UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
 
 [X]
              QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
      the quarterly period ended August 31,
2008
 
 [  
      ]
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
 
 For the
transition period from ____________ to ______________
 
 Commission
file number: 333-146517
 
 MICHAEL LAMBERT,
INC.
 (Name of
registrant in its charter)
 
 Nevada
              2300
              20-3107499(State
      or jurisdiction
              (Primary
      Standard
              (IRS
      Employerof
      incorporation or
              Industrial
              Identificationorganization)
              Classification
              No.)Code
      Number)
 
 121
Interpark Blvd., Suite 1204
 San
Antonio, Texas 78216
 (Address
of principal executive offices)
 
 (210)
490-8383
 (Registrant's
telephone number)
 
 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.     Yes  x    No   ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large
      accelerated filer   ̈
              Accelerated
      filer    ̈Non-accelerated
      filer   ̈
              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    ̈No   x
 
 The
number of shares outstanding of each of the issuer’s classes of equity as of
October 14, 2008 is 3,864,500 shares of common stock, par value $0.001, and no
shares of preferred stock, par value $0.001.
  
  PART
I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL
STATEMENTS
 
 
 MICHAEL
LAMBERT, INC.
 BALANCE
SHEETS
 (Unaudited)
  
 
 August
      31,
                2008
              
              
              November
      30,
                2007CURRENT
      ASSETSCash
              
              $
              419
              
              
              $
              864Accounts
      receivable
              
              
              438
              
              
              
              437Accounts
      receivable – related party
              
              
              3,430
              
              
              
              3,732Inventory
              
              
              1,293
              
              
              
              -TOTAL
    ASSETS
              
              $
              5,580
              
              
              $
              5,033LIABILITIES
      & STOCKHOLDERS’ DEFICITCURRENT
      LIABILITIESAccounts
      payable
              
              $
              14,582
              
              
              $
              -Accrued
      liabilities
              
              
              2,946
              
              
              
              2,390Bank
      credit line payable
              
              
              16,200
              
              
              
              14,301Related
      party debt
              
              
              34,104
              
              
              
              -Short-term
      debt, net of discount of $7,529 and $9,849
              
              
              2,471
              
              
              
              151Total
      current liabilities
              
              
              70,303
              
              
              
              16,842Long
      Term Debt
              
              
              -
              
              
              
              13,000TOTAL
      LIABILITIES
              
              
              70,303
              
              
              
              29,842Commitments
      and contingencies
              
              
              -
              
              
              
              -STOCKHOLDERS’
      DEFICITPreferred
      stock, $.001 par value,10,000,000
      shares authorized,none
      issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, $.001 par value,140,000,000
      shares authorized3,864,500
      and 3,564,500 shares issued and outstanding
              
              
              3,864
              
              
              
              3,564Additional
      paid-in-capital
              
              
              2,814,606
              
              
              
              2,662,683Accumulated
      deficit
              
              
              (2,883,193
              )
              
              
              (2,691,056
              )TOTAL
      STOCKHOLDERS’ DEFICIT
              
              
              (64,723
              )
              
              
              (24,809
              )TOTAL
      LIABILITIES & STOCKHOLDERS’ DEFICIT
              
              $
              5,580
              
              
              $
              5,033
  See notes
to financial statements.
  F-1
  MICHAEL
LAMBERT, INC.
 STATEMENTS
OF OPERATIONS
 (Unaudited)
 
 Three
      Months Ended August 31,
              
              
              Nine
      Months Ended August 31,2008
              
              
              2007
              
              
              2008
              
              
              2007(restated)
              
              
              
              
              
              (restated)Sales
      revenue
              
              $
              1,561
              
              
              $
              3,356
              
              
              $
              5,413
              
              
              $
              16,996Cost
      of revenue
              
              
              270
              
              
              
              6,029
              
              
              
              6,303
              
              
              
              10,311General
      and administrative expenses
              
              
              22,233
              
              
              
              68,197
              
              
              
              186,458
              
              
              
              778,530Interest
      expense
              
              
              1,754
              
              
              
              193
              
              
              
              4,788
              
              
              
              2,905Net
      loss
              
              $
              (22,696
              )
              
              $
              (71,063
              )
              
              $
              (192,136
              )
              
              $
              (774,750
              )Basic
      and diluted net loss per share
              
              $
              (0.01
              )
              
              $
              (0.02
              )
              
              $
              (0.05
              )
              
              $
              (0.22
              )Weighted
      average shares outstanding
              
              
              3,864,500
              
              
              
              3,463,652
              
              
              
              3,807,955
              
              
              
              3,461,621
  See notes
to financial statements.
 
 
 F-2
  MICHAEL
LAMBERT, INC.
 STATEMENTS
OF CASH FLOWS
 (Unaudited)
 
 Nine
      Months Ended
              
              
              Nine
      Months EndedAugust
      31, 2008
              
              
              August
      31, 2007
                (restated)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (192,136
              )
              
              $
              (774,750
              )Adjustments
      to reconcile net loss tocash
      used in operating activities:Imputed
      Rent Expense
              
              
              299
              
              
              
              1,350Shares
      issued for services
              
              
              150,000
              
              
              
              145,000Warrant
      expense
              
              
              -
              
              
              
              615,915Imputed
      interest on debt
              
              
              1,604
              
              
              
              940Amortization
      of discount on short term debt
              
              
              2,320
              
              
              
              10,000Changes
      in:Accounts
      Receivable
                Inventory
              
              
              301
                (1,293
              )
              
              
              -
      -Accounts
      payable and accrued  liabilities
              
              
              15,468
              
              
              
              (7,919
              )NET
      CASH USED IN OPERATING ACTIVITIES
              
              
              (23,437
              )
              
              
              (9,464
              )CASH
      FLOWS FROM FINANCING ACTIVITIESLoans
      from stockholders
              
              
              23,942
              
              
              
              5,000Principal
      payments on loans from stockholders
              
              
              (950
              )
              
              
              -Proceeds
      from sale of common stock
              
              
              -
              
              
              
              4,000NET
      CASH PROVIDED BY FINANCINGACTIVITIES
              
              
              22,992
              
              
              
              9,000NET
      CHANGE IN CASH
              
              
              (445
              )
              
              
              (464
              )Cash
      balance, beginning of period
              
              
              864
              
              
              
              1,760Cash
      balance, end of period
              
              $
              419
              
              
              $
              1,296SUPPLEMENTAL
      DISCLOSURES:Cash
      paid for interest
              
              $
              -
              
              
              $
              -Cash
      paid for income taxes
              
              $
              -
              
              
              $
              -
 
 See notes
to financial statements.
   F-3
  MICHAEL
LAMBERT, INC.
 NOTES
TO FINANCIAL STATEMENTS
 August 31, 2008
 (Unaudited)
 
 NOTE
1 – BASIS OF PRESENTATION
 
 The
accompanying unaudited interim financial statements of Michael Lambert, Inc.,
have been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in the Registration Statement filed with
the SEC on Form S-1/A.  In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein.  The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year.  Notes to the financial statements which would
substantially duplicate the disclosure contained in the audited financial
statements for fiscal 2007 as reported in the Form S-1/A have been
omitted.
 
 NOTE
2 - GOING CONCERN
 
 As
indicated in the accompanying financial statements, MLI had minimal operations
and a working capital deficit as of August 31, 2008. These conditions raise
substantial doubt as to MLI's ability to continue as a going
concern.  Management is trying to raise additional capital through
sales of MLI’s common stock and is seeking financing from third parties. The
financial statements do not include any adjustments that might be necessary if
MLI is unable to continue as a going concern.
 
 NOTE
3 – RESTATEMENTS
 
 In July
2008, management discovered the following errors:
 
 Fiscal
2007
 
 In fiscal
2007, 1,400,000 warrants were granted for services and 435,000 warrants
previously granted for services in fiscal 2005 were canceled. The 965,000 net
warrants in fiscal 2007 were valued at $422,656 due to an improper reduction of
expense for the 435,000 warrants canceled. The 1,400,000 warrants granted have a
fair value of $615,915 and the 435,000 canceled shares have zero value. General
and administrative expense, additional paid in capital and net loss were
understated by $193,259.
 
 In fiscal
2007, 290,000 shares were issued for services and 190,000 shares previously
issued for services in prior years were canceled. The 100,000 net shares in
fiscal 2007 were valued at $50,000 due to an improper reduction of expense for
the 190,000 shares canceled. The 290,000 shares issued have a fair value of
$145,000 and the 190,000 canceled shares have zero value. General and
administrative expense, additional paid in capital and net loss were understated
by $95,000.
 
 NOTE
4 - RELATED PARTY TRANSACTIONS
 
 In
November 2007, MLI entered into a revolving credit note agreement with BFP
Texas, Ltd. that allows MLI to borrow a maximum of $10,000 on
demand.   On August 15, 2008, the maximum amount available for MLI to
borrow was increased to $35,000, and the date upon which any outstanding
balances must be repaid was extended to December 31, 2009.  As of
August 31, 2008, MLI had borrowed $17,042 under the agreement, and approximately
$18,000 was available to the Company.  The outstanding balance of this
line of credit accrues interest at 0%, however interest is imputed at
10%.  BFP Texas, Ltd. is a Texas limited partnership which is
controlled by MLI’s CFO, Carey G. Birmingham.
 
 F-4
  NOTE
5 - CAPITAL STOCK
 
 In
December 2007, MLI appointed Carey G. Birmingham as Chief Financial
Officer.  In connection with this appointment, the Board of Directors
approved the issuance of 250,000 shares of MLI’s stock to Mr. Birmingham, for an
expense of $125,000, or $.50 per share.
 
 In
February 2008, MLI entered into a transfer agent agreement and agreed to issue
50,000 shares of MLI’s stock valued at $.50/share for an expense of
$25,000.
 
 F-5
  ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS
 
 CERTAIN
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE
"FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
MICHAEL LAMBERT, INC. ("THE COMPANY", "MLI", "WE", "US" OR "OUR") TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM
10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO AUGUST 31, 2008.
 
 DESCRIPTION
OF BUSINESS
 
 History
 
 Michael Lambert, Inc. was
incorporated in Nevada on November 2, 2005.  We are the successor
entity to Robert Kremer D/B/A Michael Lambert, a sole proprietorship that was
formed on July 1, 2005 (“Kremer”).  On November 2, 2005, all of the
assets and liabilities of Kremer were transferred to us in exchange for
1,000,000 shares of common stock issued to our Chief Executive Officer and
President, Robert Kremer.  Unless otherwise stated, references to the
Company herein, include the operations and prior transactions of
Kremer.  On January 3, 2006, we filed a correction to our Articles of
Incorporation with the Secretary of State of Nevada, which included the
designation of our Preferred Stock and indemnification provisions (both
described below), which were mistakenly left out of our previous November 2,
2005 filing (the “Correction”).  All disclosure contained herein takes
into account the Correction.
 
 We are a
company which manufactures handbags and plans to manufacture clothing
accessories in the future, funding permitting. We plan to design our products to
appeal to a broad market segment because of the unique design focus of our
proposed brands.  We produced only 603 handbags from inception to
October 14, 2008 and no other clothing accessories.  We currently only
sell our products under the brand “Michael Lambert” and currently only sell our
products at two independently owned clothing stores in the San Antonio, Texas
area to date; however in the future, we plan to sell our products directly to
consumers over the Internet, through our website, www.michael-lambert.com, which
includes information we do no wish to be incorporated by reference into this
filing and on the website WatchNBuy.com, through our agreement with 2BC, Inc.,
described below.   We manufacture the handbags, which are hand-sewn by
a third party, Fuerza Unida, in San Antonio, Texas.
 
 In April
2008, we entered into an agreement with 2BC, Inc., the owners of the
WatchNBuy.com website, which calls for them to receive a 20% commission on all
products sold through their website.
 
 Additionally,
in the future, funding permitting, we plan to operate through different brands,
with different pricing of our products associated with the differing
brands.  For instance, some brands will be more expensive and be made
of higher quality fabrics and some brands will have a much lower price
point.  As a result, we believe that our products will be able to
apply to a broad range of buyers.
 
 Weplan to market our
products and brands as an alternative to the existing lines of other handbag and
clothing accessories companies. We plan to develop brand awareness by employing
and integrating design and quality with marketing, packaging, promotion,
advertising and logistics.
 
 In the
future, funding permitting, our management currently anticipates employing a
promotional plan that may include celebrity endorsements by actors, musicians,
athletes and others who are in the very early stages of their careers. We also
plan to actively support selective events and organizations that are relevant to
women’s issues, funding
permitting.  In addition, we plan to take an active role promoting MLI
brands through the sponsorship of sports for women, and support academic
programs for women, particularly in the areas of design.  We intend to
raise funding for our future marketing efforts by selling debt and/or equity
securities in the future, of which there can be no
assurance.
 
 -2-
  While we
are currently solely focused on the design, manufacture and sale of handbags,
our future plans may include the design, manufacture and sale of other lifestyle
products such as belts, pillows and scarves using discontinued fabric samples,
funding permitting, if our management determines the sale of such items are in
our best interests.
 
 The
Internet is a critical component of our plans for advertising and future
growth.  It is our hope that our website will promote our planned
brands, generate sales revenues, and support retailers who we hope will sell our
products in the future.  We currently have two independently owned
retailers in San Antonio, Texas, which sell our products.
 
 On August
29, 2005, we entered into a Name & Trademark License Agreement (“Trademark
Agreement”) with KBK, Inc., which is controlled by our Chief Executive Officer
and President, Robert Kremer.  The agreement allows KBK to use our
trademark for the term, “Michael Lambert Inc.,” (the “MLI Trademark”), in
connection with the manufacture, sale and distribution of decorative fabrics and
furniture within the United States.  We have a trademark, registered
with the State of Texas for the service mark “ML Michael Lambert,” as described
below under “Trademarks, Patents and Copyrights.”
 
 The
agreement is effective for one year and renewable for successive one year
periods at the mutual agreement of both parties, and was renewed for an
additional one-year term on August 29, 2006, 2007 and 2008.  KBK is
required to pay us a 5% royalty on the sale of any products that contain the MLI
Trademark.  The rights associated with the Trademark Agreement are
non-exclusive; however, they are not able to be transferred except with the
Company’s prior written consent. The Trademark Agreement may be terminated by us
at any time without cause upon thirty (30) days written notice to
KBK.  The Company currently has no trademarks, but has contacted an
attorney and plans to register a trademark for the term “Michael Lambert Inc.,”
in the State of Texas subsequent to the date of this Report.
 
 Critical Accounting
Policies:
 
 Revenue Recognition-
The Company recognizes revenue when persuasive evidence of an arrangement
exists, goods have been delivered, the sales price is fixed or determinable and
collectibility is reasonably assured.
 
 Accounts
Receivable – Accounts receivable are amounts due on sales, are
unsecured and are carried at their estimated collectible amounts. Credit is
generally extended on a short-term basis; thus accounts receivable do not bear
interest although a finance charge may be applied to such receivables that are
more than thirty days past due. Accounts receivable are periodically evaluated
for collectibility based on past credit history with customers. Provisions for
losses on accounts receivable are determined on the basis of loss experience,
known and inherent risk in the account balance and current economic
conditions.
 
 Income Taxes- The
Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when
differences are expected to be recovered.  The Company provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.
 
 Stock Compensation-
The Company accounts for its employee stock option plans under the provisions of
SFAS No. 123R, “Share-Based Payment,” which is a revision of SFAS No. 123,
“Accounting for Stock Based Compensation.”  The Company accounts
for the fair value of equity instruments issued to non-employees in accordance
with Emerging Issues Task Force No. 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring or In Conjunction with
Selling Goods or Services.” The Company measures non-employee awards on the
earlier of the date at which a commitment for performance by the counterparty to
earn the equity instruments is reached (a "performance commitment"); or the date
at which the counterparty's performance is complete.  When there is no
performance commitment and the award is immediately
vested and non-forfeitable, the awards are measured and recognized at the date
the contract is entered into.
 
 -3-
  The
Company periodically issues shares of common stock to non-employees in exchange
for services provided.  The value of the shares is equal to quoted
market price on either the date an agreement to issue the shares is signed or
the date the director approves the issuance.  In periods where no
quoted market price exists, the Company estimates the fair value of the award
using the last cash sale of common stock.  The Company records the
value of the shares as an expense.
 
 Beneficial Conversion
Feature- The convertible feature of certain of the Company’s convertible
notes provided for a rate of conversion that was below market value (see Note
4).  Such feature is normally characterized as a beneficial conversion
feature.  Pursuant to Emerging Issues Task Force (“EITF”) No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratio” and EITF No. 00-27, “Application of
EITF Issue No. 98-5 to Certain Convertible Instruments,” the estimated relative
fair value of the BCF was recorded as a discount from the face amount of the
convertible note.  The Company uses the Black-Scholes method to
calculate the intrinsic value of the
 convertible
instrument and amortizes the discount using the effective interest method
through the conversion or maturity date of such instrument.
 
 The
following discussion should be read in conjunction with our financial
statements.
 
 Plan
of Operations For The Next Twelve Months:
 
 Initially,
we plan to use consultants to support our planned advertising and promotion
campaigns.  We plan to have our staff, which we plan to hire in the
future, funding permitting, but which we do not currently have any immediate
plans to hire, appear with products and demonstrate their designs.  
In addition, we have recently entered into an agreement with WatchNbuy.com, a
new promotional and marketing website which features short videos of our
products being used and displayed, while allowing the viewer to click on our
product and purchase it through WatchNbuy.com. Our agreement with 2BC, Inc., the
owners of the WatchNBuy.com website, calls for them to receive a 20% commission
on all products sold through their website.  Additionally, we plan to
promote the fact that our products are hand sewn in San Antonio, Texas by
minority women who operate their own sewing cooperative called Fuerza
Unida.  The Company is committed to continue our Made In America
production as long as we are assured of quality and timely results. We do not
currently have an agreement in place with Fuerza Unida, who is an independent
contractor.
 
 We also
plan to eventually sign athletes, actors, musicians, and models in the very
early stages of their careers, funding permitting, to help market our products,
with the hope that if such athletes, actors, musicians and models become
successful, our products and advertising will get more exposure. Signing female
athletes and actively supporting sports for women will be part of our marketing
plan as well, funding permitting. Additionally, we plan to be pro-active in the
support of organizations that contribute to bettering the lives and welfare of
women and children.
 
 Our Growth
Strategy
 
 The first
stage of our growth strategy, funding permitting, will be to develop and market
a full range of handbags to consumers. We will seek to differentiate
ourselves through unique designs, and the development of marketing
strategies that will create brand awareness.
 
 Our goals
for the next year include:
 
 1)
              Develop
      campaign to create consumer awareness and demand;2)
              Establish
      marketing relationships and channels of distribution;3)
              Develop
      Internet website and links;4)
              Generate
      sales revenues for purposes of increasing production;
  and5)
              Continue
      design development and plans for increased
  production.
 
 -4-
  In
addition to the growth strategy outlined above, we intend on seeking out other
business which may generate revenue and explore mergers and or acquisitions with
certain of these companies which we believe may add to our operations, generate
synergies and/or give us greater brand awareness.  We do not currently
have any agreements or understandings in place with any companies or partners
regarding strategic partnerships, mergers or acquisitions.
 
 In the
event that we are unable to raise additional funding through the sale of debt
and/or equity to fund the plan of operations and growth strategy set forth
above, we will be unable to expand our operations.  As a result, in
the event we are unable to raise additional funding, we will not be able to
undertake the marketing and advertising plans set forth above and will
concentrate on maximizing the margins on the products we currently produce
instead of expanding into new product lines.  Furthermore, while we
currently anticipate being able to continue our operations for only six (6)
months if we fail to raise additional capital in the future, we also anticipate
that if needed, our officers and shareholders will continue to loan us money on
an as needed basis to support our operations moving forward; however, no officer
or shareholder has provided us any written confirmation or agreement to provide
us funding in the future other than what has been disclosed below under
“Liquidity and Capital Resources,” and as such, we cannot provide any assurances
that such individuals will provide us funding in the future.
 
 COMPARISON
OF OPERATING RESULTS
 
 Results
of Operation for the Three Months Ended August 31, 2008 Compared to the Three
Months Ended August 31, 2007
 
 We had
sales revenues of $1,561 for the three months ended August 31, 2008, compared to
sales revenues of $3,356 for the three months ended August 31, 2007, a decrease
in sales from the prior period of $1,795 or 53.5%. The Company believes that the
decrease in sales was mainly due to a decrease in customer awareness of its
products and a general malaise in overall retail sales, and more particularly in
the Company’s market segment, during the three months ended August 31, 2008
compared to the three months ended August 31, 2007.
 
 We had
cost of revenue of $270 for the three months ended August 31, 2008, compared to
cost of revenue of $6,029 for the three months ended August 31, 2007, a decrease
in cost of revenue from the prior period of $5,759 or 95.5%.  The
decrease in cost of revenue is attributable to a decrease in manufacturing
expenses in connection with reduced production during the three months ended
August 31, 2008 compared to the three months ended August 31,
2007.  Additionally, the Company had reduced rental expenses during
the three months ended August 31, 2008 due to the addendum to the lease between
the Company and KBK, entered into on August 1, 2008, which provided that the
Company would not owe any rental fees to KBK for the use of its office space
moving forward.
 
 We had
general and administrative expenses of $22,233 for the three months ended August
31, 2008, compared to general and administrative expenses of $68,197 for the
three months ended August 31, 2007, a decrease in general and administrative
expenses of $45,964 or 67.4% from the prior period.  The decrease in
general and administrative expenses was primarily a result of the Company having
certain one-time expenses during the three months ended August 31, 2007, in
connection with the preparation of its registration statement and the payment of
legal, accounting and filing fees in connection therewith, which fees were not
represented in such high amounts during the three months ended August 31, 2008,
compared to the three months ended August 31, 2007.
 
 We had
interest expense of $1,754 for the three months ended August 31, 2008, compared
to interest expense of $193 for the three months ended August 31, 2007, an
increase in interest expense from the prior period of $1,561 from the prior
period.  The increase in interest expense was mainly due to the
increase in related party indebtedness and imputed interest in connection
therewith, associated with the loans, Line of Credit and Note described below,
during the period from August 31, 2007 to August 31, 2008, which in turn caused
interest expense to increase for the three month period ended August 31,
2008.
 
 We had a
net loss of $22,696 for the three months ended August 31, 2008, compared to a
net loss of $71,063 for the three months ended August 31, 2007, a decrease in
net loss of $48,367 or 68.1% from the prior period. The decrease in net loss was
mainly attributable to the $45,964 decrease in general and administrative
expenses offset by
the $1,795 or 53.5% decrease in sales for the three months ended August 31,
2008, compared to the three months ended August 31, 2007.
 
 -5-
  Results
of Operation for the Nine months ended August 31, 2008 Compared to the Nine
months ended August 31, 2007
 
 We had
sales revenues of $5,413 for the nine months ended August 31, 2008, compared to
sales revenues of $16,996 for the nine months ended August 31, 2007, a decrease
in sales from the prior period of $11,583 or 68.2%. The decrease in sales was
mainly due to a decrease in related party revenue for license fees and royalties
during the nine month period ended August 31, 2008, compared to the nine months
ended August 31, 2007.  The Company also believes the general malaise
in overall retail sales, and more particularly in its market segment, may have
contributed to the decrease.
 
 We had
cost of revenue of $6,303 for the nine months ended August 31, 2008, compared to
cost of revenue of $10,311 for the nine months ended August 31, 2007, a decrease
in cost of revenue from the prior period of $4,008 or 38.9% from the prior
period.  The decrease in cost of revenue is attributable to a decrease
in manufacturing expenses in connection with reduced production during the nine
months ended August 31, 2008 compared to the nine months ended August 31,
2007.  Further, in connection with the addendum to the lease between
the Company and KBK, entered into on August 1, 2008, which provided that the
Company would not owe any rental fees to KBK for the use of its office space,
the Company had reduced rental expenses during the nine months ended August 31,
2008, compared to the nine months ended August 31, 2007.
 
 We had
general and administrative expenses of $186,458 for the nine months ended August
31, 2008, compared to general and administrative expenses of $778,530 for the
nine months ended August 31, 2007, a decrease in general and administrative
expenses of $592,072 or 76.0%.  The decrease in general and
administrative expenses was primarily a result of certain one time expenses
associated with expenses for warrants issued to consultants during the nine
months ended August 31, 2007, which expenses were significantly less for the
nine months ended August 31, 2008.
 
 We had
interest expense of $4,788 for the nine months ended August 31, 2008, compared
to interest expense of $2,905 for the nine months ended August 31, 2007, an
increase in interest expense from the prior period of $1,883 or
64.8%.  The increase in interest expense was mainly due to the
increase in indebtedness and imputed interest in connection therewith,
associated with the loans, Line of Credit and Note described below, during the
period from August 31, 2007 to August 31, 2008, which in turn caused interest
expense to increase for the nine month period ended August 31, 2008, compared to
the nine months ended August 31, 2007.
 
 We had a
net loss of $192,136 for the nine months ended August 31, 2008, compared to a
net loss of $774,750 for the nine months ended August 31, 2007, a decrease in
net loss of $582,614 or 75.2% from the prior period. The decrease in net loss
was mainly attributable to the $592,072 decrease in general and administrative
expenses, offset by the $11,583 or 68.2% decrease in revenues for the nine
months ended August 31, 2008, compared to the nine months ended August 31,
2007.
 
 -6-
  Liquidity
and Capital Resources
 
 We had
total assets of $5,580 as of August 31, 2008, consisting solely of current
assets, which included $419 of cash, $438 of accounts receivable, $3,430
accounts receivable, related party, and $1,293 of inventory.  The
Company purchases inventory for its products on an as needed basis, and as such,
the Company has approximately 72 completed handbags in inventory as of the date
of this filing.
 
 We had
total liabilities of $70,303 as of August 31, 2008, consisting solely of current
liabilities, which included $14,582 of accounts payable, $2,946 of accrued
liabilities,  $16,200 of bank credit line payable, $34,104 of related
party debt, which represented amounts owed under the loans, Line of Credit and
Note, described below, and $2,471 of short-term debt.
 
 We had
negative working capital of $64,723, a total shareholders deficit of $64,723 as
of August 31, 2008 and an accumulated deficit as of August 31, 2008 of
$2,883,193.
 
 We had
$23,437 in net cash used in operating activities for the nine months ended
August 31, 2008, which included $192,136 in net loss and $1,293 in change in
inventory, offset by $150,000 in shares issued for services, $15,468 in change
in accounts payable and accrued liabilities, $301 of change in accounts
receivable, $2,320 in amortization of discount on short term debt, $299 of
imputed rent expense and $1,604 of imputed interest on debt.
 
 We had
$22,992 of net cash provided by financing activities for the nine months ended
August 31, 2008, which included $23,942 in loans from stockholders relating to a
revolving credit note with BFP Texas, Ltd. (described below), offset by $950 in
principal payments on loans from stockholders.
 
 We
entered into a revolving line of credit agreement with one of our shareholders,
Michael Sonaco, in July 2005 (“Line of Credit”).  We could borrow up
to $25,000 under the Line of Credit, but had only borrowed $8,000 as of August
4, 2006, when the Line of Credit was replaced by another line of credit in the
amount of $8,000.  The Line of Credit bears no interest and any unpaid
principal was due on December 31, 2007, but has been extended until December 31,
2008.  Currently, past due amounts are not bearing
interest.  The balance of the Line of Credit as of the filing of this
Report was $8,000.
 
 On July
15, 2005, we entered into a loan agreement with KBK, Inc. (“KBK”), which is
controlled by our Chief Executive Officer and President, Robert Kremer, for
$1,000.  The loan agreement was to mature on December 31, 2006 and had
an interest rate of 0%, provided the loan was not in default.  On or
about December 15, 2006, the loan with KBK was increased to $3,000 and the
maturity date of the loan was extended until December 31, 2007, and the maturity
date has been further extended until December 31, 2008.  The interest
rate remains 0% per annum, unless the Company defaults on payments due under the
note, at which time the interest rate will increase to 10% per
annum.  The balance of the loan agreement as of the filing of this
Report was $3,000.
 
 In July
2005, the Company issued a $27,500 Note Payable to the Company’s attorney, David
M. Loev (the “Note”), in consideration for legal services rendered and to be
rendered on behalf of the Company in connection with the drafting of our Private
Placement Memorandum and the drafting and accompanying amendments associated
with a Form S-1 registration statement.  On September 28, 2007, we
entered into a convertible promissory note with Mr. Loev, which replaced the
prior Note, and evidenced $10,000 of a total of $22,500 owed to Mr. Loev by the
Company, which included $5,000 the Company agreed to pay Mr. Loev upon the
receipt of the first round of comments (if any) on our Registration Statement by
the Commission, which amount has been paid to date, and $7,500 which the Company
agreed to pay Mr. Loev upon the effectiveness of our Registration Statement,
which amount has not been paid to date.On or about October 6, 2008, we entered
into an Amended and Restated Convertible Promissory Note that replaced the
previous convertible promissory note.  The Amended and Restated
Convertible Promissory Note bears interest at the rate of 5% per annum, and is
due on March 31, 2009.  Any amounts not paid when due accrue interest
at the rate of 15% per annum, can be converted by Mr. Loev into shares of our
common stock at an exercise price of $0.10 per share.  We have also
previously issued Mr. Loev an aggregate of 550,000 shares of our common stock
and options to purchase up to 350,000 shares of our common stock at an exercise
price of $0.375 per share, in consideration for legal services rendered to the
Company.
  -7-
  On
January 13, 2006, we entered in a loan agreement with Robert Kremer, our Chief
Executive Officer.  The loan agreement was for a total of $2,000,
which amount does not bear interest unless such amount is in default, in which
case it bears interest at the rate of 10% per annum.  The outstanding
amount of the loan agreement was due December 31, 2007, but was extended prior
to its maturity date until December 31, 2008.  On or around July 10, 2008,
the Company entered into a new loan agreement with Mr. Kremer, which modified
the terms of the original loan agreement to increase the amount available under
the loan to $6,000. The balance of this loan as of the filing of this
Report was approximately $6,000.
 
 On
February 12, 2008, we entered into a Master Revolving Line of Credit Agreement
(the “BFP Line of Credit”) with BFP Texas, Ltd., which is controlled by our
Chief Financial Officer, Carey G. Birmingham (“BFP”).  Pursuant to the
Line of Credit, BFP agreed to provide us up to $12,000 in funding, which amount
does not bear interest and is due December 31, 2009.  The BFP Line of
Credit had an outstanding balance of $28,967 as of as of the filing of this
Report.  In June 2008, the amount we are able to borrow under the Line
of Credit was increased to $16,000 and in July 2008, the amount we are able to
borrow under the Line of Credit was increased to $20,000. In August 2008, the
amount we were able to borrow under the Line of Credit was increased to
$30,000.  As of the date of this Report, a total of $28,967 had been
borrowed under the Line of Credit and a total of $1,033 was available for the
Company to borrow.
 
 Other
than as described above, the Company has no commitments from officers, director
or affiliates to provide funding, other than the Line of Credit and the BFP Line
of Credit described above.  Our growth and continued operations could
be impaired by limitations on our access to the capital markets.
 
 We depend
to a great degree on the ability to attract external financing in order to
conduct our business activities and in order that we have sufficient cash on
hand to expand our operations.  We are currently funded solely by our
shareholders and with the very limited amount of sales revenue we have generated
to date.  We believe that we can continue our business operations for
approximately the next six (6) months with the cash on hand we had as of the
filing of this report.  We anticipate the need for approximately
$20,000 in additional funding to support our operations for the next 12 months,
which amount does not include approximately $70,303 which we will need to repay
our outstanding current liabilities prior to December 31,
2009.   Due to the fact that we had $64,723 of negative working
capital and an accumulated deficit of $2,883,193 as of August 31, 2008, our
auditor has expressed concern over our ability to continue as a going
concern.  We anticipate that our founders and shareholders will
continue to support our operations and loan us additional funds on an as needed
basis until such time as we can support our operations with revenues from our
products, if ever; however, no shareholder has committed in writing to providing
us additional funding for our operations other than pursuant to the various
notes and line of credits described above.
 
 If we are
unable to raise additional capital from conventional sources, including
increases in the Line of Credit and/or additional sales of additional stock, we
may be forced to curtail or cease our operations. Even if we are able to
continue our operations, the failure to obtain financing could have a
substantial adverse effect on our business and financial results. We have no
commitments from our officer and Director or any of our shareholders to
supplement our operations or provide us with financing in the future, other than
the Line of Credit, described above.
 
 In the
future, we may be required to seek additional capital by selling debt or equity
securities, selling assets, or otherwise be required to bring cash flows in
balance when it approaches a condition of cash insufficiency. The sale of
additional equity securities, if accomplished, may result in dilution to our
shareholders. We cannot assure you, however, that financing will be available in
amounts or on terms acceptable to us, or at all.
 
 ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to
provide the information required by this Item as it is a “smaller reporting
company,” as defined by Rule 229.10(f)(1).
 
 -8-
  ITEM 4T. CONTROLS AND
PROCEDURES
 
 (a)           Evaluation
of disclosure controls and procedures. Our Chief Executive Officer and Principal
Financial Officer, after evaluating the effectiveness of our "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly Report on Form 10-Q (the "Evaluation Date"), have concluded that as of
the Evaluation Date, our disclosure controls and procedures were effective to
provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
 
 (b)           Changes
in internal control over financial reporting. There were no changes in our
internal control over financial reporting during our most recent fiscal quarter
that materially affected, or were reasonably likely to materially affect, our
internal control over financial reporting.
  -9-
  PART II - OTHER
INFORMATION
 
 ITEM 1. LEGAL
PROCEEDINGS
 
 From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.
 
 ITEM 1A. RISK
FACTORS
 
 An
investment in our common stock is highly speculative, and should only be made by
persons who can afford to lose their entire investment in us. You should
carefully consider the following risk factors and other information in this
annual report before deciding to become a holder of our common stock. If any of
the following risks actually occur, our business and financial results could be
negatively affected to a significant extent.
 
 The
Company’s business is subject to the following Risk Factors:
 
 We
May Not Be Able To Continue Our Business Plan Without Additional
Financing.
 
 We depend
to a great degree on the ability to attract external financing in order to
conduct our business activities and in order that we have sufficient cash on
hand to expand our operations.  We are currently funded solely by our
shareholders and with the very limited amount of sales revenue we have generated
to date.  We believe that we can continue our business operations for
approximately the next six (6) months with the cash on hand we had as of the
filing of this report.  We anticipate the need for approximately
$20,000 in additional funding to support our operations for the next 12 months,
which amount does not include approximately $70,303 which we will need to repay
our outstanding current liabilities prior to December 31, 2009. If we are unable
to generate sufficient revenues to support our operations in the future and/or
fail to raise additional funds after the six (6) months which we currently
believe we will be able to continue our operations, we may be forced to abandon
our current business plan.  If you invest in us and we are unable to
raise the required funds, your investment could become worthless.
 
 Our
Auditors Have Expressed Substantial Doubt As To Whether Our Company Can Continue
As A Going Concern.
 
 We have
generated only limited revenues since our inception and have incurred
substantial losses.  As of August 31, 2008, we had an accumulated
deficit of $2,883,193 and a working capital deficit of $64,723.  These
conditions raise substantial doubt as to our ability to continue as a going
concern, particularly in the event that we cannot generate sufficient cash flow
to conduct our operations and/or obtain additional sources of capital and
financing.
 
 
 We
Rely Upon Our Chief Executive Officer and Director And If He Was To Leave Us,
Our Business Plan And Results Of Operations Could Be Adversely
Affected.
 
 We rely
heavily on our Chief Executive Officer, Secretary, Treasurer and Director,
Robert Kremer.  His experience and input create the foundation for our
business and he is responsible for the directorship and control over the
production and design of our products. We do not currently have an employment
agreement or “key man” insurance policy on Mr. Kremer.   Moving
forward, should we lose the services of Mr. Kremer, for any reason, we will
incur costs associated with recruiting a replacement and delays in our
operations associated with the search for such replacement.  If we are
unable to replace Mr. Kremer with another suitably trained individual or
individuals, we may be forced to scale back or curtail our business
plan.  As a result of this, your investment in us could become
devalued.
 
 -10-
  We
Face Intense Competition For Our Products And As A Result, We May Be Unable To
Compete In The Market For Handbags and Accessories.
 
 The
market for handbags and clothing accessories is highly competitive and
fragmented. The Company expects competition to intensify in the future. We
compete in each of our markets with numerous national, regional and local
companies, many of which have substantially greater financial, managerial and
other resources than those presently available to us.  Numerous
well-established companies are focusing significant resources on providing
handbags and related clothing accessories that will compete with our products.
No assurance can be given that we will be able to effectively compete with these
other companies or that competitive pressures, including possible downward
pressure on the prices we charge for our products, will not rise. In the event
that we cannot effectively compete on a continuing basis or competitive
pressures arise, such inability to compete or competitive pressures will have a
material adverse effect on our business, results of operations and financial
condition.
 
 All
of Our Handbags Are Currently Sewn By Fuerza Unida, With Whom We Do Not
Currently Have Any Agreements In Place.
 
 All of
our handbags are currently sewn by a cooperative, Fuerza Unida (“Fuerza”) in San
Antonio, Texas.  We do not currently have any agreements in place with
Fuerza to date, and have no immediate plans to enter into any
agreements.  As a result, if Fuerza stops sewing our handbags and/or
charges us more per bag to sew such bags, we could be forced to enter into an
alternative arrangement with another company or individuals to sew our
handbags.  This could significantly raise our cost per handbag and
could force us to charge more for our products and/or decrease the gross margin
of our products, which would in turn cause our revenue to
decrease.  Additionally, if we are unable to find a suitable
replacement for the loss of Fuerza, we could be forced to suspend or abandon our
operations, which would cause the value of our securities, if any, to decrease
or such securities may become worthless.
 
 Our
Results May Be Adversely Affected By Our Failure To Anticipate And Respond To
Changes In Fashion Trends And Consumer Preferences In A Timely
Manner.
 
 Our sales
and profitability depend upon the demand by customers for our handbags. We
believe that our success depends in large part upon our ability to anticipate,
gauge and respond in a timely manner to changing consumer demands and fashion
trends and upon the appeal of our handbags. There can be no assurance that we
will be able to anticipate, gauge and respond to changes in fashion trends. A
decline in demand for our handbags, if any, or a misjudgment of fashion trends
could, among other things, lead to lower sales and excess inventories which
could have a material adverse effect on our business, financial condition and
operating results.
 
 Changes
In Economic Conditions That Impact Consumer Spending Could Harm Our
Business.
 
 Our
financial performance is sensitive to changes in overall economic conditions
that impact consumer spending, particularly discretionary spending. Future
economic conditions affecting disposable consumer income such as employment
levels, business conditions, interest rates, and tax rates could reduce consumer
spending or cause consumers to shift their spending to other products. A general
reduction in the level of discretionary spending or shifts in consumer
discretionary spending to other products could have a material adverse effect on
our growth, sales and profitability.
 
 We
Have Not And Do Not Anticipate Paying Any Cash Dividends On Our Common Stock And
Because Of This Our Securities Could Face Devaluation In The
Market.
 
 We have
paid no cash dividends on our common stock to date and it is not anticipated
that any cash dividends will be paid to holders of our common stock in the
foreseeable future. While our dividend policy will be based on the operating
results and capital needs of our business operations, it is anticipated that any
earnings will be retained to finance our business operations and future
expansion.
 
 -11-
  Our
Bylaws Provide For Indemnification Of Our Officers And Directors, So It Will Be
Difficult To Seek Damages From Our Officers And/Or Directors In A
Lawsuit.
  Our
Bylaws provide that our officers and Directors will only be liable to us for
acts or omissions that constitute actual fraud, gross negligence or willful and
wanton misconduct. Thus, we may be prevented from recovering damages for certain
alleged errors or omissions by our officers and Directors for liabilities
incurred in connection with their good faith acts on our behalf. Additionally,
such an indemnification payment on behalf of our officers and/or Directors may
deplete our assets. Investors who have questions respecting the fiduciary
obligations of our officers and Directors should consult with their own
independent legal counsel prior to making an investment in us. Additionally, it
is the position of the Securities and Exchange Commission that exculpation from
and indemnification for liabilities arising under the Securities Act and the
rules and regulations thereunder is against public policy and therefore
unenforceable.
 
 We
Have A Limited Operating History And Because Of This It May Be Difficult To
Evaluate Our Chances For Success.
 
 We were
formed as a Nevada corporation on November 2, 2005.  We have had an
extremely limited volume of sales to date and can provide no assurances that our
sales will increase in the future and/or that they will ever be great enough to
support our expenses and/or costs of sales.  We had only produced
approximately 603 handbags since inception as of October 14, 2008, and
anticipate the need to sell approximately 1,000 handbags per year to generate
sufficient revenue to support our operations. We are a relatively new company
and, as such, run a risk of not being able to compete in the marketplace because
of our relatively short existence. New companies in the competitive environment
of handbag and fashion design, such as ours, may have difficulty in continuing
in a highly competitive industry such as ours, and as a result, we may be forced
to abandon or curtail our business plan. Under such a circumstance, the value of
any investment in us may become worthless.
 
 We
Currently Have No Major Customers, Have Generated Limited Revenues And Have Only
One Licensing Agreement In Place.
 
 As stated
above, we have generated only limited revenues since our
inception.  Part of our business plan includes the licensing of
certain products under the Michael Lambert name.  We hope to
accomplish this through licensing agreements with a small number of major
customers and/or partners; however, we currently only have one license agreement
in place with KBK, Inc., which is beneficially owned by our Chief Executive
Officer and Director, Robert Kremer.  As we have raised only limited
revenues to date, have only a limited number of customers and only one licensing
agreement in place, there is a risk we will not be able to enter into further
licensing arrangements and as a result, our business plan will need to be
curtailed or abandoned.  If this were to happen, any investment in us
could become worthless.
 
 Our
Chief Executive Officer and President Possesses Significant Control Over Our
Operations, And Because Of This He May Choose A Plan Of Action Which Will
Devalue Our Outstanding Securities.
 
 Our Chief
Executive Officer and President, Robert Kremer beneficially owns 1,580,000
shares of common stock (which number includes 600,000 options to purchase shares
of our common stock), representing 40.7% of our outstanding common stock
(assuming the exercise of all options beneficially owned by Mr. Kremer (please
note as used in this Report, the term options refers to the same securities
which are called warrants in the Company’s financial statements attached
hereto)).  Accordingly, Mr. Kremer, our Chief Executive Officer and
President possesses significant influence over the matters submitted to the
stockholders for approval.  These matters include the election of
Directors, mergers, consolidations, the sale of all or substantially all of our
assets, and also the power to prevent or cause a change in
control.  This level of control by Mr. Kremer gives him substantial
ability to determine our future as a business, and as such, he may elect to
close the business, change the business plan or make any number of other major
business decisions.  This control may eventually make the value of any
investment in us worthless.
 
 Because
Our Chief Executive Officer Is Involved In Another Business, He May Not Be Able
Or Willing To Devote A Sufficient Amount Of Time To Our Business
Operations.
 
 Robert
Kremer, our Chief Executive Officer, spends approximately 20% of his time on our
operations and approximately 80% of his time on the operations of KBK, Inc., a
company which he controls.  Because Mr. Kremer does not devote all of
his time to our operations, there is a risk that he will not be able to devote
sufficient attention to our operations to allow us to grow and/or become a
successful company and because he may be
distracted by other business matters associated with KBK, Inc. or otherwise,
there is a risk that our operations will not be properly managed.  If
Mr. Kremer does not spend a sufficient amount of time serving our company, it
could have a material adverse effect on our business and results of operations,
and could cause the value of our securities to become worthless.
 
 -12-
  Nevada
Law And Our Articles of Incorporation Authorize Us To Issue Shares Of Stock,
Which Shares May Cause Substantial Dilution To Our Existing
Shareholders.
  Pursuant
to our Articles of Incorporation, we have 140,000,000 shares of common stock and
10,000,000 shares of Preferred Stock authorized.  As of the filing of
this Report, we have 3,864,500 shares of common stock issued and outstanding and
– 0 – shares of Preferred Stock issued and outstanding.  As a result,
our Board of Directors has the ability to issue a large number of additional
shares of common stock without shareholder approval, which if issued could cause
substantial dilution to our then shareholders.  Additionally, shares
of Preferred Stock may be issued by our Board of Directors without shareholder
approval with voting powers, and such preferences and relative, participating,
optional or other special rights and powers as determined by our Board of
Directors, which may be greater than the shares of common stock offered in this
Report.  As a result, shares of Preferred Stock may be issued by our
Board of Directors which cause the holders to have super majority voting power
over our shares, provide the holders of the Preferred Stock the right to convert
the shares of Preferred Stock they hold into shares of our common stock, which
may cause substantial dilution to our then common stock shareholders and/or have
other rights and preferences greater than those of our common stock
shareholders. Investors should keep in mind that the Board of Directors has the
authority to issue additional shares of common stock and Preferred Stock, which
could cause substantial dilution to our existing
shareholders.  Additionally, the dilutive effect of any Preferred
Stock, which we may issue may be exacerbated given the fact that such Preferred
Stock may have super majority voting rights and/or other rights or preferences
which could provide the preferred shareholders with voting control over us
subsequent to this offering and/or give those holders the power to prevent or
cause a change in control.  As a result, the issuance of shares of
common stock and/or Preferred Stock may cause the value of our securities to
decrease and/or become worthless.
 
 The
Issuance Of Common Stock Upon Exercise Of Our Outstanding Options Will Cause
Immediate And Substantial Dilution And Will Cause Our Majority Shareholders To
Hold An Even Greater Percentage Of Our Outstanding Common Stock.
 
 The
issuance of common stock upon exercise of our 2,165,000 outstanding Options,
including 2,000,000 Options held by “affiliates” of the Company, will result in
immediate and substantial dilution to the interests of other
stockholders.  Furthermore, the exercise of the 2,000,000 Options held
by “affiliates” of the Company, which include cashless exercise provisions, will
cause a significant increase in the number of our outstanding shares and will
cause such “affiliates” to hold an even greater number of shares of common
stock.  As such, if our option holders were to exercise all of the
Options that they hold, it will cause substantial dilution to the then holders
of our common stock and will cause our “affiliates” to hold an even greater
percentage of our outstanding common stock and influence greater control over
any shareholder votes.
 
 We
Do Not Currently Have A Public Market For Our Securities.  If There Is
A Market For Our Securities In The Future, Our Stock Price May Be Volatile And
Illiquid.
  There is
currently no public market for our common stock.  We are currently in
the process of applying, through a market maker, to have our common stock quoted
on the OTC Bulletin Board.  However, we can make no assurances that
there will be a public market for our common stock in the future.  If
there is a market for our common stock in the future, we anticipate that such
market would be illiquid and would be subject to wide fluctuations in response
to several factors, including, but not limited to:
  (1)
actual or anticipated variations in our results of operations;
  (2)
our ability or inability to generate new revenues;
  (3)
increased competition;  and
 
 (4) conditions and trends in the market for handbag and clothing
accessories.
 
 -13-
  Furthermore,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price and liquidity of our common stock.
 
 Investors
May Face Significant Restrictions on the Resale of Our Common Stock Due to
Federal Regulations of Penny Stocks.
 
 Once our
common stock is listed on the OTC Bulletin Board, it is likely that it will be
subject to the requirements of Rule 15(g)9, promulgated  under the
Securities Exchange Act as long as the price of our common stock is below $5.00
per share.  Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's consent prior to the transaction.  The
Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also
requires additional disclosure in connection with any trades involving a stock
defined as a penny stock.  Generally, the Commission defines a penny
stock as any equity security not traded on an exchange or quoted on NASDAQ that
has a market price of less than $5.00 per share.  The required penny
stock disclosures include the delivery, prior to any transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
with it. Such requirements could severely limit the market liquidity of the
securities and the ability of purchasers to sell their securities in the
secondary market.
 
 -14-
  In
the Future, We Will Incur Significant Increased Costs As a Result of Operating
As a Fully Reporting Company in Connection with Section 404 of the Sarbanes
Oxley Act, and Our Management Will Be Required to Devote Substantial Time to New
Compliance Initiatives.
 
 Moving
forward, we anticipate incurring significant legal, accounting and other
expenses in connection with our status as a fully reporting public company. The
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently
implemented by the SEC have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. As
such, our management and other personnel will need to devote a substantial
amount of time to these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. In addition, the Sarbanes-Oxley
Act requires, among other things, that we maintain effective internal controls
for financial reporting and disclosure of controls and procedures. Our
compliance with Section 404 will require that we incur substantial accounting
expense and expend significant management efforts. We currently do not have an
internal audit group, and we will need to hire additional accounting and
financial staff with appropriate public company experience and technical
accounting knowledge. Moreover, if we are not able to comply with the
requirements of Section 404 in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses, the
market price of our stock could decline, and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which would require
additional financial and management resources.
 
 
 ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 None.
 
 
 ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
 
 None.
 
 ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
 
 ITEM 5. OTHER
INFORMATION
 
 None.
 
 ITEM 6.
EXHIBITS
 
 Exhibit
      Number
              DescriptionExhibit
      3.1(1)
              Articles
      of Incorporation of Michael Lambert, Inc.Exhibit
      3.2(1)
              Articles
      of Correction and Corrected Articles of Incorporation.Exhibit
      3.3(1)
              Bylaws
      of Michael Lambert, Inc.Exhibit
      10.1(1)
              Share
      Exchange AgreementExhibit
      10.2(1)
              Name
      and Trademark License AgreementExhibit
      10.3(1)
              Promissory
      Note (KBK, Inc.)Exhibit
      10.4(1)
              Promissory
      Note (Robert Kremer)
 
 -15-
  Exhibit
      10.5(1)
              Convertible
      Promissory Note (David M. Loev)Exhibit
      10.6(1)
              Line
      of Credit with Michael SonacoExhibit
      10.7(1)
              Sublease
      Agreement with KBK, Inc.Exhibit
      10.8(2)
              Master
      Revolving Line of Credit with BFP Texas, Ltd.Exhibit
      10.9(2)
              Form
      of Stock Option AgreementExhibit
      10.10(2)
              Amended
      Promissory Note (Robert Kremer)Exhibit
      10.11(2)
              Amended
      Line of Credit with Michael SonacoExhibit
      10.12(2)
              Amended
      Promissory Note (KBK, Inc.)Exhibit
      10.13(2)
              Amended
      Master Revolving Line of Credit with BFP Texas, Ltd.Exhibit
      10.14(3)
              Amended
      Promissory Note (Robert Kremer)Exhibit
      10.15(3)
              Amended
      Master Revolving Line of Credit with BFP Texas, Ltd.Exhibit
      10.16(4)
              Amended
      Master Revolving Credit Line (BFP Texas, Ltd.)Exhibit
      10.17(4)
              Addendum
      To LeaseExhibit
      10.18*
              Amended
      and Restated Convertible Promissory Note with The Loev Law Firm,
      PC
 
 Exhibit
      31.1*
              Certificate
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002Exhibit
      31.2*
              Certificate
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002Exhibit
      32.1*
              Certificate
      of the Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002Exhibit
      32.2*
              Certificate
      of the Chief Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
 
 *           Filed
as an exhibit herein.
 
 (1)
              Filed
      as an exhibit to our Registration on Form SB-2, filed with the Securities
      and Exchange Commission on October 4, 2007, and incorporated herein by
      reference.(2)
              Filed
      as an exhibit to our Registration on Form S-1, filed with the Securities
      and Exchange Commission on June 20, 2008, and incorporated herein by
      reference.(3)
              Filed
      as an exhibit to our Registration on Form S-1, filed with the Securities
      and Exchange Commission on August 15, 2008, and incorporated herein by
      reference.(4)
              Filed
      as an exhibit to our Registration on Form S-1, filed with the Securities
      and Exchange Commission on September 11, 2008, and incorporated herein by
      reference.
 
 
 -16-
  SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 MICHAEL
      LAMBERT, INC.DATED: October
      15, 2008
              By:/s/ Robert
      KremerRobert
      KremerChief
      Executive Officer (Principal Executive Officer)DATED:
      October 15, 2008
              By:/s/ Carey G.
      BirminghamCarey
      G. BirminghamChief
      Financial Officer (Principal Financial
Officer)
 
 -17-