollar amount of net sales.
  16
 
 Over the
next year we intend to remain focused on growth, maintenance, and increasing
sales and the overall customer experience by:
  a)
                Maintaining
      ongoing relationships with existing
vendors,
 b)
                Specifically
      targeting  key cornerstone brands that we have determined will have a
      significant impact on our sales,
 c)
                Based
      on the high customer demand for natural, organic and mineral based
      products, continuing to source out and develop relationships with new
      boutique brands in the natural, organic and mineral
      makeup niches,
 d)
                Researching
      appropriate brand additions to increase choice in the color cosmetics
      segment of our websites,
 e)
                Coordinating
      with new and existing brands to facilitate expansion of our existing
      customer base,
 f)
                Continuing
      to work on effective merchandising techniques and brand development on our
      websites,
 g)
                Researching related
      niche expansion areas (natural additions to a beauty site) that may
      have the potential to both increase sales and add to customer
      satisfaction,
 h)
                Continuing
      to monitor inventory levels to ensure product is being sold within
      freshness time frames, and creating targeted promotions to sell slow
      moving product, and
 i)
                Continuing
      to ensure that customers are satisfied with their overall experience on
      our websites as a one-stop shopping destination for beauty
      products.
 
 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 $4.1 million from inception to March 31, 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.
 
 OPERATIONS
REVIEW
 
 For the
three month period ended March 31, 2008, we had a net loss of
$375,346.  As of March 31, 2008, our current assets consisted of a
cash balance of $21,422, accounts receivable of $6,763, inventory of $397,750,
and prepaid expenses and deposits of $68,277.  When these current
assets are offset against our current obligations of $349,100 in accounts
payable, $9,769 in accrued liabilities, $14,000 in accrued advertising fees,
$45,240 in accrued consulting fees, $51,884 in accrued professional fees, $6,899
in advances payable, a note payable on demand in the amount of $366,221
including accrued interest of $32,888, convertible notes payable on demand in
the amount of $4,191,236 including accrued interest of $245,281, $9,850 due to
related parties and $568 in deferred rent, we are left with a working capital
deficit of $4,550,555.
  17
 
 While our
cash position as of the date of this report is inadequate to satisfy our working
capital needs, over the next twelve months we anticipate that our expenditures
will stabilize because we have completed our warehouse move, decreased our
shipping costs, cleared out the majority of our slow moving inventory and
increased our free shipping charge threshold from $40 to
$60.
 
 Over the
next twelve months we expect sales to increase in light of our current and
proposed marketing initiatives.  Our marketing plans focus on
increasing traffic to our websites and on programs designed to encourage
customers to return to our websites.  Our marketing plans include
improving all aspects of customer service, including more delivery options,
improved product selection and availability, expanded product and beauty tips
information, improved ease in web site navigation, gift bags with purchases and
customer loyalty programs. In order to offer a wider range of products and
easier website navigation, during 2007 we launched a separate website, www.discount.makeup.com,
for the sale of our classic brands. Moving the classic brands from the
makeup.com website has enabled us to acquire a wider range of products directly
from manufacturers as well as to maximize discounts from suppliers. We plan on
continuing to increase our boutique product lines because these products have a
higher gross margin and are not as readily available to consumers as the classic
brands.
 
 Over the
next twelve months we expect our gross margin to increase because we will not
have the logistical and technical problems that arose during our warehouse move,
we expect our sales to continue to grow at a steady rate and we do not
anticipate having to manage a significant amount of slow moving or obsolete
inventory. During the first quarter of 2008 our gross profit as a
percentage of sales increased by 9% from 29% for the three months ended March
31, 2007 to 38% for the three months ended March 31, 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.
  Offline
marketing plans include paid and co-op magazine advertising, television
advertising, and sweepstakes. On January 16, 2007 we signed a contract with PTG
Studios for Television advertising with the Great Taste television show which
provides national coverage on E1 Entertainment and Style Channels.  We
anticipate this television advertisement will run later this year.
 
 Online
marketing plans include pay-per-click and cost-per-acquisition adverting with
Google, Yahoo/Overture, Yahoo Paid Inclusion, MSN, and MSN Shopping. Interactive
marketing campaigns are planned for social networking sites such as Facebook. We
plan to continue our affiliate programs with companies such as Commission
Junction. We also plan to explore cross-promotional advertising opportunities
with online websites in the beauty and fashion industry.
  18
 
 While we
focus on the continual growth and development of our customer base and expansion
of our product offerings, we expect our web based cosmetic revenues will be
insufficient to satisfy our operational and working capital
requirements.  In order to meet our working capital requirements over
the next year, we plan to continue to raise funds through private loans and
private placements of our debt or equity securities, and to seek partnerships
with larger, well-known suppliers.
 
 On May 5,
2008, we agreedto convert $3,236,490 in convertible notes and accrued interest into
149,837,498 restricted shares of our common stock at a price of $0.0216 per
share.  The price per share of $0.0216 was calculated at a discount of
20% of the market price for our stock on May 5, 2008.  The issuance of
these additional shares and any other additional shares will result in dilution
to our existing shareholders.
  We are
not involved in conducting any research and development activities.
 
 Related-Party
Transactions
 
 At March
31, 2008, we were indebted to a director in the amount of $9,850 for expenses he
incurred on our behalf.  Other than the foregoing, we do not have any
loans or advances payable to any of our directors or officers and we do not have
any commitments in place to pay administrative or directors’ fees to any related
parties. To date our directors and officers have performed their services
without compensation and to date we have not determined how our officers will be
compensated.
 
 Other
Trends, Events or Uncertainties that may Impact Results of Operations or
Liquidity
 
 We sell
products that are purchased with discretionary income.  Due to the
downturn in the U.S. economy, consumers may have less discretionary income to
spend on non-essential items.  The economic downturn may also make it
harder for us to raise capital if we need it.  Therefore, in the
future, the economic downturn may have a material adverse effect on our ability
to raise operating capital as well as on our revenues and results of
operations.  Other than as discussed in this quarterly report, we know
of no other trends, events or uncertainties that have or are reasonably likely
to have a material impact on our short-term or long-term liquidity.
 
 COMPARISON
OF THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 
 Overall
Results of Operations
 
 During
the three months ended March 31, 2008, we incurred a net loss of $375,346 which
is an increase of $116,771 from our net loss of $258,575 for the three months
ended March 31, 2007.
  The
increased loss was primarily due to increases in administrative expenses,
consulting fees and interest on our convertible debt.
 
 Revenues
 
 Our sales
increased by $66,451 or 61% from $109,594 for the three months ended March 31,
2007 to $176,045 for the three months ended March 31, 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.
  19
 
 We expect
our revenues to steadily increase over the next year due to increased customer
traffic through search engine optimization, entering into strategic advertising
contracts with companies such as LifeTips, increases in our web related
advertising, offering a broader range of products and product lines,
implementing customer purchasing incentives, adding informative beauty tips and
bi-monthly customer newsletters, moving our classic brands to the www.discount.makeup.com
website and offering customers a wider variety of payment
options.  However, in order to become profitable we will need to
exercise tight control over our expenses, which have continued to rise along
with our revenues.  We cannot guarantee that our efforts to control
our expenses will be successful.
 
 Cost
of Goods Sold and Gross Profit
 
 Our cost
of goods sold increased by $31,192 or 40% from $78,005 for the three months
ended March 31, 2007 to $109,197 for the three months ended March 31, 2008. The
increase in cost of goods sold was primarily attributable to the 61% increase in
our sales
 
 Our gross
profit increased by $35,259 or 112% from $31,589 for the three months ended
March 31, 2007 to $66,848 for the three months ended March 31, 2008. This
increase in gross profit was due to the increase in 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)
                eliminating
      or reducing costly incentive programs such as free or reduced shipping
      costs,(2)
                using
      alternative shipping options to reduce shipping
  costs,
 (3)
                increasing
      market share by increasing traffic to our websites,(4)
                determining
      optimum product mix in an effort to alleviate slow moving and
      obsolete  inventory problems and to maximize inventory turns,
      and
 (5)
                increasingproduct sourcing directly from the manufacturers in an effort to
      obtain more competitive purchase
pricing.
  Operating
Expenses
 
 Our
operating expenses increased by $152,576 or 72% from $213,332 for the three
months ended March 31, 2007 to $365,908 for the three months ended March 31,
2008.  This increase was primarily due to increases in the following
categories: $71,000 in administrative fees due to regulatory compliance and
accounting services; $64,000 in consulting fees primarily due to our contracts
with LifeTips and Savvy; $8,000 in professional fees associated with regulatory
compliance, $7,000 in advertising and promotion due to the free gift bags
created for customer promotions, advertising and promotion costs associated with
advertising products on our website and programs aimed at increasing traffic to
our websites.  Our warehouse rent, warehouse handling fees and
warehousing expenses increased by a total of $21,000 because all of our
warehousing rent and expenses for the three months ended March 31, 2008 were
reclassified to discontinued operations when we closed down
Online.  These increases were offset by decreases of approximately
$10,000 in depreciation because the majority of our fixed assets have been fully
depreciated, $7,000 in travel which was higher in the prior quarter because of
our warehouse relocation and $6,000 in delivery costs over collection due to the
move of our warehouse to Washington state.
 
 Interest
Expense
 
 During
the three months ended March 31, 2008 and 2007 our interest expense was $76,286
and $6,575 respectively.  The increase of $69,711 was due to the
issuance of the convertible notes payable.
 
 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
loss of $70,257 for the three months ended March 31, 2007, to net loss from
discontinued operations.
  20
 
 OFF
BALANCE SHEET ARRANGEMENTS
 
 We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our consolidated financial condition, changes in
consolidated financial condition, revenue or expenses, results of operations,
liquidity, capital expenditures or capital resources that would be material to
investors.  We do not have any non-consolidated, special-purpose
entities.
 
 LIQUIDITY,
CAPITAL RESOURCES AND FINANCIAL POSITION
 
 At March
31, 2008, we had a cash balance of $21,422 and negative cash flows from
operations of $340,365.  During the three months ended March 31, 2008,
we primarily funded our operations through sales and convertible notes
payable.
  The notes
to our consolidated financial statements at March 31, 2008 disclose our
uncertain ability to continue as a going concern.  We have
insufficient revenues to cover our expenses while we are establishing and
expanding our customer and product base and as a result have accumulated a
deficit (including accumulated other comprehensive loss) of $4,156,284 since
inception.  As of March 31, 2008 we had $5,044,767 in current
liabilities.  When our current liabilities are offset against our
current assets of $494,211 we are left with a working capital deficit of
$4,550,555.  While we have successfully generated sufficient working
capital and liquidity through web sales, advances, a note payable and
convertible notes payable to the date of this filing and we believe that we can
continue to do so for the next year, there are no assurances that we will
succeed in developing our business plan and achieving a profitable level of
operations sufficient to meet our ongoing cash needs.
 
 The
following table summarizes our sources and uses of cash for the three months
ended:
 
 March 31,Sources and Uses of
      Cash
                
                2008
                
                
                2007Net
      cash used in operating activities
                
                $
                (340,365
                )
                
                $
                (273,990
                )Net
      cash used in investing activities
                
                
                -
                
                
                
                (12,477
                )Net
      cash provided by financing activities
                
                
                316,388
                
                
                
                295,836Effects
      of foreign currency exchange
                
                
                2,956
                
                
                
                3,474Net
      (decrease) increase in cash
                
                $
                (21,021
                )
                
                $
                12,843
 
 Net
Cash Used In Operating Activities
 
 Net cash
used in operating activities during the three months ended March 31, 2008 was
$340,365.  We increased our inventory by $56,854, had an increase in
accounts receivable of $4,260, spent an additional $45,986 on prepaid expenses
and deposits, paid down our professional fees by $24,604, and our deferred
assets decreased by $2,084 due to our warehouse lease.  These uses of
cash were funded through increases of $45,528 in accounts payable, $1,418 in
accrued liabilities, $5,009 in accrued advertising fees, $30,240 in accrued
consulting fees, $6,648 in interest accrued on the note payable, $69,638 in
interest accrued on our convertible notes payable and depreciation in the amount
of $10,288.
 
 Net
Cash From Investing Activities
 
 During
the three months ended March 31, 2008, we did not have any investing
activities.
  21
 
 Net
Cash Provided By Financing Activities
 
 During
the three months ended March 31, 2008, we received cash of $316,390 and issued
convertible notes payable in exchange for this cash.
 
 CONTINGENCIES
AND COMMITMENTS
 
 Contractual
Obligations
 
 We had no
contingencies at March 31, 2008. Our long term contractual obligations and
commitments are a lease commitment with our warehouse in Sumner, Washington; a
letter agreement for consulting and advertising with LifeTips, Inc; and a
consulting contract with Savvy Office Solutions for customer care management and
administrative services. These contractual obligations and commitments are
summarized in the table below.
 
 We have
not included our note payable or convertible notes payable in our contractual
obligation table because the note payable and convertible notes payable are due
on demand and we do not know when they will be repaid.  We have not
included advances payable in the following table because these liabilities have
no fixed term of repayment.
 
 The
following table contains supplemental information regarding total contractual
obligations and commitments as of March 31, 2008:
 
 Payments
      due by periodTotal
                
                
                Less
      than
                  1
      year
                
                
                1-3
                  years
                
                
                3-5
                  years
                
                
                More
      than
                  5
      yearsLease
      commitments
                
                $
                37,400
                
                
                $
                37,400
                
                
                $
                0
                
                
                $
                0
                
                
                $
                0Letter
      agreement
                
                $
                11,998
                
                
                $
                11,998
                
                
                $
                0
                
                
                $
                0
                
                
                $
                0Contract
      for services
                
                $
                46,616
                
                
                $
                46,616
                
                
                $
                0
                
                
                $
                0
                
                
                $
                0Total
                
                $
                96,014
                
                
                $
                96,014
                
                
                $
                0
                
                
                $
                0
                
                
                $
                0
 
 INTERNAL
AND EXTERNAL SOURCES OF LIQUIDITY
 
 We have
funded our operations principally from the sale of cosmetics on our web site,
through advances payable, a note payable and convertible notes
payable.
 
 FOREIGN
EXCHANGE
 
 We are
subject to foreign exchange risk for sales and purchases denominated in foreign
currencies.  Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.  We do not believe that we have any material
risk due to foreign currency exchange because we prepay for the majority of our
inventory that is denominated in a foreign currency and because all of our sales
are made in United States dollars.
 
 Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.
 
 As a
smaller reporting company, we are not required to include this
information.
  22
 
 Item
4.  Controls and Procedures.
 
 Disclosure
Controls and Procedures
 
 Our chief
executive officer and our chief financial officer, have evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined
in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the
“Exchange Act”)) as of the end of the period covered by this quarterly report
(the “Evaluation Date”).  Based on such evaluation, our chief
executive officer and our chief financial officer have concluded that, as of the
Evaluation Date, our disclosure controls and procedures 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.
 
 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.
   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.
 
 Not
applicable
 
 Item 5. Other Information
 
 Not
applicable
  23
 
 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.
  24
 
 SIGNATURES
 
 In
accordance with the requirements of the Securities Exchange Act of 1934,
Makeup.com Limited has caused this report to be signed on its behalf by the
undersigned duly authorized person.
  MAKEUP.COM
      LIMITEDDate:  May
      15, 2008
                  By:
                  /s/ Robert
      E. RookRobert
      E. Rook
                    Chief
      Executive Officerand
      President