- Quarterly Report (10-Q)

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

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission file number: 333-131531

PANGLOBAL BRANDS INC.
(Exact name of small business issuer as specified in its charter)

Delaware	20-8531711
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification Number)
organization)

2853 E. Pico Blvd. Los Angeles, CA 90023
(Address of principal executive offices)

323.226-6500
(Issuer’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). 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.

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

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

As of May 15, 2009, the Company had 41,371,710 shares of common stock issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	1

ITEM 1. FINANCIAL STATEMENTS.	1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.	23

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34

ITEM 4T. CONTROLS AND PROCEDURES	35

PART II-OTHER INFORMATION	35

ITEM 1. LEGAL PROCEEDINGS	35

ITEM 1A. RISK FACTORS	36

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	40

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS	40

ITEM 5. OTHER INFORMATION	40

ITEM 6. EXHIBITS.	42

SIGNATURES	44

PART I – FINANCIAL INFORMATION

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. These statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled "Risk Factors" beginning on page 37 of this quarterly report.

Our financial statements are stated in United States Dollars (US$) unless otherwise stated and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all references to "common shares" refer to the common shares in our capital stock.

As used in this annual report, the terms "we", "us", "our", means Panglobal Brands Inc. and our wholly-owned subsidiary, Mynk Corporation, unless otherwise indicated.

ITEM 1. FINANCIAL STATEMENTS.

Panglobal Brands Inc.
March 31, 2009

	Index

Consolidated Balance Sheets (Unaudited)	F-1

Consolidated Statements of Operations (Unaudited)	F-2

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	F-3

Consolidated Statements of Cash Flows (Unaudited)	F-4

Notes to the Consolidated Financial Statements	F-6

PANGLOBAL BRANDS INC.
AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

		March 31,			September 30,
		2009			2008

ASSETS
Current assets:
Cash	$	66,210		$	---
Accounts receivable, net of allowance of $400,232 and $544,176 as		493,865			444,291
of March 31, 2009 and September 30, 2008, respectively
Due from factor, net		1,682,942			1,411,456
Inventory		1,578,073			1,304,407
Prepaid expenses and other current assets		142,485			97,354
Total current assets		3,963,575			3,257,508

Property and equipment , net		471,163			587,992
Trademarks and intangible assets		1,177235			1,177,235
Deposits		128,392			134,520
Total assets	$	5,740,365		$	5,157,255

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank overdraft	$	---		$	171,521
Accounts payable and accrued expenses		4,758,894			3,861,562
Convertible note payable to shareholders		1,750,000			750,000
Total current liabilities		6,508,894			4,783,083

Commitments and contingencies


Stockholders’ equity :
Authorized - 600,000,000 shares; issued and outstanding –
41,371,710 shares and 37,671,710 shares at
March 31, 2009 and September 30, 2008, respectively		4,137			3,767

Additional paid-in capital		15,512,100			14,741,439
Accumulated deficit		(16,284,766	)		(14,371,034	)
Total stockholders’ equity (deficit)		(768,529	)		374,172
Total liabilities and stockholders’ equity	$	5,740,365		$	5,157,255

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

F-1

PANGLOBAL BRANDS INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

		Three Months Ended						Six Months Ended
		March 31,						March 31,
		2009			2008			2009			2008


Net sales	$	5,176,794		$	2,962,919		$	11,629,258		$	3,083,552
Cost of sales		3,614,728			2,261,341			8,551,378			2,388,368
Gross profit		1,562,066			701,578			3,077,880			695,184

Costs and expenses:
Design and development		687,955			932,527			1,506,240			1,795,387
Selling and shipping		568,110			500,247			1,337,875			904,479
General and administrative, including
$204,496 and $514,899 of stock-based
compensation for the three months
ended March 31, 2009 and 2008,
respectively; and $401,031 and
$1,062,800 for the six months ended
March 31, 2009 and 2008, respectively		1,042,610			1,240,547			1,914,095			2,256,772
Depreciation and amortization		32,333			21,357			62,830			35,824
Total costs and expenses		2,331,008			2,694,678			4,821,040			4,992,462
		(768,942	)		(1,993,100	)		(1,743,160	)		(4,297,278	)

Interest income		2			4,140			5			21,983
Interest (expense)		(95,807			(8,489	)		(170,577	)		(8,489	)
Interest income/(expense), net		(95,805	)		(4,349	)		(170,572	)		13,494

Net loss	$	(864,747	)	$	(1,997,449	)		(1,913,732	)	$	(4,283,784	)

Net loss per common share - basic and
diluted	$	(0.02	)	$	(0.07	)		(0.05	)		(0.15	)
Weighted average number of common
shares outstanding - basic and diluted		40,302,800			29,635,530			38,972,800			28,789,250

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

F-2

PANGLOBAL BRANDS INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

											Total
					Additional						Stockholders’
	Common Stock				Paid-in			Accumulated			Equity
	Shares		Amount		Capital			Deficit			(Deficit)


Balance, September 30, 2006	3,749,995	$	375	$	646,635		$	(833,236	)	$	(186,226	)


Shares issued to acquire in connection
with reverse merger transaction	11,396,500		1,140		(68,991	)		—			(67,851	)
Shares issued to related parties for debt
in connection with reverse merger
transaction	975,000		97		389,903			—			390,000
Shares issued in private placement, net
of offering costs of $21,900	10,610,226		1,061		4,751,641			—			4,752,702

Stock-based compensation	—		—		644,230			—			644,230
Net loss for the year ended September 30,
2007	—		—		—			(3,924,871	)		(3,924,871	)
Balance, September 30, 2007	26,731,771		2,673		6,363,418			(4,758,107	)		1,607,984

Shares issued in private placement	10,871,759		1,087		6,152,731			—			6,153,818
Shares issued as loan fees	68,180		7		48,856			—			48,863
Stock-based compensation	—		—		2,176,434			—			2,176,434
Net loss for the year ended September 30,
2008								(9,612,927	)		(9,612,927	)
Balance, September 30, 2008	37,671,710	$	3,767	$	14,741,439		$	(14,371,034	)	$	374,172
Shares issued in private placement	3,700,000		370		369,630			—			370,000
Stock-based compensation	—		—		401,031			—			401,031
Net loss for the six months ended March
31, 2009	—		—		—			(1,913,732	)		(1,913,732	)
Balance, March 31, 2009	41,371,710	$	4,137	$	15,512,100		$	(16,284,766	)	$	(768,529	)

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

F-3

PANGLOBAL BRANDS INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

		Six Months Ended March 31,
		2009			2008

Cash flows from operating activities
Net loss	$	(1,913,732	)	$	(4,283,784	)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Depreciation and amortization		62,830			35,824
Recovery of bad debts		(143,944	)		(1,343	)
Provision for returns		3,655			63,566
Stock-based compensation		401,031			1,062,800
Stock issued as loan fees		---			25,000
Loss on abandoned leasehold improvements		---			4,243
Cancellation of website development contract		53,999			---
Changes in operating assets and liabilities:
(Increase) decrease in -
Accounts receivable		94,370			(77,125	)
Due from factor		(275,141			(1,086,109	)
Inventory		(273,666	)		(359,744	)
Prepaid expenses and other current assets		(45,131	)		(63,546	)
Deposits		6,128			(66,455	)
Increase (decrease) in -
Accounts payable and accrued expenses		897,332			1,182,439
Net cash used in operating activities		(1,132,269	)		(3,691,366	)

Cash flows from investing activities
Purchase of office equipment		---			(295,257	)
Net cash used in investing activities		---			(295,257	)

Cash flows from financing activities
Increase (decrease) in bank overdraft		(171,521	)		179,172
Gross proceeds from private placements		370,000			2,153,819
Proceeds from related party loans		1,000,000			500,000
Repayment of related party loans		---			(10,000	)
Net cash provided by financing activities		1,198,479			2,822,991

Net increase(decrease) in cash		66,210			(1,163,632	)
Cash and cash equivalents at beginning of period		---			1,170,214
Cash and cash equivalents at end of period	$	66,210		$	6,582

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

F-4

PANGLOBAL BRANDS INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (CONTINUED)

		Six Months Ended March 31,
		2009		2008



Supplemental disclosures of non-cash investing and financing activities:
Common stock issued as loan fees	$	---	$	25,000
Supplemental disclosures of cash flow information:
Cash paid for -
Interest	$	170,577	$	8,489

Income taxes	$	---	$	---

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

F-5

PANGLOBAL BRANDS INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Organization and Nature of Operations

EZ English Online Corp, a Delaware corporation (“EZ English”), was incorporated in the State of Delaware on March 2, 2005. EZ English sold common stock pursuant to a registration statement on Form SB-2 declared effective by the Securities and Exchange Commission on February 28, 2006, and raised gross proceeds of approximately $85,000. Through September 30, 2006, EZ English was a development stage company offering a teacher training course to teach English as a second language over the Internet.

Beginning in December 2006, in conjunction with a new controlling shareholder acquiring approximately 79% of the issued and outstanding common shares, EZ English began a program to discontinue its existing business operations and prepare to enter the fashion industry. On February 2, 2007, in order to better reflect its future business operations and prepare for its acquisition of Mynk Corporation, a privately-held Nevada corporation (“Mynk”), EZ English completed a merger with its wholly-owned Delaware subsidiary, in order to effect a name change to Panglobal Brands Inc. (“Panglobal”), and effected a six-for-one forward split of its outstanding common stock. All common share amounts referred to herein are presented on a post-split basis. All options referred to herein were issued on a post-split basis.

Mynk was incorporated in Nevada on February 3, 2006 to engage in the business of design, manufacture and distribution of clothing and accessories throughout the United States and Canada.

Unless the context indicates otherwise, Panglobal and Mynk are hereinafter referred to as the “Company”. The Company sells its products through a network of wholesale accounts. The Company was considered a “development stage company” as defined in Statement of Financial Accounting Standards No. 7, “Accounting and Reporting by Development Stage Enterprises” until December 31, 2007, as it had not yet commenced any material revenue-generating operations, did not have any material cash flows from operations, and was dependent on debt and equity funding to finance its operations. The Company recorded approximately $13.9 million in revenue in the year ended September 30, 2008 and no longer considers its self a “development stage” company.

Basis of Presentation

Interim Financial Information

The interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments (including normal recurring adjustments), necessary to present fairly the financial position at March 31, 2009, the results of operations for the three and six months ended March 31, 2009 and the cash flows for the six months ended March 31, 2009.

Operating results for the three and six months ended March 31, 2009 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2009.

2. Business Operations and Summary of Significant Accounting Policies

Going Concern and Plan of Operations

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Prior to December 31, 2007 the Company had been in the development stage. It generated approximately $13.9 million in revenues from operations for the year ended September 30, 2008 and $11.6 million for the six months ended March 31, 2009 but is still dependent upon debt and equity financing which raises substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to achieve profitable operations. As of March 31, 2009, the Company had an accumulated deficit of ($16,284,766);

and negative working capital of ($2,542,319) and had incurred a net loss of ($1,913,732) and used net cash in operating activities of ($1,132,269) for the six months ended March 31, 2009. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

At March 31, 2009, the Company had five quarters of revenue-generating operations. Principal activity through December 31, 2007 related to the Company’s formation, capital raising efforts and initial product design and development activities. Revenue generating activities generated approximately $13.9 million in revenue for the period from January 1-September 30, 2008 and the Company has an order backlog of approximately $10.0 million in prospective sales as of April 30, 2009. The Company has yet to generate any material cash flows from operations, and is essentially dependent on debt and equity funding from both related and unrelated parties to finance its operations.

Principles of Consolidation

The accompanying consolidated financial statements include the financial statements of Panglobal and its wholly-owned subsidiary, Mynk Corporation. All intercompany balances and transactions have been eliminated in consolidation.

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 reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, due from factor, prepaid expenses, accounts payable, accrued expenses, loan from officer and convertible note payable to shareholders approximate their respective fair values due to the short-term nature of these items and/or the current interest rates payable in relation to current market conditions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At times, such cash and cash equivalents may exceed federally insured limits. The Company has not experienced a loss in such accounts to date. The Company maintains its accounts with financial institutions with high credit ratings. The cash held by the factor is not included in cash and cash equivalents (see Note 5).

Accounts Receivable

The Company extends credit to customers whose sales invoices have not been sold to our factor based upon an evaluation of the customer’s financial condition and credit history and generally require no collateral. Management performs regular evaluations concerning the ability of our customers to satisfy their obligations and records a provision for doubtful accounts based on these evaluations. Based on existing economic conditions and collection practices, the Company’s allowance for doubtful accounts has been estimated to be $400,232 and $544,176 at March 31, 2009 and September 30, 2008, respectively.

Concentration of Credit Risks

During the three months ended March 31, 2009 sales to three customers accounted for 15.5%, 14.5% and 11.1% of the Company’s net sales. During the three months ended March 31, 2009, purchases from one supplier totaled approximately $2,241,629. At March 31, 2009, one customer accounted for 61% of the Accounts Receivable, net of allowance. At March 31, 2009, three customers accounted for 21%, 16%, and 15%, respectively, of the Due From Factor.

Inventory

Inventories are valued at the lower of cost or market, with cost being determined by the first-in, first-out method. The Company continually evaluates its inventories by assessing slow-moving product and records mark-downs as appropriate. At March 31, 2009, inventories consisted of finished goods, work-in-process and raw materials.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major renewals and improvements that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. When assets are retired or sold, the property accounts and related accumulated depreciation and amortization accounts are relieved, and any resulting gain or loss is included in operations.

Depreciation is computed on the straight-line method based on the estimated useful lives of the assets of five years. Leasehold improvements are amortized over the remaining life of the related lease, which has been determined to be shorter than the useful life of the asset.

Trademarks and Intangibles

Effective with the Company’s adoption of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” since inception of the Company, intangibles (including trademarks) with indefinite lives are no longer amortized, but instead tested for impairment. Intangible assets are reviewed for impairment annually or whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. Impairment losses are recognized if future cash flows of the related assets are less than their carrying values.

Impairment of Long-Lived Assets and Intangibles

Long-lived assets, including purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management has considered the net loss incurred for the three months ended March 31, 2009 and has concluded that there is no impairment of long lived assets or intangibles at March 31, 2009.

Revenue Recognition

The Company recognizes revenue from the sale of merchandise to its wholesale accounts when products are shipped and the customer takes title and assumes the risk of loss, collection of the relevant receivable is reasonably assured, pervasive evidence of an arrangement exists, and the sales price is fixed or otherwise determinable. Sales allowances are recorded as a reduction to revenue. Management has evaluated the effects of estimating and accruing for sales returns in the current and prior periods and provides for an estimated allowance for returns.

Design and Development

Design and development costs related to the development of new products are expensed as incurred.

Advertising

The Company expenses advertising costs, consisting primarily of placement in publications, along with design and printing costs of sales materials when incurred. Advertising expense for the three months ended March 31, 2009 and 2008 amounted to $600 and $13,345, respectively. Advertising expense for the six months ended March 31, 2009 and 2008 amounted to $1,100 and $21,821, respectively.

Shipping and Handling Costs

The Company records shipping and handling costs billed to customers as a component of revenue, and shipping and handling costs incurred by the Company for inbound and outbound freight are recorded in selling and shipping expenses. Total shipping and handling costs amounted to $56,158 and $20,520 for the three months ended March 31, 2009 and 2008, respectively. Total shipping and handling costs amounted to $110,752 and $27,979 for the six months ended March 31, 2009 and 2008, respectively.

Stock-Based Compensation

Effective February 3, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), a revision to SFAS No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123R requires that the Company measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards, with the cost to be recognized as compensation expense in the Company's financial statements over the period of benefit, which is generally the vesting period of the awards. Accordingly, the Company recognizes compensation cost for equity-based compensation for all new or modified grants issued after February 3, 2006 (Inception).

The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with EITF No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”, and EITF 00-18, “Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees”, whereas the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached or (b) at the date at which the necessary performance to earn the equity instruments is complete.

Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company will provide a valuation allowance for the full amount of the deferred tax asset since there is no assurance of future taxable income. Tax deductible losses can be carried forward for 20 years until utilized.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN 48”). FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The adoption of the provisions of FIN 48 did not have a material effect on the Company’s financial statements. The Company currently files or has in the past filed income tax returns in the United States. The Company is subject to tax examinations by tax authorities for tax years ending in 2006 and subsequently.

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of March 31, 2009, the Company has no accrued interest or penalties related to uncertain tax positions.

Loss per Common Share

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share are the same for all periods presented because all warrants and stock options outstanding are anti-dilutive. The related party loan continues to be convertible to common shares and is not repaid at March 31, 2009, but the conversion is anti-

dilutive. The 2,884,612 shares of common stock issued to the founders of Mynk in conjunction with the closing of the reverse merger transaction on May 11, 2007 have been presented as outstanding for all periods presented.

3. Share Exchange Agreement and Private Placements

Share Exchange Agreement

As a result of the sale of the 10,610,226 shares of common stock in late February 2007 at a per share price of $0.45, and the acquisition of Mynk by Panglobal effective May 11, 2007, the Company has determined that the grant date fair value charge to operations for all stock options and other similar stock-based compensation that is amortizable over future periods should begin on May 11, 2007, since that is the date on which acquisition occurred and the period of benefit therefore began. Since the Company’s common stock traded on a very limited and sporadic basis prior to May 11, 2007, the Company has also determined that the best indicator of fair value of the Company’s common stock on May 11, 2007 was the $0.45 per share cash price paid by the investors in the recent private placement, who owned approximately 40% of the issued and outstanding shares of common on May 11, 2007.

Private Placements

On February 27, 2007, in anticipation of the Exchange, the Company sold an aggregate of 9,426,894 shares of its common stock to fifty accredited investors in an initial closing of its private placement at a per share price of $0.45, resulting in aggregate gross proceeds to the Company of $4,242,103. Net cash proceeds to the Company, after the deduction of all private placement offering costs and expenses of $21,900, were $4,220,203.

On February 28, 2007, the Company sold an aggregate of 1,183,332 shares of its common stock to nine accredited investors in a second closing of the private placement at a per share price of $0.45, resulting in aggregate gross proceeds to the Company of $532,499. Net cash proceeds to the Company were also $532,499.

Stephen Soller, the Company’s Chief Executive Officer, purchased 291,666 shares in the private placement for $131,250. Craig Soller, the brother of Stephen Soller and a consultant to the Company, purchased 244,444 shares of common stock in the private placement for $110,000. Three Mynk shareholders also purchased an aggregate of 299,999 shares in the private placement for $134,500.

On October 23, 2007, the Company closed a private placement of 2,871,759 units for gross proceeds of $2,153,818. Each unit was sold for $0.75 and consists of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase, if exercised, one additional common share of our company at a price of $1.00 per common share until October 23, 2008 and at $1.50 per common share if exercised during the period from October 24, 2008 until the warrants expire on October 23, 2009.

On July 11, 2008, the Company closed a private placement, selling 8,000,000 shares of common stock at a price of $0.50 per share for proceeds of $4,000,000. The Company issued 560,000 shares pursuant to the exemption from registration under the United States Securities Act of 1933 provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the 1933 Act to four (4) investors who are “accredited investors” within the respective meanings ascribed to that term in Rule 501(a) under the 1933 Act. The Company issued 7,440,000 shares to eighteen (18) non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

On February 6, 2009, the Company raised $370,000 in a private placement selling 3,700,000 units consisting of 3,700,000 common shares at a price of $0.10 per share plus 1,850,000 warrants to purchase common shares at a price of $0.25 per share. The warrants are exercisable for twelve months. The Company issued 3,700,000 shares to four (4) non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

Stock Options

On January 18, 2007, in anticipation of the closing of the Exchange and Private Placements, the Company granted to Felix Wasser, the Company’s Chief Financial Officer, a stock option to purchase an aggregate of 250,000 shares of common stock, exercisable for a period of five years at $0.30 per share, with one quarter vesting every six months through January 18, 2009. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $97,500 ($0.39 per share), and was being charged to operations ratably from May 11, 2007 through January 18, 2009. Felix Wasser resigned as an officer of the Company on August 21, 2007 and no further charges to operations were recorded. Vesting has ceased and the 250,000 options have been cancelled.

On February 12, 2007, in anticipation of the closing of the Exchange and Private Placements, the Company granted to Stephen Soller, the Company’s Chief Executive Officer, stock options to purchase an aggregate of 1,800,000 shares of common stock, exercisable for a period of five years at $0.30 per share, with one-sixth vesting every six months through February 12, 2010. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $702,000 ($0.39 per share), and is being charged to operations ratably from May 11, 2007 through February 12, 2010. During the three months ended March 31, 2009 the Company recorded a charge to operations of $63,818 with respect to this option. During the six months ended March 31, 2009 the Company recorded a charge to operations of $127,636 with respect to this option.

The fair value of these stock options were calculated using the following Black-Scholes input variables: stock price on date of grant - $0.45; exercise price - $0.30; expected life – 4.67 – 4.75 years; expected volatility -125%; expected dividend yield - 0%; risk-free interest rate – 5.0% .

On February 12, 2007, in anticipation of the closing of the Exchange and Private Placements, the Company granted to two consultants stock options to purchase an aggregate of 375,000 shares of common stock exercisable for a period of five years at $0.45 per share, with one-third of the options vesting annually on each of February 11, 2008, February 11, 2009 and February 11, 2010. The fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was initially determined to be $142,500 ($0.38 per share). The fair value of such options is being charged to operations ratably from May 11, 2007 through February 11, 2010. In accordance with EITF 96-18, options granted to consultants are valued each reporting period to determine the amount to be recorded as an expense in the respective period. On March 31, 2009 the fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $0.07 per share, which resulted in a charge to operations of $795 during the three months ended March 31, 2009. As the options vest, they will be valued on each vesting date and an adjustment will be recorded for the difference between the value already recorded and the then current value on the date of vesting. On October 31, 2007 the relationship of one of the consultants with the Company ended and options to exercise 250,000 shares of common stock have been cancelled at that time and previously calculated compensation in the amount of $34,205 had been reversed during the three months ended December 31, 2007. Accordingly, there will be no further non-cash compensation expenses charged relating to those 250,000 options.

On February 12, 2007, the fair value of the aforementioned stock options was calculated using the following Black-Scholes input variables: stock price on date of grant - $0.45; exercise price - $0.45; expected life –4.75 years; expected volatility - 125%; expected dividend yield - 0%; risk-free interest rate – 5.0% . On September 30, 2007, the fair value of the aforementioned stock options was calculated using the following Black-Scholes input variables: stock price of grant - $1.02; exercise price - $0.45; expected life – 4.625 years; expected volatility - 125%; expected dividend yield - 0%; risk-free interest rate – 5.0%

On August 7, 2007, the Company granted a consultant a stock option to purchase 100,000 shares of common stock exercisable for a period of one year at $0.45 per share, all of which were fully vested upon issuance, for past services through June 2007. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $69,000 ($0.69 per share), and was charged to operations at June 30, 2007. At June 30, 2008, the Company agreed to extend the exercise period by one year. The fair value of the one year extension, as calculated pursuant to the Black-Scholes option pricing model, was determined to be $35,000 ($0.35 per share), and was fully charged to operations at June 30, 2008.

On October 23, 2007, the Company granted to Charles Lesser, the Company’s Chief Financial Officer, stock options to purchase an aggregate of 480,000 shares of common stock, exercisable for a period of five years at $0.75 per share, with 10,000 shares vesting monthly commencing January 1, 2008 through December 1, 2011. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $355,200 ($0.74 per share), and is being charged to operations ratably from November 1, 2007 through December 1, 2011. During the three months ended March 31, 2009 the Company recorded a charge to operations of $21,312. During the six months ended March 31, 2009 the Company recorded a charge to operations of $42,624.

The fair value of these stock options were calculated using the following Black-Scholes input variables: stock price on date of grant - $0.88; exercise price - $0.75; expected life – 4.25 – 4.50 years; expected volatility -125%; expected dividend yield - 0%; risk-free interest rate – 5.0% .

On October 23, 2007, the Company granted to Charles Lesser, the Company’s Chief Financial Officer, Incentive stock options to purchase an aggregate of 660,000 shares of common stock, exercisable for a period of five years at $0.75 per share, with 132,000 shares vesting on December 1, 2007 and 11,000 shares vesting monthly commencing January 1, 2008 through December 1, 2011. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $488,400 ($0.74 per share), and is being charged to operations ratably from November 1, 2007 through December 1, 2011. During the three months ended March 31, 2009 the Company recorded a charge to operations of $29,304. During the six months ended March 31, 2009 the Company recorded a charge to operations of $58,608.

On April 18, 2008, the Company granted to 15 employees, stock options to purchase an aggregate of 1,535,000 shares of common stock, exercisable for a period of five years at $1.10 per share, with twenty five percent of the shares vesting each year through April 18, 2012. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $1,427,550 ($0.93 per share). On June 17, 2008 the Company decided to lower the exercise price to reflect market conditions to $0.75 per share. The fair value of the options at that date, as calculated by the Black-Scholes option pricing model, was determined to be $1,473,600 ($0.96 per share) and is being charged to operations ratably from April 18, 2008 through April 17, 2013. A number of employees have since left the employee of the Company and the company cancelled 725,000 options at September 30, 2008. During the three months ended March 31, 2009 the Company recorded a charge to operations of $48,600 with respect to this option. During the six months ended March 31, 2009 the Company recorded a charge to operations of $89,400 with respect to this option.

The fair value of these stock options were calculated using the following Black-Scholes input variables: stock price on date of grant - $1.10; exercise price - $0.75; expected life – 4.75 – 5.00 years; expected volatility -125%; expected dividend yield - 0%; risk-free interest rate – 3.0% .

On June 17, 2008, the Company granted to 3 employees, stock options to purchase an aggregate of 185,000 shares of common stock, exercisable for a period of five years at $0.75 per share, with twenty five percent of the shares vesting each year through June 17, 2012. The fair value of this option, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $111,000 ($0.60 per share and is being charged to operations ratably from June 17, 2008 through June 17, 2012. During the three months ended March 31, 2009 the Company recorded a charge to operations of $6,938 with respect to this option. During the six months ended March 31, 2009 the Company recorded a charge to operations of $13,876 with respect to this option.

The fair value of these stock options were calculated using the following Black-Scholes input variables: stock price on date of grant - $.71; exercise price - $0.75; expected life – 4.75 – 5.00 years; expected volatility -125%; expected dividend yield - 0%; risk-free interest rate – 3.0% .

During the period from February 3, 2006 (Inception) through December 31, 2006, the Company did not issue any stock options.

A summary of stock option activity for the six months ended March 31, 2009 and 2008 is as follows:

					Weighted
				Weighted	Average
				Average	Remaining
	Number of			Exercise	Contractual
	Shares			Price	Life (Years)
Options outstanding at September 30, 2007	2,337,500		$	0.333	4.48
Granted	1,140,000		$	0.750	4.80
Exercised	---			---	---
Cancelled	(312,500	)	$	0.420	---
Options outstanding at March 31, 2008	3,165,000		$	0.473	4.23
Options exercisable at March 31, 2008	936,666		$	0.416	3.75
Options outstanding at September 30, 2008	4,160,0000		$	0.540	4.00
Granted	---			---	---
Exercised	---			---	---
Cancelled	---			---	---
Options outstanding at March 31, 2009	4,160,000		$	0.540	4.00
Options exercisable at March 31, 2009	1,830,334		$	0.425	2.25

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2009, and 2008 was $0.00 and $0.75, respectively.

The aggregate intrinsic value of stock options outstanding at March 31, 2009 was $0.

Share Purchase Agreements

In anticipation of the closing of the Exchange and Private Placements, additional compensatory transactions were entered into pursuant to various Share Purchase Agreements between Jacques Ninio, the controlling shareholder of Panglobal at that time, and the Chief Executive Officer and certain other consultants. Since these transactions were intended to benefit the Company and were entered into by an affiliate of the Company, the Company has recorded these transactions on its consolidated financial statements as follows:

On February 12, 2007, Stephen Soller, the Company’s Chief Executive Officer, purchased 519,250 shares of common stock from two former founding shareholders of Mynk at a price of $0.325 per share. The fair value of this transaction was determined to be in excess of the purchase price by $64,904 ($0.125 per share), reflecting the difference between the $0.325 purchase price and the $0.45 private placement price, and was charged to operations on May 11, 2007.

On February 12, 2007, Stephen Soller, the Company’s Chief Executive Officer, acquired the beneficial rights to 1,800,000 shares of common stock from Jacques Ninio, the controlling shareholder of Panglobal at that time, at a price of $0.0001 per share. Pursuant to a related Escrow Agreement, the shares are to vest and be released to Mr. Soller at the rate of 600,000 shares every six months beginning on August 12, 2007, provided that Mr. Soller’s underlying employment agreement has not been terminated. The fair value of this transaction, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $810,000 ($0.45 per share), reflecting the difference between the $0.0001 purchase price and the $0.45 private placement price, and is being charged to operations ratably from May 11, 2007 through August 11, 2008. During the three months ended March 31, 2009, the Company recorded a charge to operations of $0.

On February 12, 2007, the fair value of the aforementioned share purchases was calculated using the following Black-Scholes input variables: stock price on date of grant - $0.45; exercise price - $0.0001; expected life – 1.25 years; expected volatility - 125%; expected dividend yield - 0%; risk-free interest rate – 5.0% . On May 11, 2007, the fair value of the aforementioned share purchases was calculated using the following Black-Scholes input variables: stock price of grant - $0.45; exercise price - $0.0001; expected life – 3 years; expected volatility - 125%; expected dividend yield - 0%; risk-free interest rate – 5.0% . At June 30, 2007, the fair value of the aforementioned share purchase was calculated using the following Black-Scholes input variables: stock price of grant - $1.02; exercise price - $0.0001; expected life – 2.875 years; expected volatility - 125%; expected dividend yield - 0%; risk-free interest rate – 5.0% .

On May 11, 2007, Craig Soller and David Long, two consultants to the Company, acquired the beneficial rights to 125,000 shares and 100,000 shares of common stock, respectively, from Jacques Ninio, the controlling shareholder of Panglobal at that time, at a price of $0.0001 per share. Pursuant to related Escrow Agreements, the 225,000 shares are to vest and be released to the consultants at the rate of 75,000 shares annually beginning on May 11, 2008, provided that the underlying consulting agreements have not been terminated. The fair value of these transactions, as calculated pursuant to the Black-Scholes option-pricing model, was initially determined to be $101,250 ($0.45 per share), reflecting the difference between the $0.0001 purchase price and the $0.45 private placement price. In accordance with EITF 96-18, such compensation arrangements granted to consultants are valued each reporting period to determine the amount to be recorded as an expense in the respective period. On March 31, 2009, the fair value of the transaction, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $0.07 per share, which resulted in a charge to operations of $729 during the three months ended March 31, 2009. As the restricted shares vest, they will be valued on each vesting date and an adjustment will be recorded for the difference between the value already recorded and the then current value on the date of vesting. On October 31, 2007 the relationship of one of the consultants with the Company ended and the right to acquire 100,000 shares of common stock has ceased and previously calculated compensation related to this right to acquire 100,000 shares of common stock in the amount of $14,116 had been reversed during the three months ended December 31, 2007. Accordingly, there will be no further non-cash compensation expenses charged relating to those 100,000 shares.

On October 31, 2007, David Long, as part of a settlement agreement, acquired the beneficial rights to acquire 20,000 shares of common stock from Jacques Ninio, a shareholder of Panglobal, at a price of $0.0001 per share. The 20,000 shares are to vest immediately. The fair value of this transaction, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $20,000 ($1.00 per share), reflecting the difference between the $0.0001

purchase price and the $1.00 fair market value on October 31, 2007 and the amount of $20,000 was charged to operations during the three months ended December 31, 2007.

On October 23, 2007, Charles Lesser, the Company’s Chief Financial Officer, acquired the beneficial rights to 250,000 shares of common stock from Jacques Ninio, the controlling shareholder of Panglobal at that time, at a price of $0.0001 per share. Pursuant to a related Escrow Agreement, the shares are to vest and be released to Mr. Lesser according to the following schedule: 100,000 shares on June 30, 2008 and 75,000 shares on December 31, 2008 and June 30, 2009, provided that Mr. Lesser’s underlying employment status has not been terminated. The fair value of this transaction, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $220,000 ($0.88 per share), reflecting the difference between the $0.0001 purchase price and the fair market value of $0.88 on October 23, 2007, and is being charged to operations ratably from November 1, 2007 through June 30, 2009. During the three months ended March 31, 2009, the Company recorded a charge to operations of $33,000. During the six months ended March 31, 2009, the Company recorded a charge to operations of $66,000.

4. Accounts Receivable

The Company also sells goods to some of its customers and assumes the credit risk. The Company has a receivable in dispute for which the Company has provided an estimated allowance for doubtful accounts, however, future events may change that estimate. Accounts receivable, as presented in the balance sheet at March 31, 2009 and September 30, 2008 is presented below:

		March 31, 2009			September 30 , 2008
Outstanding accounts receivable	$	894,097		$	988,467
Less: allowance for doubtful debts		(400,232	)		(544,176	)
	$	493,865		$	444,291

Changes to the allowance for doubtful debts were ($142,352) and $270 for the three months ended March 31, 2009 and 2008, respectively.

5. Due from Factor

The Company uses a factor for credit administration and cash flow purposes. Under the factoring agreement, the factor purchases a portion of the Company’s domestic wholesale sales invoices and assumes most of the credit risks with respect to such accounts for a charge of 0.75% of the gross invoice amount. The Company can draw cash advances from the factor based on a pre-determined percentage, which is 75% of eligible outstanding accounts receivable. The factor holds as security substantially all assets of the Company and charges interest at a rate of prime plus 1.0% on the outstanding advances. Effective October 27, 2008, the interest charge was increased to prime plus 2%. At March 31, 2008, the Company had cash account in the amount of $400,000 with the factor to be used as collateral for the loans advanced. On May 5, 2008 the cash collateral was reduced to $300,000. The Company is liable to the factor for merchandise disputes and customer claims on receivables sold to the factor. The factoring agreement expires on March 4, 2009, but automatically renews unless cancelled by either side.

At times, our customers place orders that exceed the credit that they have available from the factor. We evaluate those orders to consider if the customer is worthy of additional credit based on our past experience with the customer. If we decide to sell merchandise to the customer on credit, we take the credit risk for the amounts that are above their approved credit limit with the factor. As of March 31, 2009, the amount of Due from Factor for which we bear the credit risk is $74,351.

For the three months ended March 31, 2009 and 2008, the Company paid a total of approximately $63,374 and $4,928, respectively, of interest to the factor which is reported as a component of interest expense in the consolidated statements of income. For the six months ended March 31, 2009 and 2008, the Company paid a total of approximately $121,750 and $4,928, respectively, of interest to the factor which is reported as a component of interest expense in the consolidated statements of income.

Due from factor, net of reserve for chargebacks and estimated sales returns as presented in the balance sheet at March 31, 2009 and September 30, 2008 is summarized below:

		March 31, 2009			September 30, 2008
Outstanding factored receivables	$	3,222,434		$	3,126,405
Cash collateral reserve		302,058			303,426
		3,524,492			3,429,831

Less: advances		(1,508,907	)		(1,689,387	)
Reserves for chargeback and sales returns		(332,643	)		(328,988	)

Total due from factor	$	1,682,942		$	1,411,456

6. Inventory

Inventory consists of the following at March 31, 2009 and September 30, 2008:

		March 31, 2009		September 30, 2008
Finished goods	$	1,304,791	$	1,006,116
Work-in-process		113,606		156,697
Raw materials		159,676		141,594
	$	1,578,073	$	1,304,407

7. Property and Equipment

A summary of property and equipment at March 31, 2009 and September 30, 2008 is as follows:

		March 31, 2009			September 30, 2008
Machinery and equipment	$	167,486		$	167,486
Computer hardware and software		247,950			301,949
Furniture and fixtures		76,699			76,699
Leasehold improvements		149,583			149,583
		641,718			695,717
Less accumulated depreciation and amortization		(170,555	)		(107,725	)
	$	471,163		$	587,992

Depreciation and amortization expense for the three months ended March 31, 2009 and 2008 was $32,332 and $21,357, respectively. Depreciation and amortization expense for the six months ended March, 2009 and 2008 was $62,830 and $35,824, respectively.

8. Asset Purchase

On June 18, 2008, the Company purchased certain assets, including trademarks and office equipment, originally belonging to a company in foreclosure directly from the financial institution holding a security interest in the foreclosed assets. The Company obtained a release of all claims which the financial institution had in any intellectual property and customer information which it purchased.

The Company purchased the following assets:

	(a)	certain computers, office equipment and furniture;

	(b)	all intangible property, trademarks (or rights or claims therein);

	(c)	all open and unshipped orders relating to Scrapbook and Crafty Couture apparel products, all customer lists, and information regarding customer requirements and specifications.

The Company paid $1,200,000 as consideration for both the purchase of the purchased assets and the release of all claims or rights to the two trademarks, ‘Scrapbook’ and ‘Crafty Couture’. The purchase price was allocated as follows:

Office equipment and furniture	$	22,765
Trademarks and intangible assets		1,177,235
Total Purchase price	$	1,200,000

The Company engaged an independent firm of appraisers to perform a valuation of the purchased assets and determined that the price paid represented a fair price and that no adjustment needs to be made.

Employment of Kelly Kaneda

The Company subsequently hired Kelly Kaneda, the originator of the Scrapbook label at a salary of $150,000 per year for the first 12 months, increasing by $25,000 per year for each of three additional years. In addition, Mr. Kaneda shall receive a commission of one and one-half percent (1.5%) on the net sales of the Scrapbook Division. Net sales shall be defined as gross sales less discounts, markdowns, returns, losses for uncollected accounts, and other allowances actually taken by customers. Mr. Kaneda has received a signing bonus of 200,000 shares of restricted common stock. The fair value of this transaction, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $128,000 ($0.64 per share), and, as these shares are fully vested, was charged to operations at June 30, 2008.

In each of the first four (4) years of Mr. Kaneda’s employment commencing June, 2008, upon attainment of specified sales targets, he shall receive restricted common stock in the amounts set forth below, which stock shall be transferred and shall vest on the last day of the applicable contract year. In the event that Mr. Kaneda is terminated other than for cause or Mr. Kaneda resigns for cause, he shall be entitled to a prorated portion of the annual stock bonus, calculated through the effective date of termination or resignation.

Year	Sales Goals	Shares of Stock
Year 1	$20,000,000	200,000
Year 2	$25,000,000	250,000
Year 3	$30,000,000	250,000
Year 4	$40,000,000	250,000

9. Related Party Transactions

Craig Soller, the brother of the Company’s Chief Executive Officer, Stephen Soller, is a consultant to the Company. See Note 3 for transactions involving Craig Soller.

Convertible Note Payable to Shareholders

On March 3, 2008 the Company entered into a Revolving Loan Agreement with two of the shareholders of the Company, Sinecure Holdings, Inc. and Capella Investments, Inc. The loan allows the Company to borrow and repay, on a revolving basis, up to an outstanding amount of $750,000. The outstanding principal balance of the Loan bears interest, payable monthly, at a rate of 8% per annum. The loan is secured by a lien on the assets of the Company, except for factored receivables.

The Loan was due to be repaid in full by November 30, 2008. As consideration for the loan, the Company agreed to pay 68,180 of its Common shares as loan fees. At March 31, 2008, $500,000 was advanced and the Company recorded an expense of $25,000 included in operating expenses equivalent to the issuance of 45,454 shares of the Company’s common stock at the fair market value of $0.55 per share, the closing price of the Company’s common shares on the first advance date of February 26, 2008. The Company drew a further advance on April 10, 2008 and recorded an expense in general and administrative expenses of $23,863 equivalent to the issuance of 22,726 shares of its common stock at the fair market value of $1.05, the closing price of the Company’s common stock on April 10, 2008.

At any time after August 31, 2008, if there was an outstanding amount on the Loan, the lenders may convert, by written notice, either a portion or the total amount of the outstanding loan to common shares of the Company at a price per share equal to the lesser of:

	a)	the average closing bid for the five (5) trading days immediately preceding the first advance date of February 26, 2008; or,

	b)	the average closing bid price for the five (5) trading days immediately preceding the notice of intent to convert.

At March 31, 2009 the Company had an outstanding balance of $750,000 on the loan. On April 9, the Company agreed to convert $375,000 plus accrued interest to April 30, 2009 into common shares of the Company at a new conversion arrangement which is a conversion price of $0.10 per share. In addition, the Company agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months from issuance. The conversion is effective April 30, 2009 and the Company authorized the issuance of 4,025,000 shares of Common stock and 2,12,5000 warrants.

During the three months ended March 31, 2009, the Company incurred $15,000 in interest expense on the Loan. The balance of the loan has not been repaid to date and may be recalled or converted into shares at any time.

Revolving Loan Agreement Payable to Shareholder

On January 16, 2009 the Company entered into a revolving loan agreement with Providence Wealth Management Ltd, a British Virgin Islands Company (“Providence”), whereby Providence agreed to loan the Company the aggregate principal amount of $1,000,000 for general corporate purposes. The loan is issued as follows:

	(i)	The first advance of $700,000 on the date of execution of the loan agreement;

	(ii)	subject to the fulfillment of certain conditions, by advance of up to an additional $300,000; and bearing interest at 9% per annum on the outstanding principal, and repayable on or before July 31, 2009.

The first advance of $700,000 occurred on January 16, 2009 and a second advance of $300,000 occurred on January 27, 2009. During the three months ended March 31, 2009, the Company incurred $17,433 in interest expense on the Loan.

On June 12, 2008 the Company had entered into a revolving loan agreement dated effective March 3, 2008, with Sinecure Holdings Limited, a British Virgin Islands company, and Capella Investments Inc., a Nevada company, whereby Sinecure and Capella agreed to loan us the aggregate principal amount of $750,000 for general corporate purposes, above. Also on June 12, 2008, we entered into a security agreement dated effective March 3, 2008, with Sinecure and Capella, whereby we agreed to create a security interest by way of priority security interest in our present and after-acquired personal property and such other collateral described in the Security Agreement in favor of Sinecure and Capella. On January 16, 2009 we entered into a pari passu agreement with Providence, Sinecure and Capella, whereby Panglobal, Providence, Sinecure and Capella agree that all security interests issued will have equal priority and that the creation, registration, filing and existence of the security interests will not constitute an event of default under either of the two security agreements.

In connection with the Providence loan agreement, the Company entered into a security agreement dated to be effective back to March 3, 2008, with Providence, whereby the Company agreed to create a security interest by way of priority security interest in our present and after-acquired personal property and other collateral described in the security agreement in favor of Providence.

The Providence loan may be converted at any time after the first advance and before the maturity date into common shares of the Company at a conversion price of $0.10 per share. In addition, the Company agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months from issuance. On April 9, 2009, Providence offered to convert $187,500 of the loan plus accrued interest to April 30, 2009 into common shares of the Company. The conversion is effective

April 30, 2009 and the Company authorized the issuance of 2,124,330 shares of Common stock and 1,062,165 warrants.

10. Consulting Agreement for Sosik

On August 20, 2007 the Company signed a consulting agreement with Lolly Factory, Inc. and its sole shareholder (“Consultant”) to provide sales and merchandising consulting services for the Sosilk apparel division through December 31, 2010. Consulting fees totaling $452,125 were payable between September 2007 and June 2008 and have been fully paid. In addition, under the consulting agreement the Consultant shall earn a 3.5% (reduced to 3.15% on October 1, 2008) commission on the Sosik division’s net sales. The Company recorded sales commission expense of $62,500 for the three months ended March 31, 2009. The Consultant also earned 100,000 of our common shares payable each month from September, 2007 to June, 2008, up to an aggregate of 1,000,000 common shares which shares were deemed to be earned and vested each month.

The Consultant and the Company have established sales targets totaling $30 million for calendar year 2008, $45 million for calendar year 2009 and $60 million for calendar year 2010. The Consultant can earn up to 1,500,000 additional common shares of Panglobal Brands Inc. according to the following schedule:

	(i)	500,000 shares upon meeting the sales target for calendar year 2008;

	(ii)	500,000 shares upon meeting the sales target for calendar year 2009; and,

	(iii)	500,000 shares upon meeting the sales target for calendar year 2010.

The sales target for calendar 2008 was not met and the Company had not accrued an expense for issuing shares for meeting the sales target for 2008 and at March 31, 2009 has not accrued an expense for issuing shares for meeting the sales target for 2009.

11. Common Stock

Prior to December 15, 2006, the Company’s Articles of Incorporation authorized the issuance of 100,000,000 shares of the Company’s common stock with a par value of $0.0001 per share. On February 2, 2007 the Company increased the number of its authorized shares of common stock to 600,000,000 shares. The Company does not have any preferred stock authorized.

On February 2, 2007, the Company effected a six-for-one forward split of its outstanding common stock. All common share amounts referred to herein are presented on a post-split basis. All options referred to herein were issued on a post-split basis.

Mynk’s initial capitalization consisted of cash of $497,700 in exchange for the issuance of 10,000,000 shares of Mynk common stock (equivalent to 2,884,612 shares of Panglobal common stock).

On May 11, 2007, pursuant to a Share Exchange Agreement dated as of February 15, 2007 (the “Share Exchange Agreement”) by and among Panglobal, the shareholders of Mynk Corporation (“Selling Shareholders”) and Mynk, Panglobal issued 3,749,995 shares of its common stock in exchange for all of the issued and outstanding shares of Mynk, issued 975,000 shares of it common stock in payment of $390,000 of outstanding loans to Mynk, and agreed to reimburse a shareholder of Mynk up to $100,000 for outstanding amounts due (the “Exchange”). Previously, on February 3, 2006, Mynk had issued 10,000,000 shares of its common stock to its founders for $497,700 in cash, and 3,000,000 shares of its common stock valued at $149,310, as loan fees on June 20, 2006, for a total of 13,000,000 shares, which constituted all of the issued and outstanding shares of Mynk prior to the Exchange. The share exchange was conducted on the basis of 0.2884615 common shares of Panglobal for every one common share of Mynk.

The Company raised $4,000,000 in a private placement selling 8,000,000 of its common shares at a price of $0.50 per share which officially closed on July 10, 2008; but was reflected at June 30, 2008 as cash had been received by the Company at quarter-end.

We issued 560,000 shares pursuant to the exemption from registration under the United States Securities Act of 1933 provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the 1933 Act to four (4) investors who are “accredited investors” within the respective meanings ascribed to that term in Rule 501(a) under the 1933 Act.

We issued 7,440,000 shares to eighteen (18) non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

12. Commitments and Contingencies

The Company’s executive and head office moved on February 15, 2008 to 2853 E. Pico Blvd., Los Angeles, CA 90023. The Company has signed a three year lease for the new head office measuring 18,200 square feet at a monthly rental of $11,500. The lease began on January 1, 2008 and the Company moved into the new premises on February 15, 2008. Total rent expense including sales showrooms for the three months ended March 31, 2009 and 2008 was $94,428 and $92,991, respectively. Total rent expense including sales showrooms for the six months ended March 31, 2009 and 2008 was $185,549 and $143,334, respectively.

The table below sets forth the Company’s lease obligations through 2013.

Year ending September 30,
2009	$	171,906
2010		353,528
2011		222,609
2012		123,027
2013		10,278
	$	881,349

The Company is periodically subject to various pending and threatened legal actions that arise in the normal course of business. The Company’s management believes that the impact of any such litigation will not have a material adverse impact on the Company’s financial position or results of operations. On September 19, 2008, Mynk Corporation, our wholly-owned subsidiary, sued Delia’s Inc., a customer, in the Superior Court of the State of California, for goods shipped, but unpaid, in the amount of $604,081.

13. Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

The deferred tax benefit is composed of the following:

		March 31, 2009			September 30, 2008
Deferred tax benefit: Federal	$	4,913,000		$	4,913,000
Deferred tax benefit: State		1,276,000			1,276,000
Total benefit of NOL carry forward		6,189,000			6,189,000
Valuation allowance		(6,189,000	)		(6,189,000	)
Total	$	---		$	---

As of March 31, 2009 unused net operating losses equal to $13,379,000 are available for 17 years to offset future year’s federal and state taxable income. SFAS 109 requires that the tax benefit of such NOLs be recorded using current tax rates as an asset to the extent management assesses the utilization of such NOLs to be more likely than not. Based upon the Company's short term historical operating performance, the Company provided a full valuation allowance against the deferred tax asset.

14. Subsequent Events

Conversion of Convertible Note Payable to Shareholders

On March 3, 2008 the Company entered into a Revolving Loan Agreement with two of the shareholders of the Company, Sinecure, Inc. and Capella, Inc.. The loan allows the Company to borrow and repay, on a revolving basis, up to an outstanding amount of $750,000. The outstanding principal balance of the Loan bears interest, payable monthly, at a rate of 8% per annum.

At March 31, 2009 the Company had an outstanding balance of $750,000 on the loan. On April 9, 2009 the Company agreed to convert $375,000 plus accrued interest to April 30, 2009 into common shares of the Company at a conversion price of $0.10 per share. In addition, the Company agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. The conversion is effective April 30, 2009 and the Company authorized the issuance of 4,025,000 shares of Common stock and 2,12,5000 warrants.

Conversion of Revolving Loan Payable to Shareholder

On January 16, 2009 the Company entered into a revolving loan agreement with Providence Wealth Management Ltd, a British Virgin Islands company, whereby Providence agreed to loan the Company the aggregate principal amount of US$1,000,000 for general corporate purposes. The first advance of $700,000 occurred on January 16, 2009 and a second advance of $300,000 occurred on January 27, 2009.

The loan may be converted at any time after the first advance and before the maturity date into common shares of the Company at a conversion price of $0.10 per share. In addition, the Company agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. On April 9, the borrower offered to convert $187,500 of the loan plus accrued interest to April 30, 2009 into common shares of the Company. The conversion is effective April 30, 2009 and the Company authorized the issuance of 2,124,330 shares of Common stock and 1,062,165 warrants.

Conversion of Accounts Payable to Common Shares

On April 9, 2009 the Company agreed to convert an amount of $150,000 owed to one of the Company’s apparel vendors into common shares of the Company at a conversion price of $0.10 per share. In addition, the Company agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. The conversion is effective April 30, 2009 and the Company authorized the issuance of 1,500,000 shares of Common stock and 750,000 warrants.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes for quarter ended March 31, 2009 and the factors that could affect our future financial condition and results of operations. Historical results may not be indicative of future performance.

Corporate Overview and History

We were incorporated on March 2, 2005, under the laws of the State of Delaware, under the name “EZ English Online Inc.” Since incorporation, we were engaged in the development of an online teacher training course to teach English as a second language.

On July 3, 2006, our common stock was approved for quotation on the OTC Bulletin Board.

On February 2, 2007, we affected a forward stock split of our authorized and issued and outstanding shares on a six-for-one basis. The forward split resulted in the increase of our authorized capital from 100,000,000 shares of common stock with a par value of $0.0001 to 600,000,000 shares of common stock with a par value of $0.0001.

On February 2, 2007, we completed a merger with our wholly owned subsidiary Panglobal Brands Inc. As a result, we changed our name from EZ English Online Inc. to Panglobal Brands Inc. Our subsidiary was incorporated on January 22, 2007, specifically for the purpose of the merger. The six-for-one forward stock split, merger and name change became effective with our listing on NASDAQ’s OTC Bulletin Board on February 6, 2007 and our trading symbol was changed to “PNGB”.

On May 11, 2007, we acquired all of the issued and outstanding shares of Mynk Corporation. Mynk is now our wholly-owned, operating subsidiary. With the acquisition of Mynk, we changed our business focus to that of our newly acquired subsidiary and are now engaged in the business of the design, production and sale of clothing and accessories. We intend to acquire and create brands for the contemporary apparel market in the U.S. and international markets.

Our Current Business

Business Strategy

Our strategy is to build a series of apparel brands, consisting of mainly women’s apparel, and to build brand recognition by marketing our products to fashion conscious, affluent consumers who shop in high-end boutiques and department stores and who want to wear and be seen in the latest and most fashionable clothing and accessories. We plan to update our product offerings continually to be seen as a trend setter in fashionable clothing and accessories. We also are targeting the junior market and design, have manufactured and sell junior denim, t-shirts, dresses and other apparel. Lastly, based upon our branded products, we expect to be offered the opportunity to manufacture private label women’s apparel including dresses, skirts and knit and woven tops.

We operate all of our apparel businesses through our wholly-owned subsidiary, Mynk Corporation.

Our divisions are aggregated into three major consumer market product groupings: -Sosik, Scrapbook and Contemporary. The major consumer divisions are as follows:

SOSIK-Sosik designs, merchandises and sells junior t-shirts, dresses, skirts and knit and woven tops and other apparel manufactured in Asia. Junior apparel includes clothing for girls ages 14-22 as well as products for children ages 6-14. Sales of Sosik, including products that will be sold under private labels for junior products commenced in October, 2007 and shipments commenced in January 2008. Approximately 70% of our revenue for our fiscal year ended September 30, 2008 and 53% for the three months ended March 31, 2009 related to Sosik and and private label junior products. Customers include Charlotte Russe, Forever 21, Wet Seal, Ross, J.C. Penney, and Burlington Coat Factory.

SCRAPBOOK-Scrapbook and Crafty Couture trademarks were acquired June 18, 2008. The Scrapbook label is aimed at junior (teen and early 20’s) higher-end contemporary markets and is known for its mix and match prints and comfortable knit fabrics. Scrapbook products can be found at better department stores and boutiques. Major customers include Nordstrom’s, Dillard’s, Macy’s, Anthropologie, Top Shop (in London, UK), Forever 21 and Hot Topic. We have employed Kelly Kaneda, founder of the brand, to be the new president of the Scrapbook division of Panglobal Brands, Inc. Crafty Couture is less fashionable and aimed at a younger market, early through late teens.

The following four divisions have been consolidated into the Contemporary Group.

TEA AND HONEY-Tea and Honey designs, merchandises and sells women’s mid-priced contemporary dresses. Tea and Honey is a more casual look for women ages 22-35 with a vintage feel easily convertible for wear by the working woman by day and for evening wear, as well. Tea and Honey products commenced sales in June 2008 and will be manufactured in Asia. Retail customers include Federated department store chains, Anthropologie and boutiques. Competition includes Velvet, Ella Moss and A Common Thread.

HAVEN and PRIVATE LABEL - Based upon our branded products, we started offering Haven lower priced dresses with success and are beginning to be offered the opportunity by major department stores to design, merchandise and manufacture private label women’s apparel including dresses, skirts and knit and woven tops. Our Haven shipments commenced July, 2008 and include customers such as Nordsrom, Macy’s and Dillards.

HAUTEUR MYNK-Hauteur Mynk is a trademarked brand name selling premium denim jeans, skirts, dresses and shorts. Mynk had sales during the fiscal year, but is currently dormant and only accepts orders on current inventory. The Company decided that the premium denim market was saturated with brands and decided to place Hauteur Mynk on hold.

We anticipate no significant change in our products lines or new apparel industry divisions during the fiscal year to end on September 30, 2009. In all of our divisions, we purchase finished goods from numerous contract manufacturers and to a lesser extent raw materials directly from numerous textile mills and yarn producers and converters. We have not experienced difficulty in obtaining finished goods or raw materials essential to our business in any of our apparel business divisions.

We outsource our warehousing and shipping functions to a third party warehousing company designed to ship apparel products for multiple companies.

We maintain a company website at www.panglobalbrand.com where examples of our products can be seen.

Consulting Agreement for Sosik Division

On August 20, 2007 we signed a consulting agreement with Lolly Factory, Inc. and its sole shareholder (“Consultant”) to provide sales and merchandising consulting services for the Sosik and Juniors apparel divisions through December 31, 2010. Consulting fees totaling $452,125 were payable between September 2007 and June 2008 and have been fully paid at September 30, 2008. In addition, under the consulting agreement, as amended, the Consultant shall earn a 3.15% commission on the Sosik/Junior divisions net sales. We recorded sales commission expense of $62,500 for the three months ended March 31, 2009. The Consultant also earned 100,000 of our common shares payable each month from September, 2007 to June, 2008, up to an aggregate of 1,000,000 common shares.

We and the Consultant established sales targets totaling $30.0 million for calendar year 2008, $45.0 million for calendar year 2009 and $60.0 million for calendar year 2010. The Consultant can earn up to 1,500,000 additional common shares of Panglobal Brands Inc. according to the following schedule:

	(i)	500,000 shares upon meeting the sales target for calendar year 2008;

	(ii)	500,000 shares upon meeting the sales target for calendar year 2009; and,

	(iii)	500,000 shares upon meeting the sales target for calendar year 2010.

The sales target for calendar year 2008 was not met, and, we did not accrued an expense for shares payable to the Consultant for that year. At March 31, 2009 we have not accrued an expense for shares payable for meeting the sales target for 2009.

Manufacturing

We outsource all of our manufacturing to third parties on an order-by-order basis. These contract manufacturers are found in Asia, Mexico and the United States and they will manufacture our garments on an order-by-order basis. We believe that we will be able to meet our production needs in this way. Although the various fabrics that we intend to use in the manufacture of our products will be of the high quality, they are available from many suppliers in the United States and abroad.

Employees

As of May 15, 2009, we have 43 full-time employees: two (2) are executive, seven (7) are design staff, thirteen (13) are production staff, eleven (11) are sewing staff, four (4) are sales staff, four (4) are customer service and shipping staff and two (2) are accounting/administration staff. None of our employees are subject to a collective bargaining agreement, and we believe that our relations with our employees are good.

Quality Control

We intend to establish a quality control program to ensure that our products meet our high quality standards. We intend to monitor the quality of our fabrics prior to the production of garments and inspect prototypes of each product before production runs commence. We also plan to perform random on-site quality control checks during and after production before the garments leave the contractor. We also plan to conduct final random inspections when the garments are received in our distribution centers. We believe that our policy of inspecting our products at our distribution centers and at the vendors’ facilities will be important to maintain the quality, consistency and reputation of our products.

Competition

The apparel industry is intensely competitive and fragmented. We compete against other small companies like ours, as well as large companies that have a similar business and large marketing companies, importers and distributors that sell products similar to or competitive with ours.

We believe that our competitive strengths consist of the detailing of the design, the quality of the fabric and the superiority of the fit.

Government Regulation and Supervision

Our operations are subject to the effects of international treaties and regulations such as the North American Free Trade Agreement (NAFTA). We are also subject to the effects of international trade agreements and embargoes by entities such as the World Trade Organization. Generally, these international trade agreements benefit our business rather than burden it because they tend to reduce trade quotas, duties, taxes and similar impositions. However, these trade agreements may also impose restrictions that could have an adverse impact on our business, by limiting the countries from whom we can purchase our fabric or other component materials, or limiting the countries where we might market and sell our products.

Labelling and advertising of our products is subject to regulation by the Federal Trade Commission. We believe that we are in compliance with these regulations.

Information Systems

We believe that high levels of automation and technology are essential to maintain our competitive position and support our strategic objectives and we plan to invest in computer hardware, system applications and networks to provide increased efficiencies and enhanced controls.

Trademarks

We own numerous trademarks for all of our brands including Sosik, Scrapbook, Crafty Couture, Tea and Honey, Haven, Nela and Hauteur Mynk and have applications pending for the balance of our branded apparel products.

Marketing

We market our products directly through our sales staff as well as through showrooms which carry multiple lines of apparel products. In addition we attend industry trade shows.

Financial Condition, Liquidity and Capital Resources

Cash Flows

The following is a summary of our uses of cash for the periods set forth below:

		Six Months Ended March 31,					Percent
		2009			2008		Increase
							(Decrease)
Cash Flows provided/(used) in Operating	$	(1,132,269	)	$	(1,612,219	)	(18.6%)
Activities
Cash Flows used in Investing Activities		---			(295,257	)	---
Cash Flows provided by Financing Activities		1,370,000			2,882,991		(52.5%)
Net Increase in Cash During Period	$	237,731		$	(1,163632	)	---

Assets

At March 31, 2009, our total assets were $5,740,365 compared to our assets of $5,157,255 as at September 30, 2008. The increase of $583,110 results mainly from the increase in inventory and in our due from factor.

Our current assets totaled $3,963,575 at March 31, 2009 and $3,257,508 at September 30, 2008 respectively. The increase in current assets is primarily due to an increase in inventory and in our due from factor. Our net sales increased to $11,629,258 for the six months ended March 31, 2009 compared to sales of $3,083,552 for the three months ended December 31, 2007.

Liabilities and Working Capital

The following is a summary of our working capital at March 31, 2009, September 30, 2008 and the percent increase or decrease between those dates:

							Percentage
		March 31,			September		Increase
		2009			30, 2008		Decrease
Current Assets	$	3,963,575		$	3,257,508		21.6%
Current Liabilities		6,508,894			4,783,083		36.1%
Working Capital	$	(2,542,319	)	$	(1,525,575	)	60%

The decrease in our working capital of $1,016,744 is primarily due to a loan payable to shareholders of $1,000,000 in January 2009.

Cash Requirements and Additional Funding

Our estimated cash requirements for the next 12 months are as follows:

EXPENSE		COST
Design and development	$	3,100,000
Selling and Shipping	$	3,000,000
General and administrative (excludes $750,000 non-cash compensation)	$	2,600,000
TOTAL	$	8,700,000

On October 23, 2007, we closed a private placement of 2,871,759 units for gross proceeds of $2,153,819. Each unit was sold for $0.75 and consists of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase, if exercised, one additional common share of our company at a price of $1.00 per common share until October 23, 2008 and at $1.50 per common share if exercised during the period from October 24, 2008 until the warrants expire on October 23, 2009.

On March 3, 2008, we entered into a Revolving Loan Agreement with two of our shareholders. The loan allows us to borrow and repay, on a revolving basis, up to an outstanding amount of $750,000. The outstanding principal balance of the Loan bears interest, payable monthly, at a rate of 8% per annum. The Loan was due to be repaid in full by November 30, 2008. At March 31, 2009, we had an outstanding balance of $750,000 on the loan which may be called or converted into shares at any time. On April 9, 2009 we agreed to convert $375,000 plus accrued interest to April 30, 2009 into our common stock at a conversion price of $0.10 per share. In addition, we agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. The conversion is effective April 30, 2009 and we authorized the issuance of 4,025,000 shares of Common stock and 2,12,5000 warrants.

We raised $4,000,000 in a private placement selling 8,000,000 of its common shares at a price of $0.50 per share which officially closed on July 10, 2008; but is reflected at June 30, 2008 as cash had been received by the Company at quarter-end. We issued 560,000 shares pursuant to the exemption from registration under the United States Securities Act of 1933 provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the 1933 Act to four (4) investors who are “accredited investors” within the respective meanings ascribed to that term in Rule 501(a) under the 1933 Act. We issued 7,440,000 shares to eighteen (18) non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

On January 16, 2009 we entered into a revolving loan agreement with Providence Wealth Management Ltd, a British Virgin Islands company, whereby Providence agreed to loan us the aggregate principal amount of US$1,000,000 for general corporate purposes. The first advance of $700,000 occurred on January 16, 2009 and a second advance of $300,000 occurred on January 27, 2009.

The loan may be converted at any time after the first advance and before the maturity date into our company’s shares of common stock at a conversion price of $0.10 per share. In addition, we agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. On April 9, the borrower offered to convert $187,500 of the loan plus accrued interest to April 30, 2009 into our common shares. The conversion is effective April 30, 2009 and we authorized the issuance of 2,124,330 shares of Common stock and 1,062,165 warrants.

There are no assurances that we will earn the funds required for our continued operation. If we do not earn the required revenues, then we will have to seek another source of financing, likely through the sale of more shares of our common stock or borrowing money. There can be no assurance that additional financing will be available to us

when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon a combination of our ability to obtain further long-term financing, the successful and sufficient market acceptance of any product offerings that we may introduce, the continuing successful development of our product offerings, and, finally, our ability to achieve a profitable level of operations. At this time, we have a backlog for shipments of our products extending through September 2009. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments.

The Six Months Ended March 31, 2009 Compared to the Six Months Ended March 31, 2008

Revenue

Net sales for the six months ended March 31, 2009 totaled $11,629,258 versus $3,083,552 for 2008. Sales of Sosik and junior private label apparel totaled $5,933,165, sales of Scrapbook apparel totaled $4,412,692 and the remainder of the sales were Tea and Honey, and Haven dresses. During the year ended September 30, 2007, the only product sold was Hauteur Mynk Jeans, all of our other brands commenced shipping from January of 2008 onwards. Gross profit was $3,077,880 (26.5%) and 695,184 (22.5%) for the six months ended March 31, 2009 and 2008, respectively. At this time, we have a backlog of sales orders in excess $10.1 million for shipments through September 2009. With the addition of Scrapbook, our sales mix is changing. Approximately 51% of these orders are for Sosik and junior apparel products including skirts and knit and woven tops, 35% are for Scrapbook apparel, and the balance is for contemporary brands. Our Sosik products are sold through in-house sales staff and we have corporate sales showrooms in Los Angeles and New York. Our Scrapbook apparel is sold through in-house sales staff and independent sales showrooms in Chicago, Dallas and Miami. Our Haven/Tea and Honey products are sold through contract outside sales showrooms in Los Angeles earning sales commissions of 10-12%.

Expenses

The major components of our operating expenses are outlined in the table below:

		Six Months Ended March 31,			Percent
		2009		2008	Increase
					(Decrease)
Design & Development	$	1,506,240	$	1,795,387	(16.1%)
Selling & Shipping		1,337,875		904,479	47.9%
General and Administrative		1,914,095		2,256,772	(15.2%)
Depreciation & Amortization		62,830		35,824	75.4%
Total Expenses	$	4,821,040	$	4,992,462	(3.5%)

The decrease for the six months ended March 31, 2009 was due to the expansion of our operations, particularly addition of the Scrapbook division, offset by a decrease of $661,000 in non-cash equity compensation.

For the six months ended March 31, 2009 design and development expenses totaled 1,506,240, of which $747,000 was for design expenses and $759,000 was for production and development expenses. Salaries totaled $1,055,000. Purchases of sample fabric and garments totaled $236,000. Contract labor and consulting totaled $88,000 and manufacturing and design supplies totaled $96,000. For the six months ended March 31, 20008 salaries totaled $1,125,000. Purchases of sample fabric and garments totaled $222,000. Contract labor and consulting totaled $275,000 and manufacturing and design supplies totaled $52,000.

For the six months ended March 31, 2009 selling and shipping expense totaled $1,337,875 compared to $904,479 for the six months ended March 31, 20008 due to the increase in sales volume. During the six months ended March 31, 2009, travel and trade show expenses totaled $189,000, sales showroom expense totaled $116,000, sales salaries

totaled $296,000 and sales commissions totaled $319,000. Included in sales commission expenses for the six months ended March 31, 2009 was $125,000 paid to Lolly Factory, Inc. Selling expenses for the six months ended March 31, 2008 consisted of travel and trade show expenses totaling $107,000, sales showroom expense totaled $11,000, sales salaries totaled $218,000 and sales consulting totaled $279,000. Included in sales consulting expenses for the six months ended March 31, 2008 was $271,300 paid to Lolly Factory, Inc. None of the other divisions were in operation during the six months ended March 31, 2008, only the Hauteur Mynk denim brand, and the start-up of the Sosik division.

Our general and administrative expenses consist of accounting, information technology, website development, marketing and promotion, travel, meals and entertainment, rent, insurances, office maintenance, communication expenses (cellular, internet, fax, and telephone), office supplies, and courier and postage costs.

For the six months ended March 31, 2009 general and administrative expenses (including non-cash compensation costs of $401,031) totaled $1,914,095. Key components included salaries for executive, accounting and customer service totaling $330,000, payroll taxes of $135,000, professional (accounting and legal) fees of $264,000, postage and delivery of $81,000, insurance, including health, liability and directors & officer’s liability of $158,000 and rent of $70,000. Not included in general and administrative expenses is $62,830 in depreciation expense. For the six months ended March 31, 2008 general and administrative expenses totaled $2,256,772, of which $1,062,800 was non-cash compensation expenses. Key components included salaries of $314,000, payroll taxes of $146,000, postage and delivery of $119,000 insurance $104,000, rent of $62,100 and professional fees of $135,000.

The Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

Revenue

Net sales for the three months ended March 31, 2009 totaled $5,176,794 versus $2,962,919 for 2008. Sales of Sosik and junior private label apparel totaled $2,747,000, sales of Scrapbook apparel totaled 1,873,000 and the remainder of the sales were Tea and Honey, and Haven dresses. During the year ended September 30, 2007, the only product sold was Hauteur Mynk Jeans, all of our other brands only commenced shipping in January of 2008 onwards. Gross profit/ was $1,562,066 (30%) and 701,578 (23.7%) for the three months ended March 31, 2009 and 2008, respectively. At this time, we have a backlog of sales orders in excess $10.1 million for shipments through September 2009. With the addition of Scrapbook, our sales mix is changing. Approximately 51% of these orders are for Sosik and junior apparel products including skirts and knit and woven tops, 35% are for Scrapbook apparel, and the balance is for contemporary brands. Our Sosik products are sold through in-house sales staff and we have corporate sales showrooms in Los Angeles and New York. Our Scrapbook apparel is sold through in-house sales staff and independent sales showrooms in Chicago, Dallas and Miami. Our Haven/Tea and Honey products are sold through contract outside sales showrooms in Los Angeles earning sales commissions of 10-12%.

Expenses

The major components of our operating expenses are outlined in the table below:

		Three Months Ended March 31,			Percent
		2009		2008	Increase
					(Decrease)
Design & Development	$	687,955	$	932,527	(26.2%)
Selling & Shipping		568,110		500,247	13.6%
General and Administrative		1,042,610		1,240,547	(16.0%)
Depreciation & Amortization		32,333		21,357	51.4%
Total Expenses	$	2,331,008	$	2,694,678	(13.5%)

The overall decrease for the three months ended March 31, 2009 was due to the rationalization of expenses, trimming of staff. Despite expansion of our operations, particularly addition of the Scrapbook division, expenses were down from previous quarters including a decrease of $310,000 in non-cash equity compensation.

For the three months ended March 31, 2009 design and development expenses totaled 687,955, of which $336,000 was for design expenses and $352,000 was for production and development expenses. Staffing in these departments has been reduced and duties re-assigned, such that staff work across divisional lines. Salaries totaled $489,000. Purchases of sample fabric and garments totaled $130,000. Contract labor and consulting totaled $42,000 and manufacturing and design supplies totaled $103,000. For the three months ended March 31, 20008 design and development expenses totaled $932,527. Salaries totaled $607,000. Purchases of sample fabric and garments totaled $85,000. Contract labor and consulting totaled $158,000 and manufacturing and design supplies totaled $34,000.

For the three months ended March 31, 2009 selling and shipping expense totaled $568,110 compared to $500,247 for the three months ended March 31, 20008 due to the increase in sales volume. During the three months ended March 31, 2009, travel and trade show expenses totaled $72,000, sales showroom expense totaled $71,000, sales salaries totaled $119,000 and sales commissions totaled $117,000. Included in sales commission expenses for the three months ended March 31, 2009 was $62,500 paid to Lolly Factory, Inc. Selling expenses for the three months ended March 31, 2008 consisted of travel and trade show expenses totaling $43,000, sales showroom expense totaled $56,000, sales salaries totaled $128,000 and sales consulting totaled $94,450. Included in sales consulting expenses for the three months ended March 31, 2008 was $90,450 paid to Lolly Factory, Inc. None of the other divisions were in operation during the six months ended March 31, 2008, only the Hauteur Mynk denim brand, and the start-up of the Sosik division.

For the three months ended March 31, 2009 general and administrative expenses (including non-cash compensation costs of $204,496) totaled $1,042,610. Key components included salaries for executive, accounting and customer service totaling $170,000, payroll taxes of $68,000, professional (accounting and legal) fees of $143,000, postage and delivery of $45,000, insurance, including health, liability and directors & officer’s liability of $75,000 and rent of $35,000. Not included in general and administrative expenses is $32,333 in depreciation expense. For the three months ended March 31, 2008 general and administrative expenses totaled $1,240,547, of which $514,899 was non-cash compensation expenses. Key components included salaries of $184,000, payroll taxes of $85,000, postage and delivery of $77,000, insurances of $61,000, rent of $41,400 and professional fees of $82,000.

Off Balance-Sheet Arrangements

We use a factor for credit administration and cash flow purposes. Under the factoring agreement, the factor purchases a portion of our domestic wholesale sales invoices and assumes most of the credit risks with respect to such accounts for a charge of 0.75% of the gross invoice amount. We can draw cash advances from the factor based on a pre-determined percentage, which is 75% of eligible outstanding accounts receivable. The factor holds as

security substantially all our assets and charges interest at a rate of prime plus 1.0% on the outstanding advances. Effective October 27, 2008, the interest charge was increased to prime plus 2%. At March 31, 2008, we had cash account in the amount of $400,000 with the factor to be used as collateral for the loans advanced. On May 5, 2008 the cash collateral was reduced to $300,000. We are- liable to the factor for merchandise disputes and customer claims on receivables sold to the factor. The factoring agreement expires on March 4, 2009, but automatically renews unless cancelled by either side.

For the three months ended March 31, 2009 and 2008, we paid a total of approximately $63,374 and $4,928, respectively, of interest to the factor which is reported as a component of interest expense in the consolidated statements of income. For the six months ended March 31, 2009 and 2008, we paid a total of approximately $121,750 and $4,928, respectively, of interest to the factor which is reported as a component of interest expense in the consolidated statements of income.

Due from factor, net of reserve for chargebacks and estimated sales returns as presented in the balance sheet at March 31, 2009 and September 30, 2008 is summarized below:

		March 31,			September 30,
		2009			2008
Outstanding factored receivables	$	3,222,434		$	3,126,405
Cash collateral reserve		302,058			303,426
		3,524,492			3,429,831

Less: advances		(1,508,907	)		(1,689,387	)
Reserves for chargeback and sales returns		(332,643	)		(328,988	)

Total due from Factor	$	1,682,942		$	1,411,456

Critical Accounting Policies

Our consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

Inventory is valued at the lower of cost or market, cost being determined by the first-in, first-out method. We continually evaluate our inventories by assessing slow moving current product as well as prior seasons’ inventory. Market value of non-current inventory is estimated based on historical sales trends for each category of inventory of our company’s individual product lines, the impact of market trends, an evaluation of economic conditions and the value of current orders relating to the future sales of this type of inventory.

Revenue from product sales is recognized as title passes to the customer upon shipment. Sales returns and allowances for the three months ended March 31, 2009 totaled $740,933, approximately 14.3% of sales which included a write-off of receivables from Mervyn’s Inc., in bankruptcy. We have accrued an additional $333,000 as of March 31, 2009 for estimated chargebacks and sales returns.

Accounts Receivable

performs regular evaluations concerning the ability of our customers to satisfy their obligations and records a provision for doubtful accounts based on these evaluations. Based on historical losses, existing economic conditions and collection practices, our allowance for doubtful accounts has been estimated to be $400,232 at March 31, 2009. The Company’s credit losses for the periods presented have not significantly exceeded management’s estimates.

Concentration of Credit Risks

During the three months ended March 31, 2009 sales to three customers accounted for 15.5%, 14.5% and 11.1% of our net sales. During the three months ended March 31, 2009, purchases from one supplier totaled approximately $2,241,629. At March 31, 2009, one customer accounted for 61% of the Accounts Receivable, net of allowance. At March 31, 2009, three customers accounted for 21%, 16%, and 15%, respectively, of the Due From Factor.

Inventory

Property and Equipment

Stock-Based Compensation

Effective February 3, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), a revision to SFAS No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123R requires that we measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards, with the cost to be recognized as compensation expense in our financial statements over the period of benefit, which is generally the vesting period of the awards. Accordingly, we recognize compensation cost for equity-based compensation for all new or modified grants issued after February 3, 2006 (Inception).

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”), which establishes a formal framework for measuring fair value under generally accepted accounting principles. SFAS No. 157 defines and codifies the many definitions of fair value included among various other authoritative literature, clarifies and, in some instances, expands on the guidance for

implementing fair value measurements, and increases the level of disclosure required for fair value measurements. Although SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA pronouncements, it does not, of itself, require any new fair value measurements, nor does it establish valuation standards. SFAS No. 157 applies to all other accounting pronouncements requiring or permitting fair value measurements, except for: SFAS No. 123R, share-based payment and related pronouncements, the practicability exceptions to fair value determinations allowed by various other authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue recognition. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company adopted SFAS No. 157 on October 1, 2008 The adoption of SFAS No. 157 did not have a material impact on the Company’s consolidated financial position or results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS No. 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the company’s choice to use fair value on its earnings. SFAS No. 159 also requires companies to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS No. 157 and SFAS No. 107. SFAS No. 159 is effective as of the beginning of a company’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the company makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157. The Company is currently assessing the potential effect of SFAS No. 159 on its consolidated financial statements and has not elected to adopt SFAS 159 at this time. The Company adopted SFAS No. 159 on October 1, 2008 The adoption of SFAS No. 159 did not have a material impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141(revised 2007), Business Combinations , and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements . SFAS No. 141R improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report non-controlling (minority) interests in subsidiaries in the same way—as equity in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. The two statements are effective for fiscal years beginning after December 15, 2008 and management is currently evaluating the impact that the adoption of these statements may have on our consolidated financial statements.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB No. 133,” (“SFAS 161”). SFAS 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”). SFAS 161 also applies to non-derivative hedging instruments and all hedged items designated and qualifying under SFAS 133.

SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS 161 encourages, but does not require, comparative disclosures for periods prior to its initial adoption. We adopted SFAS 161 on November 15, 2008 and it did not have a material impact on the Company’s consolidated financial position or results of operations.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of Intangible Assets”. FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The adoption of FSP 142-3 did not have a material impact on the Company’s consolidated financial position or results of operations.

As a result of the recent credit crisis, on October 10, 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That is Not Active.” This FSP clarifies the application of SFAS No. 157 in a market that is not active. The FSP addresses how management should consider measuring fair value when relevant observable date does not exist. The FSP also provides guidance on how observable market information in a market that is not active should be considered when measuring fair value, as well as how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. This FSP is effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate in accordance with SFAS No. 154, “Accounting Changes and Error Corrections.” Adoption of this standard had no effect on our results of operations, cash flows or financial position.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.

Adoption of New Accounting Policies

Effective January 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN 48”). FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The adoption of the provisions of FIN 48 did not have a material effect on our consolidated financial statements. As of September 30, 2008, no liability for unrecognized tax benefits was required to be recorded.

We currently files or has in the past filed income tax returns in Canada and the United States. We are subject to tax examinations by tax authorities for tax years ending in 2006 and subsequently.

Our policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of March 31, 2009 , we have not accrued interest or penalties related to uncertain tax positions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s 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 for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives.

As required by SEC Rule 13a-15(b), our management carried out an evaluation, with the participation of our Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Management found the following deficiency in our disclosure controls and procedures:

There is not adequate division or segregation of duties in our accounting department that has three staff members, which includes the Chief Financial Officer; and,

To compensate for the inadequate segregation of duties, we have instituted a system of sign-offs and checks and balances within the accounting department. Further, we are in the process of implementing a series of closing procedures and checklists which must be signed-off and verified.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Certifications

Certifications with respect to disclosure controls and procedures and internal control over financial reporting under Rules 13a-14(a) or 15d-14(a) of the Exchange Act are attached to this Quarterly Report on Form 10-Q.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other than as described below, we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest. The outcome of open unresolved legal proceedings is presently indeterminable. Any settlement resulting from resolution of these contingencies will be accounted for in the period of settlement. We do not believe the potential outcome from these legal proceedings will significantly impact our financial position, operations or cash flows.

On September 19, 2008 Mynk Corporation, our wholly-owned subsidiary, sued Delia’s Inc., a customer in the Superior Court of the State of California, for goods shipped, but unpaid, in the amount of $604,081.

Elk Brands Manufacturing Company, Inc. was suing Mynk Corporation, our wholly-owned subsidiary, for an alleged payment owing of approximately $70,800, which amount was previously accrued and is included in

Accounts Payable and Accrued Expenses. The claim has now been settled on February 2, 2009, with Mynk agreeing to pay $40,000 to Elk Brands in four monthly payments of $10,000 each commencing February 28, 2009 and ending May 31, 2009.

ITEM 1A. RISK FACTORS

Risks Related to our Business

Our continued operations depend on current fashion trends. If our products and designs are not considered fashionable or desirable by enough consumers, then our business could be adversely affected.

The acceptance by consumers of our products and design is important to our success and competitive position, and the inability to continue to develop and offer fashionable and desirable products to consumers could harm our business. We cannot be certain that our high-fashion clothing and accessories will be considered fashionable and desirable by enough consumers to make our operations profitable. There are no assurances that our future designs will be successful, and any unsuccessful designs could adversely affect our business. If we are unable to respond to changing consumer demands in a timely and appropriate manner, we may fail to establish or maintain our brand name and brand image. Even if we react appropriately to changes in consumer preferences, consumers may consider our brand image to be outdated or associate our brand with styles that are no longer popular. Should trends veer away from our style of products and designs, our business could be adversely affected.

We may be unable to achieve or sustain growth or manage our future growth, which may have a material adverse effect on our future operating results.

We cannot provide any assurances that our business plan will be successful and that we will achieve profitable operations. Our future success will depend upon various factors, including the strength of our brand image, the market success of our current and future products, competitive conditions and our ability to manage increased revenues, if any, or implement our growth strategy. In addition, we anticipate significantly expanding our infrastructure and adding personnel in connection with our anticipated growth, which we expect will cause our selling, general and administrative expenses to increase in absolute dollars and which may cause our selling, general and administrative expenses to increase as a percentage of revenue. Because these expenses are generally fixed, particularly in the short-term, operating results may be adversely impacted if we do not achieve our anticipated growth.

Future growth may place a significant strain on our management and operations. If we experience growth in our operations, our operational, administrative, financial and legal procedures and controls may need to be expanded. As a result, we may need to train and manage an increasing number of employees, which could distract our management team from our business. Our future success will depend substantially on the ability of our management team to manage our anticipated growth. If we are unable to anticipate or manage our growth effectively, our operating results could be adversely affected.

We face intense competition, including competition from companies with significantly greater resources than ours, and if we are unable to compete effectively with these companies, our business could be harmed.

We face intense competition in the apparel industry from other, more established companies. A number of our competitors have significantly greater financial, technological, engineering, manufacturing, marketing and distribution resources than we do. Their greater capabilities in these areas may enable them to better withstand periodic downturns in the apparel industry, compete more effectively on the basis of price and production and to develop new products in less time. In addition, new companies may enter the markets in which we compete, further increasing competition in the apparel industry.

We believe that our ability to compete successfully depends on a number of factors, including the style and quality of our products and the strength of our brand name, as well as many factors beyond our control. We may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand our development and marketing of new products, which would adversely impact the trading price of our common stock.

Our business could suffer if our manufacturers do not meet our demand or delivery schedules.

Although we design and market our products, we outsource manufacturing to third party manufacturers. Outsourcing the manufacturing component of our business is common in the apparel industry and we compete with other companies for the production capacity of our manufacturers. Because we are a small enterprise and many of the companies with which we compete have greater financial and other resources than we have, they may have an advantage in the competition for production capacity. There is no assurance that the manufacturing capacity we require will be available to us, or that if available it will be available on terms that are acceptable to us. If we cannot produce a sufficient quantity of our products to meet demand or delivery schedules, our customers might reduce demand, reduce the purchase price they are willing to pay for our products or replace our product with the product of a competitor, any of which could have a material adverse effect on our financial condition and operations.

Government regulation and supervision could restrict our business and decrease our profitability.

Any negative changes to international trade agreements and regulations such as the North American Free Trade Agreement or any agreements affecting international trade such as those made by the World Trade Organization which result in a rise in trade quotas, duties, taxes and similar impositions or which has the result of limiting the countries from whom we can purchase our fabric or other component materials, or limiting the countries where we might market and sell our products, could decrease our profitability.

Increases in the price of raw materials or their reduced availability could increase our cost of sales and decrease our profitability.

The principal fabrics used in our business are cotton, synthetics, wools and blends. The prices we pay for these fabrics are dependent on the market price for raw materials used to produce them, primarily cotton. The price and availability of cotton may fluctuate significantly, depending on a variety of factors, including crop yields, weather, supply conditions, government regulation, economic climate and other unpredictable factors. Any raw material price increases could increase our cost of sales and decrease our profitability unless we are able to pass higher prices on to our customers. Moreover, any decrease in the availability of cotton could impair our ability to meet our production requirements in a timely manner.

If we are unable to enforce our intellectual property rights or otherwise protect our intellectual property, then our business would likely suffer.

Our success depends to a significant degree upon our ability to protect and preserve any intellectual property we develop or acquire, including copyrights, trademarks, patents, service marks, trade dress, trade secrets and similar intellectual property. We rely on the intellectual property, patent, trademark and copyright laws of the United States and other countries to protect our proprietary rights. However, we may be unable to prevent third parties from using our intellectual property without our authorization, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we may develop, causing us to lose sales or otherwise harm our business. We may need to bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources. In addition, notwithstanding the rights we have secured in our intellectual property, other persons may bring claims against us that we have infringed on their intellectual property rights or claims that our intellectual property right interests are not valid. Any claims against us, with or without merit, could be time consuming and costly to defend or litigate and therefore could have an adverse affect on our business. If any of these risks arise, our business would likely suffer.

The recent weakening of economic conditions in the U.S. and around the world could have harmful effects on our business. If these harmful effects cause us to scale down our operations, then our share price will likely decrease. If these harmful effects cause us to cease our operations, then our shareholders will likely lose their entire investment in our company.

The recent weakening of economic conditions in the U.S. and around the world, including in the financial services and real estate industries, could have harmful effects on our business. Weakening economic conditions generally lead to less money being spent on clothing across the industry as a whole. Competition for these limited

resources will likely become more intense. If consumers spend less and do not choose to spend their limited funds on our clothes, we will earn less revenue and we will not be able to fund our future operations through revenues from sales.

If we cannot fund all of our future operations through revenue, we may choose to raise money through sales of our equity securities. However, many investors have recently seen large decreases in the value of various investments due to declining share prices across many economic sectors. Because of this and other market factors, if we choose to raise funds through the sale of our equity securities, potential investors may be less likely to buy our equity securities or we may be need to sell our equity securities at low prices, resulting in fewer proceeds. This would make it difficult for us to raise adequate amounts to fund our operations through the sale of our equity securities.

If we are unable to fund all of our operations through revenues or the sale of our equity securities, then we may choose to borrow money to pay for some of our operations. A tightening of credit conditions has also been experienced in the economy recently. Because of the recent credit crisis, it is possible that we would not be able to borrow adequate amounts to fund our operations on terms and at rates of interest we find acceptable and in the best interests of our company.

If we cannot fund our planned operations from revenue, the sale of our equity securities or through incurring debt on acceptable terms, then we will likely have to scale down or cease our operations. If we scale down our operations, our share price would likely decrease and if we cease our operations, shareholders will likely lose their entire investment in our company.

The recent weakening of economic conditions in the U.S. and around the world could have harmful effects on the operations of our customers and suppliers and the confidence of end consumers, all of which could cause our operations to suffer and our revenues to decrease.

Some of our customers or suppliers could experience serious cash flow problems due to the current economic situation. If our customers or suppliers attempt increase their prices, pass through increased costs, alter payment terms or seek other relief, our business may suffer from decreased sales to final consumers or increased costs to us. If any of our vendors or suppliers go out of business, we may not be able to replace them with other companies of the same quality and level of service. If the quality of our products and promptness of delivery deteriorates as a result, our revenue will likely decrease as retailers and consumers would be less likely to choose our products out of those available to them.

We do not expect that the difficult economic conditions are likely to improve significantly in the near future, and further deterioration of the economy, and even consumer fear that the economy will deteriorate further, could intensify the adverse effects of these difficult market conditions.

We have a high concentration of sales to a number of key department stores across all of our divisions. Loss of one of these key customers would take time to replace and have a short term adverse impact on our results of operations.

During the three months ended March 31, 2009 sales to three customers accounted for 15.5%, 14.5% and 11.1% of our net sales. The acceptance by consumers of our products and design is important to our success and competitive position, and the loss of one of these key customers would have a short-term adverse impact on our results from operations.

Risks Related to Our Company

We lack an operating history and have losses which we expect to continue into the future. We have incurred a loss from operations and negative cash flows from operations that raise substantial doubt about our ability to continue as a going concern. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.

Our inception date was February 3, 2006. We have a very short operating history upon which an evaluation of our future success or failure cannot be made. As of March 31, 2009, our accumulated losses since inception amount to $16,284,766. In its audit report dated January 8, 2009, our auditors stated that we have incurred a loss from

operations and negative cash flows from operations which raise substantial doubt about our ability to continue as a going concern.

We will continue to incur expenses and may incur operating losses in the future. We cannot guarantee that we will be successful in becoming or remaining profitable in the future. Failure to become and remain profitable would cause us to go out of business.

Our Controls and Procedures are not effective, which could cause us to make inaccurate or late filings and for public trading of our shares to cease.

Our disclosure controls and procedures are not effective. Without effective disclosure controls and other procedures, the information that is required to be disclosed in our company's reports filed with the SEC may not be recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. If we fail to file our required filings in an accurate and timely manner, the Financial Industry Regulatory Authority (FINRA) may determine that our company no longer meets the listing requirements for the OTC Bulletin Board and remove our company from the OTC Bulletin Board quotations. If this happens, then market makers would no longer be able to enter quotations for our common shares through the OTC Bulletin Board and shareholders would likely be unable to sell their shares in the common stock of our company. This would cause them to lose their entire investment in our company.

Risks Related to Our Securities

Our stock price is highly volatile and stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

The trading price of our common stock has fluctuated significantly since our incorporation (March 2, 2005), and is likely to remain volatile in the future. The trading price of our common stock could be subject to wide fluctuations in response to many events or factors, including the following:

quarterly variations in our operating results;
changes in financial estimates by securities analysts;
changes in market valuations or financial results of apparel companies;
announcements by us or our competitors of new products, or significant acquisitions, strategic partnerships or joint ventures;
any deviation from projected growth rates in revenues;
any loss of a major customer or a major customer order;
additions or departures of key management or design personnel;
any deviations in our net revenue or in losses from levels expected by securities analysts;
activities of short sellers and risk arbitrageurs; and,
future sales of our common stock.

The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies' securities and that have often been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

The U.S. Securities and Exchange Commission imposes additional sales practice requirements on brokers who deal in our shares which are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty reselling your shares and this may cause the price of the shares to decline.

Our shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 and the Rules which impose additional sales practice requirements on brokers/dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, the broker/dealer must make a special suitability determination and receive from you a written agreement prior to making a sale for you. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent you from reselling your shares and may cause the price of the shares to decline.

We do not intend to pay dividends and there will be less ways in which you can make a gain on any investment in our company.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through appreciation of the stock’s price.

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

On February 6, 2009, we raised $370,000 in a private placement selling 3,700,000 units consisting of 3,700,000 common shares at a price of $0.10 per share plus 1,850,000 warrants to purchase common shares at a price of $0.25 per share. The warrants are exercisable for twelve months.

We issued 3,700,000 shares to four (4) non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

1. Conversion of Convertible Note Payable to Shareholders

On March 3, 2008we entered into a Revolving Loan Agreement with two of our shareholders, Sinecure Holdings, Inc. and Capella Investments, Inc. The loan allows us to borrow and repay, on a revolving basis, up to an outstanding amount of $750,000. The outstanding principal balance of the Loan bears interest, payable monthly, at a rate of 8% per annum.

At March 31, 2009 we had an outstanding balance of $750,000 on the loan. On April 9, we agreed to convert $375,000 plus accrued interest to April 30, 2009 into our common shares at a conversion price of $0.10 per share. In addition, we agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. The conversion is effective April 30, 2009 and the Company authorized the issuance of 4,025,000 shares of Common stock and 2,12,500warrants.

Conversion of Revolving Loan Payable to Shareholder

On January 16, 2009 we entered into a revolving loan agreement with Providence Wealth Management Ltd, a British Virgin Islands company, whereby Providence agreed to loan the Company the aggregate principal amount of US$1,000,000 for general corporate purposes. The first advance of $700,000 occurred on January 16, 2009 and a second advance of $300,000 occurred on January 27, 2009.

The loan may be converted at any time after the first advance and before the maturity date into our common shares at a conversion price of $0.10 per share. In addition, we agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. On April 9, the borrower offered to convert $187,500 of the loan plus accrued interest to April 30, 2009 into our common shares. The conversion is effective April 30, 2009 and we authorized the issuance of 2,124,330 shares of Common stock and 1,062,165 warrants.

Conversion of Accounts Payable to Common Shares

On April 9, 2009 we agreed to convert an amount of $150,000 owed to one of our apparel vendors into our common shares at a conversion price of $0.10 per share. In addition, we agreed to issue one warrant to purchase one Common share for every two shares to be issued at an exercise price of $0.25 per warrant exercisable for twelve months. The conversion is effective April 30, 2009 and we authorized the issuance of 1,500,000 shares of Common stock and 750,000 warrants.

2. Change of registered public accounting firm

On January 8, 2009, Panglobal Brands Inc. was notified that effective December 8, 2008, the personnel of GrobsteinHorwath & Company LLP have joined with Crowe Horwath LLP (“Crowe”) resulting in the resignation of Grobstein Horwath as independent registered public accounting firm for our company. Crowe was appointed as our new independent registered public accounting firm.

The audit reports of Grobstein Horwath on the financial statements of our company as of and for the years ended to September 30, 2007 and 2006 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. Grobstein Horwath’s 2007 and 2006 audit report relating to Grobstein Horwath’s audit of our financial statements for the fiscal years ended September 30, 2007 and 2006 included an emphasis paragraph relating to an uncertainty as to our ability to continue as a going concern.

The decision to engage Crowe was approved by our board of directors on January 8, 2009.

During our company’s most two recent fiscal years ended September 30, 2007 and 2006 and through January 8, 2009, we did not consult with Crowe on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on our financial statements, and Crowe did not provide either a written report or oral advice to us that was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

In connection with the audits of our financial statements for the fiscal year ended September 30, 2007 and 2006 and through the date of this current report, there were: (i) no disagreements between our company and Grobstein Horwath on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Grobstein Horwath, would have caused Grobstein Horwath to make reference to the subject matter of the disagreement in their reports on our financial statements for such years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

We have provided Grobstein Horwath a copy of the disclosures in our Form 8-K and have requested that Grobstein Horwath furnish us with a letter addressed to the Securities and Exchange Commission stating whether or not Grobstein Horwath agrees with our statements in this Item 4.01(a) . A copy of the letter dated January 30, 2009, furnished by Grobstein Horwath in response to that request is filed as Exhibit 16.2 to our Form 8-K filed on February 4, 2009.

ITEM 6. EXHIBITS.

Exhibits required by Item 601 of Regulation S-B

Exhibit Number	Description
(3)	Articles of Incorporation and Bylaws
3.1	Articles of Incorporation of Panglobal Brands Inc. (formerly EZ English Online) (attached as an exhibit to our Form SB-2 filed January 3, 2006).
3.2	Bylaws of Panglobal Brands Inc. (formerly EZ English Online) (attached as an exhibit to our Form SB-2 filed January 3, 2006).
3.3	Articles of Incorporation of Mynk Corp. (attached as an exhibit to our Form SB- 2 filed February 3, 2006).
3.4	Bylaws of Mynk Corp. (attached as an exhibit to our Form SB-2 filed February 3, 2006).
3.5	Certificate of Amendment (attached as an exhibit to our Current Report on Form 8-K filed on February 6, 2007).
3.6	Certificate of Ownership (attached as an exhibit to our Current Report on Form 8-K filed on February 6, 2007).
(10)	Material Contracts
10.1	PayPal User Agreement (attached as an exhibit to our Form SB-2 filed February 3, 2006).
10.2	Affiliated Stock Purchase Agreement dated December 12, 2006 (attached as an exhibit to our Current Report on Form 8-K filed on December 13, 2006).
10.3	Share Exchange Agreement between Panglobal Brands Inc. and Mynk Corporation, dated February 15, 2007 (attached as an exhibit to our Current Report on Form 8-K filed on February 20, 2007).
10.4	Consulting Agreement between our company, Lolly Factory, LLC and Mark Cywinski dated September 16, 2007 (attached as an exhibit to our Form 8-K filed September 27, 2006).
10.5	Lease Agreement with RFS Investments LLC, dated January 11, 2007 (attached as an exhibit to our Current Report on Form 8-K filed on February 20, 2007).
10.6	Lease Agreement with YMI Jeanswear (attached as an exhibit to our Annual Report on Form 10-KSB filed on January 15, 2008)
10.7	Lease Agreement with Jamison California Market Center, L.P. (attached as an exhibit to our Annual Report on Form 10-KSB filed on January 15, 2008)
10.8	Lease Agreement with Steven Goldstein (attached as an exhibit to our Annual Report on Form 10-KSB filed on January 15, 2008)
10.9	Lease Agreement with TR 39th St. Land Corp. (attached as an exhibit to our Annual Report on Form 10- KSB filed on January 15, 2008)
10.10	Loan Agreement dated January 16, 2009 with Providence Wealth Management Ltd (attached as an exhibit to our current report on Form 8-K filed on January 22, 2009)
10.11	Security Agreement dated January 16, 2009 with Providence Wealth Management Ltd (attached as an exhibit to our current report on Form 8-K filed on January 22, 2009)
10.12	Pari Passu Agreement dated January 16, 2009 with Providence Wealth Management, Sinecure Holdings Limited and Capella Investments Inc Ltd (attached as an exhibit to our current report on Form 8-K filed on January 22, 2009)
10.13	Loan Agreement dated March 4, 2008 with Sinecure Holdings Limited and Capella Investments Inc Ltd (attached as an exhibit to our current report on Form 8-K filed on January 22, 2009)
10.14	Security Agreement dated March 4, 2008 with Sinecure Holdings Limited and Capella Investments Inc Ltd. (attached as an exhibit to our current report on Form 8-K filed on January 22, 2009)
10.15	2007 Stock Option Plan (attached as an exhibit to our annual report on Form 10-K filed on January 13, 2009.)
16	Letter re change in certifying accountant
16.1	Grobstein Horwath & Company LLP resignation dated January 8, 2009.(attached as an exhibit to our current report on Form 8-K filed on February 3, 2009)
16.2	Letter of Grobstein Horwath & Company LLP, dated January 30, 2009 (attached as an exhibit to our current report on Form 8-K filed on February 3, 2009)

Exhibit Number	Description
(31)	Section 302 Certifications
31.1*	Certification under Sarbanes-Oxley Act of 2002 .
31.2*	Certification under Sarbanes-Oxley Act of 2002.
(32)	Section 906 Certifications
32.1*	Certification under Sarbanes-Oxley Act of 2002.
32.2*	Certification under Sarbanes-Oxley Act of 2002.

* filed hereto

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

PANGLOBAL BRANDS INC.

By: /s/ Stephen Soller
Stephen Soller
Chief Executive Officer, and Director
(Principal Executive Officer )
Dated: May 20, 2009

By: /s/ Charles Lesser
Charles Lesser
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Dated: May 20, 2009

Panglobal Brands (CE) (USOTC:PNGB)
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