michaellambert10q022809.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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|
|
For
the quarterly period ended February 28,
2009
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[
]
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
|
For the
transition period from ____________ to ______________
Commission
file number: 333-146517
MICHAEL LAMBERT,
INC.
(Name of
registrant in its charter)
|
Nevada
|
2300
|
20-3107499
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|
(State
or jurisdiction
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(Primary
Standard
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(IRS
Employer
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of
incorporation or
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Industrial
|
Identification
|
|
organization)
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Classification
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No.)
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|
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Code
Number)
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121
Interpark Blvd., Suite 1204
San
Antonio, Texas 78216
(Address
of principal executive offices)
(210)
490-8383
(Registrant's
telephone number)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer ¨
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Accelerated
filer ¨
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|
Non-accelerated
filer ¨
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Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes ¨
No x
The
number of shares outstanding of each of the issuer’s classes of equity as of
April 9, 2009 is 4,404,500 shares of common stock, par value $0.001, and no
shares of preferred stock, par value $0.001.
PART
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
MICHAEL
LAMBERT INC.
BALANCE
SHEETS
(Unaudited)
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|
|
February
28, 2009
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|
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November
30, 2008
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|
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CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$ |
356 |
|
|
$ |
186 |
|
|
Inventory
|
|
|
4,118 |
|
|
|
4,401 |
|
|
TOTAL
ASSETS
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|
$ |
4,474 |
|
|
$ |
4,587 |
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|
|
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|
|
|
|
|
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LIABILITIES
& STOCKHOLDERS’ DEFICIT
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|
|
|
|
|
|
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|
|
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CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,777 |
|
|
$ |
2,229 |
|
|
Accounts
payable – related party
|
|
|
12,400 |
|
|
|
12,400 |
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Accrued
liabilities
|
|
|
2,814 |
|
|
|
2,489 |
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Bank
credit line payable
|
|
|
16,667 |
|
|
|
17,138 |
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|
Short-term
debt - related party
|
|
|
64,476 |
|
|
|
10,151 |
|
|
Total
current liabilities
|
|
|
119,134 |
|
|
|
44,407 |
|
|
Long-
term debt
|
|
|
- |
|
|
|
49,325 |
|
|
TOTAL
LIABILITIES
|
|
|
119,134 |
|
|
|
93,732 |
|
|
Commitments
and contingencies
|
|
|
- |
|
|
|
- |
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STOCKHOLDERS’
DEFICIT
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|
|
|
|
|
|
|
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Preferred
stock, $.001 par value, 10,000,000 shares authorized,
none issued and outstanding
|
|
|
- |
|
|
|
- |
|
|
Common
stock, $.001 par value, 140,000,000 shares authorized, 4,404,500 and
3,864,500 shares issued and
outstanding
as of February 28, 2009 and November 30, 2008,
respectively
|
|
|
4,404 |
|
|
|
3,864 |
|
|
Additional
paid-in-capital
|
|
|
3,094,148 |
|
|
|
2,822,630 |
|
|
Accumulated
deficit
|
|
|
(3,213,212 |
) |
|
|
(2,915,639 |
) |
|
|
|
|
|
|
|
|
|
|
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TOTAL
STOCKHOLDERS’ DEFICIT
|
|
|
(114,660 |
) |
|
|
(89,145 |
) |
|
TOTAL
LIABILITIES & STOCKHOLDERS’ DEFICIT
|
|
$ |
4,474 |
|
|
$ |
4,587 |
|
See notes
to financial statements
MICHAEL
LAMBERT, INC.
STATEMENTS
OF OPERATIONS
Three
Months Ended February 28, 2009 and February 29, 2008
(Unaudited)
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|
|
|
|
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February
28, 2009
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|
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February
29, 2008
|
|
|
|
|
|
|
|
|
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Sales
Revenue
|
|
$ |
556 |
|
|
$ |
2,329 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenue
|
|
|
283 |
|
|
|
4,812 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit/(loss)
|
|
|
273 |
|
|
|
(2,483 |
) |
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
295,947 |
|
|
|
163,184 |
|
|
|
|
|
|
|
|
|
|
|
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Interest
expense
|
|
|
1,899 |
|
|
|
934 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
|
|
297,846 |
|
|
|
164,118 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(297,573 |
) |
|
$ |
(166,601 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss
|
|
|
|
|
|
|
|
|
|
per
common share
|
|
$ |
(0.07 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
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Basic
and diluted weighted average common shares outstanding
|
|
|
4,122,500 |
|
|
|
3,693,621 |
|
See notes
to financial statements.
MICHAEL
LAMBERT, INC.
STATEMENTS
OF CASH FLOWS
Three
Months Ended February 28, 2009 and February 29, 2008
(Unaudited)
|
|
|
February
28, 2009
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|
|
February
29, 2008
|
|
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CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(297,573 |
) |
|
$ |
(166,601 |
) |
|
Adjustments
to reconcile net loss to
|
|
|
|
|
|
|
|
|
|
cash
used in operating activities:
|
|
|
|
|
|
|
|
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Shares
based compensation |
|
|
270,000
150,000 |
|
|
Imputed
rent expense
|
|
|
900 |
|
|
|
300 |
|
|
Imputed
interest on debt
|
|
|
1,158 |
|
|
|
274 |
|
|
Amortization
of discount on short term debt
|
|
|
- |
|
|
|
460 |
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
283 |
|
|
|
|
|
|
Accounts
payable
|
|
|
20,548 |
|
|
|
4,230 |
|
|
Accrued liabilities
|
|
|
325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(4,359 |
) |
|
|
(11,337 |
) |
|
|
|
|
|
|
|
|
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CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
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Loans
from stockholders
|
|
|
5,000 |
|
|
|
12,000 |
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|
Payment
on Bank Credit Line Payable
|
|
|
(471 |
) |
|
|
|
|
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Principal
payments on loans from stockholders
|
|
|
- |
|
|
|
(499 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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NET
CASH PROVIDED BY FINANCING
|
|
|
|
|
|
|
|
|
|
ACTIVITIES
|
|
|
4,529 |
|
|
|
11,501 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH
|
|
|
170 |
|
|
|
164 |
|
|
Cash
balance, beginning of period
|
|
|
186 |
|
|
|
864 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
balance, end of period
|
|
$ |
356 |
|
|
$ |
1,028 |
|
|
|
|
|
|
|
|
|
|
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SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
2,224 |
|
|
$ |
- |
|
|
Cash
paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
See notes
to financial statements.
MICHAEL
LAMBERT, INC.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
The
accompanying unaudited interim financial statements of Michael Lambert, Inc.,
have been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in the Form 10-K filed with the
SEC. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have
been reflected herein. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the full
year. Notes to the financial statements which would substantially
duplicate the disclosure contained in the audited financial statements for
fiscal 2008 as reported in the Form 10-K have been omitted.
NOTE
2 - GOING CONCERN
As
indicated in the accompanying financial statements, MLI had minimal operations
and a working capital deficit as of February 28, 2009. These conditions raise
substantial doubt as to MLI's ability to continue as a going
concern. Management is trying to raise additional capital through
sales of MLI’s common stock and is seeking financing from third parties. The
financial statements do not include any adjustments that might be necessary if
MLI is unable to continue as a going concern.
NOTE
3 - RELATED PARTY TRANSACTIONS
During
the quarter ended February 28, 2009, MLI borrowed an additional $5,000 on the
revolving credit note agreement with BFP Texas, Ltd. that allows MLI to borrow a
maximum of $35,000 on demand. Any outstanding balances must be
repaid by December 31, 2009. As of February 28, 2009, MLI had
borrowed $33,768 under the agreement. The outstanding balance of this
line of credit accrues interest at 0%, however interest is imputed at
10%. BFP Texas, Ltd. is a Texas limited partnership which is
controlled by MLI’s CFO, Carey G. Birmingham.
NOTE
4 - CAPITAL STOCK
In
January 2009, the Company issued the following common shares for services
rendered:
|
|
·
|
20,000
shares to Mr. Robert Kremer, our President and CEO, for an expense of
$10,000, or $.50/share.
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|
|
·
|
250,000
shares to Mr. Birmingham, our CFO, for an expense of $125,000, or
$.50/share.
|
|
|
·
|
250,000
shares to Mr. David Loev, our legal counsel, for an expense of $125,000,
or $.50/share.
|
|
|
·
|
20,000
shares to Mr. Kenneth Kremer, for an expense of $10,000, or
$.50/share.
|
ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS
CERTAIN
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE
"FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
MICHAEL LAMBERT, INC. ("THE COMPANY", "MLI", "WE", "US" OR "OUR") TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM
10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO FEBRUARY 28, 2009.
DESCRIPTION
OF BUSINESS
History
Michael Lambert, Inc. was
incorporated in Nevada on November 2, 2005. We are the successor
entity to Robert Kremer D/B/A Michael Lambert, a sole proprietorship that was
formed on July 1, 2005 (“Kremer”). On November 2, 2005, all of the
assets and liabilities of Kremer were transferred to us in exchange for
1,000,000 shares of common stock issued to our Chief Executive Officer and
President, Robert Kremer. Unless otherwise stated, references to the
Company herein, include the operations and prior transactions of
Kremer. On January 3, 2006, we filed a correction to our Articles of
Incorporation with the Secretary of State of Nevada, which included the
designation of our Preferred Stock and indemnification provisions, which were
mistakenly left out of our previous November 2, 2005 filing (the
“Correction”). All disclosure contained herein takes into account the
Correction.
The
Company manufactures handbags and plans to manufacture clothing accessories in
the future, funding permitting. We plan to design our products to appeal to a
broad market segment because of the unique design focus of our proposed
brands. We produced only 611 handbags from inception to April 1, 2009
and no other clothing accessories. We currently only sell our
products under the brand “Michael Lambert” and currently only sell our products
at two independently owned clothing stores in the San Antonio, Texas area to
date; however in the future, we plan to sell our products directly to consumers
over the Internet, through our website, www.michael-lambert.com, which includes
information we do no wish to be incorporated by reference into this filing and
on the website WatchNBuy.com, through our agreement with 2BC, Inc., described
below. We manufacture the handbags, which are hand-sewn by a
third party, Fuerza Unida, a sewing cooperative in San Antonio, Texas consisting
of minority women.
In April
2008, we entered into an agreement with 2BC, Inc., the owners of the
WatchNBuy.com website, which calls for them to receive a 20% commission on all
products sold through their website.
Additionally,
in the future, funding permitting, we plan to operate through different brands,
with different pricing of our products associated with the differing
brands. For instance, some brands will be more expensive and be made
of higher quality fabrics and some brands will have a much lower price
point. As a result, we believe that our products will be able to
apply to a broad range of buyers.
In the
future, funding permitting, our management currently anticipates employing a
promotional plan that may include celebrity endorsements by actors, musicians,
athletes and others who are in the very early stages of their careers. We also
plan to actively support selective events and organizations that are relevant to
women’s issues, funding permitting. In addition, we plan to take an
active role promoting MLI brands through the sponsorship of sports for women,
and support academic programs for women, particularly in the areas of
design. We intend to raise funding for our future marketing efforts
by selling debt and/or equity securities in the future, of which there can be no
assurance.
While we
are currently solely focused on the design, manufacture and sale of handbags,
our future plans may include the design, manufacture and sale of other lifestyle
products such as belts, pillows and scarves using discontinued fabric samples,
funding permitting, if our management determines the sale of such items are in
our best interests.
The
Internet is a critical component of our plans for advertising and future
growth. It is our hope that our website will promote our planned
brands, generate sales revenues, and support retailers who we hope will sell our
products in the future. We currently have two independently owned
retailers in San Antonio, Texas, which sell our products.
On August
29, 2005, we entered into a Name & Trademark License Agreement (“Trademark
Agreement”) with KBK, Inc. (“KBK”), which is controlled by our Chief Executive
Officer and President, Robert Kremer. The agreement allows KBK to use
our trademark for the term, “Michael Lambert Inc.,” (the “MLI Trademark”), in
connection with the manufacture, sale and distribution of decorative fabrics and
furniture within the United States. We have a trademark, registered
with the State of Texas for the service mark “ML Michael Lambert.”
The
Trademark Agreement was effective for one year and renewable for successive one
year periods at the mutual agreement of both parties, and was renewed for an
additional one-year term on August 29, 2006, 2007 and 2008. KBK is
required to pay us a 5% royalty on the sale of any products that contain the MLI
Trademark. The rights associated with the Trademark Agreement are
non-exclusive; however, they are not able to be transferred except with the
Company’s prior written consent. The Trademark Agreement may be terminated by us
at any time without cause upon thirty (30) days written notice to
KBK. The Company currently also has a trademark for the term “Michael
Lambert Inc.,” in the State of Texas.
Plan
of Operations For The Next Twelve Months:
Initially,
we plan to use consultants to support our planned advertising and promotion
campaigns. We plan to have our staff, which we plan to hire in the
future, funding permitting, but which we do not currently have any immediate
plans to hire, appear with products and demonstrate their designs.
In addition, we have recently entered into an agreement with WatchNbuy.com, a
new promotional and marketing website which features short videos of our
products being used and displayed, while allowing the viewer to click on our
product and purchase it through WatchNbuy.com. Our agreement with 2BC, Inc., the
owners of the WatchNBuy.com website, calls for them to receive a 20% commission
on all products sold through their website. Additionally, we plan to
promote the fact that our products are hand sewn in San Antonio, Texas by
minority women who operate their own sewing cooperative called Fuerza
Unida. The Company is committed to continue our Made In America
production as long as we are assured of quality and timely results. We do not
currently have an agreement in place with Fuerza Unida, who is an independent
contractor.
We also
plan to eventually sign athletes, actors, musicians, and models in the very
early stages of their careers, funding permitting, to help market our products,
with the hope that if such athletes, actors, musicians and models become
successful, our products and advertising will get more exposure. Signing female
athletes and actively supporting sports for women will be part of our marketing
plan as well, funding permitting. Additionally, we plan to be pro-active in the
support of organizations that contribute to bettering the lives and welfare of
women and children.
Our Growth
Strategy
The first
stage of our growth strategy, funding permitting, will be to develop and market
a full range of handbags to consumers. We will seek to differentiate
ourselves through unique designs, and the development of marketing
strategies that will create brand awareness.
Our goals
for the next year include:
|
1)
|
Develop
campaign to create consumer awareness and demand;
|
| |
|
|
2)
|
Establish
marketing relationships and channels of distribution;
|
| |
|
|
3)
|
Develop
Internet website and links;
|
| |
|
|
4)
|
Generate
sales revenues for purposes of increasing production;
and
|
| |
|
|
5)
|
Continue
design development and plans for increased
production.
|
In
addition to the growth strategy outlined above, we intend on seeking out other
business which may generate revenue and explore mergers and or acquisitions with
certain of these companies which we believe may add to our operations, generate
synergies and/or give us greater brand awareness. We do not currently
have any agreements or understandings in place with any companies or partners
regarding strategic partnerships, mergers or acquisitions.
In the
event that we are unable to raise additional funding through the sale of debt
and/or equity to fund the plan of operations and growth strategy set forth
above, we will be unable to expand our operations. As a result, in
the event we are unable to raise additional funding, we will not be able to
undertake the marketing and advertising plans set forth above and will
concentrate on maximizing the margins on the products we currently produce
instead of expanding into new product lines. Furthermore, while we
currently anticipate being able to continue our operations for only three (3) to
six (6) months if we fail to raise additional capital in the future, we also
anticipate that if needed, our officers and shareholders will continue to loan
us money on an as needed basis to support our operations moving forward;
however, no officer or shareholder has provided us any written confirmation or
agreement to provide us funding in the future other than what has been disclosed
below under “Liquidity and Capital Resources,” and as such, we cannot provide
any assurances that such individuals will provide us funding in the
future.
COMPARISON
OF OPERATING RESULTS
Results
of Operation for the Three Months Ended February 28, 2009 Compared to the Three
Months Ended February 28, 2008
We had
sales revenues of $556 for the three months ended February 28, 2009, compared to
sales revenues of $2,329 for the three months ended February 28, 2008, a
decrease in sales from the prior period of $1,773 or 76.1%. The Company believes
that the decrease in sales was mainly due to a decrease in customer awareness of
its products and a general malaise in overall retail sales, and more
particularly in the Company’s market segment, during the three months ended
February 28, 2009 compared to the three months ended February 28,
2008.
We had
cost of revenue of $283 for the three months ended February 28, 2009, compared
to cost of revenue of $4,812 for the three months ended February 28, 2008, a
decrease in cost of revenue from the prior period of $4,529 or
94.1%. The decrease in cost of revenue is attributable to a decrease
in manufacturing expenses in connection with reduced production during the three
months ended February 28, 2009 compared to the three months ended February 28,
2008.
We had
general and administrative expenses of $295,947 for the three months ended
February 28, 2009, compared to general and administrative expenses of $163,184
for the three months ended February 28, 2008, an increase in general and
administrative expenses of $132,763 or 81.4% from the prior
period. The increase in general and administrative expenses was
primarily a result of expenses incurred in connection with the issuance of
shares for services rendered to our CFO and corporate counsel, along with
accounting fees during the three months ended February 28, 2009 compared to the
three months ended February 28, 2008 offset by reduced rental expenses during
the three months ended February 28, 2009 due to the addendum to the lease
between the Company and KBK entered into on August 1, 2008, which provided that
the Company would not owe any rental fees to KBK for the use of its office space
moving forward.
We had
interest expense of $1,899 for the three months ended February 28, 2009,
compared to interest expense of $934 for the three months ended February 28,
2008, an increase in interest expense from the prior period of 103.3% or
$965. The increase in interest expense was mainly due to the increase
in related party indebtedness and imputed interest in connection therewith,
associated with the loans, Line of Credit and Note described below, during the
period from November 30, 2008 through February 28, 2009, which in turn caused
interest expense to increase for the three month period ended February 28,
2009.
We had a
net loss of $297,573 for the three months ended February 28, 2009, compared to a
net loss of $166,601 for the three months ended February 28, 2008, an increase
in net loss of $130,972 or 78.6% from the prior period. The increase in net loss
was mainly attributable to the $132,763 increase in general and administrative
expenses for the three months ended February 28, 2009, compared to the three
months ended February 28, 2008.
Liquidity
and Capital Resources
We had
total assets of $4,474 as of February 28, 2009, consisting solely of current
assets, which included $356 of cash and $4,118 of inventory. The
Company purchases inventory for its products on an as needed basis, and as such,
the Company has approximately 104 completed handbags in inventory as of the date
of this filing.
We had
total liabilities of $119,134 as of February 28, 2009, consisting of current
liabilities, which included $22,777 of accounts payable, $2,814 of accrued
liabilities, $16,667 of bank credit line payable, $12,400 in accounts payable to
a related party and $64,476 of related party debt, which represented
amounts owed under the loans, Line of Credit, owed to BFP, KBK and Mr. Kremer
(as defined below).
We had
negative working capital of $114,660, a total shareholders’ deficit of $114,660
as of February 28, 2009 and an accumulated deficit as of February 28, 2009 of
$3,213,212.
We had
$4,359 in net cash used in operating activities for the three months ended
February 28, 2009, which included $297,573 in net loss, offset by $270,000 in
shares issued for services, $20,873 in change in accounts payable and accrued
liabilities, $283 of change in inventory, $900 of imputed rent expense and
$1,158 of imputed interest on debt.
We had
$4,529 of net cash provided by financing activities for the three months ended
February 28, 2009, which included $5,000 in loans from stockholders, offset by
$471 of payment on the Bank credit line payable.
We
entered into a revolving line of credit agreement with one of our shareholders,
Michael Sonaco, in July 2005 (“Line of Credit”). We could borrow up
to $25,000 under the Line of Credit, but had only borrowed $8,000 as of August
4, 2006, when the Line of Credit was replaced by another line of credit in the
amount of $8,000. The Line of Credit bears no interest and any unpaid
principal was due on December 31, 2007, was previously extended until December
31, 2008 and was extended again as of September 1, 2008, to December 31,
2009. The balance of the Line of Credit as of the filing of this
Report was $8,000.
On July
15, 2005, we entered into a loan agreement with KBK, Inc. (“KBK”), which is
controlled by our Chief Executive Officer and President, Robert Kremer, for
$1,000. The loan agreement was to mature on December 31, 2006 and had
an interest rate of 0%, provided the loan was not in default. On or
about December 15, 2006, the loan with KBK was increased to $3,000 and the
maturity date of the loan was extended until December 31, 2007, and the maturity
date has previously been further extended until December 31, 2008, and again to
December 31, 2009 and the amount of the loan has been increased to
$4,000. The interest rate remains 0% per annum, unless the Company
defaults on payments due under the note, at which time the interest rate will
increase to 10% per annum. The balance of the loan agreement as of
the filing of this Report was $3,357.
In July
2005, the Company issued a $27,500 Note Payable to the Company’s attorney, David
M. Loev (the “Note”), in consideration for legal services rendered and to be
rendered on behalf of the Company in connection with the drafting of our Private
Placement Memorandum and the drafting and accompanying amendments associated
with a Form S-1 registration statement. On September 28, 2007, we
entered into a convertible promissory note with Mr. Loev, which replaced the
prior Note, and evidenced $10,000 of a total of $22,500 owed to Mr. Loev by the
Company, which included $5,000 the Company agreed to pay Mr. Loev upon the
receipt of the first round of comments (if any) on our Registration Statement by
the Commission, which amount has been paid to date, and $7,500 which the Company
agreed to pay Mr. Loev upon the effectiveness of our Registration Statement,
which amount has not been paid to date. On or about October 6, 2008, we entered
into an Amended and Restated Convertible Promissory Note that replaced the
previous convertible promissory note. The Amended and Restated
Convertible Promissory Note bears interest at the rate of 5% per annum, and was
due on March 31, 2009. Any amounts not paid when due accrue interest
at the rate of 15% per annum, can be converted by Mr. Loev into shares of our
common stock at an exercise price of $0.10 per share. We have also
previously issued Mr. Loev an aggregate of 800,000 shares of our common stock
and options to purchase up to 350,000 shares of our common stock at an exercise
price of $0.375 per share, in consideration for legal services rendered to the
Company. The balance of the loan as of the filing of this report was
$10,151 and the loan has been in default since March 31, 2009, but the Company
is working with Mr. Loev to extend the due date..
On
January 13, 2006, we entered in a loan agreement with Robert Kremer, our Chief
Executive Officer. The loan agreement was for a total of $2,000,
which amount does not bear interest unless such amount is in default, in which
case it bears interest at the rate of 10% per annum. The outstanding
amount of the loan agreement was due December 31, 2007, but has previously been
extended to December 31, 2008, and effective as of November 1, 2008, to December
31, 2009. On or around November 1, 2008, the Company entered into a new
loan agreement with Mr. Kremer, which modified the terms of the original loan
agreement to increase the amount available under the loan to $9,000. On or
around February 25, 2009, the loan agreement was increased again to
$12,700. The balance of this loan as of the filing of this Report was
approximately $11,900.
On
February 12, 2008, we entered into a Master Revolving Line of Credit Agreement
(the “BFP Line of Credit”) with BFP Texas, Ltd., which is controlled by our
Chief Financial Officer, Carey G. Birmingham (“BFP”). Pursuant to the
Line of Credit, BFP agreed to provide us up to $12,000 in funding, which amount
does not bear interest and is due December 31, 2009. In June 2008,
the amount we are able to borrow under the Line of Credit was increased to
$16,000 and in July 2008, the amount we are able to borrow under the Line of
Credit was increased to $20,000. In August 2008, the amount we were able to
borrow under the Line of Credit was increased to $30,000. On or
around January 15, 2009, the BFP Line of Credit was increased again to $35,000,
with no changes in the other terms of the BFP Line of
Credit. . On or around April 9, 2009, the BFP Line of
Credit was increased again to $40,000, with no changes in the other terms of the
BFP Line of Credit. As of the date of this Report, a total of approximately
$36,156 had been borrowed under the Line of Credit.
Other
than as described above, the Company has no commitments from officers, director
or affiliates to provide funding, other than the Line of Credit and the BFP Line
of Credit described above. Our growth and continued operations could
be impaired by limitations on our access to the capital markets.
We depend
to a great degree on the ability to attract external financing in order to
conduct our business activities and in order that we have sufficient cash on
hand to expand our operations. We are currently funded solely by our
shareholders and with the very limited amount of sales revenue we have generated
to date. We believe that we can continue our business operations for
approximately the next three (3) to six (6) months with the cash on hand we had
as of the filing of this report. We anticipate the need for
approximately $30,000 in additional funding to support our operations for the
next 12 months, which amount does not include approximately $119,134 which we
will need to repay our outstanding current liabilities prior to February 28,
2010. Due to the fact that we had $114,660 of negative working
capital and an accumulated deficit of $3,213,212 as of February 28, 2009, our
auditors expressed concern over our ability to continue as a going
concern. We anticipate that our founders and shareholders will
continue to support our operations and loan us additional funds on an as needed
basis until such time as we can support our operations with revenues from our
products, if ever; however, no shareholder has committed in writing to providing
us additional funding for our operations other than pursuant to the various
notes and line of credits described above.
If we are
unable to raise additional capital from conventional sources, including
increases in the Line of Credit and/or additional sales of additional stock, we
may be forced to curtail or cease our operations. Even if we are able to
continue our operations, the failure to obtain financing could have a
substantial adverse effect on our business and financial results. We have no
commitments from our officers and Director or any of our shareholders to
supplement our operations or provide us with financing in the future, other than
the Line of Credit, described above.
In the
future, we may be required to seek additional capital by selling debt or equity
securities, selling assets, or otherwise be required to bring cash flows in
balance when it approaches a condition of cash insufficiency. The sale of
additional equity securities, if accomplished, may result in dilution to our
shareholders. We cannot assure you, however, that financing will be available in
amounts or on terms acceptable to us, or at all.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to
provide the information required by this Item as it is a “smaller reporting
company,” as defined by Rule 229.10(f)(1).
ITEM 4. CONTROLS AND
PROCEDURES
(a) Evaluation
of disclosure controls and procedures. Our Chief Executive Officer and Principal
Financial Officer, after evaluating the effectiveness of our "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Annual Report on Form 10-Q (the "Evaluation Date"), have concluded that as of
the Evaluation Date, our disclosure controls and procedures were not effective
to provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. They were deemed not effective due to
adjustment and disclosure omissions identified by our Independent Registered
Public Accounting firm. The Company will continue to take steps to
identify matters of accounting and disclosure.
(b) Changes
in internal control over financial reporting. There were no changes in our
internal control over financial reporting during our most recent fiscal quarter
that materially affected, or were reasonably likely to materially affect, our
internal control over financial reporting.
PART II - OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.
ITEM 1A. RISK
FACTORS
An
investment in our common stock is highly speculative, and should only be made by
persons who can afford to lose their entire investment in us. You should
carefully consider the following risk factors and other information in this
annual report before deciding to become a holder of our common stock. If any of
the following risks actually occur, our business and financial results could be
negatively affected to a significant extent.
The
Company’s business is subject to the following Risk Factors:
We
May Not Be Able To Continue Our Business Plan Without Additional
Financing.
We depend
to a great degree on the ability to attract external financing in order to
conduct our business activities and in order that we have sufficient cash on
hand to expand our operations. We are currently funded solely by our
shareholders and with the very limited amount of sales revenue we have generated
to date. We believe that we can continue our business operations for
approximately the next three (3) to six (6) months with the cash on hand we had
as of the filing of this report, revenue from the sales of our products, and
loans from our executive officers, of which there is no assurance. We
anticipate the need for approximately $30,000 in additional funding to support
our operations for the next 12 months, which amount does not include
approximately $119,134 which we will need to repay our outstanding current
liabilities prior to February 28, 2010. If we are unable to generate sufficient
revenues to support our operations in the future and/or fail to raise additional
funds after the three (3) to six (6) months which we currently believe we will
be able to continue our operations, we may be forced to abandon our current
business plan. If you invest in us and we are unable to raise the
required funds, your investment could become worthless.
Our
Auditors Have Expressed Substantial Doubt As To Whether Our Company Can Continue
As A Going Concern.
We have
generated only limited revenues since our inception and have incurred
substantial losses. As of November 30, 2008, we had an accumulated
deficit of $2,915,639 and a working capital deficit of $39,820 and as of
February 28, 2009, had negative working capital of $114,660, and an accumulated
deficit as of February 28, 2009 of $3,213,212. These conditions raise
substantial doubt as to our ability to continue as a going concern, particularly
in the event that we cannot generate sufficient cash flow to conduct our
operations and/or obtain additional sources of capital and
financing.
We
Rely Upon Our Chief Executive Officer and Director And If He Was To Leave Us,
Our Business Plan And Results Of Operations Could Be Adversely
Affected.
We rely
heavily on our Chief Executive Officer, Secretary, Treasurer and Director,
Robert Kremer. His experience and input create the foundation for our
business and he is responsible for the directorship and control over the
production and design of our products. We do not currently have an employment
agreement or “key man” insurance policy on Mr. Kremer. Moving
forward, should we lose the services of Mr. Kremer, for any reason, we will
incur costs associated with recruiting a replacement and delays in our
operations associated with the search for such replacement. If we are
unable to replace Mr. Kremer with another suitably trained individual or
individuals, we may be forced to scale back or curtail our business
plan. As a result of this, your investment in us could become
devalued.
We
Face Intense Competition For Our Products And As A Result, We May Be Unable To
Compete In The Market For Handbags and Accessories.
The
market for handbags and clothing accessories is highly competitive and
fragmented. The Company expects competition to intensify in the future. We
compete in each of our markets with numerous national, regional and local
companies, many of which have substantially greater financial, managerial and
other resources than those presently available to us. Numerous
well-established companies are focusing significant resources on providing
handbags and related clothing accessories that will compete with our products.
No assurance can be given that we will be able to effectively compete with these
other companies or that competitive pressures, including possible downward
pressure on the prices we charge for our products, will not rise. In the event
that we cannot effectively compete on a continuing basis or competitive
pressures arise, such inability to compete or competitive pressures will have a
material adverse effect on our business, results of operations and financial
condition.
All
of Our Handbags Are Currently Sewn By Fuerza Unida, With Whom We Do Not
Currently Have Any Agreements In Place.
All of
our handbags are currently sewn by a cooperative, Fuerza Unida (“Fuerza”) in San
Antonio, Texas. We do not currently have any agreements in place with
Fuerza to date, and have no immediate plans to enter into any
agreements. As a result, if Fuerza stops sewing our handbags and/or
charges us more per bag to sew such bags, we could be forced to enter into an
alternative arrangement with another company or individuals to sew our
handbags. This could significantly raise our cost per handbag and
could force us to charge more for our products and/or decrease the gross margin
of our products, which would in turn cause our revenue to
decrease. Additionally, if we are unable to find a suitable
replacement for the loss of Fuerza, we could be forced to suspend or abandon our
operations, which would cause the value of our securities, if any, to decrease
or such securities may become worthless.
Our
Results May Be Adversely Affected By Our Failure To Anticipate And Respond To
Changes In Fashion Trends And Consumer Preferences In A Timely
Manner.
Our sales
and profitability depend upon the demand by customers for our handbags. We
believe that our success depends in large part upon our ability to anticipate,
gauge and respond in a timely manner to changing consumer demands and fashion
trends and upon the appeal of our handbags. There can be no assurance that we
will be able to anticipate, gauge and respond to changes in fashion trends. A
decline in demand for our handbags, if any, or a misjudgment of fashion trends
could, among other things, lead to lower sales and excess inventories which
could have a material adverse effect on our business, financial condition and
operating results.
Changes
In Economic Conditions That Impact Consumer Spending Could Harm Our
Business.
Our
financial performance is sensitive to changes in overall economic conditions
that impact consumer spending, particularly discretionary spending. Future
economic conditions affecting disposable consumer income such as employment
levels, business conditions, interest rates, and tax rates could reduce consumer
spending or cause consumers to shift their spending to other products. A general
reduction in the level of discretionary spending or shifts in consumer
discretionary spending to other products could have a material adverse effect on
our growth, sales and profitability.
We
Have Not And Do Not Anticipate Paying Any Cash Dividends On Our Common Stock And
Because Of This Our Securities Could Face Devaluation In The
Market.
We have
paid no cash dividends on our common stock to date and it is not anticipated
that any cash dividends will be paid to holders of our common stock in the
foreseeable future. While our dividend policy will be based on the operating
results and capital needs of our business operations, it is anticipated that any
earnings will be retained to finance our business operations and future
expansion.
Our
Bylaws Provide For Indemnification Of Our Officers And Directors, So It Will Be
Difficult To Seek Damages From Our Officers And/Or Directors In A
Lawsuit.
Our
Bylaws provide that our officers and Directors will only be liable to us for
acts or omissions that constitute actual fraud, gross negligence or willful and
wanton misconduct. Thus, we may be prevented from recovering damages for certain
alleged errors or omissions by our officers and Directors for liabilities
incurred in connection with their good faith acts on our behalf. Additionally,
such an indemnification payment on behalf of our officers and/or Directors may
deplete our assets. Investors who have questions respecting the fiduciary
obligations of our officers and Directors should consult with their own
independent legal counsel prior to making an investment in us. Additionally, it
is the position of the Securities and Exchange Commission that exculpation from
and indemnification for liabilities arising under the Securities Act and the
rules and regulations thereunder is against public policy and therefore
unenforceable.
We
Have A Limited Operating History And Because Of This It May Be Difficult To
Evaluate Our Chances For Success.
We were
formed as a Nevada corporation on November 2, 2005. We have had an
extremely limited volume of sales to date and can provide no assurances that our
sales will increase in the future and/or that they will ever be great enough to
support our expenses and/or costs of sales. We had only produced
approximately 601 handbags since inception as of April 1, 2009, and anticipate
the need to sell approximately 1,000 handbags per year to generate sufficient
revenue to support our operations. We are a relatively new company and, as such,
run a risk of not being able to compete in the marketplace because of our
relatively short existence. New companies in the competitive environment of
handbag and fashion design, such as ours, may have difficulty in continuing in a
highly competitive industry such as ours, and as a result, we may be forced to
abandon or curtail our business plan. Under such a circumstance, the value of
any investment in us may become worthless.
We
Currently Have No Major Customers, Have Generated Limited Revenues And Have Only
One Licensing Agreement In Place.
As stated
above, we have generated only limited revenues since our
inception. Part of our business plan includes the licensing of
certain products under the Michael Lambert name. We hope to
accomplish this through licensing agreements with a small number of major
customers and/or partners; however, we currently only have one license agreement
in place with KBK, Inc., which is beneficially owned by our Chief Executive
Officer and Director, Robert Kremer. As we have raised only limited
revenues to date, have only a limited number of customers and only one licensing
agreement in place, there is a risk we will not be able to enter into further
licensing arrangements and as a result, our business plan will need to be
curtailed or abandoned. If this were to happen, any investment in us
could become worthless.
Our
Chief Executive Officer and President Possesses Significant Control Over Our
Operations, And Because Of This He May Choose A Plan Of Action Which Will
Devalue Our Outstanding Securities.
Our Chief
Executive Officer and President, Robert Kremer beneficially owns 1,860,000
shares of common stock (which number includes 600,000 options to purchase shares
of our common stock), representing 36.4% of our outstanding common stock
(assuming the exercise of all options beneficially owned by Mr. Kremer (please
note as used in this Report, the term options refers to the same securities
which are called warrants in the Company’s financial statements attached
hereto)). Accordingly, Mr. Kremer, our Chief Executive Officer and
President, possesses significant influence over the matters submitted to the
stockholders for approval. These matters include the election of
Directors, mergers, consolidations, the sale of all or substantially all of our
assets, and also the power to prevent or cause a change in
control. This level of control by Mr. Kremer gives him substantial
ability to determine our future as a business, and as such, he may elect to
close the business, change the business plan or make any number of other major
business decisions. This control may eventually make the value of any
investment in us worthless.
Because
Our Chief Executive Officer Is Involved In Another Business, He May Not Be Able
Or Willing To Devote A Sufficient Amount Of Time To Our Business
Operations.
Robert
Kremer, our Chief Executive Officer, spends approximately 20% of his time on our
operations and approximately 80% of his time on the operations of KBK, Inc., a
company which he controls. Because Mr. Kremer does not devote all of
his time to our operations, there is a risk that he will not be able to devote
sufficient attention to our operations to allow us to grow and/or become a
successful company and because he may be distracted by other business matters
associated with KBK, Inc. or otherwise, there is a risk that our operations will
not be properly managed. If Mr. Kremer does not spend a sufficient
amount of time serving our company, it could have a material adverse effect on
our business and results of operations, and could cause the value of our
securities to become worthless.
Nevada
Law And Our Articles of Incorporation Authorize Us To Issue Shares Of Stock,
Which Shares May Cause Substantial Dilution To Our Existing
Shareholders.
Pursuant
to our Articles of Incorporation, we have 140,000,000 shares of common stock and
10,000,000 shares of Preferred Stock authorized. As of the filing of
this Report, we have 4,404,500 shares of common stock issued and outstanding and
– 0 – shares of Preferred Stock issued and outstanding. As a result,
our Board of Directors has the ability to issue a large number of additional
shares of common stock without shareholder approval, which if issued could cause
substantial dilution to our then shareholders. Additionally, shares
of Preferred Stock may be issued by our Board of Directors without shareholder
approval with voting powers, and such preferences and relative, participating,
optional or other special rights and powers as determined by our Board of
Directors, which may be greater than the shares of common stock offered in this
Report. As a result, shares of Preferred Stock may be issued by our
Board of Directors which cause the holders to have super majority voting power
over our shares, provide the holders of the Preferred Stock the right to convert
the shares of Preferred Stock they hold into shares of our common stock, which
may cause substantial dilution to our then common stock shareholders and/or have
other rights and preferences greater than those of our common stock
shareholders. Investors should keep in mind that the Board of Directors has the
authority to issue additional shares of common stock and Preferred Stock, which
could cause substantial dilution to our existing
shareholders. Additionally, the dilutive effect of any Preferred
Stock, which we may issue may be exacerbated given the fact that such Preferred
Stock may have super majority voting rights and/or other rights or preferences
which could provide the preferred shareholders with voting control over us
subsequent to this offering and/or give those holders the power to prevent or
cause a change in control. As a result, the issuance of shares of
common stock and/or Preferred Stock may cause the value of our securities to
decrease and/or become worthless.
The
Issuance Of Common Stock Upon Exercise Of Our Outstanding Options Will Cause
Immediate And Substantial Dilution And Will Cause Our Majority Shareholders To
Hold An Even Greater Percentage Of Our Outstanding Common Stock.
The
issuance of common stock upon exercise of our 2,165,000 outstanding Options,
including 2,000,000 Options held by “affiliates” of the Company, will result in
immediate and substantial dilution to the interests of other
stockholders. Furthermore, the exercise of the 2,000,000 Options held
by “affiliates” of the Company, which include cashless exercise provisions, will
cause a significant increase in the number of our outstanding shares and will
cause such “affiliates” to hold an even greater number of shares of common
stock. As such, if our option holders were to exercise all of the
Options that they hold, it will cause substantial dilution to the then holders
of our common stock and will cause our “affiliates” to hold an even greater
percentage of our outstanding common stock and influence greater control over
any shareholder votes.
We
Do Not Currently Have A Public Market For Our Securities. If There Is
A Market For Our Securities In The Future, Our Stock Price May Be Volatile And
Illiquid.
We were
recently approved for trading on the OTCBB under the symbol “MBER”; however, no
shares of our common stock have traded to date and there is currently no public
market for our common stock. If there is a market for our common
stock in the future, we anticipate that such market would be illiquid and would
be subject to wide fluctuations in response to several factors, including, but
not limited to:
(1)
actual or anticipated variations in our results of operations;
(2)
our ability or inability to generate new revenues;
(3)
increased competition; and
(4) conditions and trends in the market for handbag and clothing
accessories.
Furthermore,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price and liquidity of our common stock.
Investors
May Face Significant Restrictions on the Resale of Our Common Stock Due to
Federal Regulations of Penny Stocks.
Our
common stock is subject to the requirements of Rule 15(g)9,
promulgated under the Securities Exchange Act as long as the price of
our common stock is below $5.00 per share. Under such rule,
broker-dealers who recommend low-priced securities to persons other than
established customers and accredited investors must satisfy special sales
practice requirements, including a requirement that they make an individualized
written suitability determination for the purchaser and receive the purchaser's
consent prior to the transaction. The Securities Enforcement Remedies
and Penny Stock Reform Act of 1990, also requires additional disclosure in
connection with any trades involving a stock defined as a penny
stock. Generally, the Commission defines a penny stock as any equity
security not traded on an exchange or quoted on NASDAQ that has a market price
of less than $5.00 per share. The required penny stock disclosures
include the delivery, prior to any transaction, of a disclosure schedule
explaining the penny stock market and the risks associated with it. Such
requirements could severely limit the market liquidity of the securities and the
ability of purchasers to sell their securities in the secondary
market.
In
the Future, We Will Incur Significant Increased Costs As a Result of Operating
As a Fully Reporting Company in Connection with Section 404 of the Sarbanes
Oxley Act, and Our Management Will Be Required to Devote Substantial Time to New
Compliance Initiatives.
Moving
forward, we anticipate incurring significant legal, accounting and other
expenses in connection with our status as a fully reporting public company. The
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently
implemented by the SEC have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. As
such, our management and other personnel will need to devote a substantial
amount of time to these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. In addition, the Sarbanes-Oxley
Act requires, among other things, that we maintain effective internal controls
for financial reporting and disclosure of controls and procedures. Our
compliance with Section 404 will require that we incur substantial accounting
expense and expend significant management efforts. We currently do not have an
internal audit group, and we will need to hire additional accounting and
financial staff with appropriate public company experience and technical
accounting knowledge. Moreover, if we are not able to comply with the
requirements of Section 404 in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses, the
market price of our stock could decline, and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which would require
additional financial and management resources.
If
We Are Late In Filing Our Quarterly Or Annual Reports With The SEC, We May Be
De-Listed From The Over-The-Counter Bulletin Board.
Pursuant
to Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely filing
of periodic reports with the SEC, any OTCBB issuer which fails to file a
periodic report (Form 10-Q's or 10-K's) by the due date of such report (not
withstanding any extension granted to the issuer by the filing of a Form
12b-25), three (3) times during any twenty-four (24) month period is
automatically de-listed from the OTCBB. Such removed issuer would not be
re-eligible to be listed on the OTCBB for a period of one-year, during which
time any subsequent late filing would reset the one-year period of de-listing.
If we are late in our filings three times in any twenty-four (24) month period
and are de-listed from the OTCBB, our securities may become worthless and we may
be forced to curtail or abandon our business plan.
Shareholders
May Be Diluted Significantly Through Our Efforts To Obtain Financing And Satisfy
Obligations Through The Issuance Of Additional Shares Of Our Common
Stock.
We have
no committed source of financing. Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock,
we may attempt to raise capital by selling shares of our common stock, possibly
at a discount to market. These actions will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock book value,
and that dilution may be material. Such issuances may also serve to enhance
existing management’s ability to maintain control of the Company because the
shares may be issued to parties or entities committed to supporting existing
management.
State
Securities Laws May Limit Secondary Trading, Which May Restrict The States In
Which And Conditions Under Which You Can Sell Shares.
Secondary
trading in our common stock will not be possible in any state until the common
stock is qualified for sale under the applicable securities laws of the state or
there is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. If we fail
to register or qualify, or to obtain or verify an exemption for the secondary
trading of the common stock in any particular state, the common stock could not
be offered or sold to, or purchased by, a resident of that state. In the event
that a significant number of states refuse to permit secondary trading in our
common stock, the liquidity for the common stock could be significantly
impacted.
Because
We Are Not Subject To Compliance With Rules Requiring The Adoption Of Certain
Corporate Governance Measures, Our Stockholders Have Limited Protections Against
Interested Director Transactions, Conflicts Of Interest And Similar
Matters.
The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the
SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a
result of Sarbanes-Oxley, require the implementation of various measures
relating to corporate governance. These measures are designed to enhance the
integrity of corporate management and the securities markets and apply to
securities that are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial
additional costs associated with such compliance any sooner than legally
required, we have not yet adopted these measures.
Because
our Directors are not independent directors, we do not currently have
independent audit or compensation committees. As a result, our Directors have
the ability to, among other things, determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest, if any, and similar matters and
any potential investors may be reluctant to provide us with funds necessary to
expand our operations.
We intend
to comply with all corporate governance measures relating to director
independence as and when required. However, we may find it very difficult or be
unable to attract and retain additional qualified officers, Directors and
members of board committees required to provide for our effective management as
a result of the Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley
Act of 2002 has resulted in a series of rules and regulations by the SEC that
increase responsibilities and liabilities of Directors and executive officers.
The perceived increased personal risk associated with these recent changes may
make it more costly or deter qualified individuals from accepting these
roles.
ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS
In
January 2009, we issued an aggregate of 540,000 shares of our common stock to
certain individuals for services rendered to the Company for the fiscal year
ended November 30, 2008, including 250,000 shares to our Chief Financial
Officer, Carey Birmingham, 250,000 shares to our corporate counsel, David M.
Loev, 20,000 shares to our Chief Executive Officer, Robert Kremer, and 20,000
shares to Kenneth Kremer, a significant shareholder of the Company and the
brother of Robert Kremer. We claim an exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended, since the
foregoing issuances did not involve a public offering, the recipients took the
shares for investment and not resale and we took appropriate measures to
restrict transfer. No underwriters or agents were involved in the foregoing
issuances and we paid no underwriting discounts or commissions.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
None.
ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER
INFORMATION
None.
ITEM 6.
EXHIBITS
|
Exhibit
|
Number
|
Description
|
|
|
|
|
|
Exhibit
|
3.1(1)
|
Articles
of Incorporation of Michael Lambert, Inc.
|
|
|
|
|
|
Exhibit
|
3.2(1)
|
Articles
of Correction and Corrected Articles of Incorporation.
|
|
|
|
|
|
Exhibit
|
3.3(1)
|
Bylaws
of Michael Lambert, Inc.
|
|
|
|
|
|
Exhibit
|
10.1(1)
|
Share
Exchange Agreement
|
|
|
|
|
|
Exhibit
|
10.2(1)
|
Name
and Trademark License Agreement
|
|
|
|
|
|
Exhibit
|
10.3(1)
|
Promissory
Note (KBK, Inc.)
|
|
|
|
|
|
Exhibit
|
10.4(1)
|
Promissory
Note (Robert Kremer)
|
|
|
|
|
|
Exhibit
|
10.5(1)
|
Convertible
Promissory Note (David M. Loev)
|
|
|
|
|
|
Exhibit
|
10.6(1)
|
Line
of Credit with Michael Sonaco
|
|
|
|
|
|
Exhibit
|
10.7(1)
|
Sublease
Agreement with KBK, Inc.
|
|
|
|
|
|
Exhibit
|
10.8(2)
|
Master
Revolving Line of Credit with BFP Texas, Ltd.
|
|
|
|
|
|
Exhibit
|
10.9(2)
|
Form
of Stock Option Agreement
|
|
|
|
|
|
Exhibit
|
10.10(2)
|
Amended
Promissory Note (Robert Kremer)
|
|
|
|
|
|
Exhibit
|
10.11(2)
|
Amended
Line of Credit with Michael Sonaco
|
|
|
|
|
|
Exhibit
|
10.12(2)
|
Amended
Promissory Note (KBK, Inc.)
|
|
|
|
|
|
Exhibit
|
10.13(2)
|
Amended
Master Revolving Line of Credit with BFP Texas, Ltd.
|
|
|
|
|
|
Exhibit
|
10.14(3)
|
Amended
Promissory Note (Robert Kremer)
|
|
|
|
|
|
Exhibit
|
10.15(3)
|
Amended
Master Revolving Line of Credit with BFP Texas, Ltd.
|
|
|
|
|
|
Exhibit
|
10.16(4)
|
Amended
Master Revolving Credit Line (BFP Texas, Ltd.)
|
|
|
|
|
|
Exhibit
|
10.17(4)
|
Addendum
To Lease
|
|
Exhibit
|
10.18(5)
|
Amended
and Restated Convertible Promissory Note with The Loev Law Firm,
PC
|
| |
|
|
|
Exhibit
|
10.19(6) |
Amended
and Restated Promissory Note (KBK, Inc.)
|
| |
|
|
|
Exhibit
|
10.20(6) |
Amended
Promissory Note with Michael Sonaco
|
| |
|
|
|
Exhibit
|
10.21(6) |
Amended
Promissory Note with KBK, Inc.
|
| |
|
|
| Exhibit |
10.22(6) |
Amended
Master Revolving Line of Credit with BFP Texas,
Ltd.
|
| |
|
|
|
Exhibit
|
10.23* |
Amended
Promissory Note with Robert Kremer
|
| |
|
|
|
Exhibit
|
10.24* |
Amended
Master Revolving Line of Credit with BFP Texas, Ltd.
|
| |
|
|
|
Exhibit
|
31.1*
|
Certificate
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
| |
|
|
|
Exhibit
|
31.2*
|
Certificate
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
| |
|
|
|
Exhibit
|
32.1*
|
Certificate
of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
| |
|
|
|
Exhibit
|
32.2*
|
Certificate
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
* Filed
as an exhibit herein.
|
(1)
|
Filed
as an exhibit to our Registration on Form SB-2, filed with the Securities
and Exchange Commission on October 4, 2007, and incorporated herein by
reference.
|
|
|
|
|
(2)
|
Filed
as an exhibit to our Registration on Form S-1, filed with the Securities
and Exchange Commission on June 20, 2008, and incorporated herein by
reference.
|
|
|
|
|
(3)
|
Filed
as an exhibit to our Registration on Form S-1, filed with the Securities
and Exchange Commission on August 15, 2008, and incorporated herein by
reference.
|
|
|
|
|
(4)
|
Filed
as an exhibit to our Registration on Form S-1, filed with the Securities
and Exchange Commission on September 11, 2008, and incorporated herein by
reference.
|
| |
|
|
(5)
|
Filed
as an exhibit to our Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on October 15, 2008, and incorporated
herein by reference.
|
| |
|
|
(6)
|
Filed
as an exhibit to our Annual Report on Form 10-K filed with the Securities
and Exchange Commission on February 27,
2009.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
MICHAEL
LAMBERT, INC.
|
|
|
|
|
DATED:
April 14, 2009
|
By:
/s/ Robert
Kremer
|
|
|
Robert
Kremer
|
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
|
|
|
DATED:
April 14, 2009
|
By:
/s/ Carey G.
Birmingham
|
|
|
Carey
G. Birmingham
|
|
|
Chief
Financial Officer (Principal Financial
Officer)
|