UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





[X]ANNUAL
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended November 30, 2008





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





For the
transition period from __________ to _________





Commission
file number 333-146517





MICHAEL LAMBERT,
INC.


(Name of
small business issuer in its charter)





Nevada
                20-3107499(State
      of organization)
                (I.R.S.
      Employer Identification
No.)




121 Interpark Blvd., Suite
1204


San Antonio, Texas
78216


(Address
of principal executive offices)





(210)
490-8383


(Registrant's
telephone number)





SECURITIES
REGISTERED PURSUANT TO SECTION 12(B) OF


THE
EXCHANGE ACT:





None.








SECURITIES
REGISTERED PURSUANT TO SECTION 12(G) OF


THE
EXCHANGE ACT:





None.





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [   ] No [X].





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. Yes [   ] No [X]





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter periods 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 [   ]





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K  contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]





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





Large
accelerated filer
[  ]                                                                                            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 [   ] No [X].





The
issuer's revenues for its most recent fiscal year were $7,731.





The
aggregate market value of the issuer's voting and non-voting common equity held
by non-affiliates computed by reference to the closing price of such common
equity on the Over-The-Counter Bulletin Board as of May 30, 2008, the end of the
issuer’s most recently completed second fiscal quarter was $0 as there was no
market for the issuer’s common equity as of May 30, 2008.





At
February 26, 2009, there were 4,404,500 shares of the Issuer's common stock
outstanding.





Transitional
Small Business Disclosure Format (Check one): Yes [   ] No
[X].





TABLE
OF CONTENTS





PART
I





ITEM
      1. BUSINESS
            4ITEM
      1A. RISK FACTORS
            8ITEM
      2. PROPERTIES
            14ITEM
      3. LEGAL PROCEEDINGS
            14ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            14





PART
II





ITEM
      5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES
            15ITEM
      6. SELECTED FINANCIAL DATA
            16ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
            16ITEM
      7A. QUANTITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET
      RISK
            16ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            F-1ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
            21ITEM
      9A. CONTROLS AND PROCEDURES
            21ITEM
      9B. OTHER INFORMATION
            21





PART
III




ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            22ITEM
      11. EXECUTIVE COMPENSATION
            23ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
            27ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            28ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            31





PART
IV





ITEM
      15. EXHIBITS
            32SIGNATURES
            34





PART
I





FORWARD-LOOKING
STATEMENTS





ALL
STATEMENTS IN THIS DISCUSSION THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT OTHERWISE INCLUDE
THE WORDS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS", "PROJECTS",
"ESTIMATES", "PLANS", "MAY INCREASE", "MAY FLUCTUATE" AND SIMILAR EXPRESSIONS OR
FUTURE OR CONDITIONAL VERBS SUCH AS "SHOULD", "WOULD", "MAY" AND "COULD" ARE
GENERALLY FORWARD-LOOKING IN NATURE AND NOT HISTORICAL FACTS. THESE
FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED
UTILIZING NUMEROUS IMPORTANT ASSUMPTIONS AND OTHER IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING OUR
FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY, PROJECTED PLANS AND OBJECTIVES.
THESE FACTORS INCLUDE, AMONG OTHERS, THE FACTORS SET FORTH BELOW UNDER THE
HEADING "RISK FACTORS." 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. MOST OF THESE FACTORS
ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. WE ARE
UNDER NO OBLIGATION TO PUBLICLY UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-K,
UNLESS ANOTHER DATE IS STATED, ARE TO NOVEMBER 30, 2008. AS USED HEREIN, THE
"COMPANY," "WE," "US," "OUR" AND WORDS OF SIMILAR MEANING REFER TO MICHAEL
LAMBERT, INC.





ITEM
1. BUSINESS





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.





The
Company 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 604 handbags from inception to February 1,
2009 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, a sewing cooperative in San Antonio, Texas consisting
of minority women.





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.


-4-


We plan
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.





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. (“KBK”), 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
Trademark Agreement was 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.





Market
Need:





The
handbag market is highly competitive and diverse. The primary consumers for
handbags are girls and women of all ages who carry their handbags for the
utility and fashion. Many of the Company’s sales to date have been multiple
sales, we believe because women will purchase the bags for gifts knowing
that it is a one of a kind present.





Handbag sales
are driven by economic conditions, demographic trends, and pricing. We see brand
development as fulfilling a need that creates demand and generates
sales.  We believe that consumers purchase products that are
fashionable and appealing, as well as durable and practical.





According
to a May 9, 2005 press release discussing a report by NPD Group, Inc., a market
research firm located in Port Washington, New York, during 2004, 44% of women
age thirteen and over reported purchasing a handbag/purse and on average, women
bought three handbags in 2004. It is our belief that in today’s market place,
handbags with a position for quality and fashion, particularly Italian, do very
well. However, these name brands are often the first to be “knocked off” by
counterfeiters.


-5-


Many of
our sales are multiple sales, because women will purchase the bags for
gifts knowing that it is a one of a kind present. We also plan to market our
bags as “made in the USA,” since all of our bags are made in San Antonio,
Texas.  We believe that we will be able to successfully market our
products as we believe that many consumers desire to purchase products made in
the United States, rather than products made in foreign countries.





Our
relationship with Fuerza Unida  is also important because it separates
us from many of our competitors who use foreign labor. The Company has agreed to
meet Fuerza Unida's cost requirements, which are higher than similar quality
workmanship done by workers in several developing countries, in exchange for a
quality USA produced product. At the present time, we believe that this is
a “win-win” situation for Fuerza Unida and us, because our consumers receive a
handbag hand sewn in the USA at an affordable price.





Our
handbags are quality, hand sewn bags and clutches in what is often described as
vintage fashion.  Our handbags are one of a kind and never
duplicated.  This written promise and guarantee is included in each
and every handbag and clutch we manufacture.




KBK,
Inc., which is owned by our Chief Executive Officer, Robert Kremer, provides two
small offices for the storing of the fabrics before such fabrics are used in
handbags. The showroom manager, Maria Terrazas and the designer, Kari Buchanan
received stock and options, and the local artist, Kathy Sosa received stock in
the Company for services provided to the Company in connection with the design
of our handbags. Ms. Terrazas is employed by KBK. Ms. Sosa and Ms. Buchanan are
not employees of KBK, nor have they received any other remuneration for their
services other than our securities.





We
believe that our planned brands will offer quality and fashion, but that demand
must be created, and that this will be accomplished through marketing and
selective distribution.





We intend
to market our products by building a sales team that will be tasked with
generating sales leads on a national and international basis as well as being
responsible for establishing connections with retail outlets.





Key
factors in our success will be our distribution. We plan to eventually use the
following retail distribution channels:





1)
            Department
      Stores;2)
            Apparel
      Specialty Stores;3)
            Boutique
      Stores;4)
            Internet
      Store; and5)
            Cable
      Television-Home Shopping.





Currently
we only sell our handbags through two independently owned boutiques in San
Antonio, Texas.





We
believe that the distribution channel that has received the most attention
recently is the Internet, and we believe that the Internet still has the
greatest potential for growth because consumers like the convenience of being
able to shop from anywhere at anytime.





The Apparel
Industry





The U.S.
apparel industry is large, mature, and highly
fragmented.  Additionally, we believe that the apparel industry can
basically be separated into national brands, smaller brands and store brands (or
private label goods).  Apparel may be sold at discount stores and
factory outlets, specialty stores, major chain stores and through direct mail
catalogs and over the Internet.





We
currently are working to sell our products through retail outlets, and have two
retail outlets in San Antonio, Texas, which sell our
handbags.  Additionally, a major emphasis of time and capital moving
forward will be invested in website development.  Additionally, we
currently sell our handbags over the Internet through
WatchNBuy.com.


-6-


In
addition to traditional retailers and the Internet, we may seek to secure time
on major home shopping channels such as Home Shopping Network (“HSN”) and QVC,
of which there can be no assurance.





Our
primary target market for our products will be women. We intend to create broad
market appeal and demand by designing products that are unique and
stylish.  Additionally, we view the development of our brands as an
attractive target for a foreign partner wishing to establish a market position
in the United States.  Additionally, we plan to participate with
foreign partners with our licensing agreements, if any, if we are successful
with our branding.  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.





Competition





The
Company is not currently aware of any competitors who use recycled designer
fabrics, as described below, and domestic labor to produce handbags and clutches
within the price range that the Company currently offers its
products.  However, the Company currently competes with numerous other
companies, both national and international, which produce and sell handbags and
clutches for women.  These competitors include local department stores
in San Antonio, Texas, the area in which the Company currently operates, which
buy and resell products including handbags and purses; smaller boutiques which
offer a smaller number of handbags and clutches (such as the boutique which
currently resells our products); high end retailers of hand bags and purses both
in San Antonio, Texas, as well as nation wide; and internet websites, which can
often offer products at a discount to local department stores or high end
retailers.





As we
have only recently begun our retail operations, do not have a recognizable brand
name, nor any well established market demand, we do not currently have a very
strong position in the industry.  We hope that assuming we are able to
raise additional funding in the future that we will be able to increase our
marketing budget and eventually create a recognizable brand name with our
Michael Lambert products, of which there can be no assurance.





On-Line
Sales





In the
future, we may offer our products on our website. We recognize that we are
entering a very competitive market place for the discretionary dollars of
consumers. Our promotion and marketing will focus on fashion and style; quality
and value of the product; and the unique, one of a kind nature of the
handbags.





Competitors such as Ralph Lauren,
Armani, Coach, and Louis Vuitton operate their own retail stores, sell to
retailers and have informative websites. They use the Internet as a vehicle for
marketing, promotion and sales.   In our opinion, we will need to
find placement with selected retailers to successfully compete in the
marketplace.





Our
Internet development will focus on our ability to reach national and foreign
consumers with our brands and easily transact their requests. We plan to
establish payment control and delivery capability to foreign locations on our
website in the future.  We intend to raise funding for our website and
marketing efforts by selling debt and/or equity securities in the future, of
which there can be no assurance.





Competitive
Advantage





We
believe that in a market where consumers are barraged by advertising and
marketing campaigns delivering an onslaught of lifestyle and fashion messages, a
brand name can be a powerful weapon.  Brands have become an increasingly
significant factor in apparel and footwear as consumers have less time to shop
and are spending their disposable income more carefully.





We
believe that established brand names, with their quality image, make the
shopping experience easier and faster for many consumers. For manufacturers,
brands build consumer loyalty, which translates into repeat business.  As
such, we plan to focus the majority of our efforts initially in connection with
building brand awareness for our products.  Furthermore, as described
above under “Market Need,” we believe that we can effectively compete in the
market for handbags due to several factors, including the fact that our
products, unlike many other larger handbag manufacturers, are made in the United
States.


-7-


Our Manufacturing
Process




The first
step in the process is the selection of a fabric that will be used on the
outside of the bag. The fabric comes from left over samples of fabrics
previously used by KBK in its fabric showroom catering to high-end interior
designers. KBK is controlled by Robert Kremer, our Chief Executive Officer, and
KBK currently provides us the samples of material for use in our handbags
free of charge.





The
second step is the selection of a second fabric for the inside. The second
fabric must have color continuity to the primary fabric or follow the same
theme, i.e., an animal scene. The direction of the fabrics is important, as well
as the selection of the handles and color coordinated zipper.





Once this
is completed, the matched fabrics are folded and taken to Fuerza Unida for
sewing.  A card is placed in every one of the Company’ bags stating
that the bag will not be duplicated, and that it is hand sewn in the USA
by a non-profit cooperative of minority women.





The
relationship with Fuerza Unida is important because we believe it separates us
from many of our competitors who use foreign labor. The Company has agreed to
Fuerza Unida's cost requirements in exchange for a quality produced
product.





The raw
materials used in the Company’s handbags are fabric samples that are 27"
(handbags) and 18" (clutch) in size. These samples are not used until they are
designated as discontinued by the original supplier. These suppliers include
several internationally well known suppliers.





The
handles and zippers are purchased from Sunbelt Fashion. The custom made
logo labels are from Raynor.





Trademarks, Patents and
Copyrights





We have a
registered trademark for the term “Michael Lambert, Inc.” in the State of Texas,
Registration Number 800718619.  We have no other patents, trademarks
or copyrights as of the date of this Report.





Employees





As of
February 1, 2009, we had two employees, our Chief Executive Officer, President,
Secretary, Treasurer and Director, Robert Kremer, and our Chief Financial
Officer, Carey Birmingham who are not paid any salary by us and are not accruing
any salary.





ITEM
1A. RISK FACTORS.





Any
investment in shares of our common stock involves a high degree of risk. You
should carefully consider the following information in these risks before you
decide to buy our common stock. If any of the following risks actually occur,
our business would likely suffer. In such circumstances, the market price of our
common stock could decline, and you may lose all or part of the money you paid
to buy our common stock.





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 three (3) to six (6) months with the cash on hand we had
as of the filing of this report.  We anticipate the need for
approximately $30,000 in additional funding to support our operations for the
next 12 months, which amount does not include approximately $44,407 which we
will need to repay our outstanding current liabilities prior to November 30,
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 three (3) to 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.


-8-


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 November 30, 2008, we had an accumulated
deficit of $2,915,639  and a working capital deficit of
$39,820.  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.





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.


-9-


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.





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 604 handbags since inception as of February 1, 2009, 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.


-10-


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 1,860,000
shares of common stock (which number includes 600,000 options to purchase shares
of our common stock), representing 36.4% 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.





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 4,404,500 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.


-11-


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.




We were
recently approved for trading on the OTCBB under the symbol “MBER”; however, no
shares of our common stock have traded to date and there is currently no public
market for our common stock.  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.





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.





Our
common stock is 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.





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.


-12-


If
We Are Late In Filing Our Quarterly Or Annual Reports With The SEC, We May Be
De-Listed From The Over-The-Counter Bulletin Board.





Pursuant
to Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely filing
of periodic reports with the SEC, any OTCBB issuer which fails to file a
periodic report (Form 10-Q's or 10-K's) by the due date of such report (not
withstanding any extension granted to the issuer by the filing of a Form
12b-25), three (3) times during any twenty-four (24) month period is
automatically de-listed from the OTCBB. Such removed issuer would not be
re-eligible to be listed on the OTCBB for a period of one-year, during which
time any subsequent late filing would reset the one-year period of de-listing.
If we are late in our filings three times in any twenty-four (24) month period
and are de-listed from the OTCBB, our securities may become worthless and we may
be forced to curtail or abandon our business plan.





Shareholders
May Be Diluted Significantly Through Our Efforts To Obtain Financing And Satisfy
Obligations Through The Issuance Of Additional Shares Of Our Common
Stock.





We have
no committed source of financing. Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock,
we may attempt to raise capital by selling shares of our common stock, possibly
at a discount to market. These actions will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock book value,
and that dilution may be material. Such issuances may also serve to enhance
existing management’s ability to maintain control of the Company because the
shares may be issued to parties or entities committed to supporting existing
management.





State
Securities Laws May Limit Secondary Trading, Which May Restrict The States In
Which And Conditions Under Which You Can Sell Shares.





Secondary
trading in our common stock will not be possible in any state until the common
stock is qualified for sale under the applicable securities laws of the state or
there is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. If we fail
to register or qualify, or to obtain or verify an exemption for the secondary
trading of the common stock in any particular state, the common stock could not
be offered or sold to, or purchased by, a resident of that state. In the event
that a significant number of states refuse to permit secondary trading in our
common stock, the liquidity for the common stock could be significantly
impacted.





Because
We Are Not Subject To Compliance With Rules Requiring The Adoption Of Certain
Corporate Governance Measures, Our Stockholders Have Limited Protections Against
Interested Director Transactions, Conflicts Of Interest And Similar
Matters.





The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the
SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a
result of Sarbanes-Oxley, require the implementation of various measures
relating to corporate governance. These measures are designed to enhance the
integrity of corporate management and the securities markets and apply to
securities that are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial
additional costs associated with such compliance any sooner than legally
required, we have not yet adopted these measures.


-13-


Because
our Directors are not independent directors, we do not currently have
independent audit or compensation committees. As a result, our Directors have
the ability to, among other things, determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest, if any, and similar matters and
any potential investors may be reluctant to provide us with funds necessary to
expand our operations.





We intend
to comply with all corporate governance measures relating to director
independence as and when required. However, we may find it very difficult or be
unable to attract and retain additional qualified officers, Directors and
members of board committees required to provide for our effective management as
a result of the Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley
Act of 2002 has resulted in a series of rules and regulations by the SEC that
increase responsibilities and liabilities of Directors and executive officers.
The perceived increased personal risk associated with these recent changes may
make it more costly or deter qualified individuals from accepting these
roles.





ITEM
2. PROPERTIES





Effective
January 1, 2008, we entered into a sub-lease agreement with KBK, Inc., which is
controlled by our Chief Executive Officer, Robert Kremer
(“KBK”).  Pursuant to the sub-lease agreement, we agreed to lease 200
square feet of office space from KBK for the period from January 1, 2008 through
December 31, 2008, at 121 Interpark Blvd., Suite 1204, San Antonio, Texas
78216.  Pursuant to the sub-lease agreement we originally agreed to
pay KBK during the term of the sub-lease agreement.  Pursuant to a
letter amendment dated August 1, 2008, KBK agreed to reduce the rental rate of
the leased space to $0 per month for the remainder of the lease
term.





Since the
expiration of the lease on January 1, 2009, we have continued to occupy the
previously leased space provided by KBK on a month-to-month, rent free
basis.  The arrangement is able to be terminated by either party with
thirty (30) days prior notice.  Neither party currently has any plans
to terminate the lease arrangement.





ITEM
3. 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
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





No
matters were submitted to a vote of security holders during the fiscal quarter
ended November 30, 2008.


-14-


PART
II





ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES





We were
recently approved for trading on the OTCBB under the symbol “MBER”; however, no
shares of our common stock have traded to date and there is currently no public
market for our common stock.





We have a
total of 150,000,000 shares of stock authorized, of which 140,000,000 are shares
of common stock, $0.001 par value and 10,000,000 are shares of preferred stock,
$0.001 par value. As of February 10, 2009, the Company had 4,404,500 shares of
common stock outstanding held by approximately 42 shareholders of
record.  To date, the Company has not paid dividends on its common
stock.  At present, we do not anticipate paying any dividends on our
common stock in the foreseeable future and intend to devote any earnings to the
development of our business.  We have no outstanding shares of
Preferred Stock.  We currently have 2,165,000 options outstanding,
which options were granted to various consultants of the Company in
consideration for services rendered to the Company between November 2005 and
September 2007, which options have a five year term, an exercise price of $0.375
per share and contain a cashless exercise provision.





The
Company's common stock is considered a "penny stock" as defined in the
Commission's rules promulgated under the Exchange Act. The Commission's rules
regarding penny stocks impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally persons with net worth in excess
of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with
their spouse). For transactions covered by the rules, the broker-dealer must
make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale. Thus the
Rules affect the ability of broker-dealers to sell the Company's shares should
they wish to do so because of the adverse effect that the Rules have upon
liquidity of penny stocks. Unless the transaction is exempt under the Rules,
under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990,
broker-dealers effecting customer transactions in penny stocks are required to
provide their customers with (i) a risk disclosure document; (ii) disclosure of
current bid and ask quotations if any; (iii) disclosure of the compensation of
the broker-dealer and its sales personnel in the transaction; and (iv) monthly
account statements showing the market value of each penny stock held in the
customer's account. As a result of the penny stock rules, the market liquidity
for the Company's securities may be severely adversely affected by limiting the
ability of broker-dealers to sell the Company's securities and the ability of
purchasers of the securities to resell them.





Common
Stock





Holders
of shares of common stock are entitled to one vote per share on each matter
submitted to a vote of shareholders. In the event of liquidation, holders of
common stock are entitled to share pro rata in the distribution of assets
remaining after payment of liabilities, if any. Holders of common stock have no
cumulative voting rights, and, accordingly, the holders of a majority of the
outstanding shares have he ability to elect all of the Directors. Holders of
common stock have no preemptive or other rights to subscribe for shares. Holders
of common stock are entitled to such dividends as may be declared by the Board
of Directors out of funds legally available therefore. The outstanding shares of
common stock are validly issued, fully paid and non-assessable.





Preferred
Stock





We have
authorized the issuance of up to 10,000,000 shares of preferred stock, with a
par value of $0.001 per share ("Preferred Stock"). We have no present plans for
the issuance of such Preferred Stock. The issuance of such Preferred Stock could
adversely affect the rights of the holders of Common Stock and, therefore,
reduce the value of the Common Stock. It is not possible to state the actual
effect of the issuance of any shares of Preferred Stock on the rights of holders
of the Common Stock until the board of directors determines the specific rights
of the holders of the Preferred Stock.


-15-


However,
these effects may include, among other things:





-
Restricting dividends on the Common Stock;


-
Diluting the voting power of the Common Stock;


-
Impairing the liquidation rights of the Common Stock; and


-
Delaying or preventing a change in control of the Company without further action
by the stockholders.





Recent Sales of Unregistered
Securities





In
January 2009, we issued an aggregate of 540,000 shares of our common stock to
certain individuals for services rendered to the Company for the fiscal year
ended November 30, 2008, including 250,000 shares to our Chief Financial
Officer, Carey Birmingham, 250,000 shares to our corporate counsel, David M.
Loev, 20,000 shares to our Chief Executive Officer, Robert Kremer, and 20,000
shares to Kenneth Kremer, as significant shareholder of the Company and the
brother of Robert Kremer.  We claim an exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended, since the
foregoing issuance did not involve a public offering, the recipient took the
shares for investment and not resale and we took appropriate measures to
restrict transfer. No underwriters or agents were involved in the foregoing
issuance and we paid no underwriting discounts or commissions.





ITEM
6. SELECTED FINANCIAL DATA





Not
required pursuant to Item 301 of Regulation S-K.





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





The
following discussion should be read in conjunction with our financial
statements.





PLAN
OF OPERATIONS





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.


-16-


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.




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 three (3) to
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.





Critical
Accounting Policies:





Inventories-Inventories are stated at the lower of cost or market. Cost is determined
using the actual costs of parts and an allocation of labor and packing
costs.





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.





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.


-17-


RESULTS
OF OPERATION FOR THE YEAR ENDED NOVEMBER 30, 2008 COMPARED TO THE YEAR ENDED
NOVEMBER 30, 2007





We had
total revenues of $7,731 for the year ended November 30, 2008, compared to total
revenues of $29,657 for the year ended November 30, 2007, a decrease in total
sales from the prior period of $21,926 or 71%.  The decrease in sales
was due to a $10,153 or 56.8% decrease in merchandise sales, to $7,731 for the
year ended November 30, 2008, compared to $17,884 for the year ended November
30, 2007; a decrease of $9,896 in merchandise sales – related party, from $9,896
for the year ended November 30, 2007, compared to no merchandise sales – related
party for the year ended November 30, 2008; and a decrease of $1,877 in royalty
revenues – related party, from $1,877 for the year ended November 30, 2007,
compared to no royalty revenue – related party for the year ended November 30,
2008.





The
decrease in revenues was mainly due to the general downturn in overall retail
sales during the year ended  November 30, 2008, compared to the year
ended November 30, 2007, due to among other things, the ongoing recession, the
credit market crunch and the overall uncertainty regarding the economy as a
whole.  The Company anticipates having lower sales volumes until such
time as the economy, and consumer spending in general, increases, if
ever.





We had
cost of sales of $2,784 for the year ended November 30, 2008, compared to cost
of sales of $13,517 for the year ended November 30, 2007, a decrease in cost of
revenue from the prior period of $10,733 or 79.4% from the prior
period.  The decrease in cost of sales is attributable to a decrease
in manufacturing expenses in connection with reduced production during the year
ended November 30, 2008 compared to the year ended November 30,
2007.





We had
cost of sales as a percentage of revenue of 36.0% for the year ended November
30, 2008, compared to cost of sales as a percentage of revenue of 45.6% for the
year ended November 30, 2007, a decrease in cost of sales as a percentage of
revenue of 9.6%.  The main reason for the decrease in cost of revenues
as a percentage of sales was due to a surplus of inventory caused by the
decrease in production and related lead times, which in turn lowered our
manufacturing costs.





We had
general and administrative expenses of $216,239 for the year ended November 30,
2008, compared to general and administrative expenses of $790,662 for the year
ended November 30, 2007, a decrease in general and administrative expenses of
$574,423 or 72.6%.  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 year ended November 30,
2007, which expenses were significantly less for the year ended November 30,
2008.





We had
interest expense of $13,291 for the year ended November 30, 2008, compared to
interest expense of $3,783 for the year ended November 30, 2007, a increase in
interest expense from the prior period of $9,508 or 251.3%.  The
increase in interest expense was mainly due to the amortization of the
beneficial conversion feature of the Note, described below.





We had a
net loss of $224,583 for the year ended November 30, 2008, compared to a net
loss of $778,305 for the year ended November 30, 2007, a decrease in net loss of
$553,722 or 71.4% from the prior period. The decrease in net loss was mainly
attributable to the $574,723 or 72.6% decrease in general and administrative
expenses, offset by the $21,926 71.4% decrease in revenues for the year ended
November 30, 2008, compared to the year ended November 30,
2007.


-18-


LIQUIDITY
AND CAPITAL RESOURCES





We had
total assets of $4,587 as of November 30, 2008, consisting solely of current
assets, which included $186 of cash, and $4,401 of inventory.  The
Company purchases inventory for its products on an as needed basis, and as such,
the Company has approximately 102 completed handbags in inventory as of the date
of this filing.





We had
total liabilities of $93,732 as of November 30, 2008, consisting of current
liabilities, which included $2,229 of accounts payable, $12,400 of accounts
payable related party, which were owed to KBK and the Company’s legal counsel,
as described below, $2,489 of accrued liabilities,  $17,138 of bank
credit line payable, $10,151 of related party debt, which represented amounts
owed under the loans, Line of Credit and Note, described below, and total long
term debt – related parties of $49,325, consisting of amounts owed to BFP, KBK
and Mr. Kremer (as defined below).





We had
negative working capital of $39,820, a total shareholders deficit of $89,145 as
of November 30, 2008 and an accumulated deficit as of November 30, 2008 of
$2,915,639.





We had
$43,832 in net cash used in operating activities for the year ended November 30,
2008, which included $224,583 in net loss, offset by $150,000 in shares issued
for services and $3,600 and $2,298 of imputed rent expense and imputed interest
expense, respectively. We acquired $4,401 in inventory and we had a decrease of
$4,169 in accounts receivable. Also there was an increase of $2,229 in accounts
payable and a $607 increase in accruals which attributed to the net cash used in
operating activities for the year ended November 30, 2008.





We had
$43,154 of net cash provided by financing activities for the year ended November
30, 2008, which included $35,968 in loans from stockholders mainly relating to a
revolving credit note with BFP Texas, Ltd. (described below), an increase in
short term debt of $2,837 and $4,349 of related party
contributions.





We have a
credit card line of credit of $17,500 with Bank of America.  The
current balance as of November 30, 2008 was $17,138.  Interest of 24%
is payable monthly on the unpaid balance.  There is no collateral and
the credit line renews annually.





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, was previously extended until December
31, 2008 and was extended again as of September 1, 2008, to December 31,
2009.   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 previously been further extended until December 31, 2008, and again to
December 31, 2009 and the amount of the loan has been increased to
$4,000.  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 $3,357.





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 800,000 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.  The balance of the loan as of the filing of this report was
$10,151.


-19-


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 has previously been
extended to December 31, 2008, and effective as of November 1, 2008, to December
31, 2009.  On or around November 1, 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 $9,000. The
balance of this loan as of the filing of this Report was approximately
$9,000.





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.  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 approximately $28,968 had been borrowed under
the Line of Credit.  In January, 2009, the Line of Credit Note from
BFP Texas, Ltd. was increased to $35,000, with no changes in the other terms of
the Note.





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 three (3) to six (6) months with the cash on hand we had
as of the filing of this report.  We anticipate the need for
approximately $30,000 in additional funding to support our operations for the
next 12 months, which amount does not include approximately $44,407 which we
will need to repay our outstanding current liabilities prior to November 30,
2009.   Due to the fact that we had $39,820 of negative working
capital and an accumulated deficit of $2,915,639 as of November 30, 2008, our
auditors 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.


-20-


ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA








REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











To the
Stockholders and Board of Directors


Michael
Lambert, Inc.


San
Antonio, Texas








We have
audited the accompanying balance sheets of Michael Lambert, Inc. (MLI) as of
November 30, 2008 and November 30, 2007, the related statements of operations,
changes in shareholders' deficit and cash flows for each of the years then
ended.  These financial statements are the responsibility of MLI's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.





We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  MLI is
not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of MLI’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of MLI as of November 30, 2008 and
November 30, 2007, and the results of its operations and its cash flows for each
of the years then ended in conformity with accounting principles generally
accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that MLI will
continue as a going concern.   As discussed in Note 2 to the financial
statements, MLI has a working capital deficit and has incurred net losses from
operations, which raise substantial doubt about its ability to continue as a
going concern.   MLI's plans regarding those matters are also
discussed in Note 2.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





Malone
& Bailey, PC


www.malone-bailey.com


Houston,
Texas





February
25, 2009


F-1


MICHAEL
LAMBERT, INC.


BALANCE
SHEETS





November
      30,
                2008
              
              
              November
      30, 2007ASSETSCURRENT
      ASSETSCash
              
              $
              186
              
              
              
              864Accounts
      receivable
              
              
              -
              
              
              
              437Accounts
      receivable – related party
              
              
              -
              
              
              
              3,732Inventory
              
              
              4,401
              
              
              
              -TOTAL
      CURRENT ASSETS
              
              $
              4,587
              
              
              
              5,033LIABILITIES
      & SHAREHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      Payable
              
              $
              2,229
              
              
              
              2,390Accounts
      Payable – related party
              
              
              12,400
              
              
              
              -Accrued
      liabilities
              
              
              2,489
              
              
              
              -Bank
      credit line payable
              
              
              17,138
              
              
              
              14,301Related
      Party Debt
              
              
              10,151
              
              
              
              -Short-term
      debt, net of discount
              
              
              -
              
              
              
              151Total
      current liabilities
              
              
              44,407
              
              
              
              16,842Long
      Term Debt – related parties
              
              
              49,325
              
              
              
              13,000TOTAL
      LIABILITIES
              
              
              93,732
              
              
              
              29,842Commitments
      and contingencies
              
              
              -
              
              
              
              -SHAREHOLDERS'
      DEFICITPreferred
      stock, $.001 par value, 10,000,000 shares authorized,none
      issued or outstanding
              
              
              -
              
              
              
              -Common
      stock, $.001 par value, 140,000,000 shares authorized,3,864,500 and
      3,564,000 shares issued and outstanding at November 30, 2008 and 2007,
      respectively3,864
              
              
              
              3,564Additional
      paid-in-capital
              
              
              2,822,630
              
              
              
              2,662,683Accumulated
      deficit
              
              
              (2,915,639
              )
              
              
              (2,691,056
              )TOTAL
      SHAREHOLDERS' DEFICIT
              
              
              (89,145
              )
              
              
              (24,809
              )TOTAL
      LIABILITIES & SHAREHOLDERS' DEFICIT
              
              $
              4,587
              
              
              
              5,033


The
accompanying notes are an integral part of the financial
statements.


F-2


MICHAEL LAMBERT, INC.


STATEMENTS
OF OPERATIONS


For
the Years Ended November 30, 2008 and 2007





2008
              
              
              2007Merchandise
      sales
              
              $
              7,731
              
              
              $
              17,884Merchandise
      sales – related party
              
              
              -
              
              
              
              9,896Royalty
      revenue – related party
              
              
              -
              
              
              
              1,877Total
      revenue
              
              
              7,731
              
              
              
              29,657Cost
      of sales
              
              
              2,784
              
              
              
              13,517Gross
      profit
              
              
              4,947
              
              
              
              16,140General
      and administrative expenses
              
              
              216,239
              
              
              
              790,662Interest
      expense
              
              
              13,291
              
              
              
              3,783Total
      expenses
              
              
              232,314
              
              
              
              794,445Net
      loss
              
              $
              (224,583
              )
              
              $
              (778,305
              )Basic
      and diluted net lossper
      common share
              
              $
              (0.06
              )
              
              $
              (0.22
              )Basic
      and diluted weighted average commonshares
      outstanding
              
              
              3,822,014
              
              
              
              3,487,996


The
accompanying notes are an integral part of the financial
statements.


F-3


MICHAEL
LAMBERT, INC.


STATEMENT
OF CHANGES IN SHAREHOLDERS' DEFICIT


For
the Years Ended November 30, 2008 and 2007

















Common
    Shares
                                        
                                        
                                        
                                        Common
      Stock at Par Value
                                        
                                        
                                        
                                        Additional
      Paid-in-Capital
                                        
                                        
                                        
                                        Accumulated
      Deficit
                                        
                                        
                                        
                                        TotalBalances
      at November 30, 2006
                                        
                                        
                                        3,454,500
                                        
                                        
                                        $
                                        3,454
                                        
                                        
                                        $
                                        1,865,638
                                        
                                        
                                        $
                                        (1,912,751
                                        )
                                        
                                        $
                                        (43,659
                                        )Common
      shares issued-
      for cash
                                        
                                        
                                        8,000
                                        
                                        
                                        
                                        8
                                        
                                        
                                        
                                        3,992
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,000-
      for services
                                        
                                        
                                        290,000
                                        
                                        
                                        
                                        290
                                        
                                        
                                        
                                        144,710
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        145,000-
      for note conversion
                                        
                                        
                                        2,000
                                        
                                        
                                        
                                        2
                                        
                                        
                                        
                                        998
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,000Shares
      canceled
                                        
                                        
                                        (190,000
                                        )
                                        
                                        
                                        (190
                                        )
                                        
                                        
                                        190
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Stock
      warrant expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        615,915
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        615,915Beneficial
      conversion feature – short-term debt
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        10,000
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        10,000Contribution
      to capital
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        18,500
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        18,500Imputed
      rent expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,800
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,800Imputed
      interest expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        940
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        940Net
      loss
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (778,305
                                        )
                                        
                                        
                                        (778,305
                                        )Balances
      at November 30, 2007
                                        
                                        
                                        3,564,500
                                        
                                        
                                        
                                        3,564
                                        
                                        
                                        
                                        2,662,683
                                        
                                        
                                        
                                        (2,691,056
                                        )
                                        
                                        
                                        (24,809
                                        )Common
      shares issued
                                          -
      for services
                                        
                                        
                                        300,000
                                        
                                        
                                        
                                        300
                                        
                                        
                                        
                                        149,700
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        150,000Imputed
      rent expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,600
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,600Contribution
      to capital
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,349
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,349Imputed
      interest expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,298
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,298Net
      loss
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (224,583
                                        )
                                        
                                        
                                        (224,583
                                        )Balances
      at November 30, 2008
                                        
                                        
                                        3,864,500
                                        
                                        
                                        $
                                        3,864
                                        
                                        
                                        $
                                        2,822,630
                                        
                                        
                                        $
                                        (2,915,639
                                        )
                                        
                                        $
                                        (89,145
                                        )


The
accompanying notes are an integral part of the financial
statements.


F-4


MICHAEL
LAMBERT, INC.
 STATEMENT
OF CASH FLOWS
 For
the Years Ended November 30, 2008 and 2007
  2008
                                                  
                                                  
                                                  2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                                  
                                                  $
                                                  (224,583
                                                  )
                                                  
                                                  $
                                                  (778,305
                                                  )Adjustments
      to reconcile net loss tocash
      used in operating activities:Share
      based compensation
                                                  
                                                  
                                                  150,000
                                                  
                                                  
                                                  
                                                  760,915Imputed
      rent expense
                                                  
                                                  
                                                  3,600
                                                  
                                                  
                                                  
                                                  1,800Amortization
      of discount on short-term debt
                                                  
                                                  
                                                  9,849
                                                  
                                                  
                                                  
                                                  151Imputed
      interest expense
                                                  
                                                  
                                                  2,298
                                                  
                                                  
                                                  
                                                  940Changes
      in:Accounts
      receivable
                                                  
                                                  
                                                  4,169
                                                  
                                                  
                                                  
                                                  (4,169
                                                  )Inventory
                                                  
                                                  
                                                  (4,401
                                                  )
                                                  
                                                  
                                                  -Accounts
      payable
                                                  
                                                  
                                                  2,229
                                                  
                                                  
                                                  
                                                  -Accrued  liabilities
                                                  
                                                  
                                                  607
                                                  
                                                  
                                                  
                                                  (5,529
                                                  )Accounts
      payable - related parties
                                                  
                                                  
                                                  12,400
                                                  
                                                  
                                                  
                                                  -NET
      CASH USED IN OPERATING ACTIVITIES
                                                  
                                                  
                                                  (43,832
                                                  )
                                                  
                                                  
                                                  (24,197
                                                  )CASH
      FLOWS FROM FINANCING ACTIVITIESLoans
      from stockholders
                                                  
                                                  
                                                  35,968
                                                  
                                                  
                                                  
                                                  6,000Proceeds
      from short term debt
                                                  
                                                  
                                                  2,837
                                                  
                                                  
                                                  
                                                  14,301Contributions
      to capital
                                                  
                                                  
                                                  4,349
                                                  
                                                  
                                                  
                                                  -Principal
      payments on loans from stockholders
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,000
                                                  )Proceeds
      from sale of common stock
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  4,000NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                                                  
                                                  
                                                  43,154
                                                  
                                                  
                                                  
                                                  23,301Net
      change in cash
                                                  
                                                  
                                                  (678
                                                  )
                                                  
                                                  
                                                  (896
                                                  )Cash
      balance, beginning of year
                                                  
                                                  
                                                  864
                                                  
                                                  
                                                  
                                                  1,760Cash
      balance, end of year
                                                  
                                                  $
                                                  186
                                                  
                                                  
                                                  $
                                                  864SUPPLEMENTAL
      DISCLOSURES:Beneficial
      conversion feature of short-term debt
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  10,000Common
      stock issued for note conversion
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  1,000Contribution
      to capital for forgiveness of debt by related party
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  18,500Cash
      paid for interest
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Cash
      paid for income taxes
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
 The
accompanying notes are an integral part of the financial
statements.
 F-5


MICHAEL
LAMBERT, INC.


NOTES
TO FINANCIAL STATEMENTS








NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of Business
-  Michael Lambert, Inc. was formed as a sole proprietorship on July
1, 2005 and incorporated in Nevada on November 2, 2005 and is engaged in the
design, manufacture and sale of handbags and accessories.  In
addition, MLI has licensed the use of its name and trademark to a related-party
under an agreement that entitles it to receive royalty revenues.





Stage of Operations
–Michael Lambert, Inc. came out of the development stage during the year ended
November 30, 2007 as it began operations and began recognizing
revenue.





Use of Estimates - In
preparing financial statements, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities in the balance sheet and
revenue and expenses in the statement of expenses. Actual results could differ
from those estimates.





Cash and Cash
Equivalents - All highly liquid investments purchased with an original
maturity of three months or less are considered to be cash
equivalents.





Inventories-Inventories are stated at the lower of cost or market. Cost is determined
using the actual costs of parts and an allocation of labor and packing
costs.





Revenue Recognition-
MLI 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.  This typically occurs when the customer takes
delivery of the product.





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- MLI
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.  MLI provides a valuation allowance for
deferred tax assets for which it does not consider realization of such assets to
be more likely than not.





Earnings Per Share -
Basic loss per share is computed using the weighted average number of shares of
common stock outstanding during each period.  Diluted loss per share
includes the dilutive effects of common stock equivalents on an “as if
converted” basis.  For the years presented, potential dilutive
securities had an anti-dilutive effect and were not included in the calculation
of diluted net loss per common share.





Stock Compensation-
MLI 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.”  MLI 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.”  MLI 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 nonforfeitable,
the awards are measured and recognized at the date the contract is entered
into.


F-6


MLI
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, MLI estimates the fair value of the award using the last cash sale
of common stock.  MLI records the value of the shares as an
expense.





Beneficial Conversion
Feature- The convertible feature of certain of MLI’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 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.  MLI 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.





Recently Issued Accounting
Pronouncements- MLI does not expect the adoption of recently issued
accounting pronouncements to have a significant effect on MLI's results of
operations, financial position or cash flow.





NOTE
2 - GOING CONCERN





As
indicated in the accompanying financial statements, MLI has had minimal
operations and an accumulated deficit of $2,915,639 as of November 30,
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 - RELATED PARTY TRANSACTIONS





On August
29, 2005, MLI entered into a Name & Trademark License Agreement with KBK,
Inc., which is majority-owned and controlled by Robert Kremer, MLI's sole
officer and director, and Kenneth Kremer.  The agreement allows KBK to
use MLI's trademark in connection with the manufacture, sale and distribution of
decorative fabrics and furniture within the United States.  The
agreement is effective for one year and renewable for successive one year
periods if requested by KBK and granted by MLI.  KBK is required to
pay MLI a 5% royalty on the sale of any products that contain the
trademark.  MLI had related party sales with KBK in
2007.  MLI has recorded related party purse sales with KBK of $9,896
and $0 and related party receivable of $3,732 and $0 as of and for the year
ended November 30, 2007 and November 30, 2008, respectively.





Beginning
January 1, 2008, MLI currently sub-leases office space from KBK through a lease
which expired on August 31, 2008.This lease was modified in September 2008 to
provide for a term expiring on December 31, 2008 and carrying lease payments of
$0 per month.  Future minimum lease commitment is $0.  Prior
to this agreement, MLI was on a month to month sub-lease which could be
terminated at any time by KBK.  MLI has recorded imputed rent expense
of $3,600 for the year ended November 30, 2008.  The amount of imputed
rent expense was determined by reference to the actual amount of rent currently
paid by KBK for the space.





KBK owned
4.5% of MLI's outstanding common shares as of November 30, 2008 and has the
option to purchase an additional 100,000 shares.





NOTE
4 – NOTES PAYABLE TO RELATED PARTIES





On August
30, 2005, MLI entered into a $27,500 note in consideration for legal services
relating to the preparation of a private placement memorandum and the
registration of MLI's stock with the Securities and Exchange
Commission.  The attorney also received 550,000 shares of common stock
for his services and was granted the option to purchase an additional 350,000
shares.  This note was amended on September 7, 2007 wherein the
attorney forgave $18,500 and the interest rate was changed to 5%.  The
$18,500 was accounted for as a contribution to capital due to the related party
nature of the transaction.  This note was changed to $10,000 and
matures on March 31, 2009.  This note and any accrued unpaid interest
is convertible into MLI’s common stock by the attorney at $.10 per share after
maturity, upon demand.  This note is not a derivative
instrument.  MLI determined that the value of the embedded beneficial
conversion feature of this note at the time of issuance to be
$10,000.  MLI is amortizing this discount over the life of the note
and charged $9,849 to interest expense for the year ended November 30,
2008.


F-7


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, was previously extended until December
31, 2008 and was extended again as of September 1, 2008, to December 31,
2009.   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 previously been further extended until December 31, 2008, and again to
December 31, 2009 and the amount of the loan has been increased to
$4,000.  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 $3,357.





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 has previously been
extended to December 31, 2008, and effective as of November 1, 2008, to December
31, 2009.  On or around November 1, 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 $9,000. The
balance of this loan as of the filing of this Report was approximately
$9,000.





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.  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 approximately $28,968 had been borrowed under
the Line of Credit.  In January, 2009, the Line of Credit Note from
BFP Texas, Ltd. was increased to $35,000, with no changes in the other terms of
the Note.





NOTE
5 – BANK CREDIT LINE PAYABLE





MLI has a
credit card line of credit of $17,500 with Bank of America.  The
current balance as of November 30, 2008 was $17,138.  Interest of 24%
is payable monthly on the unpaid balance.  There is no collateral and
the credit line renews annually.





NOTE
6 - CAPITAL STOCK





During
the year ended November 30, 2007, MLI issued 290,000 shares of common stock to
non-employees in exchange for services rendered on its behalf, which had a fair
value of $145,000.  Two shareholders transferred 20,000 shares of
their stock of MLI to a service provided for services provided to the
company.  The 40,000 shares were accounted for as returned to the
company and canceled and issued by the company.  The fair value was
$20,000.  MLI canceled 190,000 shares of common stock that were issued
to non-employees in exchange for services in prior years due to an agreement
between MLI and the non-employees that the level of service received did not
meet MLI’s original expectation.  These shares when issued were fully
vested and non-forfeitable and MLI expensed the full value when
issued.  MLI accounted for the cancellation as a repurchase of the
shares with no consideration.  MLI sold 8,000 shares of common stock
for $4,000 and converted a note payable of $1,000 for 2,000
shares.


F-8


During
the year ended November 30, 2008, MLI issued 300,000 shares of common stock to
related parties in exchange for services rendered on its behalf, which had a
fair value of $150,000.





NOTE
7 - STOCK WARRANTS





On
November 2, 2005, MLI awarded 1,200,000 warrants to non-employees in exchange
for services.  All of the outstanding warrants had no explicit service
period, vested immediately, were exercisable at $0.375 per share and will expire
on November 2, 2010.  MLI estimated the fair value of the warrants to
be $533,132 using the Black-Scholes pricing model and expensed the entire value
during 2005.  During 2007, MLI determined the level of service
received from some of the warrant holders did not meet MLI’s original
expectation and came to a mutual agreement with the warrant holders to reduce
the number of warrants granted due to dissatisfaction over the level of services
that had been performed.  As a result of this agreement, 435,000
warrants of the original 1,200,000 were cancelled.  MLI accounted for
the cancellation as a repurchase of warrants with no consideration.





Also,
during 2007 MLI granted 1,400,000 warrants to non-employees in exchange for
services.  All of the outstanding warrants had no explicit service
period, vested immediately, were exercisable at $0.375 per share and will expire
on November 2, 2012.  The fair value of the warrants determined using
the Black-Scholes model was $615,915.  Because the warrants all vested
immediately, the entire value of the warrants was expensed in
2007.  The assumptions used to value the warrants are as
follows:  Dividend Yield:  0%, Expected
Volatility:  182.89%, Risk-Free Rate:  4.9%, Expected
Term:  2.5 Years.





The
following table summarizes common stock warrants issued and
outstanding:





Warrants
                    Weighted
      Average Exercise Price
                    Weighted
      Average Remaining Contractual Life (years)
                    Aggregate
      Intrinsic Value
                    Weighted
      Average Grant Date Fair ValueExercisable
      at November 30, 2006
                    1,200,000Granted
                    1,400,000
                    $.375
                    
                    
                    $0.44Cancelled
                    (435,000)
                    $.375Outstanding
      at November 30, 2007
                    2,165,000
                    $.375
                    3
                    $270,625No
      activity in fiscal 2008Outstanding
      at November 30, 2008
                    2,165,000
                    $.375
                    3
                    $270,625Exercisable
      at November 30, 2008
                    2,165,000





NOTE
8 - INCOME TAXES





As of
November 30, 2008, MLI accumulated a net operating loss of $74,583 which
resulted in a deferred tax asset of $51,818  This loss may be used to
offset future taxable income earned and will begin expiring in 2025. Due to the
substantial doubt regarding MLI's ability to continue as a going concern,
management has recorded a full valuation allowance against the deferred tax
asset.


F-9


NOTE
9 - SUBSEQUENT EVENTS





In
January 2009, a total of 540,000 shares valued at $270,000 were issued to 4
individuals, including our President/CEO, or CFO and our corporate counsel for
services.





In
January, 2009, the Line of Credit Note from BFP Texas, Ltd. was increased to
$35,000. The interest rate is 0% and note is due December 31,
2009.


F-10


ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None.





ITEM
9A. 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
Annual Report on Form 10-K (the "Evaluation Date"), have concluded that as of
the Evaluation Date, our disclosure controls and procedures were not 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.   They were deemed not effective due to
adjustments disclosure omissions identified by our Independent Registered Public
Accounting firm.  The Company will continue to take steps to identify
matters of accounting and disclosure.





This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.





(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.





ITEM
9B. OTHER INFORMATION.





None.


-21-


PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





DIRECTORS,
EXECUTIVE OFFICERS,


PROMOTERS,
CONTROL PERSONS AND SIGNIFICANT EMPLOYEES





The
following table sets forth the name, age and position of our director and
executive officer:





NAME
            AGE
            POSITION
            TERM
      EXPIRESRobert
      Kremer
            61
            Chief
      Executive Officer, President, Secretary, Treasurer
              and
      Director
            At
      the next annual meeting of shareholders (1) and until  his
      successor is elected and qualifiedCarey
      G. Birmingham
            53
            Chief
      Financial Officer
            Until
      his successor is elected by the Board of
  Directors





(1)  
The Company does not currently have a planned date for its next annual meeting
of shareholders.





Robert
Kremer





Robert
Kremer has served as our Chief Executive Officer, President, Secretary,
Treasurer and Director since our incorporation on November 2,
2005.  From November 2, 2005 to November 2007, Mr. Kremer served as
our Chief Financial Officer.  Since January 1981, Mr. Kremer has
served as the President of KBK, Inc., a Texas corporation which is a wholesale
seller of decorative products.  Mr. Kremer obtained his Bachelors in
Business degree in management from the University of Texas in Austin, Texas, in
1970.  Currently Mr. Kremer spends approximately 80% of his working
time, representing approximately 45-55 hours per week on the operations of KBK
and 20% of his working time, representing approximately 5-10 hours on the
Company’s business.  Mr. Kremer anticipates spending more time on the
Company’s operations as the Company grows.





Carey
G. Birmingham





Carey G.
Birmingham has served as our Chief Financial Officer since November
2007.  Since May 2008, Mr. Birmingham has served as Vice President,
Secretary, Treasurer and Director of SEV, Inc., a Nevada
corporation.  Mr. Birmingham has served as the President, Chief
Executive Officer and as a Director of United Restaurant Management, Inc.
[UREM:OTC BB](“URM”) since April 2006.  Additionally, from September
1999 through September 2003, Mr. Birmingham served as President, Executive Vice
President and Director of URM. He originally resigned as a Director of URM in
September 2003 and resigned as Executive Vice President in April 2004, prior to
being reappointed as URM’s sole officer and Director in April 2006. Mr.
Birmingham served as President of Baseline Oil & Gas Corp. [BOGA:OTC BB]
("Baseline") from January 2004 to November 2006. Between January 2004 and
February 2006, Mr. Birmingham served as a Director of Baseline.





---------------------------------





Our
Director is elected annually and holds office until our next annual meeting of
the shareholders and until his successor is elected and qualified. Officers will
hold their positions at the pleasure of the Board of Directors (consisting
solely of Mr. Kremer), absent any employment agreement. Our officers and
Director may receive compensation as determined by us from time to time by vote
of the Board of Directors. Such compensation might be in the form of stock
options (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).  Our Director may be reimbursed by the Company for
expenses incurred in attending meetings of the Board of Directors. Vacancies in
the Board are filled by majority vote of the then remaining
director(s).


-22-


Involvement In Certain Legal
Proceedings





There
have been no events under any bankruptcy act, no criminal proceedings and no
judgments, injunctions, orders or decrees material to the evaluation of the
ability and integrity of any director, executive officer, promoter or control
person of Registrant during the past five years.





Independence
of Directors




We are
not required to have independent members of our Board of Directors, and do not
anticipate having independent Directors until such time as we are required to do
so.





Audit
Committee





Due to
the Company's size, the Board of Directors does not have an Audit
Committee.





Code
of Ethics




We have
not adopted a formal Code of Ethics. The Board of Directors has evaluated the
business of the Company and the number of employees and determined that since
the Company is operated by a relatively small number of persons, general rules
of fiduciary duty and federal and state criminal, business conduct and
securities laws are adequate ethical guidelines.   In the event
our operations, employees and/or Directors expand in the future, we may take
actions to adopt a formal Code of Ethics.





ITEM
11. EXECUTIVE COMPENSATION.




Summary
Compensation Table:





Name
      and principal position
                                                                                                                                                                                                                                                                                                                                                                                          (a)
                                                                                                                                                                                                                                                                                                                                                                                        Year
                                                                                                                                                                                                                                                                                                                                                                                          (b)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Salary
      ($)
                                                                                                                                                                                                                                                                                                                                                                                          (c)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Bonus
      ($)
                                                                                                                                                                                                                                                                                                                                                                                          (d)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Stock
      Awards ($)
                                                                                                                                                                                                                                                                                                                                                                                          (e)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Option
      Awards ($)
                                                                                                                                                                                                                                                                                                                                                                                          (f)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Non-Equity
      Incentive Plan Compensation ($)
                                                                                                                                                                                                                                                                                                                                                                                          (g)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Nonqualified
      Deferred Compensation Earnings ($)
                                                                                                                                                                                                                                                                                                                                                                                          (h)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        All
      Other Compensation ($)
                                                                                                                                                                                                                                                                                                                                                                                          (i)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        Total
      ($)
                                                                                                                                                                                                                                                                                                                                                                                          (j)Robert
      Kremer
                                                                                                                                                                                                                                                                                                                                                                                          CEO,
      President, Secretary, Treasurer and Director
                                                                                                                                                                                                                                                                                                                                                                                        2008
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        10,000
                                                                                                                                                                                                                                                                                                                                                                                        (1)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        10,0002007
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        175,976
                                                                                                                                                                                                                                                                                                                                                                                        (2)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        175,9762006
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -Carey
      G. Birmingham
                                                                                                                                                                                                                                                                                                                                                                                          Chief
      Financial Officer
                                                                                                                                                                                                                                                                                                                                                                                        2008
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        125,000
                                                                                                                                                                                                                                                                                                                                                                                        (3)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        125,0002007
                                                                                                                                                                                                                                                                                                                                                                                          (4)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        125,000
                                                                                                                                                                                                                                                                                                                                                                                        (5)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        109,985
                                                                                                                                                                                                                                                                                                                                                                                        (6)
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        -
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                        $
                                                                                                                                                                                                                                                                                                                                                                                        234,985





The table
above does not include perquisites and other personal benefits in amounts less
than 10% of the total annual salary and other compensation.


-23-


(1)
Represents the value of 20,000 shares of common stock (valued at $0.50 per
share) issued to Mr. Kremer in January 2009 in consideration for services
rendered to the Company as Chief Executive Officer during the year ended
November 30, 2008.





(2)
Represents the value of 400,000 five year options to purchase shares of our
common stock at an exercise price of $0.375 per share issued to Mr. Kremer and
50,000 five year options to purchase shares of our common stock at an
exercise price of $0.375 per share issued to KBK, Inc., a company
controlled by Mr. Kremer. The value of the options have been calculated in
connection with FAS 123(R).  The number of options granted to Mr.
Kremer was determined by the Board of Directors in its sole determination based
on the Board’s determination of the value of Mr. Kremer’s services to the
Company.





(3)
Represents the value of 250,000 shares of common stock (valued at $0.50 per
share) issued to Mr. Birmingham in January 2009 in consideration for services
rendered to the Company as Chief Financial Officer during the year ended
November 30, 2008.





(4) Mr.
Birmingham was appointed Chief Financial Officer of the Company on November 30,
2007.





(5)
Represents the value of 250,000 shares of the Company’s restricted common stock
issued to Mr. Birmingham in January 2008, in consideration for services rendered
to the Company which were valued at $0.50 per share.





(6)
Represents the value of 250,000 five year options to purchase shares of our
common stock at an exercise price of $0.375 per share issued to Mr. Birmingham.
The value of the options have been calculated in connection with FAS
123(R).   The number of options granted to Mr. Birmingham was
determined by the Board of Directors in its sole determination based on the
Board’s determination of the value of Mr. Birmingham’s services to the
Company.





Neither
Robert Kremer nor Carey G. Birmingham receive or accrue a salary other than the
options and shares they have been issued in the past in consideration for
services rendered. Mr. Kremer does not receive any compensation for his service
to the Board of Directors other than the compensation he receives as an
executive officer of the Company.  It is anticipated that they will
not receive a salary until we obtain a minimum of $150,000 in annual revenues,
of which there can be no assurance; however, it is anticipated that they will
continue to receive share and/or option grants for services rendered moving
forward.


-24-


Outstanding
Equity Awards at Fiscal Year End:








OPTION
      AWARDS
            
            STOCK
      AWARDSNumber
      Of
              Securities
              Underlying
              Unexercised
            
            Number
      Of
              Securities
              Underlying
              Unexercised
            
            Equity
      Incentive Plan: Number Of
              Securities
              Underlying
              Unexercised
            
            Option
            
            
            
            Number
      Of
              Shares
      Or
              Units
      Of Stock
            
            Market
      Value
              Of
      Share Or
              Units
      Of Stock
            
            Equity
      Incentive Plan
              Awards:
      Number Of
              Unearned
      Shares,
              Units
      Or Other Rights
            
            
            Equity
      Incentive Plan
              Awards:
      Market Of Unearned
              Shares,
              Units
      Or Other RightsOptions
            
            Options
            
            Unearned
            
            Exercise
            
            Options
            
            That
      Have Not
            
            That
      Have Not
            
            That
      Have Not
            
            
            That
      Have Not(#)
            
            
            (#)
            
            Option
            
            Price
            
            Expiration
            
            Vested
            
            Vested
            
            Vested
            
            
            VestedName
            Exercisable
            
            Unexercisable
            
            
            (#)
            
            ($)
            
            Date
            
            
            (#)
            
            ($)
            
            
            (#)
            
            
            ($)Robert
      Kremer
            
            250,000
            (1)
            
            0
            
            
            0
            
            $
            0.375
            
            November
      2, 2010
            
            
            0
            
            
            0
            
            
            0
            
            
            
            050,000
            (2)
            
            0
            
            
            0
            
            $
            0.375
            
            February
      10, 2012
            
            
            0
            
            
            0
            
            
            0
            
            
            
            0400,000
            (2)
            
            0
            
            
            0
            
            $
            0.375
            
            September
      26, 2012
            
            
            0
            
            
            0
            
            
            0
            
            
            
            0Carey
      G. Birmingham
            
            100,000
            
            
            0
            
            
            0
            
            $
            0.375
            
            November
      2, 2010
            
            
            0
            
            
            0
            
            
            0
            
            
            
            0250,000
            
            
            0
            
            
            0
            
            $
            0.375
            
            September
      26, 2012
            
            
            0
            
            
            0
            
            
            0
            
            
            
            0





(1)
Includes 200,000 options held by Robert Kremer and 100,000 options held in KBK,
Inc., a corporation beneficially controlled and owned by Mr.
Kremer.  The terms of these options included a cashless exercise
provision and a lifespan of 5 years.  The options have an exercise
price of $0.375 per share.  The options vested immediately and the
holders are able to exercise the options at any time.  A form of Stock
Option Agreement which includes the material terms of the options is
incorporated by reference hereto as Exhibit 10.9.




(2)
Represents options held by KBK, Inc.





(3)
Includes 400,000 options held by Robert Kremer. The terms of these options
included a cashless exercise provision and a lifespan of 5 years.  The
options have an exercise price of $0.375 per share.  The options
vested immediately and the holders are able to exercise the options at any
time.  A form of Stock Option Agreement which includes the material
terms of the options is incorporated by hereto as Exhibit 10.9.





COMPENSATION
DISCUSSION AND ANALYSIS





Director
Compensation





No member
of our Board of Directors has ever received any separate compensation other than
the salary, if any, that they receive as an executive of the Company; however,
the Board of Directors (consisting solely of Mr. Kremer) reserves the right in
the future to award the members of the Board of Directors cash or stock based
consideration for their services to the Company, which awards, if granted shall
be in the sole determination of the Board of Directors.


-25-


Executive
Compensation Philosophy





Our Board
of Directors, consisting solely of Mr. Kremer, determines the compensation given
to our executive officers in his sole determination. As our executive officers
currently draw no compensation from us, we do not currently have any executive
compensation program in place. Although we have not to date, our Board of
Directors also reserves the right to pay our executives a salary, and/or issue
them shares of common stock issued in consideration for services rendered and/or
to award incentive bonuses which are linked to our performance, as well as to
the individual executive officer’s performance.




This
package may also include long term stock based compensation to certain
executives which is intended to align the performance of our executives with our
long-term business strategies.




In the
past, Mr. Kremer has received shares of common stock and options in
consideration for services rendered to the Company, and it is anticipated that
Mr. Kremer will continue to receive stock based compensation either in the form
of shares of our common stock or options to purchase shares of our common stock
from time to time, as may be determined by the Board of Directors, until such
time as the Board of Directors, in its sole determination, determines that the
Company has sufficient cash on hand to pay Mr. Kremer a salary, if
ever.





Incentive
Bonus





The Board
of Directors may grant incentive bonuses to our executive officers in its sole
discretion, if the Board of Directors believes such bonuses are in the Company’s
best interest, after analyzing our current business objectives and growth, if
any, and the amount of revenue we are able to generate each month, which revenue
is a direct result of the actions and ability of such executives.





Long-term,
Stock Based Compensation





In order
to attract, retain and motivate executive talent necessary to support the
Company’s long-term business strategy we may award certain executives with
long-term, stock-based compensation in the future, in the sole discretion of our
Board of Directors.




Criteria
for Compensation Levels





The
Company seeks to attract and retain qualified executives and employees able to
positively contribute to the success of the Company for the benefit of its
various stakeholders, the most important of which is its shareholders, but also
including its officers, employees, and the communities in which the Company
operates.




The Board
of Directors (in establishing compensation levels for the Company’s Chief
Executive Officer, if any) and the Company (in establishing compensation levels
for other executives, if any) may consider many factors, including, but not
limited to, the individual’s abilities and performance that results in: the
advancement of corporate goals of the Company, execution of the Company’s
business strategies, contributions to positive financial results, and
contributions to the development of the management team and other employees. In
determining compensation levels, the Board of Directors may also consider the
experience level of each particular individual and/or the compensation level of
executives in similarly situated companies in our industry.




Compensation
levels for executive officers are generally reviewed upon the expiration of such
executive’s employment agreements (if any), or annually, but may be reviewed
more often as deemed appropriate.


-26-


ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.





The
following table provides the names and addresses of each person known to own
directly or beneficially more than a 5% of the outstanding common stock (as
determined in accordance with Rule 13d-3 under the Exchange Act) as of February
10, 2009 and by the officers and director, individually and as a
group.  Except as otherwise indicated, all shares are owned
directly.





Common
      Stock Beneficially Owned
            
            Percentage
      Owned (1)Robert
      Kremer (2)
            
            1,860,000
            (3)
            36.4%
            (4)CEO,
      President,  Secretary, Treasurer and Director121
      Interpark Blvd., Suite 1204
              San
      Antonio, Texas 78216Kenneth
      Kremer (2)
            
            1,600,000
            (5)
            32.0%
            (6)11502
      Whisper Ledge
              San
      Antonio, Texas 78230David
      M. Loev
            
            1,150,000
            (7)
            24.2%
            (8)6300
      West Loop South, Suite 280
              Bellaire,
      Texas 77401Carey
      Birmingham
              Chief
      Financial Officer
            
            1,152,000
            (9)
            24.2%
            (10)20222
      Creek Farm
              San
      Antonio, Texas 78259Officers
      and Director as a Group (2 persons)
            
            3,012,000
            
            55.2%
            (11)








(1)
            Using
      4,404,500 shares outstanding as of February 10, 2009, unless otherwise
      stated.(2)
            Robert
      and Kenneth Kremer are brothers.(3)
            This
      number includes 1,000,000 shares held in Robert Kremer’s name, 600,000
      five year options to purchase shares of our common stock at $0.375 per
      share, held by Mr. Kremer to purchase shares of our common stock, as well
      as 160,000 shares of our common stock held by KBK, Inc., which is
      controlled by Mr. Kremer and 100,000 five year options to purchase shares
      of our common stock at $0.375 per share, held by KBK, Inc.  The
      options are described in greater detail below under “Certain Relationships
      and Related Transactions.”(4)
            Using
      5,104,500 shares outstanding, assuming the full exercise of the 700,000
      options beneficially owned by Robert Kremer.(5)
            Includes
      1,000,000 shares held by Kenneth Kremer and 600,000 five year options to
      purchase shares of our common stock at $0.375 per share, held by Kenneth
      Kremer. The options are described in greater detail below under “Certain
      Relationships and Related Transactions.”(6)
            Using
      5,004,500 shares outstanding, assuming the full exercise of the 600,000
      options held by Kenneth Kremer.


-27-


(7)
            Includes
      800,000 shares held by Mr. Loev and 350,000 five year options to purchase
      shares of our common stock at $0.375 per share, held by Mr. Loev. The
      options are described in greater detail below under “Certain Relationships
      and Related Transactions.”(8)
            Using
      4,754,500 shares outstanding assuming the full exercise of the 350,000
      options held by Mr. Loev.(9)
            Includes
      800,000 shares of common stock held by Mr. Birmingham 2,000 which Mr.
      Birmingham owns through his beneficial ownership of BFP Texas, Ltd., which
      holds 2,000 shares of our common stock and 350,000 five year options to
      purchase shares of our common stock at $0.375 per share, held by Mr.
      Birmingham.  The options are described in greater detail below
      under “Certain Relationships and Related Transactions.”(10)
            Using
      4,754,500 shares of common stock outstanding assuming the exercise by Mr.
      Birmingham of all 350,000 options which he holds.(11)
            Using
      5,454,500 shares of common stock outstanding assuming the exercise by Mr.
      Kremer of the 700,000 options which holds and the exercise by Mr.
      Birmingham of the 350,000 options which he
  holds.





ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





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 previously been further extended until December 31, 2008, and again to
December 31, 2009 and the amount of the loan has been increased to
$4,000.  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 $3,357.





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 800,000 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.  The balance of the loan as of the filing of this report was
$10,151.





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 has previously been
extended to December 31, 2008, and effective as of November 1, 2008, to December
31, 2009.  On or around November 1, 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 $9,000. The
balance of this loan as of the filing of this Report was approximately
$9,000.





In
September 2006, we issued 200,000 shares of common stock to Mr. Loev in
consideration for legal services rendered to the Company.


-28-


In
October 2006, we issued an aggregate of 200,000 restricted shares of our
Common Stock to Mr. Birmingham in consideration for services
rendered.





In or
around February 2007, we granted 85,000 options to Mr. Birmingham and 50,000
options to KBK, in consideration for services rendered by Mr. Birmingham and Mr.
Kremer, the Chief Executive Officer of the Company and beneficial owner of
KBK.  We also granted 250,000 options to David M. Loev, in
consideration for services rendered on or around February 2007.  The
terms of these options included a cashless exercise provision and a lifespan of
5 years, expiring on February 10, 2012.  The options have an exercise
price of $0.375 per share.  The options vested immediately and the
holders are able to exercise the options at any time.  A form of Stock
Option Agreement which includes the material terms of the options is attached
hereto as Exhibit 10.9.





Effective
January 1, 2007, we entered into a sub-lease agreement with KBK, Inc., which is
controlled by our Chief Executive Officer, Robert Kremer (“KBK”), which was
replaced by a sub-lease agreement entered into in January 1, 2008, described in
greater detail above under “Description of Property.”





In
February 2007, our Chief Executive Officer, Robert Kremer transferred 20,000
shares of common stock which he held to a non-affiliated individual in
consideration for services rendered to Company.





In
February 2007, Kenneth Kremer, a significant shareholder of the Company, and the
brother of Robert Kremer transferred 20,000 shares of common stock which he held
to a non-affiliated individual in consideration for services rendered to the
Company.





In or
around September 2007, we granted 400,000 options each to Robert and Kenneth
Kremer, and 165,000 options to Mr.  Birmingham, in consideration for
services rendered.  The terms of these options included a cashless
exercise provision and a lifespan of 5 years, expiring in September
2012.  The options have an exercise price of $0.375 per
share.  The options vested immediately and the holders are able to
exercise the options at any time.  A form of Stock Option Agreement
which includes the material terms of the options is incorporated by reference
herein as Exhibit 10.9.





In
November 2007, we appointed Carey Birmingham as our Chief Financial
Officer.





Effective
January 1, 2008, we entered into a sub-lease agreement with KBK, Inc., which is
controlled by our Chief Executive Officer, Robert Kremer (“KBK”), described in
greater detail above under “Description of Property.”  Since the
expiration of the lease on January 1, 2009, we have continued to occupy the
previously leased space provided by KBK, which is controlled by Robert Kremer,
our Chief Executive Officer, on a month-to-month, rent free
basis.  The arrangement is able to be terminated by either party with
thirty (30) days prior notice.  Neither party currently has any plans
to terminate the lease arrangement.





In
January 2008, we issued 250,000 shares of our common stock to our Chief
Financial Officer, Carey Birmingham in consideration for services rendered to
the Company.





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.  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 approximately $28,968 had been borrowed under
the Line of Credit.  In January, 2009, the Line of Credit Note from
BFP Texas, Ltd. was increased to $35,000, with no changes in the other terms of
the Note.





The Board
of Director(s) has deemed that the share based compensation issued to
consultants, officers, Directors and affiliated persons has been on terms at
least as favorable as those terms which may have been offered to unaffiliated
persons.


-29-


In
January 2009, we issued an aggregate of 540,000 shares of our common stock to
certain individuals for services rendered to the Company for the fiscal year
ended November 30, 2008, including 250,000 shares to our Chief Financial
Officer, Carey Birmingham, 250,000 shares to our corporate counsel, David M.
Loev, 20,000 shares to our Chief Executive Officer, Robert Kremer, and 20,000
shares to Kenneth Kremer, a significant shareholder of the Company and the
brother of Robert Kremer.





Review,
Approval and Ratification of Related Party Transactions





Given our
small size and limited financial resources, we had not adopted formal policies
and procedures for the review, approval or ratification of transactions, such as
those described above, with our executive officers, Directors and significant
stockholders.  However, all of the transactions described above were
approved and ratified by our Board of Directors.  In connection with
the approval of the transactions described above, the Board of Directors took
into account several factors, including their fiduciary duties to the Company;
the relationships of the related parties described above to the Company; the
material facts underlying each transaction; the anticipated benefits to the
Company and related costs associated with such benefits; whether comparable
products or services were available; and the terms the Company could receive
from an unrelated third party.





We intend
to establish formal policies and procedures in the future, once we have
sufficient resources and have appointed additional Directors, so that such
transactions will be subject to the review, approval or ratification of our
Board of Directors, or an appropriate committee thereof.   On a
moving forward basis, the Board of Directors will continue to approve any
related party transaction based on the criteria set forth above.


-30-


ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.





AUDIT
FEES





The
aggregate fees billed for the fiscal years ended November 30, 2008 and 2007, for
professional services rendered by the Company's independent principal
accountants), Malone & Bailey, PC for the audit of the Company's annual
financial statements as included in the Company’s Annual Reports on Form 10-K
and the review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q, as well as services provided in connection with statutory
and regulatory filings or engagements for those fiscal years were approximately
$ 27,000 and $25,000, respectively.





AUDIT
RELATED FEES





None.





TAX
FEES





None.





ALL
OTHER FEES




None.


-31-


PART
IV





ITEM
15. 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)





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(5)
                Amended
      and Restated Convertible Promissory Note with The Loev Law Firm,
      PCExhibit
      10.19*
                Amended
      and Restated Promissory Note (KBK, Inc.)Exhibit
      10.20*
                Amended
      Promissory Note with Michael SonacoExhibit
      10.21*
                Amended
      Promissory Note with KBK, Inc.Exhibit
      10.22*
                Amended
      Master Revolving Line of Credit with BFP Texas,
Ltd.


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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.(5)
            Filed
      as an exhibit to our Quarterly Report on Form 10-Q, filed with the
      Securities and Exchange Commission on October 15, 2008, and incorporated
      herein by reference.


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SIGNATURES





In
accordance with Section 13 or 15(d) 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: February
      27, 2009
                By:/s/
      Robert KremerRobert
      KremerChief
      Executive Officer (Principal Executive Officer)DATED:
      February 27, 2009
                By:/s/
      Carey G. BirminghamCarey
      G. BirminghamChief
      Financial Officer (Principal Financial
Officer)





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





MICHAEL
      LAMBERT, INC.DATED: February
      27, 2009
                By:/s/
      Robert KremerRobert
      KremerChief
      Executive Officer (Principal Executive Officer), President, Secretary,
      Treasurer and sole DirectorDATED:
      February 27, 2009
                By:/s/
      Carey G. BirminghamCarey
      G. BirminghamChief
      Financial Officer (Principal Financial
Officer)


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