<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

               FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 30, 2006

                        Commission File Number 333-135107

                               LOTUS BANCORP, INC
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                          <C>
            MICHIGAN                                              20-2377468
(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)
</TABLE>

                    45650 GRAND RIVER AVENUE, NOVI, MI 48374
          (Address of principal executive offices, including zip code)

                                 (248) 735-1000
              (Registrant's telephone number, including area code)

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [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]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

The number of shares outstanding of the issuer's common stock as of September
30, 2006 was 1 share.

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




<PAGE>

TABLE OF CONTENTS

                                      INDEX

<TABLE>
<S>                                                                          <C>
PART I  - FINANCIAL INFORMATION                                                3

   ITEM 1. FINANCIAL STATEMENTS                                                3
   ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION          10
   ITEM 3. CONTROLS AND PROCEDURES                                            14

PART II - OTHER INFORMATION                                                   15

   ITEM 1. LEGAL PROCEEDINGS                                                  15
   ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS        15
   ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                    16
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                16

   ITEM 5. OTHER INFORMATION                                                  16
   ITEM 6. EXHIBITS                                                           16
</TABLE>

Certification Pursuant to Rule 13a - 15(e) and 15d - 15(e)
Certification Pursuant to Rule 13a - 15(e) and 15d - 15(e)
Certification Pursuant to Rule 13a - 14(b) and 15d - 14(b)


                                       2

<PAGE>

                         PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               LOTUS BANCORP, INC.
                      (A Company in the Development Stage)
                                  BALANCE SHEET

                                     ASSETS

<TABLE>
<CAPTION>
                                            September 30, 2006
                                                (Unaudited)      December 31, 2005
                                            ------------------   -----------------
<S>                                         <C>                  <C>
Current Asset - Cash                             $ 20,650             $68,867
Property & Equipment, net of depreciation         910,328                  --
Prepaid Expenses                                    3,750                  --
Other Assets                                        3,500              25,000
Deferred Offering Costs (Note 1)                   56,907                  --
                                                 --------             -------
   TOTAL ASSETS                                  $995,135             $93,867
                                                 ========             =======
</TABLE>

                 LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                            September 30, 2006
                                                (Unaudited)      December 31, 2005
                                            ------------------   -----------------
<S>                                         <C>                  <C>
Bank Note Payable (Note 3)                      $1,357,724           $      --
Advances from Organizers (Note 4)                  189,990             189,990
Accrued Liabilities (Note 5)                        21,573              47,414
                                                ----------           ---------
      Total Current Liabilities                 $1,569,287           $ 237,404
                                                ----------           ---------
Shareholder's Equity (Deficit)
   Common Stock, $0.01 par value
         Authorized -8,000,000 shares at
            September 30, 2006 and 60,000
            shares At December 31, 2005
         Issued and outstanding - 1 share
            at September 30, 2006 and
            December 31, 2005                           --                  --
Paid in Capital                                         10                  10
Deficit accumulated during the
   development stage                              (574,162)           (143,547)
                                                ----------           ---------
      Total Shareholder's Equity
         (deficit)                              $ (574,152)          $(143,537)
                                                ----------           ---------
      TOTAL LIABILITIES AND SHAREHOLDER'S
         EQUITY (DEFICIT)                       $  995,135           $  93,867
                                                ==========           =========
</TABLE>


                                       3
<PAGE>

                               LOTUS BANCORP, INC.
                      (A Company in the Development Stage)
                             STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                               Three Months Ended      Nine Months Ended        Period from
                                  September 30            September 30        January 1, 2005
                              --------------------   --------------------      (Inception) to
                                 2006       2005        2006       2005     September  30, 2006
                              ---------   --------   ---------   --------   -------------------
<S>                           <C>         <C>        <C>         <C>        <C>
Total Revenue                 $      --   $    739   $      --   $    739        $   1,711
                              ---------   --------   ---------   --------        ---------
Operating Expenses
   Professional (Note 5)        160,717     21,128     313,498     62,970          453,915
   Occupancy (Note 7)            22,371         --      25,487         --           26,237
   Licenses                        (331)        --      19,566         25           19,590
   Automobile                       841         62       2,648         62            3,058
   Service Charges                   88          3         619          3              623
   Dues & Subscriptions           1,460          4       2,209          4            2,272
   Insurances                     5,913         --       5,913         --            5,913
   Postage                          435         --       1,076         25            1,250
   Printing                       3,529         --       3,652         --            4,209
   Telephone                        839        139       1,772        139            2,294
   Travel & Entertainment        12,751        221      13,891        508           15,737
   Office Supplies                1,028         67       1,265         67            1,343
   Advertising                   11,923         --      17,486         --           17,520
   Charitable Contributions          --         --         100         --              100
   Outside Office Services        1,230        280       1,230        280            1,510
   Education & Training           9,286         --       9,994         --           10,094
   Miscellaneous                  2,150                  2,150                       2,150
   Depreciation                   1,098         --       1,559         --            1,559
                              ---------   --------   ---------   --------        ---------
Total Operating Expenses      $ 235,328   $ 21,904   $ 424,115   $ 64,083        $ 569,374
Other Expense - Interest          1,499         --       6,499         --            6,499
                              ---------   --------   ---------   --------        ---------
Total Expenses                $ 236,827   $ 21,904   $ 430,614   $ 64,083        $ 575,873
Income Taxes (Note 6)                --         --          --         --               --
                              ---------   --------   ---------   --------        ---------
Net (Loss)                    $(236,827)  $(21,165)  $(430,614)  $(63,344)       $(574,162)
                              ---------   --------   ---------   --------        ---------
Net Loss Per Share            $(236,827)  $(21,165)  $(430,614)  $(63,344)
                              ---------   --------   ---------   --------
</TABLE>

                                       4

<PAGE>

                               LOTUS BANCORP, INC.
                      (A Company in the Development Stage)
                   STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
         Period from January 1, 2005 (Inception) to September 30, 2006
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                Deficit Accumulated
                             Common   Paid In        During the
                              Stock   Capital    Development Stage      Total
                             ------   -------   -------------------   ---------
<S>                          <C>      <C>       <C>                   <C>
Balance Jan. 1, 2005           $--      $--          $      --        $      --
Issuance of 1 Share
   Common Stock                 --       10                 --               10
Net Loss                        --       --           (143,547)        (143,547)
                               ---      ---          ---------        ---------
Balance December 31, 2005       --       10           (143,547)        (143,537)
Net Loss                        --                     (88,697)         (88,697)
                               ---      ---          ---------        ---------
Balance March 31, 2006          --       10           (232,244)        (232,234)
Net Loss                        --       --           (105,091)        (105,091)
                               ---      ---          ---------        ---------
Balance June 30, 2006           --       10           (337,335)        (337,325)
Net Loss                        --       --           (236,827)        (236,827)
                               ---      ---          ---------        ---------
Balance September 30, 2006     $--      $10          $(574,162)       $(574,152)
                               ---      ---          ---------        ---------
</TABLE>


                                        5

<PAGE>

                               LOTUS BANCORP, INC.
                      (A Company in the Development Stage)
                             STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                             Nine Months            Period from
                                         Ended September 30       January 1, 2005
                                       ----------------------     (Inception) to
                                          2006         2005     September 30, 2006
                                       ----------   ---------   ------------------
<S>                                    <C>          <C>         <C>
CASH FLOWS FROM OPERATING
   ACTIVITIES
   Net (Loss)                          $ (430,614)  $ (63,344)      $ (574,162)
   Depreciation                             1,559          --            1,559
   Increase (decrease) in Accrued
      Liabilities                         (25,842)         --           21,573
   Increase in Prepaid Expenses            (3,750)                      (3,750)
   Increase in Other Assets                (3,500)         --           (3,500)
   Increase in Deferred
      Offering Costs                      (56,907)         --          (56,907)
                                       ----------   ---------       ----------
      Net Cash Used in Operating
         Activities                    $ (519,054)  $ (63,344)      $ (615,187)
                                       ----------   ---------       ----------
CASH FLOWS FROM INVESTING
   ACTIVITIES
   Purchase of Securities              $       --   $(105,000)      $       --
   Purchase of Equipment                  (57,654)         --          (57,654)
   Purchase of Land                      (854,233)         --         (854,233)
                                       ----------   ---------       ----------
      Net Cash Used in Investing
         Activities                    $ (911,887)  $(105,000)      $ (911,887)
                                       ----------   ---------       ----------
CASH FLOWS FROM FINANCING
   ACTIVITIES
   Advances on Line of Credit          $1,357,724   $      --       $1,357,724
   Issuance of Common Stock                    --          --               10
   Increase in Advances from
      Organizers                               --     180,000          189,990
                                       ----------   ---------       ----------
   Net Cash Provided by
      Financing Activities             $1,357,724   $ 180,000       $1,547,724
                                       ----------   ---------       ----------
INCREASE (DECREASE) IN CASH            $  (73,217)  $  11,656       $   20,650
CASH AT BEGINNING OF PERIOD            $   93,867   $      --       $       --
                                       ----------   ---------       ----------
CASH AT END OF PERIOD                  $   20,650   $  11,656       $   20,650
                                       ----------   ---------       ----------
</TABLE>


                                        6
<PAGE>

                               LOTUS BANCORP, INC.
                      (A Company in the Development Stage)
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

ORGANIZATION - Lotus Bancorp, Inc. (the "Company") was incorporated as De Novo
Holdings, Inc. on October 27, 2004 for the purpose of becoming a bank holding
company. The Company subsequently changed its name to Lotus Bancorp, Inc. The
Company received preliminary regulatory approvals to organize a bank on June 30,
2006 from the Federal Deposit Insurance Corporation and on July 5, 2006 from the
State of Michigan's Office of Financial and Insurance Services. The Company
plans to purchase the common stock of Lotus Bank (the "Bank"), a de novo
currently in formation. The Company intends to raise a minimum of $11,000,000 in
equity capital, prior to offering costs, through the sale of shares of the
Company's common stock. Proceeds of the offering will be used to capitalize the
Bank, construct facilities, and provide working capital. The Company has
generated no revenue except interest income, and has incurred direct offering
expenses and general operating expenses since inception. There were no revenues
or expenses from October 27, 2004 to December 31, 2004.

Final charter approval and authorization to open the proposed Bank will not be
granted until all pre-opening requirements are met. These requirements relate to
capital, timeliness of opening and other industry standard and proposed Bank
specific examination and procedural issues.

BASIS OF PRESENTATION - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates and assumptions.

The accompanying unaudited interim financial statements for the three months
ended September 30, 2006, and for the period from January 1, 2006 through
September 30, 2006 have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. These financial
statements, in the opinion of management, include all adjustments necessary for
the fair presentation of the financial position, results of operations and cash
flows for the three month period ended September 30, 2006 and for the nine month
period ended September 30, 2006. Interim operating results are not necessarily
indicative of operating results for the full year.

PROPERTY AND EQUIPMENT - Equipment is stated at cost. Depreciation is computed
for financial reporting purposes using the straight-line method over the useful
life of the assets.

ORGANIZATION AND PRE-OPENING COSTS - Organization and pre-opening costs
represent incorporation costs, legal, accounting, consultant and other
professional fees and costs relating to the organization. Management anticipates
that the organization and pre-opening costs will approximate $980,000 through
the commencement of operations, which will be charged to expense as incurred.

DEFERRED OFFERING COSTS - Direct costs relating to the offering of common stock
will be capitalized and netted against the proceeds when the sale of stock in
the Company is completed. Management expects these costs will approximate
$400,000.


                                        7

<PAGE>

INCOME TAXES - Deferred income tax assets and liabilities are determined using
the liability (or balance sheet) method. Under this method, the net deferred tax
asset or liability is determined based on the tax effect of the various
temporary differences between the book value and tax basis of the various
balance sheet assets and liabilities, and requires the current recognition of
changes in tax rates and laws. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.

EARNINGS PER SHARE - Basic earnings per share represent income available to
shareholders divided by the weighted-average number of shares outstanding during
the period.

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                             September 30,
                                                  2006       December 31,
                                              (unaudited)        2005
                                             -------------   ------------
<S>                                          <C>             <C>
Development costs for building                  $ 23,681          $--
Land                                             854,233           --
Office Equipment                                  33,973           --
                                                --------          ---
                                                 911,887           --
Less: Accumulated depreciation                     1,559           --
                                                --------          ---
Property and equipment net of depreciation      $910,328          $--
                                                --------          ---
</TABLE>

NOTE 3 - BANK NOTE PAYABLE

On February 1, 2006, the Company signed a $1,000,000 line of credit agreement
with the Bankers Bank of Atlanta, Georgia. The Line was increased to $2,000,000
on August 16, 2006. The line of credit is payable on demand with interest at the
prime rate (8.25% as of September 30, 2006) minus one percent, and is secured by
the personal guarantees of the Company's Organizers. The line expires January
31, 2007. The balance on this line was $1,357,724 as of September 30, 2006.

NOTE 4 - ADVANCES FROM ORGANIZERS

Advances from Organizers in the amount of $189,990 were used for certain
operating and pre-opening expenses.

NOTE 5 - OTHER LIABILITIES

The Company has entered into consulting agreements with three individuals. These
individuals will become employees of the Bank when it opens for business. These
agreements call for additional payments to be paid to the parties at the rate of
$25,416 per month. The parties have been paid consulting fees totaling $55,833
for the three months ended September 30, 2006, and $128,062 for the period from
inception through September 30, 2006.

NOTE 6 - INCOME TAXES

The Company has a net operating loss carryforward for the year ended December
31, 2005 of approximately $144,000. This amount is available to reduce future
taxable income through the year ending December 31, 2025. In addition, the
Company has incurred a taxable loss of approximately


                                        8

<PAGE>

$237,000 for the three months ended September 30, 2006. The deferred tax asset
created by that loss carryforward has been offset with a valuation allowance
since the Company has no history of earnings.

The components of the net deferred tax asset, included in other assets, are as
follows:

<TABLE>
<CAPTION>
                                      Three Months    Period from
                                         Ended        Inception to
                                     September 30,   September 30,
                                          2006            2006
                                     -------------   -------------
<S>                                  <C>             <C>
Deferred Tax Asset:
   Net Operating Loss Carryforward     $ 81,000        $ 195,000
   Less Valuation Allowance             (81,000)        (195,000)
                                       --------        ---------
Total Net Deferred Tax Asset           $     --        $      --
                                       ========        =========
</TABLE>

NOTE 7 - LEASES AND COMMITMENTS

On August 10, 2006, the Company entered into a lease agreement for temporary
office space, which calls for lease payments of $3,753 per month through
September 2, 2007, and $3,866 per month for each month thereafter. Rent expense
for the three month period ended September 30, 2006 totaled $5,871 and totaled
$9,621 for the period of inception through September 30, 2006.

NOTE 8 - STOCK OPTIONS AND WARRANTS

The Company plans to issue 55,000 stock options to the future executive officers
of the Bank upon approval from the Board of Directors. The Company is also
planning to issue 142,500 stock warrants to the organizing members of the Bank.
These proposed options and warrants would be issued with a strike price of $10.
In conjunction with its upcoming stock offering, the Company is planning to
issue to each initial shareholder one warrant for every five shares of common
stock purchased in the offering. These warrants would have a strike price of
$12.50. As of September 30, 2006, the stock incentive plan has not been created.

NOTE 9 - PROPOSED PUBLIC OFFERING

As described in Note 1 (Organization), the Company will be conducting an initial
public offering in which it is proposed that at least $11,000,000 in net
proceeds be available upon commencement of operations. The proceeds are net of
related offering costs, pre-opening expenses, and estimated capital expenditures
of $980,000 to be incurred on behalf of Lotus Bancorp, Inc. The portion of these
costs expended through September 30, 2006 have been recognized in the accounts
of the Company, and substantially all of the remaining costs connected to this
offering will be incurred by the Company. If the initial public offering is
successful, all of these costs will be repaid to the Company, and the advances
from organizers will be converted into stock. The offering is expected to close
in the fourth quarter of 2006. If the initial public offering is not successful,
all of these costs will be paid by the Company, including repayment of the
revolving line of credit, and the compensation obligation discussed in Note 5.

NOTE 10 - SUBSEQUENT EVENTS

As of October 25, 2006, a total of $4,501,000 in subscription funds were held in
escrow.


                                        9

<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the financial statements and accompanying notes appearing in
this report.

Statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, including the Company's and Bank's
expectations, intentions, beliefs or strategies regarding the future. Any
statements in this document about expectations, beliefs, plans, objectives,
assumptions or future events or performance are not historical facts and are
forward-looking statements. These statements are often, but not always, made
through the use of words or phrases such as "may," "should," "could," "predict,"
"potential," "believe," "will likely result," "expect," "will continue,"
"anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and
"outlook" and similar expressions. Accordingly, these statements involve
estimates, assumptions and uncertainties, which could cause actual results to
differ materially from those expressed in them. Any forward-looking statements
are qualified in their entirety by reference to the factors discussed throughout
this document. All forward-looking statements concerning economic conditions,
rates of growth, and rates of income or values included in this document are
based on information available to the Company on the dates noted, and the
Company assumes no obligation to update any such forward-looking statements. It
is important to note that the actual results of the Company or the Bank may
differ materially from those in such forward-looking statements due to
fluctuations in interest rates, inflation, government regulations, economic
conditions, customer disintermediation and competitive product and pricing
pressures in the geographic and business areas in which the Company and the Bank
conduct operations, including their respective plans, objectives, expectations
and intentions and other factors discussed under the section entitled "Risk
Factors," in the Company's Prospectus contained in its Registration Statement on
Form SB-2, which was declared effective on August 14, 2006, including the
following:

     -    The Company and Bank must receive final regulatory approvals before
          the Bank may open for business;

     -    The Bank must satisfy certain conditions following regulatory approval
          before it may open for business;

     -    Any delay in beginning banking operations will result in additional
          losses;

     -    Because the offering is being undertaken on a best efforts basis, we
          may be unable to raise the minimum offering amount;

     -    The Company has no operating history upon which to base an estimate of
          its future financial performance;

     -    The Company expects to incur losses during its initial years of
          operations;

     -    Failure of the Company or the Bank to implement its business
          strategies may adversely affect its financial performance;

     -    Departures of key personnel or directors may impair the Bank's
          operations;

     -    The Bank will face intense competition from a variety of competitors;

     -    The Bank's legal lending limits may impair its ability to attract
          borrowers;

     -    An economic downturn, especially one affecting the Bank's primary
          service areas, may have an adverse effect on the Company's financial
          performance;

     -    Adverse economic conditions in the automobile manufacturing and
          related service industries may impact the Company's banking business;

     -    Monetary policy and other economic factors could adversely affect the
          Bank's profitability;


                                       10

<PAGE>

     -    The common stock of the Company is not an insured deposit;

     -    The stockholder's share of ownership may be diluted in the future;

     -    The Bank could be negatively affected by changes in interest rates;

     -    The determination of the offering price in the initial public offering
          was arbitrary, and shareholders may be unable to resell their shares
          at or above the offering price;

     -    The Company does not intend to pay dividends in the foreseeable
          future;

     -    The Company and Bank are subject to extensive regulatory oversight,
          which could restrain growth and profitability;

     -    The Company may not be able to raise additional capital on terms
          favorable to it;

     -    The stockholder will incur immediate and substantial dilution in the
          book value per share of any shares purchased in the offering;

     -    The liquidity of the Company's common stock will be affected by its
          limited trading market;

     -    The Company's articles of incorporation and by-laws, and the
          employment agreements of the Company's executive officers, contain
          provisions that could make a takeover more difficult;

     -    Management of the Bank may be unable to adequately measure and limit
          credit risk associated with the loan portfolio, which would affect the
          Company's profitability; and,

     -    The Company's directors and executive officers could have the ability
          to influence shareholder actions in a manner that may be adverse to
          your personal investment objectives.

These factors and the risk factors referred to in the Company's Prospectus,
dated August 25, 2006, could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements made by the
Company, and undue reliance should not be placed on any such forward-looking
statements. Any forward-looking statement speaks only as of the date on which it
is made and the Company does not undertake any obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for the Company to predict which will arise. In addition, the Company
cannot assess the impact of each factor on the business of the Company or the
Bank or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
statement.

OVERVIEW

The Company is a Michigan corporation that was incorporated on October 27, 2004
to organize and serve as the holding company for a proposed Michigan state bank,
Lotus Bank (in organization)(the "Bank"). The Bank will be a full service
commercial bank headquartered in Novi, Michigan, and will initially serve the
communities of Novi, Farmington, Farmington Hills, West Bloomfield, Wixom,
Walled Lake and Commerce Township and the neighboring communities.

On January 11, 2006, an application was filed with the Michigan Office of
Financial and Insurance Services (OFIS) to organize the Bank and with the FDIC
for federal deposit insurance. The Bank has received the regulatory approvals of
the OFIS and the FDIC; however, these regulatory approvals are subject to
certain conditions that the Bank must satisfy before receiving a license to
commence banking operations, including: (1) capitalizing the Bank with at least
$10.0 million, and (2) implementing appropriate banking policies and procedures.
The Company expects to capitalize the Bank with proceeds from the Company's
initial public offering, and receive all necessary final regulatory approvals
and begin banking operations during the first quarter of 2007.

The Company has filed a Registration Statement on Form SB-2 with the Securities
and Exchange Commission (SEC) which became effective August 14, 2006. Pursuant
to the Registration Statement, a


                                       11

<PAGE>

minimum of 1,100,000 shares of common stock, $0.01 par value per share, and a
maximum of 1,600,000 shares of common stock were registered for sale at an
offering price of $10.00 per share. The Company expects to use at least $10.101
million of the proceeds of its initial public offering to capitalize the Bank if
it sells 1,100,000 shares and at least $12.936 million to capitalize the Bank if
it sells 1,600,000 shares. As of September 30, 2006, no subscriptions of funds
had been received into escrow for the purchase of the shares.

In addition to raising the capital necessary to open the Bank, during the period
between regulatory approval and commencement of banking operations, the
Company's main activities have included:

     -    Seeking, interviewing and selecting the officers of the Company and
          the Bank;

     -    Preparing the business plan; and

     -    Applying to the Federal Reserve to become a bank holding company.

PLAN OF OPERATION

The Company's (and the Bank's) proposed main office will be located on 12 Mile
Road in Novi, Michigan, near the intersection of Novi Road. The Company expects
construction of the main office to be complete in the fourth quarter of 2007.
The building will be a free standing facility of approximately 4,500 square
feet. The Company is operating out of leased facilities located at 45650 Grand
River Avenue, Novi, Michigan 48374. The Company has executed a one year lease
agreement for approximately 2,200 square feet at this location. The lease
commenced in September, 2006.

The Company expects to use approximately $2,550,000 of the proceeds of the
Company's initial public offering to pay off a portion of the line of credit
used to purchase the land, construct the facility, and purchase furniture,
fixtures and equipment for its banking location. The Bank expects to hire up to
12 full-time equivalent employees to staff its banking office, and the Company
does not expect that it will have any employees who are not also employees of
the Bank.

The Bank will use the remainder of its capital proceeds for customer loans,
investments and other general banking purposes. We believe that the Company's
minimum initial public offering proceeds will enable the Bank to maintain a
leverage capital ratio, which is a measure of core capital to average total
assets, in excess of 8% for the first three years of operations as required by
the FDIC. Accordingly, the Company does not anticipate raising additional
capital during the 12 month period following its initial public offering.
However, the Company cannot assure you that it will not need to raise additional
capital within the next three years or over the next 12 month period.

The Bank has not fully developed the products and services that it will
initially offer its customers and anticipates engaging in additional product
research and development during the 12 month period following the offering.


                                       12

<PAGE>

FINANCIAL RESULTS

For the three month period ending September 30, 2006, the Company generated a
net loss totaling $236,827. The largest expenses were fees for legal services
and consulting fees paid to outside firms and future employees of the Bank.
Because the Company is in the organizational stage, it has no operations from
which to generate revenues.

Initially, the Bank anticipates deriving its revenues principally from interest
charged on loans, and to a lesser extent, from interest earned on investments,
fees received in connection with the origination of loans and other
miscellaneous fees and service charges. Its principal expenses are expected to
be interest expense on deposits and operating expenses. The funds for these
expenses are anticipated to be provided principally by operating revenues,
deposit growth, purchases of federal funds from other banks, the sale of
investment securities, and the partial or full repayment of loans by borrowers.

The Bank's operations will depend substantially on its net interest income,
which is the difference between the interest income earned on its loans and
other assets and the interest expense paid on deposits and other borrowings.
This difference is largely affected by changes in market interest rates, credit
policies of monetary authorities, and other local, national or international
economic factors which are beyond the Bank's abilities to predict or control.
Large moves in interest rates may decrease or eliminate the Bank's
profitability.

FUNDING OF OPERATIONS AND LIQUIDITY

During the organizational period, the Company's cash requirements have consisted
principally of funding the Company's pre-opening expenses, described above.
Through September 30, 2006, the primary sources of liquidity to meet current
obligations have been direct cash advances from the organizers totaling
approximately $190,000 and an extension of credit in the amount of $2,000,000
from the Bankers Bank of Atlanta, Georgia. The extension of credit has been
guaranteed by the organizers of the Bank. The line of credit carried a balance
of $1,357,724 as of September 30, 2006. The Company will repay the outstanding
balance of the Bankers Bank line of credit by using a portion of the proceeds of
the initial public offering. Organizer advances will be converted to stock at
the close of the offering.

The Company has filed a Registration Statement on Form SB-2 with the SEC which
became effective August 14, 2006. Pursuant to the Registration Statement, a
minimum of 1,100,000 shares of the Company's common stock, $0.01 par value per
share, and a maximum of 1,600,000 shares of common stock were registered for
sale at an offering price of $10.00 per share. At October 25, 2006, subscription
funds in the amount of $4,501,000 had been received into escrow for the purchase
of shares.

The Company believes that the proceeds to be raised during the initial public
offering will provide sufficient capital to support the growth of both the
Company and the Bank for their initial years of operations. The Company does not
anticipate that it will need to raise additional funds to meet expenditures
required to operate its business or that of the Bank over the initial 12 months
after a successful offering; all anticipated material expenditures during that
period are expected to be provided for out of proceeds of the Company's initial
public offering.


                                       13

<PAGE>

CAPITAL EXPENDITURES

The Company has made capital expenditures of $33,973 as of September 30, 2006,
for certain office equipment, development costs in the amount of $23,681, and
$854,233 to purchase vacant land at the intersection of 12 Mile and Novi Roads,
upon which it intends to build its headquarters facility.

ITEM 3 - CONTROLS AND PROCEDURES

The Company's chief executive officer and chief financial officer have evaluated
the effectiveness of the design and operation of the Company's "disclosure
controls and procedures," as such term is defined under Exchange Act Rules
13a-15(e) and 15d-15(e), and concluded that such disclosure controls and
procedures were effective to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in the
rules and the forms of the SEC, and accumulated and communicated to the
Company's management as appropriate to allow timely decisions regarding required
disclosure.

In designing and evaluating the disclosure controls and procedures, the
Company's management recognized that any controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives and in reaching a reasonable level of assurance
the Company's management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes to the Company's internal controls over financial
reporting during the quarter ended September 30, 2006 that materially affected,
or are reasonably likely to materially affect, the Company's internal controls
over financial reporting.


                                       14

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

The Company is not a party to any pending litigation.

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

On August 14, 2006, the SEC declared effective the Company's Registration
Statement on Form SB-2 relating to its initial public offering of common stock,
$0.01 par value. The Company is offering for sale a minimum of 1,100,000 and a
maximum of 1,600,000 shares of common stock at a price of $10.00 per share to
raise the money to capitalize Lotus Bank, a Michigan state bank (in
organization). The Company is registering a total of 2,062,500 shares of common
stock, of which 462,500 shares are issuable under registered common stock
warrants (warrants to purchase an aggregate of 320,000 shares of common stock at
an exercise price of $12.50 per share issued to the initial shareholders of the
Company in connection with the offering, and warrants to purchase an aggregate
of 142,500 shares of common stock at an exercise price of $10.00 per share
issued to the organizers of the Company). The Company expects the offering to
end on December 15, 2006. However, the Company may, in its sole discretion, end
the offering prior to December 15, 2006 or extend it for additional periods, but
not beyond June 30, 2007. As of October 25, 2006, subscription funds in the
amount of $4,501,000 had been received into escrow for purchase of shares
pursuant to the offering.

We anticipate that the gross proceeds of the offering will be a minimum of
$10,745,000 and a maximum of $15,745,000. The following tables summarize the
anticipated use of the proceeds by the Company and the Bank, respectively, based
on the sale of the minimum and maximum number of shares being offered. These
figures are estimates based on information currently available. Accordingly,
actual results may vary.

LOTUS BANCORP, INC.

<TABLE>
<CAPTION>
                                 MINIMUM OFFERING      MAXIMUM OFFERING
                               -------------------   -------------------
<S>                            <C>           <C>     <C>           <C>
Gross Proceeds from Offering   $11,000,000   100.0%  $16,000,000   100.0%
Sales Agency Commission        $   255,000     2.3%  $   255,000     1.6%
Repayment of pre-opening
   extensions of credit and
   direct cash advances        $   643,998     5.9%  $   643,998     4.0%
Investment in common
   stock of Lotus Bank         $10,101,002    91.8%  $12,936,002    80.9%
                               -----------   -----   -----------   -----
Remaining proceeds             $         0     0.0%  $ 2,165,000    13.5%
                               -----------   -----   -----------   -----
</TABLE>

As shown, we expect to use approximately $10.1 million to capitalize Lotus Bank
if we sell 1,100,000 shares and approximately $12.9 million if we sell 1,600,000
shares. However, we reserve the right to retain a greater or lesser portion of
the proceeds of the offering at Lotus Bancorp for general corporate purposes as
long as we contribute no less than $10 million to the Bank to fund its initial
capitalization.


                                       15

<PAGE>

LOTUS BANK

<TABLE>
<CAPTION>
                                             MINIMUM OFFERING      MAXIMUM OFFERING
                                           -------------------   -------------------
<S>                                        <C>           <C>     <C>           <C>
Gross Proceeds from Offering               $10,101,002   100.0%  $12,936,002   100.0%
Land acquisition and construction          $ 2,200,000    21.8%  $ 2,200,000    17.0%
Furniture, fixtures, equipment and other
   capital items                           $   350,000     3.4%  $   350,000     2.7%
Loans to customers, investments and
   other general corporate purposes        $ 7,551,002    74.8%  $10,386,002    80.3%
                                           -----------   -----   -----------   -----
Remaining proceeds                         $         0     0.0%  $         0     0.0%
                                           -----------   -----   -----------   -----
</TABLE>

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

This item is not applicable.

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

This item is not applicable.

ITEM 5 - OTHER INFORMATION

This item is not applicable.

ITEM 6 - EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NUMBER   DESCRIPTION OF EXHIBIT
--------------   ----------------------
<S>              <C>
10.1             Consulting Agreement, dated August 22, 2006 between Lotus
                 Bancorp, Inc. and Richard Gurne (incorporated by reference from
                 Current Report on Form 8-K filed on August 29, 2006).

10.2             Employment Agreement, dated August 22, 2006 between Lotus
                 Bancorp, Inc. and Richard Gurne (incorporated by reference from
                 Current Report on Form 8-K filed on August 29, 2006).

31.1             Rule 13a-14(a) Certification of Chief Executive Officer

31.2             Rule 13a-14(a) Certification of Chief Financial Officer

32               Certification pursuant to 18 U.S.C. Section 1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>


                                       16

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        LOTUS BANCORP, INC.


Date: November 10, 2006                 By: /s/ Satish B. Jasti
                                            ------------------------------------
                                            Satish B. Jasti
                                            Chief Executive Officer


Date: November 10, 2006                 By: /s/ Richard E. Bauer
                                            ------------------------------------
                                            Richard E. Bauer
                                            Chief Financial Officer


                                       17

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER   DESCRIPTION OF EXHIBIT
--------------   ----------------------
<S>              <C>
10.1             CONSULTING AGREEMENT, DATED AUGUST 22, 2006 BETWEEN LOTUS
                 BANCORP, INC. AND RICHARD GURNE (INCORPORATED BY REFERENCE FROM
                 CURRENT REPORT ON FORM 8-K FILED ON AUGUST 29, 2006).

10.2             EMPLOYMENT AGREEMENT, DATED AUGUST 22, 2006 BETWEEN LOTUS
                 BANCORP, INC. AND RICHARD GURNE (INCORPORATED BY REFERENCE FROM
                 CURRENT REPORT ON FORM 8-K FILED ON AUGUST 29, 2006).

31.1             RULE 13A-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

31.2             RULE 13A-14(A) CERTIFICATION OF CHIEF FINANCIAL OFFICER

32               CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
                 PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</TABLE>


                                       18