UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




(Mark
One)




x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
quarter ended November 30, 2008




o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
transition period from _____________ to ____________




Commission
File Number:







SEW
CAL LOGO, INC.


(Exact
name of Registrant as specified in charter)




Nevada
              46-0495298(State
      or other jurisdiction of
                incorporation
      or organization)
              (I.R.S.
      Employer I.D. No.)




207 W. 138th Street, Los Angeles,
California 90061


(Address
of principal executive offices) (Zip Code)




Issuer's
telephone number, including area code: (310) 352-3300









(Former
name, former address and former fiscal year, if changed since last
report)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.




YesxNoo




Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.  See the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.




Large accelerated
      filer
            o
            
            Accelerated
      filer
            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 o  No x




APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY


PROCEEDINGS DURING THE
PRECEDING FIVE YEARS




Indicate by check mark
whether the registrant has filed all documents and reports required to be filed
by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.




Yes o  No o




APPLICABLE ONLY TO
CORPORATE ISSUERS:




Indicate the number of
shares outstanding of each of the issuer's classes of common stock, as of the
last practicable date.




At
November 30, 2008, there were 188,432,638 shares of the registrant's Common
Stock outstanding and 2,500,000 shares of Series A Preferred Stock
outstanding.




1




Index
              Page
      NumberPART
      I
              FINANCIAL
      INFORMATION
              3ITEM
      1.
              Financial
      Statements
              3


Report
      of Independent Registered Public Accountant
                      4Consolidated
      Balance Sheets as of November 30,
      2008 (Unaudited) and August 31, 2008
                      5Consolidated
      Statements of Operations (Unaudited) for the three months
      ended November 30, 2008 and the year ended August 31,
      2008
                      6Consolidated
      Statements of Stockholders' Equity (Unaudited) cumulative from August
      31, 2005 to November 30, 2008
                      7Consolidated
      Statements of Cash Flows (Unaudited) for the three months
      ended November 30, 2008 and the year ended August 31,
      2008
                      8Notes
      to Financial Statements
                      9ITEM
      2.
                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      17ITEM
      3.
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      19ITEM
      4T.
                      Controls
      and Procedures
                      19PART
      II
                      OTHER
      INFORMATION
                      20ITEM
      1.
                      Legal
      Proceedings
                      20ITEM
      1A.
                      Risk
      Factors
                      20ITEM
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      20ITEM
      3.
                      Defaults
      Upon Senior Securities
                      20ITEM
      4.
                      Submission
      of Matters to Vote of Security Holders
                      20ITEM
      5.
                      Other
      Information
                      20ITEM
      6.
                      Exhibits
                      21SIGNATURES
                      
                      21









2






PART
I




ITEM
1. FINANCIAL STATEMENTS




The
financial statements included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. However, in the opinion of management, all
adjustments (which include only normal recurring accruals) necessary to present
fairly the financial position and results of operations for the periods
presented have been made. The results for interim periods are not necessarily
indicative of trends or of results to be expected for the full year. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's most recent registration statement
on Form SB-2 as amended.






3


MOORE
& ASSOCIATES, CHARTERED
 ACCOUNTANTS AND
ADVISORS
 PCAOB
REGISTERED
  
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  
 To the
Board of Directors
 Sew Cal
Logo, Inc.
 
 
 We have
reviewed the accompanying condensed consolidated balance sheet of Sew Cal Logo,
Inc. as of November 30, 2008, and the related statements of operations,
stockholders’ equity (deficit), and cash flows for the three-month periods ended
November 30, 2008 and 2007. These interim financial statements are the
responsibility of the Corporation’s management.
 
 We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  A review of interim
financial information consists of principally applying analytical procedures and
making inquiries of persons responsible for the financials and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.  Accordingly, we
do not express such an opinion.
 
 Based on
our reviews, we are not aware of any material modifications that should be made
to such condensed consolidated financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
 
 We have
previously audited, in accordance with standards of the Public Company
Accounting Oversight Board (United States), the balance sheet of Sew Cal Logo,
Inc. as of August 31, 2008, and the related consolidated statements of income,
stockholders’ equity and cash flows for the year then ended (not presented
herein); and in our report dated November 25, 200, we expressed a qualified
opinion with a going concern paragraph on those financial
statements.  In our opinion, the information set forth in the
accompanying balance sheet as of November 30, 2008 is fairly stated, in all
material respects, in relations to the balance sheet from which it has been
derived.
 
 /s/
Moore & Associates, Chartered
 Moore
& Associates, Chartered
 Las
Vegas, Nevada
 January
19, 2009
  
   2675 S. JONES BLVD. SUITE 109, LAS VEGAS, NEVADA 89146
(702) 253-7499 Fax: (702)253-7501
  4
  SEW
      CAL LOGO, INC.BALANCE SHEETSNovember
      30,
                                    
                                    
                                    August
      31,2008
                                    
                                    
                                    2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                                    
                                    $
                                    11,523
                                    
                                    
                                    $
                                    15,716Accounts
      Receivable, net
                                    
                                    
                                    141,795
                                    
                                    
                                    
                                    216,108Inventory
                                    
                                    
                                    70,902
                                    
                                    
                                    
                                    70,902Prepaid
      Expenses
                                    
                                    
                                    2,200
                                    
                                    
                                    
                                    2,200Total
      current assets
                                    
                                    
                                    226,420
                                    
                                    
                                    
                                    304,926Equipment
      and machinery, net
                                    
                                    
                                    123,923
                                    
                                    
                                    
                                    141,977Security
      Deposits
                                    
                                    
                                    6,000
                                    
                                    
                                    
                                    6,000Total
      assets
                                    
                                    $
                                    356,343
                                    
                                    
                                    $
                                    452,903LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
                                    
                                    
                                    122,460
                                    
                                    
                                    
                                    98,693Note
      Payable-shareholder
                                    
                                    
                                    353,884
                                    
                                    
                                    
                                    353,884Other
      current liabilities
                                    
                                    
                                    443,079
                                    
                                    
                                    
                                    443,220Current
      Poriton of Long Term Debt
                                    
                                    
                                    139,780
                                    
                                    
                                    
                                    158,290Total
      current liabilities
                                    
                                    
                                    1,059,203
                                    
                                    
                                    
                                    1,054,087Long-term
      liabilitiesNote
      Payable-related party
                                    
                                    
                                    21,552
                                    
                                    
                                    
                                    25,135Convertible
      Debentures
                                    
                                    
                                    2,639,361
                                    
                                    
                                    
                                    2,655,975Discount
      on Convertible Debentures
                                    
                                    
                                    (646,899
                                    )
                                    
                                    
                                    (646,899
                                    )Equipment
      Loans
                                    
                                    
                                    8,095
                                    
                                    
                                    
                                    9,101Total
      liabilities
                                    
                                    
                                    3,081,312
                                    
                                    
                                    
                                    3,097,399Stockholders'
      Equity (Deficit)Preferred
      stock, authorized 300,000 shares,Par
      value $0.001, issued and outstanding at11/30/08
      and 8/31/08 is 22,300,000 and 300,000respectively
                                    
                                    
                                    22,300
                                    
                                    
                                    
                                    300Common
      stock, authorized 500,000,000 shares,$0.001
      par value,  issued and outstanding atNovember
      30, 2008 and August 31, 2008 is242,404,741
      and 34,080,702 shares respectively.
                                    
                                    
                                    242,405
                                    
                                    
                                    
                                    143,125Additional
      Paid in Capital
                                    
                                    
                                    4,028,509
                                    
                                    
                                    
                                    4,120,649Stock
      Subscribed
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Accumulated
      Deficit
                                    
                                    
                                    (7,018,183
                                    )
                                    
                                    
                                    (6,908,570
                                    )Total
      stockholders' equity (deficit)
                                    
                                    
                                    (2,724,969
                                    )
                                    
                                    
                                    (2,644,496
                                    )Total
      liabilities and stockholders' equity
                                    
                                    $
                                    356,343
                                    
                                    
                                    $
                                    452,903The
      accompanying notes are an integral part of these
  statements
  5
  SEW
      CAL LOGO, INC.STATEMENTS OF OPERATIONSThree
      MonthsEnded
                              
                              
                              Year
      EndedNovember
      30,
                              
                              
                              August
      31,2008
                              
                              
                              2008Revenue:Sales
      of Caps, Embroidery and Other
                              
                              $
                              354,193
                              
                              
                              $
                              1,886,224Total
      Revenue
                              
                              
                              354,193
                              
                              
                              
                              1,886,224Cost
      of Goods Sold
                              
                              
                              344,200
                              
                              
                              
                              1,594,905Gross
      profit/(loss)
                              
                              
                              9,993
                              
                              
                              
                              291,319Expenses:General
      and Administrative
                              
                              
                              14,639
                              
                              
                              
                              265,462Officer
      and Administrative Compensation
                              
                              
                              3,462
                              
                              
                              
                              164,469Consulting,
      Legal and Accounting
                              
                              
                              8,007
                              
                              
                              
                              187,773Depreciation
                              
                              
                              18,053
                              
                              
                              
                              75,289Rent
                              
                              
                              48,000
                              
                              
                              
                              240,000Total
      expenses
                              
                              
                              92,161
                              
                              
                              
                              932,993Loss
      from Operations
                              
                              
                              (82,168
                              )
                              
                              
                              (641,674
                              )Other
      Income (Expenses)Interest
      (Expense)
                              
                              
                              27,445
                              
                              
                              
                              74,566Total
      other expenses
                              
                              
                              27,445
                              
                              
                              
                              74,566Loss
      before income taxes
                              
                              
                              (109,613
                              )
                              
                              
                              (716,240
                              )Provision
      for income taxes
                              
                              
                              -
                              
                              
                              
                              -Net
      loss
                              
                              $
                              (109,613
                              )
                              
                              $
                              (716,240
                              )Basic
      and Diluted Earnings (Loss) per Share
                              
                              $
                              (0.00
                              )
                              
                              $
                              (0.01
                              )Weighted
      Average Number of Common Shares
                              
                              
                              199,447,735
                              
                              
                              
                              60,889,409The
      accompanying notes are an integral part of these
  statements
  6
  SEW
      CAL LOGO, INC.STATEMENTS
      OF STOCKHOLDERS' EQUITY(
      From Inception to November 30, 2008)Additional
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    TotalPreferred
      Stock
                                    
                                    
                                    Common
      Stock
                                    
                                    
                                    Paid
      in
                                    
                                    
                                    Stock
                                    
                                    
                                    Accumulated
                                    
                                    
                                    Stockholders'Shares
                                    
                                    
                                    Amount
                                    
                                    
                                    Shares
                                    
                                    
                                    Amount
                                    
                                    
                                    Capital
                                    
                                    
                                    Subscribed
                                    
                                    
                                    (Deficit)
                                    
                                    
                                    EquityBalance,
      August 31, 2005
                                    
                                    
                                    234,800
                                    
                                    
                                    $
                                    235
                                    
                                    
                                    
                                    5,176,168
                                    
                                    
                                    $
                                    5,176
                                    
                                    
                                    $
                                    187,517
                                    
                                    
                                    $
                                    36,000
                                    
                                    
                                    $
                                    (673,814
                                    )
                                    
                                    $
                                    (444,886
                                    )Shares
      issued for Servicesat
      $0.15 per share
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    50,000
                                    
                                    
                                    
                                    50
                                    
                                    
                                    
                                    7,450
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,500Fair
      Value of Warrants attached toConvertible
      Debentures
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,081,657
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,081,657Beneficial
      Conversion Feature attached toConvertible
      Debentures
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,500,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,500,000Shares
      issued for Servicesat
      $0.10 per share
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    33,334
                                    
                                    
                                    
                                    33
                                    
                                    
                                    
                                    3,300
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    3,333Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    290,000
                                    
                                    
                                    
                                    290
                                    
                                    
                                    
                                    32,741
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    33,031Net
      Loss for Year
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (2,947,833
                                    )
                                    
                                    
                                    (2,947,833
                                    )Balance,
      August 31, 2006
                                    
                                    
                                    234,800
                                    
                                    
                                    
                                    235
                                    
                                    
                                    
                                    5,549,502
                                    
                                    
                                    
                                    5,549
                                    
                                    
                                    
                                    3,812,665
                                    
                                    
                                    
                                    36,000
                                    
                                    
                                    
                                    (3,621,647
                                    )
                                    
                                    
                                    232,802Preferred
      Shares issued for Services
                                    
                                    
                                    65,200
                                    
                                    
                                    
                                    65
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,891
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,956Common
      Stock Issued for Cash
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    61,000
                                    
                                    
                                    
                                    61
                                    
                                    
                                    
                                    60,939
                                    
                                    
                                    
                                    (36,000
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    25,000Shares
      issued for Services
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    3,500,200
                                    
                                    
                                    
                                    3,501
                                    
                                    
                                    
                                    214,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    217,501Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    24,970,000
                                    
                                    
                                    
                                    24,970
                                    
                                    
                                    
                                    65,482
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    90,452Net
      Income (Loss) for period
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (2,570,683
                                    )
                                    
                                    
                                    (2,570,683
                                    )Balance,
      August 31, 2007
                                    
                                    
                                    300,000
                                    
                                    
                                    
                                    300
                                    
                                    
                                    
                                    34,080,702
                                    
                                    
                                    
                                    34,081
                                    
                                    
                                    
                                    4,154,977
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (6,192,330
                                    )
                                    
                                    
                                    (2,002,972
                                    )Shares
      issued for Services
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    9,150,000
                                    
                                    
                                    
                                    9,150
                                    
                                    
                                    
                                    36,600
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    45,750Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    744,833
                                    
                                    
                                    
                                    745
                                    
                                    
                                    
                                    292
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,037Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    200,000
                                    
                                    
                                    
                                    200
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    200Shares
      issued for Services
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    17,200,000
                                    
                                    
                                    
                                    17,200
                                    
                                    
                                    
                                    (8,450
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,750Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    27,916,000
                                    
                                    
                                    
                                    27,916
                                    
                                    
                                    
                                    (18,411
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    9,505Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    53,833,000
                                    
                                    
                                    
                                    53,833
                                    
                                    
                                    
                                    (44,359
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    9,474Net
      Income (Loss) for period
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (716,240
                                    )
                                    
                                    
                                    (716,240
                                    )Balance,
      August 31, 2008
                                    
                                    
                                    300,000
                                    
                                    
                                    
                                    300
                                    
                                    
                                    
                                    143,124,535
                                    
                                    
                                    
                                    143,125
                                    
                                    
                                    
                                    4,120,649
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (6,908,570
                                    )
                                    
                                    
                                    (1,928,256
                                    )Shares
      issued for Conversion of Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    99,280,206
                                    
                                    
                                    
                                    99,280
                                    
                                    
                                    
                                    (92,140
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,140Shares
      issued for Services
                                    
                                    
                                    22,000,000
                                    
                                    
                                    
                                    22,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    22,000Net
      Income (Loss) for period
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (109,613
                                    )
                                    
                                    
                                    (109,613
                                    )Balance,
      November 30, 2008
                                    
                                    
                                    22,300,000
                                    
                                    
                                    $
                                    22,300
                                    
                                    
                                    
                                    242,404,741
                                    
                                    
                                    $
                                    242,405
                                    
                                    
                                    $
                                    4,028,509
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (7,018,183
                                    )
                                    
                                    $
                                    (2,008,729
                                    )The
      accompanying notes are an integral part of these
  statements
  7


SEW
      CAL LOGO, INC.STATEMENTS OF CASH FLOWSThree
      MonthsEnded
                              
                              
                              Year
      EndedNovember
      30,
                              
                              
                              August
      31,Operating
      Activities:
                              
                              2008
                              
                              
                              2008Net
      income (loss)
                              
                              $
                              (109,613
                              )
                              
                              $
                              (716,240
                              )Adjustments
      to reconcile net income (loss)Depreciation
                              
                              
                              18,054
                              
                              
                              
                              75,289Stock
      issued for services
                              
                              
                              22,000
                              
                              
                              
                              54,500Stock
      issued to convert debt
                              
                              
                              7,140
                              
                              
                              
                              20,216Amortization
      of Discount on Debentures
                              
                              
                              -
                              
                              
                              
                              -Changes
      in Assets and Liabilities(Increase)
      decrease in prepaid expenses
                              
                              
                              -
                              
                              
                              
                              1,600(Increase)
      decrease in inventory
                              
                              
                              -
                              
                              
                              
                              25,973(Increase)
      decrease in security deposits
                              
                              
                              -
                              
                              
                              
                              -(Increase)
      decrease in accounts receivable
                              
                              
                              74,313
                              
                              
                              
                              (74,747
                              )Increase
      (decrease) in accounts payable
                              
                              
                              23,767
                              
                              
                              
                              45,376Increase
      (decrease) in other current liabilities
                              
                              
                              (141
                              )
                              
                              
                              190,590Net
      cash provided by (used in) operating activities
                              
                              
                              35,520
                              
                              
                              
                              (377,443
                              )Investing
      Activities:(Purchases)
      disposal of equipment
                              
                              
                              -
                              
                              
                              
                              -Cash
      (used) in investing activities
                              
                              
                              -
                              
                              
                              
                              -Financing
      Activities:Notes
      Payable
                              
                              
                              (22,093
                              )
                              
                              
                              (90,253
                              )Debentures
      Payable
                              
                              
                              (16,614
                              )
                              
                              
                              324,458Increase/(Decrease)
      in shareholder loan
                              
                              
                              -
                              
                              
                              
                              6,000Repayment
      of loans
                              
                              
                              -
                              
                              
                              
                              -Proceeds
      from equipment loan
                              
                              
                              (1,006
                              )
                              
                              
                              (2,750
                              )Net
      cash provided by (used in) financing activities
                              
                              
                              (39,713
                              )
                              
                              
                              237,455Net
      increase (decrease) in cash and cash equivalents
                              
                              
                              (4,193
                              )
                              
                              
                              (139,988
                              )Cash
      and cash equivalents at beginning of the period
                              
                              
                              15,716
                              
                              
                              
                              155,704Cash
      and cash equivalents at end of the period
                              
                              $
                              11,523
                              
                              
                              $
                              15,716Cash
      Paid For:Interest
                              
                              $
                              27,445
                              
                              
                              $
                              74,566Taxes
                              
                              $
                              -
                              
                              
                              $
                              -Non
      Cash Activities:Stock
      issued for services
                              
                              $
                              22,300
                              
                              
                              $
                              54,500Stock
      issued for convertible debt
                              
                              $
                              7,140
                              
                              
                              $
                              21,996The
      accompanying notes are an integral part of these
  statements
   8
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
  NOTE
1. Summary of Significant Accounting Policies


The
Company
 
 Sew Cal
Logo, Inc. (The Company) was incorporated in the State of California on August
30, 1985 as C J Industries and on February 24, 2004 merged with Calvert
Corporation, a Nevada Corporation which changed its name to Sew Cal Logo,
Inc.  This was a recapitalization accounted for as a stock exchange
reverse merger.
 
 The
Company is a Nevada corporation doing business in Los Angeles,
California.  The Company produces and manufactures custom embroidered
caps, sportswear and related corporate identification apparel.  The
Company provides an in-house, full-service custom design center where original
artwork and logo reproduction for embroidery are available.  The
Company also offers contract embroidery and silk-screening to the manufacturing
and promotional industry.  The Company’s products are sold, primarily
in the United States, to Fortune 500 companies, major motion picture and
television studios, retailers, and local schools and small
businesses.
 
 Use
of Estimates
 
 The
financial statements have been prepared in conformity with accounting principles
generally accepted in the United States, which require management to make
estimates, and assumptions that affect the reported amounts of assets and
liabilities (including disclosure of contingent assets and liabilities) at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ
from those estimates.
 
 Accounts
Receivable
 
 The
Company’s trade accounts receivable and allowance for doubtful accounts are
shown below.
 9/30/08
                              
                              
                              8/31/08Gross
      Trade Accounts Receivable
                              
                              $
                              144,030
                              
                              
                              $
                              218,343Allowance
      for Doubtful Accounts
                              
                              
                              (2,235
                              )
                              
                              
                              (2,235
                              )Accounts
      Receivable, net
                              
                              $
                              141,795
                              
                              
                              $
                              216,108
  Revenue
Recognition
 
 The
Company recognizes revenue from product sales upon shipment, which is the point
in time when risk of loss is transferred to the customer, net of estimated
returns and allowances.
 
 Cash
and Cash equivalents
 
 The
Company maintains its cash in institutions insured by the Federal Deposit
Insurance Corporation (FDIC).  This government corporation insured
balances up to $100,000 through October 13, 2008.  As of October 14,
2008 all non-interest bearing transaction deposit accounts at an FDIC-insured
institution, including all personal and business checking deposit accounts that
do not earn interest, are fully insured for the entire amount in the
deposit account.  This unlimited insurance coverage is temporary and
will remain in effect for participating institutions until December 31,
2009.
 
 All other
deposit accounts at FDIC-insured institutions are insured up to at least
$250,000 per depositor until December 31, 2009.  On January 1, 2010,
FDIC deposit insurance for all deposit accounts, except for certain retirement
accounts, will return to at least $100,000 per depositor.  Insurance
coverage for certain retirement accounts, which include all IRA deposit
accounts, will remain at $250,000 per depositor.
 
 9
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
  NOTE 1. Summary of
Significant Accounting Policies-
continued
 
 Inventory
 
 Inventory
is stated at the lower of cost (first-in, first-out method) or market and
consists of raw material, work-in-process and finished
goods.  Normally the Company ships out to the customer the finished
goods as soon as they are produced and therefore usually does not maintain a
finished goods inventory.  Overhead items are applied on a standard
cost basis to work in process and finished goods.
  9/30/08
                              
                              
                              8/31/08Raw
      Materials and WIP
                              
                              $
                              70,902
                              
                              
                              $
                              70,902Finished
      Goods
                              
                              
                              -
                              
                              
                              
                              -Total
      Inventory
                              
                              $
                              70,902
                              
                              
                              $
                              70,902
  Equipment
and Machinery
 
 Equipment
and machinery are stated at cost.  Depreciation is computed using the
straight-line method over their estimated useful lives ranging from five to
seven years.  Depreciation and amortization expense for the three
months ended November 30, 2008 and the fiscal year ended August 31, 2008
amounted to $18,053 and $79,493 respectively and includes $16,558 and $69,180
for depreciation related to Cost of Goods Sold.  Gains from losses on
sales and disposals are included in the statements of
operations.  Maintenance and repairs are charged to expense as
incurred.  As of November 30, 2008 and August 31, 2008 equipment and
machinery consisted of the following:
  9/30/08
                              
                              
                              8/31/08Equipment
      and Machinery
                              
                              $
                              980,717
                              
                              
                              $
                              942,890Less:Accumulated
      depreciation
                              
                              
                              (856,794
                              )
                              
                              
                              (800,913
                              )$
                              141,977
                              
                              
                              $
                              141,977
  Fiscal
Year
 
 The
Company operates on a fiscal year basis with a year ending August
31.
 
 Earnings
and Loss Per Share Information
  Basic net
earnings (loss) per common share is computed by dividing net earnings (loss)
applicable to common shareholders by the weighted-average number of common
shares outstanding during the period.
  Segment
Reporting
 
 Pursuant
to Statement of Financial Accounting Standards No. 131 (“SFAS No. 131”),
“Disclosure about Segments of an Enterprise and Related Information,” the
Company has determined it operated in only one segment.
   10
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
  NOTE
2.  Going Concern
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern, which contemplates the realization of assets
and the liquidation of liabilities in the normal course of
business.  However, the Company has accumulated a loss $6,908,570
during its years of operation.  This raises substantial doubt about
the Company’s ability to continue as a going concern.  The financial
statements do not include any adjustments that might result from this
uncertainty.
 
 Managements
Plan
 
 Management
continues to seek funding from its shareholders and other qualified investors to
pursue its business plan.  It is in the process of expanding its sales
and distribution capability.
 
 
 NOTE
3.  Note Payable- Related Party
 
 On March
1, 2003, for purposes of working capital, the sole shareholder and spouse made a
$355,384 subordinated loan to the Company.  The Company is obligated
to pay monthly interest only on the subordinated loan during its term at the
rate of 10% per annum (fixed-rate calculated as simple interest).  The
entire principal amount of the loan was originally due on March 1, 2004, and has
continued from that time on a month-to-month basis.  The subordinated
loan, which was consented to by United Commercial Bank and subsequent banks, is
collateralized by the assets of the Company, including but not limited to any
and all equipment owned by the Company, inventory, and outstanding
receivables.  The balance due at November 30, 2008 is
$353,884.
 
 On April
4, 2005 a shareholder loaned the company $100,000 on a five year monthly
installment loan at 5% per annum for the purchase equipment.  Balance
of loan as of November 30, 2008 is $21,255.
 
 
 NOTE
4. Commitments and Contingencies
 
 Long-Term
Debt
 
 On March
25, 2002 the Company entered into an agreement with United Commercial Bank for a
$515,000 SBA loan.  For the years ending August 31, 2003 and 2002, the
unpaid principal balance of the loan was $462,100 and $500,313
respectively.  The monthly required payment varied with an annual
interest rate of 6.75% and a maturity date of March 1, 2012.  This
loan related to the purchase of equipment.
  On August
11, 2004 the Company refinanced this SBA loan with Pacific Liberty
Bank.  As of August 31, 2008 the balance was
$158,290.  Monthly payments are made the 15th of each
month with interest at prime plus 2.5.  Currently the interest rate is
9.5%.  This loan is collateralized by the assets of the corporation
and is in first place before the shareholder loan.
 
 On April
16, 2003 the Company entered an installment sale contract with GMAC for the
purchase of a vehicle.  The total amount financed at signing was
$40,754 that represents the total sale price.  The agreement requires
60 monthly payments of approximately $679 beginning on May 16, 2003 and ending
on April 16, 2008.  This Loan has been paid off.
 
 The
Company has a second installment loan with GMAC on a vehicle with a balance as
of November 30, 2008 of $8,095.
 
 Lease
Commitments
 
 The
Company leases warehouse and office facilities under an operating lease
requiring the Company to pay property taxes and utilities.  In July
2004 this building was purchased by a related party (a corporation controlled by
the officers) and the lease was re-written for 5 years.  Lease expense
is currently $12,500 per month.
 
 The lease
obligation is shown below for the next five years.
  Year
      1
                            
                            
                            Year
      2
                            
                            
                            Year
      3
                            
                            
                            Year
      4
                            
                            
                            Year
      5Office
      /warehouse lease
                            
                            $
                            150,000
                            
                            
                            $
                            150,000
                            
                            
                            $
                            150,000
                            
                            
                            $
                            150,000
                            
                            
                            $
                            150,000
   11
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
  NOTE 4. Commitments and
Contingencies -
continued
 Callable
Convertible Debentures
 
 On
February 16, 2006 the Company executed an equity financing agreement wherein it
will issue an aggregate of $2,000,000 callable convertible debentures in three
segments.  The Company has received a net of
$1,955,000.  The debentures are convertible to common stock at 45%
below the lowest three intra-day trading price during the 20 trading days
immediately preceding conversion.
 
 The
Debentures also carry five-year warrants exercisable at $0.50 per
share.  The aggregate number of warrants to be issued is 2,142,855.
The Company has recorded an expense of $585,343 for the fair value of the
warrants. The value was determined using the Black-Scholes pricing model and
assumes a 5 year maturity, a risk free interest rate of 4.85% and a volatility
of 207%.
 
 The
Company has recorded a discount on the convertible debentures of $2,000,000
which represents the beneficial conversion feature.  During the years
ended August 31, 2007 and 2006 the Company converted $90,452 and $33,031 debt
into stock, respectively.  During the years ended August 31, 2007 and
2006 the Company expensed $983,485 and $565,752 of the recorded discount as
interest expense, respectively.  The Company will amortize the
remaining discount over the remaining life of the debentures. The discount was
determined using the Black-Scholes pricing model and assumes a 2 year maturity,
a risk free interest rate of 4.85% and a volatility of 207%.
 
 On July
31, 2006 the Company executed an equity financing agreement wherein it has
issued $500,000 in callable convertible debentures and 20,000,000 seven year
warrants exercisable at $0.05 per share.  The debentures are
convertible to common stock at 40% below the lowest three intra-day trading
price during the 20 trading days immediately preceding
conversion.  The aggregate number of shares to possibly be issued at
100% conversion is 69,444,444 shares.
  Calculated
using a current 3 day trading average price per share of $0.012 per share less
40% is $0.0072 per share divided into $500,000 equals 69,444,444
shares.
 
 During
the year ended August 31, 2006, the Company recorded an expense of $496,314 for
the fair value of the warrants. The value was determined using the Black-Scholes
pricing model and assumes a 5 year maturity, a risk free interest rate of 4.85%
and a volatility of 207%.
 
 The
Company recorded a discount on the convertible debentures of $500,000 which
represents the beneficial conversion feature and is amortized to interest
expense over the 2 year life of the debentures. The Company recorded an expense
of $ 250,000 and $20,833 respectively for the years ended August 31, 2007 and
2006. The discount was determined using the Black-Scholes pricing model and
assumes a 2 year maturity, a risk free interest rate of 4.85% and a volatility
of 207%.
 
  NOTE
5.  Stockholders’ Equity
 
 Preferred
Stock
 
 The
Company (post merger) is authorized to issue three hundred thousand (300,000)
shares of series A preferred stock at a par value of $0.001.  The
preferred stock is convertible to common stock at one share of preferred for
every 100 shares of common.  The preferred shares can only be
converted when the Company reaches $10,000,000 in sales for any fiscal
year.  As of August 31, 2004 there were 234,800 shares of preferred
stock.  The value was placed at par.  The conversion to
common stock would be 23,480,000 shares.  Based upon the actual growth
for the last two years, the $10,000,000 in sales will not be reached within five
years.  Therefore, these shares are not considered in calculating the
loss per share.
 
 During
the quarter ended May 31, 2007 the Company issued 65,200 preferred shares for
services to key employees for services.
 
 During
the quarter ended November 30, 2008 the Company issued 2,200,000 preferred
shares to key employees for services.
  12
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
  NOTE
5.  Stockholders’ Equity -
continued
  Common
Stock
 
 On August
25, 2006 the Company’s authorization to issued common stock was increased from
50,000,000 shares to 500,000,000 shares at par value of $0.001
 
 As of
August 31, 2004 (post merger) the Company had 5,020,000 common shares issued and
outstanding. The Company’s financial statements have been restated to reflect
the recapitalization on a retroactive basis.
 
 In May
2005 the Company purchased equipment valued at $114,100 for 33,334 common share
and issued 122,834 common shares for services valued at $12,283.
 
 As of 31
May 2005 the Company had received from investors $36,000 in investment funds for
which restricted common shares will be issued.  The exact number of
shares has not yet been determined.
 
 On
January 6, 2006 the Company issued 50,000 common shares for services valued at
$7,500.
  On February 16, 2006 the Company
entered into a securities purchase agreement for a total subscription amount of
$2,000,000 that includes stock purchase warrants and callable convertible
debentures.  A discount on convertible debentures was recorded as
additional paid in capital of $2,000,000 for the beneficial conversion feature
which is being amortized over the life of the debentures.  The total
subscription includes an aggregate of 2,142,858 five-year warrants exercisable
for the same number of common shares at $0.50 per share.An
aggregate of 25,974,026 common shares have been registered and are available for
issue to potentially convert the full $2,000,000.
 
 On July
31, 2006 the Company issued $500,000 in convertible debentures which are
convertible to shares of the Company’s common stock at a 40% discount to the
market price at the time of conversion.  A discount on convertible
debentures was recorded as additional paid in capital of $500,000 for the
beneficial conversion feature which is being amortized over the life of the
debentures.  Common stock registered to convert the full $500,000 was
calculated at 69,444,444 shares using the current three day average price per
share of $0.012 less a 40% discount.
 
 On May
31, 2006 the Company issued 290,000 common shares by converting $33,031 of
debenture debt and issued 33,334 common shares for consulting services valued at
$3,333.
 
 The
Company issued 61,000 common shares for cash of $25,000 and the subscription
deposit of $36,000 received in May 2005 in a private placement.
 
 During
the Year ended August 31, 2007 the Company issued 3,500,200 common shares for
various services valued at $217,501 including 2,750,000 common shares in
settlement of a finders fee dispute valued at $200,000.  The Company
converted $90,452 debenture debt by issuing 24,970,000 common
shares.
 
 During
the three months ended November 30, 2007 the Company issued 9,150,000 common
shares for various services valued at $45,750.  The Company converted
$1,037 debenture debt by issuing 744,833 common shares.
 
 During
the three months ended February 29, 2008 the Company converted $200 debenture
debt using 200,000 common shares.
 
 During
the three months ended March 31, 2008 the Company converted $9,505 debenture
debt by issuing 27,916,000 commons shares and issued 17,200,000 common shares
for $8,750 services.
 
 During
the three months ended August 31, 2008 the Company converted $9,474 debenture
debt issued by issuing 53,833,000 common shares.
 
 During
the three months ended November 30, 2008 the Company converted $7,140 debenture
debt issued by issuing 99,280,206 common shares.
 
 Warrants
 
 With the
$1,955,000 worth of convertible debentures described above 2,000,000 five-year
warrants for commons stock exercisable at $0.50 per share were issued and with
the $500,000 convertible debentures 20,000,000 seven-year warrants for common
shares exercisable at $0.05 per share were issued.  Both exercisable
prices are “out of the money” therefore no discount has been
recorded.
   13
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
 NOTE
6.  Interest Expense
 
 Interest
expense for the period ended November 30, 2008 and the year ended August 31,
2008 is $ 27,445 and $74,566 respectively.
 
  NOTE
7.  Income Taxes
 
 The
Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
 
 SFAS No.
109 requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.  The total
deferred tax asset is $1,503,916 as of August 31, 2008 which is calculated by
multiplying a 22% estimated tax rate by the cumulative NOL of $6,835,981 the
total valuation allowance is a comparable $1,503,916.
 
 The
provision for income taxes for the period ended August 31, 2008 and 2007 is
calculated by applying the statutory rate of 22% to the income/(loss) from
continuing operations and deducting appropriate taxes and allowances as
follows:
 
 August
      31,2008
                    
                    
                    2007Deferred
      Tax Asset
                    
                    $
                    157,573
                    
                    
                    $
                    565,550Valuation
      Allowance
                    
                    
                    (157,573
                    )
                    
                    
                    (565,550
                    )Current
      Taxes Payable
                    
                    
                    -
                    
                    
                    
                    -Income
      Tax Expense
                    
                    $
                    -
                    
                    
                    $
                    -
 
 At August
31, 2008, federal income tax net operating loss carry forwards (“NOL’s”) which
were available to the Company were the following with the year in which they
expire.
 
 Year
                    
                    Amount
                    
                    Expiration1996
                    
                    
                    2,104
                    
                    20111997
                    
                    
                    9,265
                    
                    20121998
                    
                    
                    26,317
                    
                    20131999
                    
                    
                    21,074
                    
                    20192000
                    
                    
                    50,619
                    
                    20202001
                    
                    
                    21,675
                    
                    20212002
                    
                    
                    319,424
                    
                    20222003
                    
                    
                    45,381
                    
                    20232005
                    
                    
                    105,366
                    
                    20252006
                    
                    
                    2,947,833
                    
                    20262007
                    
                    
                    2,570,683
                    
                    20272008
                    
                    
                    716,240
                    
                    2028Total
      NOL
                    
                    $
                    6,835,981
 
 Were the
NOL tax asset to be recorded at August 31, 2008 it would be a long-term asset of
$1,503,916.  Continued profitability by the Company will be a major
factor in the valuation account being removed and the recording of this
asset.
  14
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
 NOTE  8.
The Effect of Recently Issued Accounting Standards
 
 Below is
a listing of the most recent Statement of Financial
Accounting Standards (SFAS) issued by the Financial Accounting Standards
Board (FASB) SFAS 157-163 and their effect on the Company.
 
 Statement
No. 157 – Fair Value
Measurements
  In
September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements, to clarify how to measure fair value and to expand
disclosures about fair value measurements.  The expanded disclosures
include the extent to which companies measure assets and liabilities at fair
value, the information used to measure fair value, and the effect of fair value
on earnings and is applicable whenever other standards require (or permit)
assets and liabilities to be measured at fair value.  SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years.
  The
adoption of this new Statement has not had a material effect on the Company’s
current financial position, results or operations, or cash flows.
  Statement No. 159 –The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments in Debt and
Equity Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not report
net income. SFAS No. 159 is effective as of the beginning of an entities first
fiscal year that begins after November 15, 2007. Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that
choice in the first 120 days of that fiscal year and also elects to apply the
provisions of SFAS No. 157 Fair Value Measurements.
 
 Adoption
of this pronouncement has not had a material effect on the Company’s
consolidated financial statements.
  Statement No. 141 (revised 2007) –Business
Combinations
  In
December 2007, the FASB revised SFAS No. 141 (revised 2007), Business
Combinations.This revision changes the way the minority
interest in a company is measured, recorded and reported in the parent companies
financial statements to the end that a statement user can better evaluate the
nature and financial effects of the business combination.  The Company
will adopt this statement beginning March 1, 2009.
  It is not
believed that this will have an impact on the Company’s consolidated financial
position, results of operations or cash flows.
  Statement No. 160 –Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51
  In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No.
51.A noncontrolling interest, sometimes called a minority
interest, is the portion of equity in a subsidiary not attributable, directly or
indirectly, to a parent. The objective of this Statement is to improve the
relevance, comparability, and transparency of the financial information that a
reporting entity provides in its consolidated financial statements related to
the noncontrolling or minority interest.
  The
Company will adopt this statement beginning March 1, 2009. It is not believed
that this will have an impact on the Company’s consolidated financial position,
results of operations or cash flows.
  15
 
 SEW
CAL LOGO, INC.
 NOTES
TO FINANCIAL STATEMENTS
 (November
30, 2008 and August 31, 2008)
  NOTE  8. The
Effect of Recently Issued Accounting Standards-
continued
  Statement No. 161 –Disclosures about Derivative
Instruments and Hedging Activities—an amendment to FASB No.
133
  In March
2008, the FASB, issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.  This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 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. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged.
 
 The
Company has not yet adopted the provisions of SFAS No. 161, but does not expect
it to have a material impact on its consolidated financial position, results of
operations or cash flows.
  Statement No. 162 –The Hierarchy of Generally Accepted
Accounting Principles
  In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
The Hierarchy of Generally
Accepted Accounting Principles.  SFAS No. 162 sets forth the
level of authority to a given accounting pronouncement or document by category.
Where there might be conflicting guidance between two categories, the more
authoritative category will prevail. SFAS No. 162 will become effective 60 days
after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA
Professional Standards.
 
 SFAS No.
162 has no effect on the Company’s financial position, statements of operations,
or cash flows at this time.
  Statement No. 163 –Accounting for Financial Guarantee
Insurance Contracts – and interpretation of FASB Statement No.
60
  In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
Accounting for Financial
Guarantee Insurance Contracts-and interpretation of FASB Statement No.
60.  SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance
contracts.  SFAS No. 163 is effective for fiscal years beginning on or
after December 15, 2008, and interim periods within those years.
  SFAS No.
163 has no effect on the Company’s financial position, statements of operations,
or cash flows at this time.




16
  ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





FORWARD
LOOKING STATEMENTS





This
analysis should be read in conjunction with the condensed consolidated financial
statements, the notes thereto, and the financial statements and notes thereto
included in the Company's Registration Statement on Form SB-2, as amended,
initially filed on March 20, 2004. All non-historical information contained in
this annual report is a forward-looking statement. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause the actual results to differ materially from those reflected in the
forward-looking statements.




Results
of Operations





Total revenue was $354,193 for the
quarter ended November 30, 2008 as compared to$547,658 for the quarter
ended November 30,, 2007, a net
decrease of $193465.  The net decrease is a result of our continued
effort to replace non-profitable with profitable business. Also, overall losses
as a percentage of sales continue to decline. This can be attributed directly to
both internal restructuring and to our significant investment in the research
and development of our new surf based brand. Our line of merchandise is
continuing to be  developed and additional advertising and promotional
campaigns are planned.   Officer and Administrative Compensation
was $3,642 for the quarter ended November 30, 2008 as compared
to$43,100 for the quarter ended November 30, 2007, a net decrease of
$39,458.  The net decrease is due to the continued restructuring and
streamlining of management responsibilities, voluntary retirement of one
officer, and reduction in wages for others, all helping to facilitate more
focused company direction and the anticipated resulting profitability from
same.  Total Assets were $ $356,343 at November 30as compared to$509,556 at November 30, 2007, a net decrease of
$153,213.  The net decrease was primarily due to cash used for
development expenses and reduction of inventory.




Plan
of Operation





We
continue promoting and marketing the Posse product line, a recognized name in
the world of surf and action sports. Our intent  remains the
manufacturing, selling and distributing of our own lines of surf wear and to
promote this and other lines of goods in appropriate trade journals and other
media as they are developed, expanded and distributed. Our first full length
movie (surf video) – “Pipeline Posse – Project One” is now for sale in surf
shops nationwide as well as available on the website:
pipelineposse.com.  Ads have been placed in major surf publications as
well as on selected internet websites and the video trailers are available for
viewing in our website video section.  Private label business is still
down but beginning to return in spite of the economic downturn and continuing
competition with aggressively marketed inexpensive overseas manufacturing. We
continue to advocate the value of “Made in the USA” products and this is having
some effect on new business as well as the return of previous customers. Our
unique ability to respond to client needs for fast delivery also adds to our
value as a domestic producer of quality goods. We are now aggressively trying to
perpetuate and expand this trend we plan to add to our existing staff to support
expansion and growth of both our private label business and entertainment
business and remain cautiously optimistic on both issues.





Private
Labeling





Domestic
headwear suppliers have been drastically reduced as a result of increased lower
priced imports. Suppliers remaining in this business each have their own niche
in the market place. Few remain in California and our customer base is
increasing somewhat with this reduced competition. There are U.S. suppliers
located in the Midwest and on the East Coast. They seldom manufacture for our
market and deal mainly in the golf, major league baseball and ad specialty-type
businesses.





Overseas
suppliers continue to be a different situation. They can produce a cap at a
fraction of the price we can and we are constantly in competition with them.
They can copy all that we create, but if they are asked to create on their own,
they may fall short, as our industry is constantly changing by way of fabrics,
styles, and method of decorating. Overseas suppliers are in the business of mass
production for export. Our current customers continue to use overseas suppliers
for some of their "bread and butter" styles but tend to use U.S. suppliers for
the more cutting edge products. However, overseas manufacturers require
considerably more time in creating new products because of their inability to
provide face-to-face contact with designers and domestic customers. They also
require greater lead times for shipping and cannot make changes overnight
(literally) when required. The logistics also may not allow them to be
immediately aware of developing trends, forecasting them, and then developing an
appropriate finished product instantly.





At
present, the youth oriented "action sports" lifestyle-clothing market
(surf/skate/snow) is led by labels such as "Quiksilver" of Huntington Beach,
California, representing in excess of $1 billion in annual sales. Also, "O'Neill
Sportswear", "Rip Curl", "Lost", "Billabong", "Volcom", and numerous other
Orange County, California-based clothing companies service this market and can
be considered competition for our new brands. Our in depth knowledge of the
market continues to support our belief that teens and young adults
are looking for something new and trendy to identify with, purchase, and wear,
even considering the economic and political changes we have in
2009.




17




ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
continued




Although
we believe we now have the experience and resources to take advantage of and
fulfill the needs of this market and we have already made significant steps
towards doing so, the youth, active and sports apparel industry is highly
competitive, with many of our competitors having greater name recognition and
resources than we do. Many of our competitors are well established, have
longer-standing relationships with customers and suppliers, greater name
recognition and greater financial, technical and marketing resources. As a
result, these competitors may be able to respond more quickly and effectively
than we can to new or changing opportunities or customer requirements. Existing
or future competitors may develop or offer products that provide price, service,
number or other advantages over those we intend to offer. If we fail to compete
successfully against current or future competitors with respect to these or
other factors, our business, financial condition, and results of operations may
be materially and adversely affected.





We
currently have no market share data available for competition in these areas. We
work on each job through personal contacts and are frequently the only company
contacted for the particular project.





We do not
depend on any one or a few major customers.




Patents,
Trademarks, Franchises, Concessions, Royalty Agreements, or Labor
Contracts





We
recently applied to the USTPO for the trademark “Pipeline Posse” in several
categories. Our applications are active and currently under review or approved
by the USPTO examiners.  We will continue to assess the need for any
copyright, trademark or patent applications on an ongoing basis.





Film
Wardrobe & Entertainment Related Business





Film
wardrobe and related business remains slow as productions continue to be
produced outside the United States.  This holds true for nearly all of
the major studios as well as independent filmmakers, causing the majority of the
local costume houses to downsize.  The situation is improving and we
have begun working on projects with new productions.





To help
regain our lost dollar volume in this area we will continue our existing
strategy of marketing directly to movie and television productions before they
begin filming locally and send units out of town on location.  Our
strategy of dealing directly with producers, wardrobe personnel, and talent is
beginning to pay off with recent orders from major films such as “Mandela”
(working title)  and several  recently released
productions.





Corporate
Sales





While
corporate clients currently account for less than fifteen percent (15%) of our
business, we continue to focus on growing this area of our business over the
next year with the addition of in-house salespeople. Also, the addition of more
new silk screening equipment has given us the capability to accept and produce
specialized orders of promotional t-shirts and related items for corporate
programs through outside sales and advertising organizations. Our salespeople
are now attempting to solicit business to our existing client base via telephone
and Internet as well as to potential new customers through the same means. We
are committed to making this division profitable and more qualified labor has
been retained to operate the new equipment as needed.   Second
and third manufacturing shifts can be added as growth requires. Current
production capacity is adequate to handle the anticipated increased
volume.  No other major capital expenditures are anticipated at this
time.





Development
of new Product Lines





The
pursuit of our efforts continue to work to export the California life style to
the rest of America and to the worldwide markets in general. Started as an idea
born in San Clemente, California, home of the premier surfing beaches in the
world, we are continuing to develop a number of California Driven brands of
products.




Several
California Driven products are being developed by us but they do not represent
any significant amount of our current overall revenue. The California Driven
brand lines are being created as an expansion into our own line of products to
market and sell.






18




ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-
continued




Clothing
design is being aggressively developed by both in-house personnel and
professional independent contractors experienced in product development for the
Action Sports Industry.  Contact with our target market has been
initially established in several major surf publications  through
personal interviews with our athletes as well as editorials on The Pipeline
Posse itself.  Print and on-line advertising
campaigns have commenced in both industry related magazines and
websites.  We also maintain our website, PIPELINEPOSSE.COM, which
features information on the athletes, activities, photo and video galleries, an
active news blog, related action sports links, and a fully developed online
store.  The secure site and shopping capability has been recently
activated to accept credit cards and offer shipment of merchandise
worldwide.  A multi- faceted major advertising and marketing campaign
is being planned, budgeted, and developed for  2009 and professional
sales organizations are being interviewed and considered for representation and
distribution of the brand both domestically and worldwide.




In
addition, other  related brands are being considered and are in
various stages of development in regard to trademarks, competition, market
potential, and strategy and cost.  Target dates for launch have not
been yet
established.




This Form
10-Q includes forward looking statements concerning the future operations of the
Company. This statement is for the express purpose of availing the Company of
the protections of such safe harbor with respect to all forward looking
statements contained in this Form 10-Q. We have used forward looking statements
to discuss future plans and strategies of the Company. Management's ability to
predict results or the effect of future plans is inherently uncertain. Factors
that could affect results include, without limitation, competitive factors,
general economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision, seasonality,
distribution networks, product introductions, acceptance, technological change,
changes in industry practices and one-time events. These factors should be
considered when evaluating the forward looking statements and undue reliance
should not be placed on such statements. Should any one or more of these risks
or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described
herein.




Critical
Accounting Policies




Sew Cal’s
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
("GAAP"). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use if estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.




Our
significant accounting policies are summarized in Note 1 of our financial
statements. While all these significant accounting policies impact its financial
condition and results of operations, Sew Cal's views certain of these policies
as critical. Policies determined to be critical are those policies that have the
most significant impact on Sew Cal's consolidated financial statements and
require management to use a greater degree of judgment and estimates. Actual
results may differ from those estimates. Our management believes that given
current facts and circumstances, it is unlikely that applying any other
reasonable judgments or estimate methodologies would cause effect on our
consolidated results of operations, financial position or liquidity for the
periods presented in this report. During the next twelve months, we expect to
take the following steps in connection with the further development of our
business and the implementation of our plan of operations.






ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
applicable.






ITEM
4T. CONTROLS AND PROCEDURES





Our
management, under the supervision and with the participation of our Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the
effectiveness of our disclosure controls and procedures as defined in Securities
and Exchange Commission (“SEC”) Rule 13a-15(e) and 15d-15(e) as of the end of
the period covered by this report.  Based upon that evaluation,
management  has concluded that our  disclosure  controls 
and  procedures  are  effective  to ensure  that
information  we are required to disclose in reports that we file or submit
under the Securities Exchange Act is communicated to management, including the
CEO and CFO, as appropriate to allow timely decisions  regarding required
disclosure and is  recorded,  processed,  summarized 
and  reported  within the time periods specified in the SEC’s rules
and forms.




There
were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during the Third quarter 2008 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.






19




PART
II - OTHER INFORMATION


ITEM
1. LEGAL PROCEEDINGS




None






ITEM
1A. RISK FACTORS




Not
required






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




None






ITEM
3. DEFAULTS UPON SENIOR SECURITIES




None.






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




None.






ITEM
5. OTHER INFORMATION




None









20




ITEM
6. EXHIBITS




(a)
EXHIBITS




31.1
            Certification of the Chief Executive Officer
      Pursuant to Section 302 of the Sarbanes-Oxley
    Act31.2
            Certification of the Chief Financial Officer
      Pursuant to Section 302 of the Sarbanes-Oxley
      Act32.1
            Certification of the Chief Executive Officer
      Pursuant to Section 906 of the Sarbanes-Oxley
      Act32.2
            Certification of the Chief Financial Officer
      Pursuant to Section 906 of the Sarbanes-Oxley
      Act












SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




Date:
      January 20, 2009
                By:
                /s/  
      Richard SongerRichard
      SongerPresident,
      Director and ChiefExecutive
      Officer







Date:
      January 20, 2009
                  By:
                  /s/ Judy
      SongerJudy
      SongerDirector
      and ChiefFinancial
      Officer







21