<PAGE>

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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT 0F 1934

                      FOR THE QUARTER ENDED MARCH 31, 2008

                        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>

                    44350 W. TWELVE MILE ROAD, NOVI, MI 48377
          (Address of principal executive offices, including zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, 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 (Check one):

         Large accelerated filer [ ]              Accelerated filer         [ ]

         Non-accelerated filer   [ ]              Smaller reporting company [X]
(Do not check if a smaller reporting company)

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

The number of shares outstanding of the Issuer's Common Stock, $0.01 par value,
as of May 15, 2008 was 1,389,965 shares.

<PAGE>

                                      INDEX

<TABLE>
<S>     <C>
PART I  FINANCIAL INFORMATION
        ITEM 1.  FINANCIAL STATEMENTS
        ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATION
        ITEM 3.  QUANTITATIVE AND QUALIFTATIVE DISCLOSURES ABOUT MARKET RISK
        ITEM 4.  CONTROLS AND PROCEDURES

PART II OTHER INFORMATION
        ITEM 1.  LEGAL PROCEEDINGS
        ITEM 1A. RISK FACTORS
        ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
        ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
        ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ITEM 5.  OTHER INFORMATION
        ITEM 6.  EXHIBITS
</TABLE>

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


                                        2
<PAGE>

                         PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                               LOTUS BANCORP, INC.
                                 AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                     March 31, 2008
                                                       (unaudited)    December 31, 2007
                                                     --------------   -----------------
<S>                                                  <C>              <C>
Cash and cash equivalents
   Cash and due from banks                            $   415,629        $   356,783
   Interest bearing balances due from banks                    --          3,000,000
   Federal funds sold                                   4,453,008          4,209,078
                                                      -----------        -----------
      Total cash and cash equivalents                   4,868,637          7,565,861
Loans, less allowance for loan losses of
   $114,000 and $88,000 at March 31, 2008 and
   December 31, 2007, respectively (Note 2)            11,095,128          9,021,152
Property & equipment, net of depreciation (Note 5)      3,113,734          2,507,552
Accrued interest receivable and other assets              189,076            186,961
                                                      -----------        -----------
      Total assets                                    $19,266,575        $19,281,526
                                                      ===========        ===========
</TABLE>

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                     March 31, 2008
                                                      (unaudited)     December 31, 2007
                                                     --------------   -----------------
<S>                                                  <C>              <C>
Deposits (Note 3)
   Non-interest bearing                               $ 1,660,156        $ 1,401,162
   Interest bearing                                     5,973,674          5,981,961
                                                      -----------        -----------
      Total deposits                                    7,633,830          7,383,123
Accrued interest payable and other liabilities
   (Note 6)                                                88,774             39,277
                                                      -----------        -----------
      Total liabilities                                 7,722,604          7,422,400
                                                      -----------        -----------
Stockholders' equity
   Common Stock, $0.01 par value
      Authorized -8,000,000 shares
      Issued and outstanding - 1,389,965
      shares at March 31, 2008 and
      at December 31, 2007, respectively                   13,899             13,899
Additional paid in capital                             13,950,787         13,950,787
Accumulated deficit                                    (2,420,715)        (2,105,560)
                                                      -----------        -----------
      Total stockholders' equity                       11,543,971         11,859,126
                                                      -----------        -----------
      Total liabilities and stockholders' equity      $19,266,575        $19,281,526
                                                      ===========        ===========
</TABLE>

See accompanying notes to unaudited condensed financial statements


                                       3

<PAGE>

                               LOTUS BANCORP, INC.
                                 AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                Three Months Ended
                                                     March 31
                                              ----------------------
                                                 2008         2007
                                              ----------   ---------
<S>                                           <C>          <C>
Interest income:
   Loans receivable, including fees           $  165,980   $      --
   Interest bearing balances due from banks       23,034          --
   Federal funds sold                             31,525     148,929
                                              ----------   ---------
      Total interest income                      220,539     148,929
                                              ----------   ---------
Interest Expense:
   Deposits                                       53,216       2,700
   Other                                              --      21,675
                                              ----------   ---------
      Total interest expense                      53,216      24,375
                                              ----------   ---------
Net interest income                              167,323     124,554
                                              ----------   ---------
      Provision for loan losses                   26,000          --
                                              ----------   ---------
      Net interest income after provision        141,323     124,554
                                              ----------   ---------
Non-interest income:
   Service charges and fees                        4,866           8
   Gain on sale of loans                           4,575          --
                                              ----------   ---------
      Total non-interest income                    9,441           8
                                              ----------   ---------
Non-interest expense:
   Compensation and employee benefits            255,228     198,388
   Occupancy and equipment                        45,354      27,454
   Professional fees                              45,000      31,248
   Data processing fees                           24,921       5,556
   Advertising and promotion                      12,644      14,563
   Other                                          82,772      31,610
                                              ----------   ---------
      Total non-interest expense                 465,919     308,819
                                              ----------   ---------
Loss before income tax benefit                  (315,155)   (184,257)
      Income tax benefit                              --          --
                                              ----------   ---------
Net Loss                                      $ (315,155)  $(184,257)
                                              ==========   =========
Basic and Diluted Loss Per Share              $     (.23)  $    (.39)
                                              ==========   =========
Weighted Average Shares Outstanding            1,389,965     476,306
</TABLE>

See accompanying notes to unaudited condensed financial statements


                                       4
<PAGE>

                               LOTUS BANCORP, INC.
                                 AND SUBSIDIARY
       CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                   (unaudited)

<TABLE>
<CAPTION>
                             Common     Paid In     Accumulated
                             Stock      Capital       Deficit        Total
                            -------   -----------   -----------   -----------
<S>                         <C>       <C>           <C>           <C>
Balance December 31, 2007   $13,899   $13,950,787   $(2,105,560)  $11,859,126
Net loss                                               (315,155)     (315,155)
                            -------   -----------   -----------   -----------
Balance March 31, 2008      $13,899   $13,950,787   $(2,420,715)  $11,543,971
                            =======   ===========   ===========   ===========
</TABLE>

See accompanying notes to unaudited condensed financial statements


                                        5

<PAGE>

                               LOTUS BANCORP, INC.
                                 AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                            -----------------------------------
                                                                            March 31, 2008     March 31, 2007
                                                                            --------------   ------------------
<S>                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Adjustments to reconcile actual loss
      to net cash from operating activities:
      Net loss                                                               $  (315,155)       $  (184,257)
      Depreciation                                                                19,629             15,193
      Provision for loan losses                                                   26,000                 --
      (Increase) decrease in accrued interest receivable and other assets         (2,115)            63,386
      Increase in accrued interest payable and other liabilities                  49,497              2,307
                                                                             -----------        -----------
         Net cash used in operating activities                                  (222,144)          (103,371)
                                                                             -----------        -----------
CASH FLOWS FROM INVESTING ACTIVITIES
      Net increase in loans                                                   (2,099,976)                --
      Purchase of equipment                                                     (625,811)          (135,104)
                                                                             -----------        -----------
            Net cash used in investing activities                             (2,725,787)          (135,104)
                                                                             -----------        -----------
CASH FLOWS FROM FINANCING ACTIVITIES
      Decrease in deferred offering costs                                             --           (277,118)
      Increase in non-interest bearing deposits                                  258,994            673,945
      Increase (decrease) in interest bearing deposits                            (8,287)         1,803,452
      Payments on line of credit                                                      --         (1,856,775)
      Issuance of common stock and warrants                                           --         12,551,800
      Decrease in advances from organizers                                            --            (80,000)
                                                                             -----------        -----------
      Net cash provided by financing activities                                  250,707         12,815,304
                                                                             -----------        -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (2,697,224)        12,576,829
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               7,565,861              6,422
                                                                             -----------        -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   $ 4,868,637        $12,583,251
                                                                             ===========        ===========
Supplemental Disclosure of Non-Cash Financing Activity:
      Conversion of advances from organizers into shares
         of common stock                                                     $        --        $   109,990
</TABLE>

See accompanying notes to unaudited condensed financial statements


                                        6
<PAGE>

                               LOTUS BANCORP, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF FINANCIAL STATEMENT PRESENTATION - The accompanying unaudited
consolidated interim financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America and
with the instructions to Form 10-Q. Accordingly, certain information and
disclosures required by the accounting principles generally accepted in the
United States of America for complete financial statements are not included
herein. The interim financial statements of Lotus Bancorp, Inc. should be read
in conjunction with the financial statements of Lotus Bancorp, Inc. and the
notes thereto included in the Company's annual report on Form 10-KSB for the
year ended December 31, 2007.

All adjustments, consisting of normal recurring adjustments, which in the
opinion of management are necessary for a fair presentation of the results of
operations and cash flows, have been made. The results of operations for the
three months ended March 31, 2008 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2008.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include accounts of Lotus Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, Lotus Bank ("the Bank"). All significant inter-company accounts and
transactions have been eliminated.

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 under the Bank Holding Company Act of 1956, as amended. The Company
subsequently changed its name to Lotus Bancorp, Inc. The Company received the
required regulatory approvals to purchase the common stock of Lotus Bank (the
"Bank") on February 2, 2007. The Company withdrew common stock subscription
funds totaling $12,582,050 from its escrow account on February 27, 2007 and
capitalized the Bank with $10,500,000 on that same date. The Bank commenced
operations on February 28, 2007. The Company completed the public offering of
its common stock on June 30, 2007. The Company raised a total of $13,899,650 in
capital. As of May 15, 2008, there were 1,389,965 shares of the Company's common
stock issued and outstanding.

USE OF ESTIMATES - 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. Material estimates that are
particularly susceptible to significant change in the near term include the
determination of loan losses and the valuation of deferred tax 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. The organization and
pre-opening costs totaled approximately $790,000 through the commencement of
operations, and were charged to expense as incurred.

DEFERRED OFFERING COSTS - Direct costs relating to the offering of common stock
totaled approximately $487,000 through March 31, 2008, and were capitalized and
netted against the offering proceeds.

CASH AND CASH EQUIVALENTS - Cash and cash equivalents are comprised of highly
liquid investments with purchase maturities of three months or less. Cash
equivalents are carried at cost, which approximates fair value. At times bank
balances may be in excess of insured limits. Management has deemed this a normal
business risk.

LOANS - The Company grants mortgage, commercial and consumer loans to customers.
A large portion of the loan portfolio is represented by commercial and
commercial real estate loans in Oakland County, Michigan and elsewhere. The
ability of the Company's debtors to honor their contracts is dependent on the
real estate and general economic conditions in those areas.

Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off are reported at their outstanding unpaid
principal balances adjusted for charge-offs, the allowance for loan losses, and
any deferred fees or costs on originated loans. Interest income is accrued on
the unpaid principal balance. Loan origination, net of certain direct
origination costs, are deferred and recognized as an adjustment of the related
loan yield using either the straight line or interest method.


                                        7

<PAGE>

The accrual of interest on loans is discontinued at the time the loan is 90 days
delinquent unless the credit is well secured and in the process of collection.
In all cases, loans are placed on nonaccrual or charged-off at an earlier date
if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed in nonaccrual
or charged-off is reversed against interest income. The interest on these loans
is accounted for on the cash basis or cost-recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current and future payments
are reasonably assured.

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan losses
charged to earnings. Actual loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and
is based upon management's periodic review of the collectibility of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower's ability to repay, estimated
value of any underlying collateral, and prevailing economic conditions. The
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and allocated components. The
specific component relates to loans that are classified as either doubtful,
substandard or special mention. For such loans that are also classified as
impaired, an allowance is established when the discounted cash flows (or
collateral value or observable market value) of the impaired loan is lower than
the carrying value of that loan. The general component covers nonclassified
loans and is based on historical loss experience adjusted for qualitative
factors. An unallocated component is maintained to cover uncertainties that
could affect management's estimates of probable losses. The unallocated
component of the allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating specific and
general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it
is probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the borrower and the loan, including length of the delay, the
reasons for the delay, the borrower's prior payment record, and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan-by-loan basis for commercial loans by either the present
value of expected future cash flows discounted at the loan's effective interest
rate, or the loan's obtainable interest rate, or by the fair value of the
collateral if the loan is collateral dependent.

Large groups of homogenous loans are collectively evaluated for impairment.
Accordingly, the Company does not separately identify individual consumer and
residential mortgage loans for impairment disclosures.

During the first three years of operation, the Bank will maintain an allowance
for loan losses at or above a minimum level of 1.00% established by the Federal
Deposit Insurance Corporation and the State of Michigan Office of Financial and
Insurance Regulation pursuant to their orders granting the Bank authority to
commence activity as a de novo financial institution.

OFF-BALANCE-SHEET INSTRUMENTS - In the ordinary course of business, the Company
has entered into commitments under commercial lines of credit and standby
letters of credit. Such financial instruments are recorded when they are funded.

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.

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.


                                        8

<PAGE>

EARNINGS PER SHARE - Basic earnings per share have been computed by dividing the
net loss by the weighted-average number of common shares outstanding for the
period.

RECLASSIFICATION - Certain amounts appearing in the prior year's financial
statements have been reclassified to conform to the current year's financial
statements.

RECENT ACCOUNTING PRONOUNCEMENTS - In September 2006, the FASB issued Statement
of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FASB
157"). FASB 157 enhances existing guidance for measuring assets and liabilities
using fair value. Prior to the issuance of FASB 157, guidance for applying fair
value was incorporated in several accounting pronouncements. FASB 157 provides a
single definition of fair value, together with a framework for measuring it, and
requires additional disclosure about the use of fair value to measure assets and
liabilities. FASB 157 also emphasizes that fair value is a market-based
measurement, not an entity-specific measurement, and sets out a fair value
hierarchy with the highest priority being quoted prices in active markets. Under
FASB 157, fair value measurements are disclosed by level within the hierarchy.
While FASB 157 does not add any new fair value measurements, it does change
current practice. Changes to practice include: (1) a requirement for an entity
to include its own credit standing in the measurement of its liabilities; (2) a
modification of the transaction price presumption; (3) a prohibition on the use
of block discounts when valuing large blocks of securities for broker-dealers
and investment companies; and (4) a requirement to adjust the value of
restricted stock for the effect of the restriction even if the restriction
lapses within one year. FASB 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company
has determined the impact of adopting FASB 157 is immaterial to the financial
statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans," (:FASB 158"), which amends FASB 87 and FASB 106 to
require recognition of the overfunded or underfunded status of pension and other
postretirement benefit plans on the balance sheet. Under FASB 158, gains and
losses, prior to service costs and credits, and any remaining transition amounts
under FASB 87 and FASB 106 that have not yet been recognized through net
periodic benefit cost will be recognized in accumulated other comprehensive
income, net of tax effects, until they are amortized as a component of net
periodic cost. The measurement date (the date at which the benefit obligation
and plan assets are measured) is required to be the company's fiscal year end.
FASB 158 is effective for publicly-held companies for fiscal years ending after
December 15, 2006, except for the measurement date provisions, which are
effective for fiscal years ending after December 15, 2008. This FASB is not
applicable to the Company because they do not have defined benefit pension or
other postretirement plans.

In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities,"
("FASB 159"). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. An entity shall
report unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. The statement is
effective as of the beginning of an entity's first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or after November 15, 2007, provided the entity also elects
to apply the provisions of FASB 157. The Company has determined the impact of
adopting FASB 159 is immaterial to the financial statements.


                                        9

<PAGE>

NOTE 2 - LOANS

A summary of the balances of loans as of March 31, 2008 is as follows. The
Company had no loans on its books as of March 31, 2007:

<TABLE>
<CAPTION>
                                            March 31, 2008
                                            --------------
<S>                                         <C>
Mortgage loans on real estate:
   Residential 1 to 4 family                 $ 1,232,246
   Commercial                                  4,717,326
   Second mortgage                               190,028
   Equity lines of credit                        670,418
                                             -----------
      Total mortgage loans on real estate      6,810,018
Commercial loans                               3,693,155
Consumer installment loans                       697,328
                                             -----------
      Total loans                             11,200,501
                                             -----------
Less:
   Allowance for loan losses                     114,000
   Net deferred loan fees                         (8,627)
                                             -----------
      Net loans                              $11,095,128
                                             ===========
</TABLE>

The following table shows the maturities and sensitivity to changes in interest
rates of the loan portfolio as of March 31, 2008:

<TABLE>
<CAPTION>
                                         Maturing or repricing in
                                   ------------------------------------
                                    less than     1 to 5        after
                                     1 year       years        5 years       Total
                                   ----------   ----------   ----------   -----------
<S>                                <C>          <C>          <C>          <C>
Commercial and financial           $4,239,694   $2,128,739   $2,042,048   $ 8,410,481
Real estate - mortgage                713,983      961,709      417,000     2,092,692
Installment loans to individuals      271,655      421,177        4,496       697,328
                                   ----------   ----------   ----------   -----------
Total loans                        $5,225,332   $3,511,625   $2,463,544   $11,200,501
                                   ==========   ==========   ==========   ===========
</TABLE>

At March 31, 2008, loans maturing in greater than 1 year are comprised of the
following:

<TABLE>
<S>             <C>
Fixed rate      $5,163,754
Variable rate   $4,259,289
</TABLE>

The Company has no loan concentrations greater than 10% of total loans.

An analysis of the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
                                             March 31, 2008
                                             --------------
<S>                                          <C>
Balance at December 31, 2007                    $ 88,000
Provision for loan losses                         26,000
Loans charged-off                                     --
Recoveries on loans previously charged-off            --
                                                --------
Balance at March 31, 2008                       $114,000
                                                ========
</TABLE>

At March 31, 2008, there were no loans considered to be impaired or over 90 days
delinquent and still accruing.

In the ordinary course of business, the Bank has granted loans to executive
officers and directors and their affiliates amounting to $3,200,296 at March 31,
2008 and $0 at March 31, 2007.


                                       10

<PAGE>

NOTE 3 - DEPOSITS

The following is a distribution of deposits as of March 31, 2008 and December
31, 2007:

<TABLE>
<CAPTION>
                                                 March 31,   December 31,
                                                   2008          2007
                                                ----------   ------------
<S>                                             <C>          <C>
Non-interest bearing deposits                   $1,660,156    $1,401,162
NOW accounts                                       266,537       293,119
Savings and money market accounts                4,182,257     4,396,649
Certificates of deposit less than $100,000         735,014       504,079
Certificates of deposit greater than $100,000      789,866       788,114
                                                ----------    ----------
   Total                                        $7,633,830    $7,383,123
                                                ==========    ==========
</TABLE>

At March 31, 2008, the scheduled maturities of time deposits are as follows:

<TABLE>
<CAPTION>
           Less than   Greater than
            $100,000     $100,000        Total
           ---------   ------------   ----------
<S>        <C>         <C>            <C>
2008        $735,014     $539,866     $1,274,880
2009              --      250,000        250,000
            --------     --------     ----------
   Total    $735,014     $789,866     $1,524,880
            ========     ========     ==========
</TABLE>

NOTE 4 - OFF BALANCE SHEET ARRANGEMENTS

CREDIT RELATED FINANCIAL INSTRUMENTS - The subsidiary bank is a party to
credit-related financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit, standby letters of credit, and
undisbursed lines of credit. Such commitments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated balance sheet.

The Bank's exposure to credit loss is represented by the contractual amount of
these commitments. The Bank follows the same credit policies in making
commitments as it does for on-balance sheet instruments.

The total contractual amounts of commitments to extend credit, standby letters
of credit, and undisbursed lines of credit as of March 31, 2008 and December 31,
2007 are shown below:

<TABLE>
<CAPTION>
                               March 31, 2008   December 31, 2007
                               --------------   -----------------
<S>                            <C>              <C>
Commitments to extend credit     $  500,000         $2,373,000
Standby letters of credit           727,295            212,214
Undisbursed lines of credit       2,480,159          2,608,965
                                 ----------         ----------
Total                            $3,707,454         $5,194,179
                                 ----------         ----------
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require repayment of a fee. The commitments for equity lines of credit may
expire without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral
obtained, if it is deemed necessary by the Company, is based on management's
credit evaluation of the customer.

Undisbursed lines of credit under commercial lines of credit, revolving credit
lines, and overdraft protection agreements are commitments for possible future
extensions of credit to existing customers. These lines of credit can be
collateralized and may not be drawn upon to the total extent to which the
Company is committed.

Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those letters of
credit are used primarily to support public and private borrowing arrangements.
Essentially all letters of credit have expiration dates within one year. The
Company generally holds collateral supporting those commitments if deemed
necessary.

COLLATERAL REQUIREMENTS - To reduce credit risk related to the use of credit
related financial instruments, the Company might deem it necessary to obtain
collateral. The amount and nature of the collateral obtained are based on the
Company's evaluation


                                       11
<PAGE>

of the customer. Collateral held varies but may include cash, securities,
accounts receivable, inventory, property, plant and equipment, and real estate.

If the counterparty does not have the right and the ability to redeem the
collateral or the Company is permitted to sell or repledge the collateral on
short notice, the Company records the collateral on its balance sheet at fair
value with a corresponding obligation to return it.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                              March 31,   December 31,
                                                2008          2007
                                             ----------   ------------
<S>                                          <C>           <C>
Construction in process                      $1,779,340    $1,276,741
Land                                            854,233       854,233
Office equipment                                602,304       479,092
                                             ----------    ----------
                                              3,235,877     2,610,066
Less: Accumulated depreciation                  122,143       102,514
                                             ----------    ----------
Property and equipment net of depreciation   $3,113,734    $2,507,552
                                             ----------    ----------
</TABLE>

On August 19, 2007, the Company broke ground and commenced construction on its
headquarters building located at the intersection of 12 Mile and Dixon Roads in
Novi. The approximately 5,200 square foot building will feature full service
banking accommodations and will also house the Company's executive management.
The total cost of construction is estimated to total $2.2 million and is
scheduled for occupancy on April 14, 2008..

NOTE 6 - OTHER LIABILITIES

The Company entered into a termination of employment and release of claims
agreement with a former employee on March 21, 2008. As provided for in this
agreement, the Company recorded a liability for a severance payment to this
individual in the amount of $34,327.

NOTE 7 - INCOME TAXES

The Company has net operating loss carryforwards of approximately $2,421,000 as
of March 31, 2008 that are available to reduce future taxable income through the
year ending December 31, 2027. The deferred tax asset created by that loss
carryforward has been offset with a valuation allowance since the Company does
not have a history of earnings.

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

<TABLE>
<S>                                  <C>
Deferred Tax Asset:
   Net Operating Loss Carryforward   $ 823,140
   Less: Valuation Allowance          (815,908)
                                     ---------
      Total net deferred tax asset   $   7,232
                                     ---------
</TABLE>

A reconciliation of the provision for income taxes for each period ended March
31 follows:

<TABLE>
<CAPTION>
                                                                2008       2007
                                                             ---------   --------
<S>                                                          <C>         <C>
Income tax benefit at federal statutory rate of 34 percent   $ 107,153   $ 62,647
Change in valuation allowance                                 (107,000)   (63,000)
Other - net                                                       (153)       353
                                                             ---------   --------
Net income tax expense                                       $      --   $     --
                                                             ---------   --------
</TABLE>


                                       12

<PAGE>

NOTE 8 - LEASES AND COMMITMENTS

On August 10, 2006, the Company entered into a lease agreement for temporary
office space, which called for lease payments of $3,753 per month through
September 2, 2007, and $3,866 per month for each month thereafter. In January,
2007, the lease was amended to reflect the Company renting additional office
space, and the monthly rent was increased to $4,188 per month through October,
2007, and $4,314 per month for each month thereafter. The Company is renting
this space through April 30, 2008. Rent expense for the three month period ended
March 31, 2008 totaled $12,942. The following is a schedule of future minimum
rental payments under the operating leases on a calendar basis:

<TABLE>
<CAPTION>
Year Ending December 31    Amount
-----------------------   -------
<S>                       <C>
2008                      $17,256
2009                           --
2010                           --
2011                           --
2012                           --
2013 and after                 --
                          -------
Total                     $17,256
                          -------
</TABLE>

NOTE 9 - STOCK OPTIONS AND WARRANTS

The Company plans to issue 59,074 stock options to the executive officers of the
Bank upon approval from the Board of Directors and subject to the approval of
the 2008 Stock Incentive Plan by the Company's shareholders. These proposed
options would be issued with a strike price of $10.00. In conjunction with its
completed stock offering, the Company has issued a total of 277,993 warrants to
initial shareholders in the ratio of one warrant for every five shares of common
stock purchased in the offering. These warrants have a strike price of $12.50.
Additionally, the Company has issued 142,500 warrants to its organizers. These
warrants have a strike price of $10.00. A total of 420,493 warrants to purchase
the Company's common stock were outstanding as of March 31, 2008 and 2007,
respectively.

Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised) requires
the measurement and recognition of compensation expense for all stock-based
payment awards made to employees and directors. SFAS No. 123 (R) requires
companies to estimate the fair value of the stock-based payment awards on the
date of grant using an option-pricing model. The value of the portion of the
award that is ultimately expected to vest is recognized as compensation expense
over the requisite service periods in the Company's statement of operations.

NOTE 10 - SUBSEQUENT EVENTS

On April 14, 2008, the Company moved all of its operations to its newly
constructed building located at 44350 West Twelve Mile Road in Novi, Michigan.

NOTE 11 - MINIMUM REGULATORY CAPITAL REQUIREMENTS

Banks and bank holding companies are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and,
additionally for the Bank, prompt corrective action regulations, involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items calculated under regulatory accounting policies. Capital amounts and
classifications are also subject to qualitative judgments by regulators. Failure
to meet capital requirements can initiate regulatory action. The prompt
corrective action regulations provide five classifications; well capitalized,
adequately capitalized, undercapitalized and critical undercapitalized, although
these terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The Bank and the
Company were well capitalized as of March 31, 2008.


                                       13

<PAGE>

The Bank's and Company's actual capital amounts and ratios as of March 31, 2008
are presented in the following table (dollars in thousands):

<TABLE>
<CAPTION>
                                                 For Capital
                                                  Adequacy        To Be Well
                                  Actual          Purposes        Capitalized
                             ---------------   --------------   --------------
                              Amount   Ratio   Amount   Ratio   Amount   Ratio
                             -------   -----   ------   -----   ------   -----
<S>                          <C>       <C>     <C>      <C>     <C>      <C>
As of March 31, 2008:
Total Risk Based Capital
   to Risk Weighted Assets
      Lotus Bank             $ 9,469   56.32%  $1,345   8.00%   $1,681   10.00%
      Lotus Bancorp, Inc.     11,658   69.29%   1,346   8.00%    1,682   10.00%
Tier One Capital to Risk
   Weighted Assets
      Lotus Bank             $ 9,355   55.64%  $  673   4.00%   $1,009    6.00%
      Lotus Bancorp, Inc.     11,544   68.61%     673   4.00%    1,009    6.00%
Tier One Capital to Assets
      Lotus Bank             $ 9,355   48.57%  $  770   4.00%   $  963    5.00%
      Lotus Bancorp, Inc.     11,544   59.90%     771   4.00%      964    5.00%
</TABLE>


                                       14

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.

The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of its 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 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;

     -    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, and the Company's Annual Report on Form 10-KSB filed with the
SEC on March 30, 2007, and which are incorporated into this report by reference,
could


                                       15

<PAGE>

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

Lotus Bancorp, Inc. (formerly known as City Central Bancorp, Inc.)(the
"Company") is a Michigan corporation that was incorporated on October 27, 2004
to serve as a bank holding company for Lotus Bank (the "Bank"). The Company
received approval from the Federal Reserve Bank of Chicago to become a bank
holding company upon acquisition of 100% of the common stock of Lotus Bank. The
Company has no material business operations other than owning and managing the
Bank, and has no plans for other business operations in the foreseeable future.

The Company commenced its initial public offering on September 28, 2006 to raise
the capital required to capitalize Lotus Bank. The initial public offering ended
on June 30, 2007. On February 26, 2007, the Company broke escrow in the amount
of $12,769,358, consisting of $12,582,050 in stock subscriptions received plus
$187,308 in accrued interest receivable. On February 27, 2007, the Company
capitalized the Bank by downstreaming $10,500,000 into its capital accounts.
Early in the third quarter of 2007, the Company closed on the remaining portion
of its equity offering of $1,317,600, bringing its total equity to $13,899,650.
As of May 15, 2008, there were 1,389,965 shares of the Company's common stock
issued and outstanding.

PLAN OF OPERATION

The Company's (and the Bank's) main office will be located at the intersection
of 12 Mile and Dixon Roads in Novi, Michigan. The Company has begun construction
of the main office and expects it to be complete in April, 2008. The building
will be a free standing facility of approximately 5,200 square feet. As of March
31, 2008, the Company operated out of leased facilities located at 45650 Grand
River Avenue, Novi, Michigan 48374. The Company has executed a one year lease
agreement for approximately 2,500 square feet at this location. The term of the
lease commenced in September, 2006, and expired on September 2, 2007. At this
time, the Company is leasing the facility on a month to month basis until its
permanent facility is completed. On April 14, 2008, the Company and the Bank
vacated the leased facilities and moved to the newly constructed building
located at 44350 W. Twelve Mile Road in Novi, Michigan.

The Bank has hired 10 full-time equivalent employees to staff its banking
office, and the Company does not currently have any employees who are not also
employees of the Bank.

The Bank will use its capital 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.

FINANCIAL RESULTS

For the three months ended March 31, 2008, the Company generated a net loss of
$315,155. The largest expenses were compensation and employee benefits which
amounted to $255,228, occupancy and equipment costs totaling $45,354,
professional fees totaling $45,000, data processing costs totaling $24,921and
advertising and promotion costs totaling $12,644. Interest and fee income for
the quarter of $220,539 was largely due to interest and fees on loans
outstanding of $165,980, federal funds sold of $31,525, and interest on balances
due from other banks totaling $23,034, which was offset by interest expense on
deposits of $53,216.

The Company's balance sheet has remained fairly stable during the quarter, but
has grown rapidly since the opening of the Bank. While balance sheet growth
remained flat, its asset mix richened with the conversion of cash equivalent
assets into loans. Net loans totaled $11,095,128 at quarter end, an increase of
approximately $2.0 million over December 31, 2007, and


                                       16

<PAGE>

were funded largely by deposits gathered amounting to $7,633,830. The Company
expects this growth to continue for the foreseeable future, resulting in the
continued enrichment in its asset mix as federal funds sold balances continue to
be converted into higher-yielding loans.

An approximately 5% increase in deposits at quarter-end, as compared to year-end
2007, were comprised primarily of non-interest bearing demand balances. The
Company's equity declined during the same period due exclusively to its
operating losses discussed above.

The Bank derives its revenues primarily 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 interest expense on deposits and operating expenses.
The funds for these activities are provided principally by operating revenues,
deposit growth, purchases of federal funds from other financial institutions,
sales of loans and investment securities, and the partial or full repayment of
loans by borrowers.

The Bank's operations depend substantially on its net interest income, which is
the difference between interest earned on loans and other investments, and
interest expense paid on deposits and other borrowings. This difference can be
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 ability to predict or control. Large moves
in interest rates may decrease or eliminate the Bank's profitability.

FUNDING OF OPERATIONS AND LIQUIDITY

On February 26, 2007, the Company had its first closing on the common stock
subscriptions received, and issued 1,258,205 shares of stock for a total of
$12,582,050, which included the conversion of $109,990 of organizer advances
into common stock. The Company continued to offer its common stock for sale
pursuant to the terms of the registration statement until June 30, 2007. Since
the initial closing on February 26, 2007, the Company has closed on an
additional $1,314,600 in common stock subscriptions, and issued an additional
131,760 shares. As of May 15, 2008, a total of 1,389,965 shares of the Company's
common stock were issued and outstanding.

The Company believes that the proceeds 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 during the Company's initial 12 months
of operations; all anticipated material expenditures during that period are
expected to be provided for out of the proceeds of the Company's initial public
offering.

CAPITAL EXPENDITURES

The Company has made capital expenditures of $625,811 for the three month period
ended March 31, 2008, for certain office equipment and construction costs
associated with the new headquarters. The Company broke ground on its
headquarters construction project in the August, 2007. The Company extended
approximately $2,200,000 and the building was completed on March 28, 2008.

LIQUIDITY AND INTEREST RATE SENSITIVITY

Liquidity represents the ability to provide a steady source of funds for loan
commitments and other investment activities, as well as the ability to maintain
sufficient funds to cover deposit withdrawals and the payment of debt and
operating obligations. The Bank can obtain these funds by converting assets into
cash, obtaining new deposits, or by borrowing funds. Its ability to attract and
maintain these deposits will serve as its primary source of funding.

On February 26, 2007, the Company met the conditions to capitalize and open
Lotus Bank and issued 1,258,205 shares of stock for the subscriptions received
in escrow and in lieu of cash repayment of the organizer advances of $109,990.
The Company repaid the outstanding balance on its organizational line of credit
by using a portion of the proceeds of its initial public offering, and then
invested $10,500,000 of the proceeds in the capital of the Bank. Since that
date, the Company has issued an additional 131,760 shares. As of March 31, 2008,
the Company's primary sources of liquidity are cash and due from banks and
federal funds sold which amounted to $4,868,637. As the Bank continues to grow,
it is expected that a substantial portion of these funds will be invested in
loans and be supplanted by increases in deposits.


                                       17

<PAGE>

Net interest income, the Bank's primary source of earnings, will fluctuate with
significant interest rate movements. The Company's profitability depends
substantially on the Bank's net interest income. A large change in interest
rates may significantly impact the Bank's net interest income and decrease or
eliminate the Company's profitability. Most of the factors that influence
changes in market interest rates, including economic conditions, are beyond the
Company's ability to control. While the Bank will take measures to minimize the
impact of these fluctuations, the Bank intends to structure its balance sheet
such that repricing opportunities exist both for assets and liabilities in
roughly equal amounts at approximately the same time intervals. Imbalances in
these repricing opportunities at any point in time constitute interest rate
sensitivity.

Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The Bank will
generally attempt to maintain a balance between rate sensitive assets and
liabilities and the changes in interest income and expense in order to limit its
overall interest rate risk. The Bank regularly evaluates the balance sheet's
asset mix in terms of several variables: yield, credit quality, funding sources
and liquidity.

To effectively manage the balance sheet's liability mix, the Bank plans to
expand its deposit base and converting assets to cash where necessary. As the
Bank continues to grow, it will continuously structure its rate sensitivity
position in an attempt to hedge against rapidly rising or falling interest
rates. The Bank's asset and liability committee will meet regularly to develop
strategies for the upcoming period.

Other than increases in loans and deposits, management knows of no trends,
demands, commitments, events or uncertainties that would result in or are
reasonably likely to result in the Company's liquidity increasing or decreasing
in any material way in the foreseeable future.

OFF BALANCE SHEET ARRANGEMENTS

At March 31, 2008, the Company had unfunded loan commitments outstanding of $3.7
million. Because these commitments generally have fixed expiration dates and
many will expire without being drawn upon, the total commitments level does not
necessarily represent future cash requirements. The Company has the ability to
fund these commitments if required.

CAPITAL ADEQUACY

There are two primary measures of capital adequacy for banks and bank holding
companies: (i) risk-based capital guidelines and (ii) the leverage ratio. The
risk-based capital guidelines measure the amount of a bank's required capital in
relation to the degree of risk perceived in its assets and its off-balance sheet
items. Under the risk-based capital guidelines, capital is divided into two
"tiers." Tier 1 capital consists of common stockholder's equity, non-cumulative
perpetual preferred stock, and minority interests. Goodwill, if any, is deducted
from the total. Tier 2 capital consists of the allowance for loan losses, hybrid
capital instruments, term subordinated debt and immediate term preferred stock.
Banks are required to maintain a minimum risk-based capital ratio of 8%, with at
least 4% consisting of Tier 1 capital.

The second measure of capital adequacy relates to the leverage ratio. The FDIC
has established a 3% minimum leverage ratio requirement. The leverage ratio in
computed by dividing Tier 1 capital by total assets. In the case of the Bank and
other banks that are experiencing growth or have not received the highest
regulatory rating from their primary regulator, the minimum leverage ratio
should be 3% plus an additional cushion of at least 1% to 2%, depending upon
risk profiles and other factors.

The Company believes that net proceeds of its initial public offering will
enable the Bank to satisfy its capital requirements for at least the 36 month
period following the opening of the Bank.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     This item does not apply to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

The management of Lotus Bancorp, Inc. is responsible for establishing and
maintaining adequate internal control over financial reporting. The company's
internal control over financial reporting is a process designed under the
supervision of the company's chief executive officer and chief financial officer
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the company's financial statements for external reporting
purposes in accordance with U.S. generally accepted accounting principles.


                                       18

<PAGE>

Lotus Bancorp, Inc.'s management assessed the effectiveness of the company's
internal control over financial reporting as of March 31, 2008 based on criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in "Internal Control - Integrated Framework." Based on that
assessment, management determined that, as of March 31, 2008, the company's
internal control over financial reporting is effective, based on those criteria.

There was no change in the company's internal control over financial reporting
that occurred during the company's fiscal quarter ended March 31, 2008, that
materially affected, or is reasonably likely to affect, the company's internal
control over financial reporting.


                                       19

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There are no known pending legal proceedings to which the Company or the Bank is
a party or to which any of its properties are subject, nor are there any
material proceedings known to the Company in which any director, officer or
affiliate, or any principal shareholder is a party or has an interest adverse to
the Company.

ITEM 1A. RISK FACTORS.

     This item does not apply to smaller reporting companies.

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

     This item is not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     This item is not applicable.

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

     No matters were submitted to a vote of security holders for the three
     months ended March 31, 2008.

ITEM 5. OTHER INFORMATION.

     This item is not applicable.

ITEM 6. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                           DESCRIPTION OF EXHIBIT
-------   ---------------------------------------------------------------------
<S>       <C>
31.1      Rule 13 a - 14 (a) Certification of Chief Executive Officer
31.2      Rule 13 a - 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>


                                       20

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       LOTUS BANCORP, INC.


Date: May 15, 2008                     By: /s/ Satish B. Jasti
                                           -------------------------------------
                                           Satish B. Jasti
                                           President and Chief Executive Officer


Date: May 15, 2008                     By: /s/ Richard E. Bauer
                                           -------------------------------------
                                           Richard E. Bauer
                                           Chief Financial Officer


                                       21

<PAGE>

                                              EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                           DESCRIPTION OF EXHIBIT
-------   ----------------------------------------------------------------------
<S>       <C>
31.1      CERTIFICATION PURSUANT TO RULES 13A - 15(E) AND 15D - 15(E) OF THE
          SECURITIES EXCHANGE ACT
31.2      CERTIFICATION PURSUANT TO RULES 13A - 15(E) AND 15D - 15(E) OF THE
          SECURITIES EXCHANGE ACT
32        CERTIFICATION PURSUANT TO RULES 13A - 14(B) OR RULE 15D - 14(B) OF THE
          SECURITIES EXCHANGE ACT AND 18 U.S.C. SECTION 1350
</TABLE>


                                       22