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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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 quarterly period ended July 31, 2010

or

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________
to________________________

Commission File Number 000-52452

DUSSAULT APPAREL INC.(Exact name of registrant as specified in its charter)

|Nevada                                                               | 98-0513727                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)
|                                                                     |                                  
|2250 East Hastings Street, Vancouver BC                              | V5L 1V4                          
|(Address of principal executive offices)                             | (Zip Code)                       

604.569.2619(Registrants telephone number,
including area code)

N/A(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. [X] YES    [ 
 ] NO

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a small
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 [    ]
    
    Accelerated
      filer                  
      [   ]Non-accelerated filer   [    ]
    (Do not check if a smaller reporting company)
    Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act [   ]
YES    [X] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.[   ]
YES    [   ] NO

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).[   ] YES    [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date. 111,990,000
common shares issued and outstanding as of September 17, 2010

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PART 1  FINANCIAL INFORMATION

Item 1. Financial Statements.

2

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|DUSSAULT APPAREL INC.        
|-----------------------------
|(A Development Stage Company)
|Balance
      Sheet          

|                                                                                                                                                                                                                                                                                 |   | July 31,    |   |   | October 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                                                                 |   | 2010        |   |   | 2009        |  
|ASSETS                                                                                                                                                                                                                                                                           |   | (Unaudited) |   |   |             |  
|Current Assets                                                                                                                                                                                                                                                                   |   |             |   |   |             |  
|Cash                                                                                                                                                                                                                                                                             | $ | 42,048      |   | $ | 52,991      |  
|Accounts Receivable, net of allowance for doubtful accounts                                                                                                                                                                                                                      |   | 29,486      |   |   | 41,273      |  
|Inventory                                                                                                                                                                                                                                                                        |   | 53,303      |   |   | 46,114      |  
|Total Current
      Assets                                                                                                                                                                                                                                                       |   | 124,837     |   |   | 140,378     |  
|                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|Notes Receivable                                                                                                                                                                                                                                                                 |   | 234,409     |   |   | 238,565     |  
|                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|Property and Equipment, net                                                                                                                                                                                                                                                      |   | 10,088      |   |   | 11,425      |  
|Other Assets                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|Trade Mark                                                                                                                                                                                                                                                                       |   | 44,484      |   |   | -           |  
|Deposits                                                                                                                                                                                                                                                                         |   | 48,470      |   |   | 41,934      |  
|Total Assets                                                                                                                                                                                                                                                                     | $ | 462,288     |   | $ | 432,302     |  
|                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                             |   |             |   |   |             |  
|Current Liabilities                                                                                                                                                                                                                                                              |   |             |   |   |             |  
|Accounts Payable and accrued liabilities                                                                                                                                                                                                                                         | $ | 37,951      |   | $ | 100,551     |  
|Customer Deposits                                                                                                                                                                                                                                                                |   | -           |   |   | 5,986       |  
|Total Current Liabilities                                                                                                                                                                                                                                                        |   | 37,951      |   |   | 106,537     |  
|Other Liabilities                                                                                                                                                                                                                                                                |   |             |   |   |             |  
|Loan Payable                                                                                                                                                                                                                                                                     |   | 86,775      |   |   | -           |  
|Total Liabilities                                                                                                                                                                                                                                                                |   | 124,726     |   |   | 106,537     |  
|                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|Stockholders' Equity                                                                                                                                                                                                                                                             |   |             |   |   |             |  
|Common
      Stock, $0.001 par value;
      authorized                       200,000,000
      shares; issued and
      outstanding                       67,212,000
      shares as at July 31,
      2010                       67,212,000
      shares as at October 31, 2009 |   | 67,212      |   |   | 67,212      |  
|Additional Paid-In
      Capital                                                                                                                                                                                                                                                 |   | 10,511,314  |   |   | 10,511,314  |  
|Accumulated other comprehensive loss                                                                                                                                                                                                                                             |   | 37,908      |   |   | (41,954     | )
|Accumulated
      deficit during the development stage                                                                                                                                                                                                                           |   | (10,278,872 | ) |   | (10,210,807 | )
|Total Stockholders' Equity                                                                                                                                                                                                                                                       |   | 337,562     |   |   | 325,765     |  
|Total Liabilities and Stockholders'
      Equity                                                                                                                                                                                                                                 |   | 462,288     |   |   | 432,302     |  

3

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|DUSSAULT APPAREL INC.        
|-----------------------------
|(A Development Stage Company)
|Statement of Operations      
|(Unaudited)                  

|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   | For the     |  
|---------------------------------------------------------------------------------------------- | - | -------------------------- | - | - | ------------------------- | - | - | -------------- | - | - | ---------- | - | - | ----------- | -
|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   | period      |  
|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   | Aug. 1 2006 |  
|                                                                                               |   | For the three months ended |   |   | For the nine months ended |   |   | (inception) to |  
|                                                                                               |   | July 31,                   |   |   | July 31,                  |   |   | July 31,       |  
|                                                                                               |   | 2010                       |   |   | 2009                      |   |   | 2010           |   |   | 2009       |   |   | 2010        |  
|Revenue                                                                                        | $ | 32,388                     |   | $ | 81,744                    |   | $ | 209,301        |   | $ | 526,092    |   | $ | 1,467,952   |  
|Cost of Sales                                                                                  |   | 11,942                     |   |   | 64,299                    |   |   | 81,125         |   |   | 332,139    |   |   | 554,692     |  
|Operating Income                                                                               |   | 20,446                     |   |   | 17,445                    |   |   | 128,176        |   |   | 193,953    |   |   | 913,260     |  
|Selling Costs                                                                                  |   |                            |   |   |                           |   |   |                |   |   |            |   |   |             |  
|Marketing                                                                                      |   | 632                        |   |   |                           |   |   | 6,370          |   |   | -          |   |   | 26,370      |  
|Advertising                                                                                    |   | 9,378                      |   |   | 3,374                     |   |   | 9,378          |   |   | 64,412     |   |   | 110,921     |  
|Samples                                                                                        |   | -                          |   |   | 41,014                    |   |   | -              |   |   | 127,569    |   |   | 60,659      |  
|Development - Vancouver                                                                        |   | -                          |   |   | 125,161                   |   |   | -              |   |   | 208,520    |   |   | 729,083     |  
|                                                                                               |   | 10,010                     |   |   | 169,549                   |   |   | 15,748         |   |   | 400,501    |   |   | 927,033     |  
|General and Administrative Expenses:                                                           |   |                            |   |   |                           |   |   |                |   |   |            |   |   |             |  
|Salaries & Wages                                                                               |   | -                          |   |   | -                         |   |   | 201            |   |   | 30,000     |   |   | 402,147     |  
|Professional Fees                                                                              |   | 17,987                     |   |   | 26,688                    |   |   | 54,850         |   |   | 109,989    |   |   | 514,111     |  
|Consulting                                                                                     |   | -                          |   |   | -                         |   |   | -              |   |   | -          |   |   | 69,250      |  
|Occupancy Costs                                                                                |   | 12,324                     |   |   | 26,587                    |   |   | 31,681         |   |   | 26,587     |   |   | 90,701      |  
|Warehousing                                                                                    |   | -                          |   |   | -                         |   |   | -              |   |   | -          |   |   | 81,550      |  
|Design                                                                                         |   | 4,392                      |   |   | 1,144                     |   |   | 19,567         |   |   | 5,042      |   |   | 38,258      |  
|Depreciation                                                                                   |   | -                          |   |   | -                         |   |   | 1,337          |   |   | -          |   |   | 42,716      |  
|Retail Launch                                                                                  |   | -                          |   |   | -                         |   |   | -              |   |   | -          |   |   | 5,777,175   |  
|Inventory markdown                                                                             |   | -                          |   |   | -                         |   |   | -              |   |   | -          |   |   | 1,827,166   |  
|Other Administrative Exp.                                                                      |   | 26,462                     |   |   | 10,526                    |   |   | 72,857         |   |   | 131,585    |   |   | 1,459,933   |  
|                                                                                               |   | 61,165                     |   |   | 64,945                    |   |   | 180,493        |   |   | 303,203    |   |   | 10,303,007  |  
|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   |             |  
|Total Expenses                                                                                 |   | 71,175                     |   |   | 234,494                   |   |   | 196,241        |   |   | 703,704    |   |   | 11,230,040  |  
|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   |             |  
|Net Income (Loss)                                                                              |   | (50,729                    | ) |   | (217,049                  | ) |   | (68,065        | ) |   | (509,751   | ) |   | (10,316,780 | )
|Currency translation adjustment                                                                |   | (92,772                    | ) |   | 340                       |   |   | 79,862         |   |   | 14,498     |   |   | 37,908      |  
|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   |             |  
|Comprehensive income (loss)                                                                    | $ | (143,501                   | ) | $ | (216,709                  | ) | $ | 11,797         |   | $ | (495,253   | ) | $ | (10,278,872 | )
|                                                                                               |   |                            |   |   |                           |   |   |                |   |   |            |   |   |             |  
|Loss Per Common Share: 
                 
                     Basic and diluted               | $ | (0.00                      | ) | $ | (0.00                     | ) | $ | 0.00           |   | $ | (0.01      | ) |   |             |  
|Weighted average shares outstanding, 
                 
                     basic and diluted |   | 51,687,000                 |   |   | 51,687,000                |   |   | 67,212,000     |   |   | 51,687,000 |   |   |             |  

4

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|DUSSAULT APPAREL INC.        
|-----------------------------
|(A Development Stage Company)
|Statement of Cash Flows      
|(Unaudited)                  

|                                                                                                        |   |                           |   |   |                |   |   | For the period |  
|------------------------------------------------------------------------------------------------------- | - | ------------------------- | - | - | -------------- | - | - | -------------- | -
|                                                                                                        |   |                           |   |   |                |   |   | Aug. 1 2006    |  
|                                                                                                        |   | For the nine months ended |   |   | (inception) to |  
|                                                                                                        |   | July
      31,            |   |   | July 31,       |  
|                                                                                                        |   | 2010                      |   |   | 2009           |   |   | 2010           |  
|Cash flows from operating activities:                                                                   |   |                           |   |   |                |   |   |                |  
|Net loss                                                                                                | $ | (68,065                   | ) | $ | (509,751       | ) | $ | (10,278,872    | )
|**Adjustments to reconcile
      net loss** to **net**     **cash used by operating**
      activities: |   |                           |   |   |                |   |   |                |  
|Depreciation                                                                                            |   | 1,337                     |   |   |                |   |   | 11,880         |  
|Stock issued for services                                                                               |   |                           |   |   |                |   |   | 5,341,000      |  
|Change in operating assets and liabilities:                                                             |   |                           |   |   |                |   |   |                |  
|Accounts receivable                                                                                     |   | 11,787                    |   |   | 58,436         |   |   | (29,486        | )
|Accounts
      payable                                                                                  |   | (62,600                   | ) |   | 5,034          |   |   | 37,951         |  
|Inventory                                                                                               |   | (7,189                    | ) |   | 170,803        |   |   | (53,303        | )
|Deposits                                                                                                |   | (6,536                    | ) |   |                |   |   | (48,470        | )
|Customer Deposits                                                                                       |   | (5,986                    | ) |   |                |   |   | -              |  
|Net cash (used by) operating
      activities                                                           |   | (137,252                  | ) |   | (275,478       | ) |   | (5,019,300     | )
|Cash flows from investing activities:                                                                   |   |                           |   |   |                |   |   |                |  
|Sale (Purchase) of equipment                                                                            |   |                           |   |   | 51,514         |   |   | (21,968        | )
|Purchase of Trade Mark                                                                                  |   | (44,484                   | ) |   |                |   |   | (44,484        | )
|Net cash (used by) investing
      activities                                                           |   | (44,484                   | ) |   | 51,514         |   |   | (66,452        | )
|Cash flows from financing activities:                                                                   |   |                           |   |   |                |   |   |                |  
|Loan to Dayton Boots                                                                                    |   | 4,156                     |   |   | 8,109          |   |   | (234,409       | )
|Proceeds of loan                                                                                        |   | 86,775                    |   |   | 38,503         |   |   | 86,775         |  
|Subscription received                                                                                   |   |                           |   |   | 74,500         |   |   |                |  
|Common stock issued for
      cash                                                                      |   |                           |   |   |                |   |   | 5,016,000      |  
|Contribution of capital assets                                                                          |   |                           |   |   |                |   |   | 221,526        |  
|Net cash (used
      by) provided by financing activities                                               |   | 90,931                    |   |   | 121,112        |   |   | 5,089,892      |  
|Effect of exchange rates on cash                                                                        |   | 79,862                    |   |   | 14,498         |   |   | 37,908         |  
|Net increase (decrease) in cash                                                                         |   | (10,943                   | ) |   | (88,354        | ) |   | 42,048         |  
|Cash, beginning of the period                                                                           |   | 52,991                    |   |   | 163,214        |   |   | -              |  
|Cash, end of the period                                                                                 | $ | 42,048                    |   | $ | 74,860         |   | $ | 42,048         |  
|                                                                                                        |   |                           |   |   |                |   |   |                |  
|Supplemental cash flow disclosure:                                                                      |   |                           |   |   |                |   |   |                |  
|Interest paid                                                                                           |   | -                         |   |   | -              |   |   | -              |  
|Taxes paid                                                                                              |   | -                         |   |   | -              |   |   | -              |  

5

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|DUSSAULT APPAREL INC.                                                
|---------------------------------------------------------------------
|(A Development Stage Company)                                        
|Statement of Stockholders' Equity                                    
|For the period
      from inception (August 1, 2006) to July 31, 2010
|(Unaudited)                                                          

|                                                                 |  |                    |   |   |            |   |   |            |   |   | Accumulated |   |   | Accumulated   |   |   |            |  
|---------------------------------------------------------------- |  | ------------------ | - | - | ---------- | - | - | ---------- | - | - | ----------- | - | - | ------------- | - | - | ---------- | -
|                                                                 |  |                    |   |   |            |   |   |            |   |   | Other       |   |   | Deficit       |   |   | Total      |  
|                                                                 |  | Common
      Stock |   |   | Additional |   |   | Compre-    |   |   | during the  |   |   | Shareholders' |  
|                                                                 |  | Number of          |   |   |            |   |   | Paid-In    |   |   | hensive     |   |   | Development   |   |   | Equity     |  
|                                                                 |  | Shares             |   |   | Amount     |   |   | Capital    |   |   | Income      |   |   | Stage         |   |   | (Deficit)  |  
|                                                                 |  |                    |   |   |            |   |   |            |   |   |             |   |   |               |   |   |            |  
|Inception: August 1, 2006                                        |  | -                  |   | $ | -          |   | $ | -          |   | $ | -           |   | $ | -             |   | $ | -          |  
|                                                                 |  |                    |   |   |            |   |   |            |   |   |             |   |   |               |   |   |            |  
|Aug. 31, 2006: issued stock for cash at $0.02
      per share    |  | 1,500,000          |   |   | 1,500      |   |   | 13,500     |   |   |             |   |   |               |   |   | 15,000     |  
|Oct 31, 2006: issued stock for cash at $0.02 per share           |  | 1,550,000          |   |   | 1,550      |   |   | 29,450     |   |   |             |   |   |               |   |   | 31,000     |  
|Net loss for period January 12 - October 31,
      2006          |  |                    |   |   |            |   |   |            |   |   |             |   |   | (2,154        | ) |   | (2,154     | )
|                                                                 |  |                    |   |   |            |   |   |            |   |   |             |   |   |               |   |   |            |  
|Balances October 31, 2006                                        |  | 3,050,000          |   | $ | 3,050      |   | $ | 42,950 $-  |   | $ | -           |   | $ | (2,154        | ) | $ | 43,846     |  
|                                                                 |  |                    |   |   |            |   |   |            |   |   |             |   |   |               |   |   |            |  
|Nov. 8, 2006: issued stock for cash at $0.02
      per share     |  | 450,000            |   |   | 450        |   |   | 8,550      |   |   |             |   |   |               |   |   | 9,000      |  
|Balances before 14 for 1 forward common stock
      split        |  | 3,500,000          |   |   | 3,500      |   |   | 51,500     |   |   |             |   |   | (2,154        | ) |   | 52,846     |  
|Jun 11, 2007: 14 for 1 forward common stock split                |  | 45,500,000         |   |   | 45,500     |   |   | (45,500    | ) |   |             |   |   |               |   |   | -          |  
|Balances after 14 for 1 forward common stock split               |  | 49,000,000         |   | $ | 49,000     |   | $ | 6,000      |   | $ | -           |   | $ | (2,154        | ) | $ | 52,846     |  
|Aug 31, 2007 issued stock for services at $1.00 per sh.          |  | 5,272,000          |   |   | 5,272      |   |   | 5,266,728  |   |   |             |   |   |               |   |   | 5,272,000  |  
|Aug. 31, 2007 issued stock for cash at $1.00
      per share     |  | 2,215,000          |   |   | 2,215      |   |   | 2,212,785  |   |   |             |   |   |               |   |   | 2,215,000  |  
|Net loss for year ended October 31, 2007                         |  |                    |   |   |            |   |   |            |   |   |             |   |   | (5,921,650    | ) |   | (5,921,650 | )
|Balances at October 31, 2007                                     |  | 56,487,000         |   | $ | 56,487     |   | $ | 7,485,513  |   | $ | -           |   | $ | (5,923,804    | ) | $ | 1,618,196  |  
|Nov. 23, 2007: stock returned to Treasury                        |  | (13,000,000        | ) |   | (13,000    | ) |   | 13,000     |   |   |             |   |   |               |   |   | -          |  
|April 30, 2008 contribution of Vancouver office
      assets     |  |                    |   |   |            |   |   | 667,242    |   |   |             |   |   |               |   |   | 667,242    |  
|Apr. 28, 2008 issued stock for cash at $1.00 per share           |  | 1,275,000          |   |   | 1,275      |   |   | 1,273,725  |   |   |             |   |   |               |   |   | 1,275,000  |  
|Oct. 7, 2008 issued stock for cash at $1.20
      per share      |  | 6,925,000          |   |   | 6,925      |   |   | 1,378,075  |   |   |             |   |   |               |   |   | 1,385,000  |  
|Net loss for the year ended October 31, 2008                     |  |                    |   |   |            |   |   |            |   |   | (21,194     | ) |   | (4,158,068    | ) |   | (4,179,262 | )
|Balances at October 31, 2008                                     |  | 51,687,000         |   | $ | 51,687     |   | $ | 10,817,555 |   | $ | (21,194     | ) | $ | (10,081,872   | ) | $ | 766,176    |  
|Overcontribution of Vancouver assets                             |  |                    |   |   |            |   |   | (445,966   | ) |   |             |   |   |               |   |   | (445,966   | )
|Nov. 13, 2008 issued stock for cash at $0.01
      per share     |  | 8,600,000          |   |   | 8,600      |   |   | 77,400     |   | $ | (8,493      | ) |   |               |   |   | 77,507     |  
|Nov. 24, 2008 issued stock for services at $0.01 per share       |  | 425,000            |   |   | 425        |   |   | 3,825      |   |   |             |   |   |               |   |   | 4,250      |  
|Nov. 26, 2008 issued stock for services at
      $0.01 per share |  | 600,000            |   |   | 600        |   |   | 5,400      |   |   |             |   |   |               |   |   | 6,000      |  
|Feb. 2, 2009 issued stock for services at $0.01 per sh.          |  | 2,900,000          |   |   | 2,900      |   |   | 26,100     |   |   |             |   |   |               |   |   | 29,000     |  

6

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|DUSSAULT APPAREL INC.                                                
|---------------------------------------------------------------------
|(A Development Stage Company)                                        
|Statement of Stockholders' Equity                                    
|For the period
      from inception (August 1, 2006) to July 31, 2010
|(Unaudited)                                                          

|                                                              |  |                    |  |   |            |  |   |            |  |   | Accumulated |   |   | Accumulated   |   |   |           |  
|------------------------------------------------------------- |  | ------------------ |  | - | ---------- |  | - | ---------- |  | - | ----------- | - | - | ------------- | - | - | --------- | -
|                                                              |  |                    |  |   |            |  |   |            |  |   | Other       |   |   | Deficit       |   |   | Total     |  
|                                                              |  | Common
      Stock |  |   | Additional |  |   | Compre-    |  |   | during the  |   |   | Shareholders' |  
|                                                              |  | Number of          |  |   |            |  |   | Paid-In    |  |   | hensive     |   |   | Development   |   |   | Equity    |  
|                                                              |  | Shares             |  |   | Amount     |  |   | Capital    |  |   | Income      |   |   | Stage         |   |   | (Deficit) |  
|Feb 28, 2009 issued stock for services at
      $0.01 per sh. |  | 3,000,000          |  |   | 3,000      |  |   | 27,000     |  |   |             |   |   |               |   |   | 30,000    |  
|Net loss for the year ended October 31, 2010                  |  |                    |  |   |            |  |   |            |  |   | (12,267     | ) |   | (128,935      | ) |   | (141,202  | )
|Balances at October 31, 2009                                  |  | 67,212,000         |  | $ | 67,212     |  | $ | 10,511,314 |  | $ | (41,954     | ) | $ | (10,210,807   | ) | $ | 325,765   |  
|Net income for the nine months ended July 31, 2010            |  |                    |  |   |            |  |   |            |  |   | 79,862      |   |   | (68,065       | ) |   | 11,797    |  
|Balances at January 31, 2010                                  |  | 67,212,000         |  | $ | 67,212     |  | $ | 10,511,314 |  | $ | 37,908      |   | $ | (10,278,872   | ) | $ | 337,562   |  

7

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DUSSAULT APPAREL INC.(A Development Stage
Company)NOTES TO THE FINANCIAL STATEMENTSJuly 31, 2010(Unaudited)(Stated in U.S. Dollars)

Note 1  Basis of Presentation and Nature of Operations

These interim financial statements as of and for the nine
months ended July 31, 2010 reflect all adjustments which, in the opinion of
management, are necessary to fairly state the Companys financial position and
the results of its operations for the periods presented in accordance with the
accounting principles generally accepted in the United States of America. All
adjustments are of a normal recurring nature.

These interim financial statements should be read in
conjunction with the Companys financial statements and notes thereto included
in the Companys fiscal year end October 31, 2009 report. The Company assumes
that the users of the interim financial information herein have read, or have
access to, the audited financial statements for the preceding period, and that
the adequacy of additional disclosure needed for a fair presentation may be
determined in that context. The results of operations for the nine month period
ended July 31, 2010 are not necessarily indicative of results for the entire
year ending October 31, 2010.

Organization

The financial statements presented are those of Dussault
Apparel Inc. (the Company). The Company was incorporated under the laws of the
State of Nevada on August 1, 2006 as Release Your Lease Inc. Business operations
had not commenced when in May, 2007, control of the company changed hands. Jason
Dussault bought 1,500,000 common shares of the majority shareholder and assumed
the offices of President, CEO, CFO, Secretary and Treasurer, and a Director.

On June 11, 2007 Release Your Lease Inc. effected a reverse
forward merger with Dussault Apparel Inc, a Nevada shell company. The name was
changed to Dussault Apparel, Inc. The Company changed its orientation toward the
retail fashion clothing business.

Current Business of the Company

The Company opened a retail clothing and accessory store on
Melrose Avenue in Los Angeles in November, 2007. Designs were produced in the
Vancouver, Canada office, manufactured in China and warehoused in Los Angeles.
The Company closed this store in November, 2008 in the wake of declining sales
and deteriorating economic conditions. The Company continues to wholesale to
retail outlets as well as to sports organizations throughout the U.S. and Canada
from its Vancouver office.

Note 2  Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with
generally accepted accounting principles in the United States of America
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities known
to exist as of the date the financial statements are published, and the repted
amounts of revenues and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of the
Companys financial statements; accordingly, it is possible that the actual
results could differ from these estimates and assumptions and could have a
material effect on the reported amounts of the Companys financial position and
results of operations.

8

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Fair value of financial instruments

The Financial Accounting Standards Board issued ASC (Accounting
Standards Codification) 820-10 (SFAS No. 157), Fair Value Measurements and
Disclosures" for financial assets and liabilities. ASC 820-10 provides a
framework for measuring fair value and requires expanded disclosures regarding
fair value measurements. FASB ASC 820-10 defines fair value as the price that
would be received for an asset or the exit price that would be paid to transfer
a liability in the principal or most advantageous market in an orderly
transaction between market participants on the measurement date. FASB ASC 820-10
also establishes a fair value hierarchy which requires an entity to maximize the
use of observable inputs, where available. The following summarizes the three
levels of inputs required by the standard that the Company uses to measure fair
value:

| | - | Level 1: Quoted prices in active markets for identical
      assets or liabilities.                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | Level 2: Observable inputs other than Level 1 prices,
      such as quoted prices for similar assets or liabilities; quoted prices in
      markets that are not active, or other inputs that are observable or can be
      corroborated by observable market data for substantially the full term of
      the related assets or liabilities.
| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | Level 3: Unobservable inputs that are supported by little
      or no market activity and that are significant to the fair value of the
      assets or liabilities.                                                                                                                                                                           

The carrying amounts of the Companys
financial instruments as of April 30, 2010, reflect

| | - | Cash: Level One measurement based
      on bank reporting.                         
| | - | -----------------------------------------------------------------------------------
| |   |                                                                                    
| | - | Loans Receivable, Loans Payable:
      Level 2 based on promissory notes and terms.

Income taxes

The Company utilizes FASB ACS 740, Income Taxes, which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.

The Company generated deferred tax credits through net
operating loss carryforwards. However, a valuation allowance of 100% has been
established, as the realization of the deferred tax credits is not reasonably
certain, based on going concern considerations outlined below. The income tax
effect of temporary differences between financial and tax reporting gives rise
to the deferred tax asset of the fiscal years ended October 31, 2009 and 2008 as
follows:

2009
    
    
    2008Deferred tax asset, beginning
    $
    1,512,637
    
    $
    50,334Benefit (provision of current years
      operating loss carryforward (gain)
    $
    47,798
    
    $
    1,462,203Deferred tax asset, ending
    $
    1,560,435
    
    $
    1,512.637Valuation allowance,
      beginning
    $
    (1,512,637
    )
    $
    50,334Current years loss carry forward (provision)
    $
    ( 47,798
    )
    $
    (1,462,303
    )


9

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Valuation allowance, ending.
    $
    (1,560,435
    )
    $
    ( 1,512,637
    )Deferred tax asset, net
    $
    -
    
    $
    -Tax at blended U.S./Canadian
      statutory rates
    
    (35%
    )
    
    (35%
    )Loss carryover
    
    . 35%
    
    
    35% .Deferred Tax expense
    $
    -
    
    $


Recent Accounting Pronouncements

In May, 2009, the FASB issued FASB issued ASC 855 (SFAS No.
165), Subsequent Events, which established general accounting standards
and disclosure for subsequent events. In accordance with SFAS No. 165, the
Company has evaluated subsequent events through the date the financial
statements were filed.

In June, 2009, the FASB issued their final SFAS, No. 168,
FASB Accounting Standards Codification, (ASC), and the Hierarchy
of Generally Accepted Accounting Principles. This was reflected in the
codification as FASB ASC 105, Generally Accepted Accounting Principles.
ASC is the single source of authoritative US generally accepted accounting
principles recognized by the FASB to be applied to nongovernmental entities. It
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The adoption of ASC 105 will not have an impact
on the Companys financial position, results of operations or cash flows.

Going Concern

The Companys financial statements are prepared using
accounting principles generally accepted in the United States of America
applicable to a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The Company as at
July 31, 2010 had not established an ongoing source of revenues sufficient to
cover its operating costs and to allow it to continue as a going concern.

As shown in the accompanying financial statements, the Company
incurred a net loss of $68,065 in the nine months ended July 31, 2010. The
Company closed its retail outlet in November 2008. Its ability to continue as a
going concern is dependent on the successful stimulation of wholesale sales or
in other areas in order to fund operating losses and become profitable. If the
Company is unable to make it profitable, the Company could be forced to cease
development of operations. Management cannot provide any assurances that the
Company will be successful in its retail operation. The accompanying financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.

Development-Stage Company

The Company is considered a development-stage company, with
limited operating revenues during the periods presented. Such companies report
their operations, shareholders deficit and cash flows since inception through
the date that revenues are generated from managements intended operations,
among other things. Management has defined inception as August 1, 2006. Since
inception, the Company has incurred operating losses totaling $10,316,780. The
Companys working capital has been generated through the sales of common stock
and the sale/liquidation of inventory. Management has provided financial data
since August 1, 2006 Inception in the financial statements, as a means to
provide readers of the Companys financial information to make informed
investment decisions.

10

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Inventory

Inventory was moved to the Vancouver office after the retail
outlet in Los Angeles was closed in November, 2008. Inventories are stated at
the lower of cost or market value. Market value represents net realizable value.
Inventory is priced according to the FIFO first in first out method, and
counted periodically. Inventory at the fiscal year end October 31, 2009 was
marked down by $30,479 on slow moving items to $46,114. Current inventory at
July 31, 2010 is $53,303.

Note Receivable

On April 16, 2008 the Company entered into a bridge loan
agreement under a promissory note from Dayton Boot Co. Enterprises Ltd. of
Vancouver, Canada for $C 300,000 in Canadian funds. The terms were that the
principal amount, plus 6% simple interest, would be due and payable when a
merger transaction was concluded between the two parties, or December 31, 2008,
the earlier. The anticipated merger did not take place. Terms of a payout are
being negotiated and interest is not accrued, being unlikely to be paid.

The bridge loan advanced in Canadian funds equated to USD
$293,000. The note is accompanied by restrictions on Dayton Boot regarding the
acquisition of stock or votes or control of the Company or selling its stock to
the Company. The note is being amortized by rent for company offices within
Dayton Boot premises.

Note Payable

On May 12, 2010 the Company issued a promissory note to Asher
Enterprises, Inc., a Delaware corporation, for $50,000. Subsequent additions to
the note raised the total to $86,775 as of July 31, 2010. The note matures
February 14, 2011 and accrues interest at 8%, and alternately 22% in the event
of default. The loan is convertible to common stock at a conversion price of 58%
of the market price.

Loss Per Share

Net loss per share is calculated in accordance with FASB ASC
260, Earnings Per Share, for the periods presented. Basic net loss per
share is based upon the weighted average number of common shares outstanding.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. The Company
has potentially dilutive securities in a convertible loan payable, however the
conversion would be anti-dilutive and is not considered in the calculation.

The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations for the
nine months ended July 31, 2010 and 2009:

2010
    
    
    2009Basic and diluted net loss
      per share:NumeratorNet Earnings (Loss)
    $
    11,797
    
    $
    (495,253
    )DenominatorBasic
      and diluted weighted
      average                    number
      of shares outstanding
    
    67,212,000
    
    
    51,687,000Basic and Diluted Net Loss Per Share
    $
    0.00
    
    $
    (0.01
    )


11

---

Note 3  Capital Structure

There were no changes to capital accounts in the nine months
ended July 31, 2010. As of July 31, 2010 the Company had authorized 75,000,000
shares of $0.001 par value common stock, of which 67,212,000 shares were issued
and outstanding.

Note 4  Legal Proceedings

There were no legal proceedings against the Company with
respect to matters arising in the ordinary course of business. Neither the
Company nor any of its officers or directors is involved in any other litigation
or is involved either as plaintiffs or defendants, and have no knowledge of any
threatened or pending litigation against them or any of the officers or
directors.

12

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Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

Forward-Looking Statements

This quarterly report contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
"may", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles. The following discussion should be read in
conjunction with our financial statements and the related notes that appear
elsewhere in this quarterly report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
quarterly report, particularly in the section entitled "Risk Factors".

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to "CDN$"
refer to Canadian dollars and all references to "common stock" refer to the
common shares in our capital stock.

As used in this quarterly report, the terms we, us and
our refer to Dussault Apparel Inc. and our wholly-owned subsidiaries, unless
the context clearly requires or states otherwise.

Corporate Overview

The address of our principal executive office is 2250 East
Hastings Street, Vancouver, BC V5L 1V4. Our telephone number is (604) 569 -
2619.

Our common stock is quoted on the OTC Bulletin Board under the
symbol DUSS.

Corporate History

We were incorporated on August 1, 2006 in the State Nevada
under the name Release Your Lease Inc. Our initial business plan was to create a
web-based service for buyers and sellers of leased automobiles. Our stock was
listed for trading on the OTC Bulletin Board on March 14, 2007 under the symbol
RLYL. A decision was made by new management, to change the corporate direction
of our company and to pursue opportunities in the retail fashion industry.

Effective June 11, 2007, we completed a merger with our wholly
subsidiary Dussault Apparel Inc. As a result, we changed our name from Release
Your Lease Inc. to Dussault Apparel Inc. We changed the name of our company
to better reflect the anticipated direction and business of our company. On June
11, 2007, our symbol changed to DUSS. The subsidiary was created solely for
the purpose of the merger and change of name.

Effective June 11, 2007 we effected a fourteen (14) for one (1)
forward stock split of our authorized, issued and outstanding shares. As a
result, our authorized capital increased from 75,000,000 shares of common stock
with a par value of $0.001 to 10,050,000,000 shares of common stock
with a par value of $0.001. Our issued and outstanding share capital increased
from 3,060,000 shares of common stock to 49,000,000 shares of common stock.

13

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On November 8, 2007, we opened our first retail location on
Melrose Avenue, Los Angeles, California. Our Melrose location featured womens
and mens Ready-To-Wear collections as well as jewelry, luggage and headwear. On
October 31, 2008, we elected to close our store located on Melrose Avenue in Los
Angeles, California and ceased all operations relating to this location. Given
the losses associated with our Melrose location, and the current market
circumstances for retailers, management was of the view such closure was
necessary to prevent further losses and conserve working capital.

On April 15, 2009, our company entered into an assignment of
royalty with Jason Dussault. The assignment of royalty provides for the payment
by Jason Dussault of 5% of the royalties received by him pursuant to a
merchandising license agreement with Gene Simmons Company and USPA Accessories
LLC for the license of Moneybag intellectual property and related products,
pursuant to and in accordance with the terms and conditions of a merchandising
license agreement. Jason Dussault has agreed to provide sales and design
services under a merchandising license agreement in consideration for royalty
payments from 4.5% to 7.5% of gross income from sales derived under a
merchandising license agreement. From any royalty payments that may become and
payable to Jason Dussault, Mr. Dussault has agreed to assign to our company 5%
of the gross income and has agreed to assign to our company to his rights, title
and interest in and to the amount of the royalty. We have been advised that the
underlying license agreement with Gene Simmons Company and USPA Accessories LLC
has been terminated. As a result we will not be receiving any assigned royalty
payments.

Between May 15, 2009 and July 10, 2009, we entered into
consulting agreements with four (4) consultants, wherein, each of the
consultants agreed to provide consulting services to our company. Pursuant to
the terms of the consulting agreements, we have agreed to issue an aggregate of
2,750,000 restricted shares of our companys common stock.

On October 31, 2009, our company entered into a merchandising
license agreement with USPA Accessories, LLC, wherein, our company agreed to
provide design services under a merchandising license agreement in consideration
for royalty payments of 10% of the gross income from the sales derived under a
merchandising license agreement.

On November 10, 2009, our company entered into a distribution
agreement with EHM Holdings for a term of two years, wherein, EHM Holdings holds
distribution rights to Deuce Custom Ink brand throughout Canada.

We will continue to focus on our remaining operations and distribution
  arrangements and will seek additional opportunities in the apparel retail sector.

Our Current Business

Our current business is limited to the design and distribution
of our apparel lines, which we do on an order by order basis. Once we receive an
order from a retailer, we outsource the manufacturing of that order to third
parties. Upon submission and receipt of the order the retailer is required to
prepay 50% of the order, with the balance payable on delivery. When we place the
order with a manufacturer for production, we pay for the manufacturing costs
upon completion. We do not have any agreements in place for manufacturing, given
this model. Given this order by order business model, we can function without
maintaining inventory and warehousing of products. Our design functions are
carried out at our head office location. Our hoodies are manufactured in Canada,
our tee shirts are manufactured in the United States and our head ware is
manufactured in China.

We do have distribution agreements in regards to our Deuce
collection in Canada, and for our head ware collection in the United States as
follow:

- On November 10, 2009, our company entered into a distribution agreement
  with EHM Holdings for a term of two years, wherein, EHM Holdings holds
  distribution rights to Deuce Custom Ink brand throughout Canada. Our Deuce
  collection is distributed pursuant to this agreement with EHM Holdings,
  pursuant to which we split the gross profit margin from the product sales with
  them.

14

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- On October 31, 2009, our company entered into a merchandising license
  agreement with USPA Accessories, LLC, wherein, our company agreed to provide
  design services under a merchandising license agreement in consideration for
  royalty payments of 10% of the gross income from the sales derived under a
  merchandising license agreement. Our head ware collection is distributed
  pursuant to this agreement with USPA Accessories, LLC , doing business as
  Concept One,

Both of the foregoing distribution/merchandising agreements are
non-exclusive.

At present, our products are available in approximately 200
retail locations across the United States and Canada, through approximately 40
different retailers. Of these locations, approximately 140 are Hatworld, which
carries our head ware collection. Given that such retailers only carry our
products on an order by order basis, we can provide no assurances that such
retailers will continue to purchase and carry our products on any ongoing
basis.

Competition

The apparel industry is intensely competitive and fragmented.
We compete against other small apparel companies, as well as large companies
that have a similar business and large marketing companies, importers and
distributors that sell products similar to or competitive with ours.

Government Regulation and Supervision

Our operations are subject to the effects of international
treaties and regulations such as the North American Free Trade Agreement
(NAFTA). We are also subject to the effects of international trade agreements
and embargoes by entities such as the World Trade Organization. Generally, these
international trade agreements benefit our business rather than burden it
because they tend to reduce trade quotas, duties, taxes and similar impositions.
However, these trade agreements may also impose restrictions that could have an
adverse impact on our business, by limiting the countries from whom we can
purchase our fabric or other component materials, or limiting the countries
where we might market and sell our products.

Labeling and advertising of our products is subject to
regulation by the Federal Trade Commission. We believe that we are in
substantial compliance with these regulations.

Research and Development

We do not currently have a formal research and development
effort but we plan to continue to develop new products.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the
twelve months ending April 30, 2011.

Corporate Offices

Our principal office is located at 2250 East Hastings Street,
Vancouver, BC V5L 1V4. We sublease space at this location from Dayton Boot Co.
Ltd. for $4,000 per month, on a month to month basis. We believe that this space
is sufficient to meet our present needs and do not anticipate any difficulty in
securing alternative or additional space, as needed, on terms acceptable to us.

Employees

Currently, our only employees are our directors and officers,
who include Jason Dussault, our president, chief executive officer, secretary,
treasurer and sole director, Robert Mintak, our chief operating officer and
chief financial officer and Jason Sundar, our VP corporate finance.

15

---

We do not expect to hire new employees over the next 12 month
period.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles used in the United
States. Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our consolidated financial statements is critical to an understanding of our
financials.

Use of Estimates

The preparation of financial statements in accordance with
generally accepted accounting principles in the United States of America
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities known
to exist as of the date the financial statements are published, and the reported
amounts of revenues and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of our
companys financial statements; accordingly, it is possible that the actual
results could differ from these estimates and assumptions and could have a
material effect on the reported amounts of our companys financial position and
results of operations.

Loss Per Share

Net loss per share is calculated in accordance with SFAS 128,
Earnings Per Share, for the periods presented. Basic net loss per share is based
upon the weighted average number of common shares outstanding. Diluted net loss
per share is based on the assumption that all dilutive convertible shares and
stock options were converted or exercised. The Company has no potentially
dilutive securities as of July 31, 2010.

The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations for the
nine months ended July 31, 2010 and 2009:

2010
    
    
    2009Basic and diluted net loss
      per share:NumeratorNet Earnings (Loss)
    $
    11,797
    
    $
    (495,253
    )DenominatorBasic and diluted weighted average number of 
                         
        shares outstanding
    
    67,212,000
    
    
    51,687,000Basic and Diluted Net Loss
      Per Share
    $
    (0.00
    )
    $
    (0.01
    )


Going Concern

We have suffered recurring losses from operations and are
dependent on our ability to raise capital from stockholders or other sources to
meet our obligations and repay our liabilities arising from normal business
operations when they become due. In their report on our audited financial
statements for the year ended October 31, 2009, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosure describing the circumstances that lead to this disclosure by our
independent auditors.

16

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Results of Operations

The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended July 31,
2010 which are included herein.

Three month Summary ended July 31, 2010 and 2009

Three Months EndedJuly 312010
      
      
      2009Sales
      $
      32,388
      
      $
      81,711Cost of Sales
      $
      11,942
      
      $
      64,299Operating Expenses
      $
      71,175
      
      $
      234,494Net Loss
      $
      (50,729
      )
      $
      (217,049
      )


Sales

Our sales for the three months ended July 31, 2010 were
$32,388, compared to our sales for the three months ended July 31, 2009, which
were $81,711, representing approximately a 60% decrease. The decrease in sales
is due to change in distribution chain priorities. Our company is licensing its designs and
collecting royalties.

Cost of Sales

Our cost of sales for the three months ended July 31, 2010 was
$11,942 (37% of product sales), compared to our cost of sales for the three
months ended July 31, 2009, which was $64,299 (79% of product sales). The
decrease in sales is due to our change of distribution to licensing agreements.
Our company is licensing its designs and collecting royalties. We expect that
our cost of sales will remain decrease over the next twelve months, mainly due
to distribution through licensing agreements.

Total Operating Costs

Our total operating expenses consist of salaries and wages,
professional fees and general and administrative costs. For the three months
ended July 31, 2010, our total operating expenses were $71,175 while they were
$234,494 for the three months ended July 31, 2009. The decrease in our total
operating costs is mainly due to a decrease in salaries and wages and
professional fees. We expect to continue to increase our business activities,
but we expect our total operating expenses to continue to decrease over the
coming twelve months.

Nine month Summary ended July 31, 2010 and 2009

Nine months EndedJuly 312010
      
      
      2009Sales
      $
      209,301
      
      $
      526,092Cost of Sales
      $
      81,125
      
      $
      332,139Operating Expenses
      $
      196,241
      
      $
      703,704Net Loss
      $
      (68,065
      )
      $
      (509,751
      )


Sales

Our sales for the nine months ended July 31, 2010 were
$209,301, compared to our sales for the nine months ended July 31, 2009, which
were $526,092, representing approximately a 60% decrease. The decrease in sales
is due to our change of distribution to licensing agreements. Our company is now
focusing collecting royalties on its designs sold through licensing agreements in addition to direct sales to retailers of  select limited run collections.

17

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Cost of Sales

Our cost of sales for the nine months ended July 31, 2010 was
$81,125 (39% of product sales), compared to our cost of sales for the nine
months ended July 31, 2009, which was $332,139 (63% of product sales). The
decrease in our cost of sales is mainly due our change of distribution to
licensing agreements. Our company is now licensing its designs through licensing
agreements. Our licensing partners pay production and distribution costs.

We expect that our cost of sales will remain decrease over the
next twelve months, mainly due to maximizing efficiencies and increased use of
licensing.

Total Operating Costs

Our total operating expenses consist of salaries and wages,
professional fees and general and administrative costs. For the nine months
ended July 31, 2010, our total operating expenses were $196,241 while they were
$668,306 for the nine months ended July 31, 2009. The decrease in our total
operating costs is mainly due to a decrease in salaries and wages, professional
fees and other administrative expenses. We expect to continue to increase our
business activities, but we expect our total operating expenses to continue to
decrease over the coming twelve months.

Liquidity and Financial Condition

Working Capital

At
    
    
    AtJuly 31,
    
    
    October 31,2010
    
    
    2009Current assets
    $
    124,837
    
    $
    140,377Current liabilities
    $
    37,951
    
    $
    106,537Working capital
    $
    86,886
    
    $
    33,840


Cash Flows

Nine Months EndedJuly 31,
      
      
      July 31,2010
      
      
      2009Net Cash (Used by) Operating Activities
      $
      (137,252
      )
      $
      (275,478
      )Net Cash (Used by) Investing Activities
      $
      (44,484
      )
      $
      51,514Net Cash (Used by)Provided by Financing
        Activities
      $
      90,931
      
      $
      121,112Net increase (decrease) in cash during period
      $
      (10,943
      )
      $
      (88,354
      )


We had cash in the amount of $42,048 as of July 31, 2010 as
compared to $52,991 as of October 31, 2009. We had a working capital surplus of
$86,886 as of July 31, 2010 compared to a working capital surplus of $33,840 as
of October 31, 2009.

Our principal source of funds has been cash flows from private
placement financings.

Future Financings

Presently, our revenues may not be sufficient to meet our
operating and capital expenses.

Our capital requirements are difficult to plan in light of our
current strategy to limit our operations and our products. Since our inception,
we have been dependent on investment capital as an important source of
liquidity. Our operations presently are generating negative cash flow, and we do
not expect positive cash flow from operations in the near term. We need to
secure additional working capital in the short-term in order to sustain our
operations and execute our business plan. We have incurred operating losses
since inception, and this is likely to continue into the year ended October 31,
2010.

There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis should it be required, or generate significant material
revenues from operations, we will not be able to meet our other obligations as
they become due and we will be forced to scale down or perhaps even cease our
operations.

18

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Contractual Obligations

As a smaller reporting company, we are not required to
provide tabular disclosure obligations.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.

Item 4. Controls and Procedures

Managements Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our president (also
our principal executive officer) and our chief financial officer (also our
principal financial officer and principal accounting officer) to allow for
timely decisions regarding required disclosure.

As of July 31, 2010, the end of our second quarter covered by
this report, we carried out an evaluation, under the supervision and with the
participation of our president (also our principal executive officer) and our
chief financial officer (also our principal financial officer and principal
accounting officer), of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our president (also
our principal executive officer) and our chief financial officer (also our
principal financial officer and principal accounting officer) concluded that our
disclosure controls and procedures were effective in providing reasonable
assurance in the reliability of our financial reports as of the end of the
period covered by this quarterly report.

Inherent limitations on effectiveness of controls

Internal control over financial reporting has inherent
limitations which include but is not limited to the use of independent
professionals for advice and guidance, interpretation of existing and/or
changing rules and principles, segregation of management duties, scale of
organization, and personnel factors. Internal control over financial reporting
is a process which involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by collusion or
improper management override. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements on a
timely basis, however these inherent limitations are known features of the
financial reporting process and it is possible to design into the process
safeguards to reduce, though not eliminate, this risk. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial
Reporting

There have been no changes in our internal controls over
financial reporting that occurred during the quarter ended July 31, 2010 that
have materially or are reasonably likely to materially affect, our internal
controls over financial reporting.

19

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OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, active or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder are an
adverse party or has a material interest adverse to us.

Item 1A. Risk Factors

Much of the information included in this annual report includes
or is based upon estimates, projections or other forward looking statements.
Such forward looking statements include any projections and estimates made by us
and our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.

Such estimates, projections or other forward looking
statements involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other forward looking statements.

RISKS RELATED TO OUR BUSINESS

We have had minimal cash flows from operations and if we are
not able to obtain further financing we may be forced to scale back or cease
operations or our business operations may fail.

To date we have had minimal cash flows from operations and we
have been dependent on sales of our equity securities to meet our cash
requirements. As of July 31, 2010, we had working capital surplus of $86,886. We
do not expect positive material cash flow from operations in the near term. We
have estimated that we may require up to $100,000 to carry out our plan in
regards to retail fashion during the twelve month period ended July 31, 2011.
However, there is no assurance that actual cash requirements will not exceed our
estimates.

We depend on third parties for significant elements of our
sales and distribution efforts. If these third parties do not continue to assist
us in our sales and distribution, our revenue could decrease, which would have
an adverse impact on our business.

We have limited marketing efforts. We depend substantially upon
third parties for several critical elements of our business including, among
other things, sales and distribution activities. There can be no assurance that
we or these third parties will be able to establish or maintain adequate sales
and distribution capabilities, that we will be able to enter into agreements or
relationships with third parties in additional territories on financially
acceptable terms or that any third parties with whom we enter into such
arrangements will be successful in selling or distributing our products. If they
are not, our business could be negatively impacted. Also, if we are unable to
maintain our relationships with these sales agents and distributors or if these
sales agents and distributors begin selling our competitors products, then our
ability to generate revenues through the sale of our products could be
negatively impacted.

Changes to government regulation and supervision could have
an adverse effect on our business.

Any negative changes to international trade agreements and
regulations such as NAFTA or any agreements affecting international trade such
as those made by the World Trade Organization which result in a rise in trade
quotas, duties, taxes and similar impositions or which has the result of
limiting the countries from whom we can purchase our fabric or other component
materials, or limiting the countries where we might market and sell our
products, could have an adverse effect on our business.

20

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Changes in trends may cause uncertainties with respect to
the growth of our company and can effect our ability to generate revenues.

Our ability to generate revenues in the future is dependent on
whether we successfully develop our products and create a marketable product and
license or otherwise commercialize our products. We cannot predict whether or
when this may happen and this causes uncertainty with respect to the growth of
our company and our ability to generate revenues.

Our revenues are influenced by general economic cycles; a
  continued or sustained rise in oil prices could adversely affect consumer spending
  and demand for our products and also increase our operating costs, both of which
  could adversely affect our business and financial condition.

Apparel is a cyclical industry that is dependent upon the
overall level of consumer spending. Our wholesale customers anticipate and
respond to adverse changes in economic conditions and uncertainty by reducing
inventories and canceling orders. As a result, factors that diminish consumer
spending and confidence in any of the regions in which we compete, particularly
deterioration in general economic conditions, increases in energy costs or
interest rates, housing market downturns, and other factors such as acts of war,
acts of nature or terrorist or political events that impact consumer confidence,
could reduce our sales and adversely affect our business and financial
condition. For example, the price of oil has risen in the recent past. A
continued or sustained rise in oil prices could adversely affect consumer
spending and demand for our products and also increase our operating costs, both
of which could adversely affect our business and financial condition.

Intense competition in the worldwide apparel industry could
reduce our sales and prices.

We face a variety of competitive challenges from street wear
and casual apparel marketers, fashion-oriented apparel marketers, vertically
integrated specialty stores and retailers of private-label products. Some of
these competitors have greater financial and marketing resources than we do and
may be able to adapt to changes in consumer preferences or retail requirements
more quickly, devote greater resources to the building and sustaining of their
brand equity and the marketing and sale of their products or adopt more
aggressive pricing policies than we can. As a result, we may not be able to
compete as effectively with them and may not be able to maintain or grow the
equity of and demand for our brand. Increased competition in the worldwide
apparel industry  including from international expansion of vertically
integrated specialty stores, from department stores, chain stores and mass
channel retailers developing exclusive labels, and from well-known and
successful non-apparel brands expanding into jeans and casual apparel  could
reduce our sales and adversely affect our business and financial condition.

RISKS RELATED TO OUR COMMON STOCK

Trading in our common shares on the OTC Bulletin Board is
limited and sporadic making it difficult for our shareholders to sell their
shares or liquidate their investments.

Our common shares are currently listed for public trading on
the OTC Bulletin Board. The trading price of our common shares has been subject
to wide fluctuations. Trading prices of our common shares may fluctuate in
response to a number of factors, many of which will be beyond our control. The
stock market has generally experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance
of companies with no current business operation. There can be no assurance that
trading prices and price earnings ratios previously experienced by our common
shares will be matched or maintained. These broad market and industry factors
may adversely affect the market price of our common shares, regardless of our
operating performance.

In the past, following periods of volatility in the market
price of a companys securities, securities class-action litigation has often
been instituted. Such litigation, if instituted, could result in substantial
costs for us and a diversion of managements attention and resources.

21

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Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations which may limit a stockholders
ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.

FINRA sales practice requirements may also limit a
stockholders ability to buy and sell our stock and may have an adverse effect
on the market for our shares.

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, the FINRA has adopted rules that require
that in recommending an investment to a customer, a broker-dealer must have
reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customers financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the
FINRA believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. The FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Removed and Reserved]

Item 5. Other Information

None.

22

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Item 6. Exhibits

|Exhibit |                                                                                                                                                                                                               
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                   
|        |                                                                                                                                                                                                               
|(3)     | Articles
        of Incorporation and By-laws                                                                                                                                                                 
|        |                                                                                                                                                                                                               
|3.1     | Articles of
        Incorporation (incorporated by reference from our Registration Statement
        on Form SB-2 filed on January 11, 2007).                                                                 
|        |                                                                                                                                                                                                               
|3.2     | Bylaws (incorporated
        by reference from our Registration Statement on Form SB-2 Filed on January
        11, 2007).                                                                                    
|        |                                                                                                                                                                                                               
|3.3     | Articles of
        Merger filed with the Nevada Secretary of State on May 29, 2007 (incorporated
        by reference from our Current Report on Form 8-K filed on June 16, 2007).                           
|        |                                                                                                                                                                                                               
|3.4     | Certificate
        of Change filed with the Nevada Secretary of State on May 29, 2007 (incorporated
        by reference from our Current Report on Form 8-K filed on June 16, 2007).                        
|        |                                                                                                                                                                                                               
|(10)    | Material
        Contracts                                                                                                                                                                                    
|        |                                                                                                                                                                                                               
|10.1    | Employment Agreement
        dated June 22, 2007, between our company and Terry Fitzgerald incorporated
        by reference from our Current Report on Form 8-K filed on June 25, 2007).                     
|        |                                                                                                                                                                                                               
|10.2    | Letter of Intent
        dated June 25, 2007, between our company and Dussault Jeans Inc. (incorporated
        by reference from our Current Report on Form 8-K filed on July 2, 2007).                      
|        |                                                                                                                                                                                                               
|10.3    | Letter of Intent
        dated November 5, 2007 between our company and Dussault Jeans Inc. (incorporated
        by reference from our Current Report on Form 8-K filed on November 5,
        2007).        
|        |                                                                                                                                                                                                               
|10.4    | Consulting Agreement
        dated July 19, 2007, between our company and Jason Sundar (incorporated
        by reference from our Annual Report on Form 10-KSB filed on February 13,
        2008).          
|        |                                                                                                                                                                                                               
|10.5    | Consulting Agreement
        dated July 19, 2007, between our company and Robert Mintak (incorporated
        by reference from our Annual Report on Form 10-KSB filed on February 13,
        2008).         
|        |                                                                                                                                                                                                               
|10.6    | Bridge Loan
        Agreement dated July 19, 2007, between our company and Dussault Jeans
        Inc. (incorporated by reference from our Current Report on Form 8-K filed
        on August 1, 2007).       
|        |                                                                                                                                                                                                               
|10.7    | Bridge Loan
        Agreement dated April 16, 2008, between our company and Dayton Boot Co.
        Ent. Ltd. (incorporated by reference from our Current Report on Form 8-K
        filed on April 23, 2008).
|        |                                                                                                                                                                                                               
|(31)    | Section 302
        Certification                                                                                                                                                                             
|        |                                                                                                                                                                                                               
|31.1*   | Section
        302 Certification of Chief Executive Officer.                                                                                                                                                 
|        |                                                                                                                                                                                                               
|31.2*   | Section
        302 Certification of Chief Financial Officer.                                                                                                                                                 
|        |                                                                                                                                                                                                               
|(32)    | Section 906
        Certification                                                                                                                                                                             
|        |                                                                                                                                                                                                               
|32.1*   | Section
        906 Certification of Chief Executive Officer.                                                                                                                                                 
|        |                                                                                                                                                                                                               
|32.2*   | Section
        906 Certification of Chief Financial Officer.                                                                                                                                                 

* Filed herewith.

23

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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.

|                          | DUSSAULT APPAREL INC.                     
|------------------------- | ------------------------------------------
|                          | (Registrant)                              
|                          |                                           
|                          |                                           
|                          |                                           
|                          |                                           
|Dated: September 20, 2010 | /s/
      Jason Dussault                  
|                          | Jason Dussault                            
|                          | Chief Executive Officer and President     
|                          | (Principal Executive Officer)             
|                          |                                           
|                          |                                           
|Dated: September 20, 2010 | /s/
      Robert Mintak                   
|                          | Robert Mintak                             
|                          | Chief Financial Officer                   
|                          | (Principal Financial Officer and Principal
|                          | Accounting Officer)                       

24

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