U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

______________________

FORM 10-SB

GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934

________________________

ACTION FASHIONS, LTD.
 
(Name of small business issuer in its charter)
 

 
Colorado
(State or jurisdiction of
incorporation
or organization)
 
20-4092640
(I.R.S. Employer
Identification No.)
     
PO Box 235472
Encinitas, CA 92024
(Address of Principle Executive Offices)
 
 
92024
(Zip Code)
     
 
(858) 229-8116
(Issuer’s Telephone Number)
 



Securities to be registered under Section 12(b) of the Act:
         
Title of each class
To be so registered
     
Name of exchange on which each class is to be registered
         
None
     
N/A
         
Securities to be registered under Section 12(g) of the Act:
         
Common Stock, no par value
(Title of Class)
         






TABLE OF CONTENTS
 
Item 1. Description of Business……………………………………………………….
 
3
Item 2. Management’s Discussion and Analysis or Plan of operation………………..
 
12
Item 3. Description of Property………………………………………………………
 
13
Item 4. Security Ownership of Certain Beneficial Owners and Management……….
 
13
Item 5. Directors and Executive Officers, Promoters and Control Persons…………..
 
14
Item 6. Executive Compensation……………………………………………………...
 
14
Item 7. Certain Relationships and Related Transactions and Director Independence...
 
15
Item 8. Description of Securities……………………………………………………...
 
15
Part II
   
Item 1. Market Price of and Dividends on the Registrant’s Common Equity and
Related Stockholder Matters………………………………………………….
 
16
Item 2. Legal Proceedings……………………………………………………………..
 
16
Item 3. Changes in and Disagreements with Accountants…………………………….
 
17
Item 4. Recent Sales of Unregistered Securities………………………………………
 
17
Item 5. Indemnification of Directors and Officers…………………………………….
 
17
Part F/S
   
Part III
   
Item 1. Index to Exhibits………………………………………………………………
 
35
Item 2. Description of Exhibits………………………………………………………..
 
35
 



INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 1.   Description of Business

The Company

Action Fashions, Ltd. is in the business of retail sports apparel sales. Our executive offices are located at, P.O. Box 235472, Encinitas, California, 92024. Our telephone number is (858) 229-8116. Our retail location is located at 2026 Lowe Street, Fort Collins, CO 80525.

We were originally incorporated under the laws of the State of Colorado on June 22, 1990, as U.S.A. Connection, Inc. Since inception, the Company had no business operations and lost its charter with the Colorado Secretary of State on April 1, 2004. The Company’s charter was reinstated on September 19, 2005 and on October 28, 2005, the Company filed the Articles of Amendment with the Colorado Secretary of State changing its name to Action Fashions, Ltd. The Company’s fiscal year end is March 31 st .

The Business

We are a specialty retailer of exercise, gymnastics, and dance apparel including clothing, outfits, shoes and related accessories. Our retail outlet is presently within the facilities of G.K. Gymnastics, Inc., a dance and gymnastics school/studio located in Fort Collins, Colorado. By embedding our retail facilities internally at the school we have been able to market to a captive audience of dance and gymnastics students with minimal outside competition. Our goal is to expand the retail outlets from the current location to multiple dance and gymnastics schools throughout the country beginning with the State of Colorado.

General Market

The gymnastics and dance markets continue to grow each year in the United States. USA Gymnastics, the sole national governing body for the sport of gymnastics in the United States, maintained a membership base of 108,641 professional members in 2005. In addition to these professional members, the organization estimates there are over 3 Million recreational gymnasts and over 4,000 gymnastics clubs throughout the country. General public interest for the sport as well has continued to maintain record highs over the last few years. Gymnastics continues to be the most popularly viewed Olympic sport. Over 40 million households tuned into USA gymnastics telecasts on NBC Sports during the 2000 Olympic season. Dance studios and schools as well continue to maintain a significant presence. The US Census Bureau’s 2002 Economic Census reported approximately 6,500 dance schools in the United States. In addition to schools, the Yellow Pages Directory currently lists over 14,500 dance studios throughout the country.

Merchandise/Product
 
We focus on dance and gymnastics clothing and accessories. These items are distinguished from normal women’s apparel in that dance and gymnastics apparel must be comfortable and provide freedom of movement. Dancers and gymnasts need clothes made from fabrics that breathe, are quick drying and transport moisture away from the skin, to keep them dry and comfortable during intense workouts and performances.

We currently maintain distribution, franchise, consignment or similar supply agreements with the following leading manufacturers of dance and gymnastics apparel:
 
§  
Capezio (Ballet Makers, Inc.)- Ballet Makers Incorporated is one of the leading manufactures of clothing for the performer in dance, theater and recreation. For over 100 years, they have been committed to providing exceptional service to customers with innovative, quality products and services, while continuously advancing market research and technologies.
 
§  
Elite Sportswear GK - Elite Sportswear GK is a well recognized manufacturer of gymnastics apparel around the world. Elite Sportswear is recognized around the globe for superior quality, styling, and fit, and friendly, knowledgeable customer service. With the release of ten catalogs a year and Custom Design Services, Elite Sportswear offers more Workout and Team apparel choices than anyone else. Since 2000, Elite Sportswear in affiliation with Addidas America has been manufacturing the United States National, World, and Olympic Team Apparel.

§  
Tighe Industries - Tighe designs, manufactures, and markets garments designed for dance recitals, gymnastics schools, cheerleaders, and drill teams. Tighe Industries, located in York, Pennsylvania, is a company with a global focus. With sales representatives in Japan, the United Kingdom, Ireland, Iceland and Germany, Tighe has become a world leader in producing dance costumes and gymnastics apparel. Olympic teams from around the world continue to compete in garments designed and produced by Tighe associates. Specialized lines like Curtain Call Spirit have made tremendous inroads into the world of professional sports, outfitting cheerleading squads for teams like the NBA’s Dallas Mavericks and Cleveland Cavaliers and the NFL’s Philadelphia Eagles and Buffalo Bills. Tighe Industries has also provided the costumes for the extravagant Orange and Sugar Bowl halftime shows.

§  
Gibson, Inc - For over 30 years Gibson has provided Gymnastics, Fitness, Dance and Stretch Apparel to individuals and public and private institutions concerned about quality when purchasing athletic equipment and supplies. Gibson is one of the largest manufacturers of innovative dance and stretch clothing in the United States and a leading provider of AAI American competitive gymnastics equipment. Gibson markets products to Schools, Universities, private gym clubs, dance studios, Parks and Recreation departments, YMCAs and individuals. Gibson manufactures and sources equipment from around the world and throughout the U. S. in order to provide customers with the best equipment and supplies available.

We purchase our entire inventory from third-party suppliers or manufacturers. We do not own or operate any manufacturing facilities. Our products generally maintain a 100% mark-up above wholesale. We maintain close relationships with our suppliers and continually consult with them regarding developing fashion trends so that we can respond quickly to our industry trends. Prior to delivery, we regularly inspect our manufactured goods for quality based on materials, color and sizing specifications. We believe that we have established relationships with an adequate number of suppliers to meet our ongoing inventory needs and that we have strong relationships with these suppliers. We have been purchasing inventory from our various suppliers for many years. We do not have long-term contracts with our suppliers, and we transact business principally on an order-by-order basis.

Business Strategy

We are presently located within the facilities of G.K. Gymnastics, Inc. dance and gymnastics school/studio in Fort Collins, Colorado. By embedding the retail facilities internally at the school/studio we are able to market to a captive audience of dance and gymnastics students with minimal outside competition. We have found that the symbiotic relationship between the retail store and the studio has both increased store sales and satisfied a consumer need for the studio/school and its members. This relationship and location gives us a considerable advantage over our competitors. Most sales outlets for dance and gymnastics apparel exist in larger sporting goods stores, department stores and a limited number of specialty athletic clothing stores. By focusing our sales on our specific target market we believe we will be able to compete more efficiently with larger retail competitors. By placing our store front locations in areas of high target customer traffic with highly visible product placement and creative store displays, we hope to attract an increased customer sales base.

Personalized customer service is highly emphasized at Action Fashions. Sales associates are experienced and trained to emphasize product knowledge, sport familiarity and customer service. Personalized service is supplemented by store procedures designed to allow the customer to efficiently make purchases and by merchandise presentation.

We have historically not found a need for heavy outside marketing. We conduct limited marketing and advertising, relying more on our individual store displays, embedded locations and word-of-mouth to attract customers. Our product lines are supported by visual merchandising, which consists of window displays, table layouts and various promotions. This type of marketing is an important component of our marketing and promotion strategies since our embedded locations provide significant target customer foot traffic.

In addition to the existing location, we plan to aggressively expand our business by implementing the same business plan currently in existence. We plan to expand locations by placing them in existing gymnastics and dance schools and studios throughout the county. While some studios may already maintain in-store retail sales departments, we hope to market standard, prepackaged and uniform exercise, gymnastics, and dance apparel retail outlets into these already existing locations. The exercise and gymnastics apparel industry is not an easy industry to break into. Many suppliers control the market for their products by limiting the retail outlets they supply to. We maintain close relationships with the suppliers of our clothing and accessories. By offering existing gyms a prepackaged business model, complete with existing clothing and accessory supply arrangements, we are able to provide the gymnastics and dance studios the needed supply connections to existing clothing and accessory manufacturers.

Competitive Business Conditions

The retail gymnastics and dance apparel industry is competitive and highly fragmented with no standout industry leaders. This type of apparel is usually sold though sporting goods stores, department stores and a limited number of specialty athletic clothing stores. We believe our target customers choose to purchase apparel based on the following factors: style and fashion, fit and comfort, customer service, shopping convenience and environment and value and we believe that we have advantages over our competitors in meeting these needs. Specifically, by locating our stores within dance and gymnastics studios, we hope to gain a captive market of the studio’s students and members.

We experience the normal seasonal pattern of the retail apparel industry with our peak sales occurring during the Christmas, back-to-school and spring periods. In addition, we also experience additional sales and interest increases in cyclical periods surrounding the Summer Olympics. To keep merchandise fresh and fashionable, slow-moving merchandise is marked down throughout the year.

Distribution Methods of the Products

We currently market our products to a limited captive market based on its current location. Products are sold on site with little distribution and shipping costs. We project revenue increase from future expansion by adding additional retail outlets in various target market areas throughout the country.

Dependence on One or a Few Major Customers

We are highly dependent on our customer base derived from the location of our facilities. By its nature, our competitive advantage of internal store locations places us at the mercy of the studios/schools where our facilities are or will be located. In the event the studio/school ceases operations or loses its facility, we may lose a key retailer and major customer supplier.

Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration;

We do not have any designs which are copyrighted, trademarked or patented.

Effect of existing or probable governmental regulations on the business

The effects of existing or probable government regulations are minimal.

Research and Development

We do not foresee any immediate future research and development costs.

Costs and effects of compliance with environmental laws

The expense of complying with environmental regulations is of minimal consequence.

Number of total employees and number of full time employees.

We have two part-time staff workers. We do not have any fully time employees.

Item 1a.  Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information in this registration statement before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks. The trading price of our common stock could decline due to any of these risks.

Risks Related to Our Industry

Customer tastes and fashion trends are volatile and tend to change rapidly.

Our success depends in part on management's ability to effectively predict and respond to changing fashion tastes and consumer demands, and to translate market trends into appropriate, saleable product offerings far in advance. If we are unable to successfully predict or respond to changing styles or trends and misjudge the market for our products or any new product lines, our sales will be lower and we may be faced with a substantial amount of unsold inventory or missed opportunities. In response, we may be forced to rely on additional markdowns or promotional sales to dispose of excess, slow-moving inventory, which may have a material adverse effect on our business, financial condition and results of operations. Compared to our retail segments, our wholesale business is more sensitive to changes in fashion trends because of longer lead times in the design and manufacture of its apparel.

The specialty retail apparel business is highly cyclical and is sensitive to economic conditions and consumer spending.
 
       The specialty retail apparel business historically has been subject to cyclical variations. Consumer purchases of discretionary retail items and specialty retail products, including our products and those sold in our stores, may decline during recessionary periods and also may decline at other times when disposable income is lower. A prolonged economic downturn could have a material adverse impact on our business, financial condition and results of operations.

Existing and increased competition in the specialty retail apparel business may reduce our net revenues, profits and market share.

The specialty retail apparel business is highly competitive. Our retail segment competes against a wide variety of small, independent specialty stores as well as department stores, national specialty chains and catalog and Internet-based retailers. In addition, some of our suppliers offer products directly to consumers. Many of our competitors are considerably larger and have substantially greater financial, marketing and other resources than we have. We cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on our business, financial condition and results of operations.

A downturn in the economy may affect consumer purchases of discretionary items and could harm our operating results.

In general, our sales represent discretionary spending by our customers. Discretionary spending on our products is affected by many factors, including, among others:

§  
general business conditions;
§  
interest rates;
§  
inflation;
§  
consumer debt levels;
§  
the availability of consumer credit;
§  
the number of new and second home purchases;
§  
taxation;
§  
energy prices;
§  
unemployment trends;
§  
terrorist attacks and acts of war; and
§  
other matters that influence consumer confidence and spending.

Purchases of discretionary items, including the products we sell, could decline during periods when disposable income is lower or during periods of actual or perceived unfavorable economic conditions. If this occurs, our operating results could suffer.

Terrorist attacks and threats or actual war may negatively affect our business, financial condition and results of operations.

Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control, such as terrorist attacks and acts of war. Recent terrorist attacks in the United States, as well as events occurring in response to or in connection with them, including future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our customers, may adversely impact our operations. It is possible that any or a combination of these occurrences could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business
 
We are a development stage company and we have limited history.

We are a development stage company that has limited operations. Our plans and businesses are “proposed” and “intended” but we may not be able to successfully implement them. Our primary business purpose is the expansion of our retail sports apparel sales business. As a development stage company we are subject to all of the risks, uncertainties, expenses, delays, problems, and difficulties typically encountered in the establishment of a new business. We expect that unanticipated expenses, problems, and technical difficulties will occur and that they will result in material delays in the development of our projects. We may not obtain sufficient capital or achieve a significant level of operations and, even if we do, we may not be able to conduct such operations on a profitable basis.

If we are unable to maintain the profitability of our existing store and profitably open and operate new stores, we may not be able to adequately implement our growth strategy, which may adversely affect our overall operating results.

Our planned growth depends, in part, on our ability to maintain the profitability of our existing store and open new stores. There can be no assurance, however, that we will be able to identify and obtain favorable store sites, arrange favorable leases for stores, obtain governmental and other third-party consents, permits and licenses needed to expand or operate stores, construct or refurbish stores, open stores in a timely manner, or hire, train and integrate qualified sales associates in those stores. If we are unable to profitably open and operate stores and maintain the profitability of our existing stores, we may not be able to adequately implement our growth strategy, which may adversely affect our overall operating results.

Our future expansion into new, unfamiliar markets presents increased risks that may prevent us from being profitable in these new markets.

As we expand and grow, we plan to enter new markets where we believe we can achieve a potential market share. Until we attain a market share in a new market, we anticipate that the initial stores opened in that new market will not achieve targeted operating results. In addition to the factors described above relating to our ability to profitably open and operate new stores, factors that may affect the performance of new stores in new, unfamiliar markets include the rate of new store openings within a new market and the speed with which we achieve market leadership in that market, the success of advertising and marketing program in new markets, our ability to hire and retain a sufficient number of qualified employees, our ability to attract customers due to lack of brand familiarity and other considerations. In addition, entry into new markets may bring us into competition with new, unfamiliar competitors. We cannot assure you that we will be successful in opening or operating our stores in new markets on a profitable basis.
 
The loss of the services of any members of our management team could impair our ability to execute our business strategy and as a result, reduce our sales and profitability.

We depend on the continued services of our management team. The loss of such key personnel could have a material adverse effect on our ability to execute our business strategy and on our financial condition and results of operations. We do not maintain key-person insurance for members of our senior management team. We may have difficulty replacing members of our management team who leave and, therefore, the loss of the services of any of these individuals could harm our business.
 
Our planned growth together with our added obligations of being a public company may strain our business infrastructure, which could adversely affect our operations and financial condition.

We expect to grow at a rapid pace. As we grow, we will face the risk that our existing resources and systems may be inadequate to support our growth. We may also face new challenges, including an increase in information to be processed by our management information systems and diversion of management attention and resources away from existing operations and towards the opening of new and relocated stores and new markets. Our current growth strategy will require us to increase our management and other resources over the next few years. In particular, heightened new standards with respect to internal accounting and other controls, as well as other resource-intensive requirements of being a public company, may further strain our business infrastructure. If we are unable to manage our planned growth and maintain effective controls, systems and procedures, we would be unable to efficiently operate and manage our business and may experience errors or information lapses affecting our public reporting, either of which could adversely effect our operations and financial condition.

We need to continue to attract qualified employees.

Our future success depends in large part upon our ability to attract, train, retain and motivate employees. Qualified individuals of the requisite caliber and number needed to fill positions are in short supply in some areas. The retail industry is characterized by high levels of employee attrition. Although we believe we offer competitive salaries and benefits, we may have to increase spending in order to retain personnel.
        
Our expansion strategy will be dependent upon the availability of adequate capital.

Our expansion strategy will require additional capital for, among other purposes, opening new and relocated stores, renovating existing stores and entering new markets, including researching existing and new real estate and consumer markets, lease costs, inventory, property and equipment, integration of new stores and markets into company-wide systems and programs and other costs associated with new store, renovated and relocated store and market entry expenses and growth. If cash generated internally is insufficient to fund capital requirements, or if funds are not available, we will require additional debt or equity financing. Adequate financing may not be available or, if available, may not be available on terms satisfactory to us. If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our expansion, renovation and relocation strategies by reducing or delaying capital expenditures relating to new stores, renovated and relocated stores and new market entry, selling assets or restructuring or refinancing our indebtedness. As a result, there can be no assurance that we will be able to fund our current plans for the opening of new stores, the expansion, renovation and relocation of existing stores or entry into new markets .
 
We depend on a number of suppliers and any failure by any of them to supply us with products may impair our inventory and adversely affect our ability to meet customer demands, which could result in a decrease in net sales.

We typically do not maintain long-term purchase contracts with suppliers, but instead operate principally on a purchase order basis. Our current suppliers may not continue to sell products to us on current terms or at all, and we may not be able to establish relationships with new suppliers to ensure delivery of products in a timely manner or on terms acceptable to us. We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. Our business could also be adversely affected if there were delays in product shipments to us due to freight difficulties, financial difficulties with our major suppliers, delays due to the difficulties of our suppliers involving strikes or other difficulties at their principal transport providers or otherwise. We are also dependent on suppliers for assuring the quality of merchandise supplied to us. Our inability to acquire suitable merchandise in the future or the loss of one or more of our suppliers and our failure to replace them may harm our relationship with our customers and our ability to attract new customers, resulting in a decrease in net sales.
 
We may not have sufficient funds to operate our business and may not be able to obtain additional financing.

If we do not operate within our budget, we will require additional funds to continue our business. We may not be able to obtain additional financing as needed, on acceptable terms, or at all, which would force us to delay our plans for growth and implementation of our strategy which could seriously harm our business, financial condition, and results of operations. If we need additional funds, we may seek to obtain them primarily through stock or debt financings. Those additional financings could result in dilution to our stockholders.

Failure to fund continued capital expenditures could adversely affect results.

If our anticipated revenues substantially decrease as a result of market fluctuations or otherwise, we may have a limited ability to expend the capital necessary to maintain business operations at expected levels, resulting in a decrease in revenue over time. Historically, we have financed these expenditures primarily with proceeds from debt and equity financings. We believe that we will have sufficient cash flow from operations and financings to fund capital expenditures. However, if our cash flow from anticipated operations is not sufficient to satisfy our capital expenditure requirements, there can be no assurance that additional debt or equity financing or other sources of capital will be available to meet these requirements.

Costs of legal matters and regulation could exceed estimates.

We may become parties to a number of legal and administrative proceedings involving matters pending in various courts or agencies. These include proceedings associated with facilities currently or previously owned, operated or leased by us and include claims for personal injuries and property damages. It is not possible for us to estimate reliably the amount and timing of all future expenditures related to legal matters and other contingencies.

Any projections used in this registration statement may not be accurate.

Any and all projections and estimates contained in this registration statement or otherwise prepared by us are based on information and assumptions which management believes to be accurate; however, they are mere projections and no assurance can be given that actual performance will match or approximate the projections.

Our estimates may prove to be inaccurate and future net cash flows are uncertain.

Our estimates of both future sales and the timing of development expenditures are uncertain and may prove to be inaccurate. We also make certain assumptions regarding net cash flows and operating and development costs that may prove incorrect when judged against our actual experience. Any significant variance from these assumptions could greatly affect our estimates of future net cash flows and our ability to borrow under our credit facility.

Risks Related to this Offering and our Stock

Requirements associated with being a public company will require significant company resources and management attention.

Prior to this offering, we had not been subject to the reporting requirements of the Securities Exchange Act of 1934, or the other rules and regulations of the SEC or any securities exchange relating to public companies. We are working with independent legal, accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal controls over financial reporting. However, we cannot assure you that these and other measures we may take will be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

In addition, compliance with reporting and other requirements applicable to public companies such as Sarbanes Oxley will create additional costs for us, will require the time and attention of management and will require the hiring of additional personnel and outside consultants. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the degree of impact on our management's attention to these matters will have on our business.
       
In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors' and officers' liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

We require substantial capital requirements to finance our operations.

We have substantial anticipated capital requirements. Although we believe we have sufficient capital to fund current operations, we may require additional capital for future operations. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources:

§  
cash provided by operating activities;
§  
available cash and cash investments; and
§  
capital raised through debt and equity offerings.

Although we believe the funds provided by these sources will be sufficient to meet our anticipated cash requirements, the uncertainties and risks associated with future performance and revenues will ultimately determine our liquidity and our ability to meet anticipated capital requirements. If declining prices cause our anticipated revenues to decrease, we may be limited in our ability to replace our inventory. As a result, our production and revenues would decrease over time and may not be sufficient to satisfy our projected capital expenditures. We may not be able to obtain additional financing in such a circumstance.
 
Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them.

Before this offering there has not been a public market for our common stock, and an active public market for our common stock may not develop or be sustained after this offering. Further, the market price of our common stock may decline below the price you paid for your shares.

Among the factors that could affect our stock price are:

§  
industry trends and the business success of our vendors;
§  
actual or anticipated fluctuations in our quarterly financial and operating results, including our comparable store sales;
§  
our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future operating results;
§  
strategic moves by our competitors, such as product announcements or acquisitions;
§  
regulatory developments;
§  
litigation;
§  
general market conditions;
§  
other domestic and international macroeconomic factors unrelated to our performance; and
§  
additions or departures of key personnel.

The stock market has from time to time experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These kinds of broad market fluctuations may adversely affect the market price of our common stock.

In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted. If a securities class action suit is filed against us, we would incur substantial legal fees and our management's attention and resources would be diverted from operating our business in order to respond to the litigation.

We may need to raise additional money before we achieve profitability; if we fail to raise additional money, it could be difficult to continue our business.

      Based on our current plans, we may not have sufficient financial resources to meet our operating expenses and capital requirements. We may seek additional funding through public or private financing or through collaborative arrangements with strategic partners.
 
You should be aware that in the future:

§  
we may not obtain additional financial resources when necessary or on terms favorable to us, if at all;
§  
any available additional financing may not be adequate; and
§  
we may be required to sell shares of our common stock at extremely discounted prices in order for us to obtain additional financing.
 
If we cannot raise additional funds when needed, or on acceptable terms, we will not be able to continue to operate.
 
Issuing preferred stock with rights senior to those of our common stock could adversely affect holders of common stock.

Our charter documents give our board of directors the authority to issue series of preferred stock without a vote or action by our stockholders. The board also has the authority to determine the terms of preferred stock, including price, preferences and voting rights. The rights granted to holders of preferred stock may adversely affect the rights of holders of our common stock. For example, a series of preferred stock may be granted the right to receive a liquidation preference - a pre-set distribution in the event of a liquidation - that would reduce the amount available for distribution to holders of common stock. In addition, the issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock. As a result, common stockholders could be prevented from participating in transactions that would offer an optimal price for their shares.

We do not anticipate paying dividends on our capital stock in the foreseeable future.

We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of the instruments governing our existing debt and any future debt or credit facility may preclude us from paying any dividends.

You will suffer immediate and substantial dilution.

The initial public offering price of our common stock will be substantially higher than the book value per share of our outstanding common stock. If you purchase common stock in this offering, you will incur immediate and substantial dilution in the net tangible book value per share of the common stock from the price you paid. To the extent we raise additional capital by issuing equity securities; our stockholders may experience substantial additional dilution.

Currency risks and fluctuations could negatively impact our company.

We anticipate that some of our revenues may be received in currencies other than US Dollars. Foreign currency can fluctuate against the US dollar in which the Company’s financial statements are prepared. There is no assurance that any currency exchange will be favorable and given that some or our major expenses are fixed in US dollars, our operating results could be negatively impacted by such currency fluctuations.

Item 2.   Management’s Discussion and Analysis or Plan of Operation.

Critical Accounting Policies

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes included in this registration statement. This registration statement contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions.

Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section “Risk Factors” set forth in this registration statement.

The forward-looking events discussed in this registration statement, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection of the “bespeaks caution” doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Plan of Operation
 
We currently have one retail outlet operating inside a gymnastics school located in Fort Collins, Colorado. We are considering opening a second location in another gymnastic school located in Loveland, Colorado. Our long term goals are to expand into multiple retail outlets dance and gymnastics studios and schools throughout the county starting initially in the State of Colorado, followed by the in the western United States then expanding throughout the rest of the county.
 
While most dance and gymnastics studios and schools do offer some retail sales of apparel, it is typically haphazard and unorganized. Our goal is to offer a pre-packaged program that will allow the studios and schools to offer their captive customers dance and gymnastics apparel from a small retail store within their existing facility without the cost and burden of establishing the retail store, seeking vendors and/or purchasing large amounts of inventory.
 
By locating our retail outlets internally at the facilities we are able to market to a captive audience of dance and gymnastics students with minimal outside competition. Our goal is to provide standardized, prepackaged and uniform exercise, gymnastics, and dance apparel retail outlets in existing locations. The exercise and gymnastics apparel industry is not an easy industry to break into. Many suppliers control the market for their products by limiting the retail outlets they supply to. We maintain close relationships with the suppliers of our clothing and accessories. By offering existing gyms a prepackaged business model, complete with existing clothing and accessory supply arrangements, we are able to provide the gyms the needed supply connections to existing clothing and accessory manufacturers. While our primary growth strategy will continue to be through organic growth, we would consider, under certain circumstances, franchising out operations.
 
Off-balance Sheet Arrangements
 
We maintain no significant off-balance sheet arrangements

Foreign Currency Transactions

None.

Item 3. Description of Property.

Real Property

At present, we do not own any property. Our retail operation is located in a leased facility. We have local access to all commercial freight systems. The current retail facility is approximately 300 square feet. This facility contains both the administrative/sales offices and retail floor sections. The current lease runs until May 31, 2010. The retail facility is located at 2026 Lowe St, Fort Collins, CO 80525. We lease this facility on a monthly basis for $200 per month.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth certain information regarding the beneficial ownership of the 545,900 issued and outstanding shares of our common stock as of January 15, 2007, by the following persons:

1)  
each person who is known to be the beneficial owner of more than five percent (5%) of our issued and outstanding shares of common stock;
2)  
each of our directors and executive officers; and
3)  
All of our Directors and Officers as a group

 
Name And Address
Number Of Shares Beneficially Owned
 
Percentage Owned
Phillip E. Koehnke (1)
540,100
98%
     
Total
540,100
98%

                                   (1)   The address is PO Box 235472, Encinitas, California 92024.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The number of shares and the percentage beneficially owned by each individual listed above include shares that are subject to options held by that individual that are immediately exercisable or exercisable within 60 days from the date of this registration statement and the number of shares and the percentage beneficially owned by all officers and directors as a group includes shares subject to options held by all officers and directors as a group that are immediately exercisable or exercisable within 60 days from the date of this registration statement.
 
Item 5.   Directors and Executive Officers, Promoters and Control Persons.

The following table sets forth, as of the date of this registration statement, the name, age and position of our directors, executive officers and other significant employees:
 
NAME
 
AGE
 
POSITION
         
Phillip E. Koehnke
 
44
 
President, Chief Executive Officer, Chief Financial Officer, Secretary, and Director

The backgrounds of our directors, executive officers and significant employees are as follows:

Phillip E. Koehnke
 
Mr. Koehnke is an attorney with over 14 years of experience. His practice has focused on business law and corporate finance. Mr. Koehnke attended Colorado State University on a wrestling scholarship where he graduated with honors with a Bachelors of Science. He then obtained his J.D. from the University of Washington School of Law in 1992. From 1997 through 2001, Mr. Koehnke served as corporate counsel for Tradeway Securities Group, Inc. based in Carlsbad, California. From 2001 to 2003, Mr. Koehnke acted as corporate counsel for Finance 500, Inc. based in Irvine, California. From 2003 to the present, Mr. Koehnke operates a sole practitioner law practice providing legal services to small to midsize private companies and NASD broker dealers. Mr. Koehnke also represents several public companies assisting them with their financing, SEC reporting and general corporate matters. Mr. Koehnke is licensed to practice law in the states of California and Colorado.

Item 6.   Executive Compensation.

The following table sets forth the cash compensation paid to the Chief Executive Officer and to all other executive officers for services rendered, and to be rendered:

   
Annual Compensation
 
Long-Term Compensation
   
                       
Common Shares
   
                       
Underlying
 
All
                   
Restricted
 
Options
 
Other
               
Other Annual
 
Stock
 
Granted
 
Compen
Name and Position
 
Year
 
Salary
 
Bonus
 
Compensation
 
Awards ($)
 
(# Shares)
 
-sation
                             
Phillip E. Koehnke
 
2006
 
120,000 (1)
 
0
 
0
 
0
 
0
 
0
President, Chief Executive Officer, Chief Financial Officer, Secretary, and Director
 
2005
 
120,000 (1)
 
0
 
0
 
0
 
0
 
0
                             
 
     (1)   Under the terms of the Mr. Koehnke’s employment agreement, Mr. Koehnke is entitled to receive an annual base salary of $120,000. To date, Mr. Koehnke has not received any cash compensation under the terms of his employment agreement with the Company.
 
Employment Agreements

We currently maintain an employment agreement with Phillip Koehnke to serve as our Director, President, Chief Executive Officer, Chief Financial Officer and Secretary. The agreement terminates on December 6, 2007 with an optional 12 month extension.
 
Compensation of Directors

We currently do not compensate our directors. In the future, we intend to compensate our directors for reasonable out-of-pocket expenses in attending board of directors meetings and for promoting our business. From time to time we may request certain members of the board of directors to perform services on our behalf. In such cases, we will compensate the members for their services at rates no more favorable than could be obtained from unaffiliated parties.

Compensation Committee
 
We have not formed an independent compensation committee

Item 7. Certain Relationships and Related Transactions and Director Independence.

We have not entered into any material transactions with related parties in the past two years.

Item 8.   Description of Securities.

The following description of our capital stock is a summary of the material terms of our capital stock. This summary is subject to and qualified in its entirety by our Articles of Incorporation and Bylaws, and by the applicable provisions of Colorado law.

The authorized capital stock of Action Fashions consists of 510,000,000 shares of stock consisting of (i) 500,000,000 shares of common stock, no par value per share (the “Common Stock”) of which 545,900 shares are issued and outstanding, and (ii) 10,000,000 shares of preferred stock, no par value per share (the “Preferred Stock”) of which no shares have been issued. Stockholders do not have any preemptive or subscription rights to purchase shares in any future issuance of Action Fashions common stock. There are no options, warrants or other instruments convertible into shares outstanding.

Common Stock

The Board of Directors is authorized to issue 500,000,000 shares of common stock, of which 545,900 shares have been issued and are outstanding. Each share of our common stock is entitled to share pro rata in dividends and distributions with respect to our common stock when, as and if declared by the Board of Directors from funds legally available therefore. No holder of any shares of common stock has any preemptive right to subscribe for any of our securities. Upon dissolution, liquidation or winding up of Action Fashions, the assets will be divided pro rata on a share-for-share basis among holders of the shares of common stock after any required distribution to the holders of preferred stock, if any. All shares of common stock outstanding are fully paid and non-assessable.
Dividend Policy

Subject to any preferential rights of any series of preferred stock, holders of shares of common stock will be entitled to receive dividends on the stock out of assets legally available for distribution when, as and if authorized and declared by our Board of Directors. We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds for use in our business and therefore do not anticipate paying any cash dividends in the foreseeable future. Any future determination relating to dividend policy will be made by the discretion of our Board of Directors and will depend on a number of factors, including the future earnings, capital requirements, financial condition and future prospects and such other factors as our Board of Directors may deem relevant. Payment of dividends on the common stock may be restricted by loan agreements, indentures and other transactions entered into by us from time to time. We do not anticipate the payment of cash dividends on our common stock in the foreseeable future.

Voting Rights

Holders of common stock are entitled to one vote per share on all matters voted on generally by the stockholders, including the election of directors, and, except as otherwise required by law or except as provided with respect to any series of preferred stock, the holders of the shares possess all voting power. The holders of shares of common stock of Action Fashions do not have cumulative voting rights in connection with the election of the board of directors, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of Action Fashions directors.

Liquidation Rights

Subject to any preferential rights of any series of preferred stock, holders of shares of common stock are entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up.

Absence of Other Rights

Holders of common stock have no preferential, preemptive, conversion or exchange rights.

Miscellaneous

All shares of common stock being offered by the registration statement will be fully paid and not liable to further calls or assessment by us.

Preferred Stock

The Board of Directors is authorized, without further shareholder approval, to issue from time to time up to an aggregate of 10,000,000 shares of preferred stock. No preferred stock is issued and outstanding at this time. The preferred stock may be issued in one or more series and the Board of Directors may fix the rights, preferences and designations thereof. No shares of preferred stock are currently outstanding and we have no present plans to issue any shares of preferred stock. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding voting stock.

PART II
 
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder  Matters
 
There is no public market for our common stock, and no assurance can be given that a market will develop or that any stockholder will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. In addition, an active public market for our common stock may not develop or be sustained. For additional information, see “Risk Factors” above.

As of the date of this registration statement, there are approximately 37 holders of record of our common stock.

We have never declared or paid cash dividends on our common stock.  We anticipate that in the future we will retain any earnings for the development and operation of our business.  Accordingly, we do not anticipate declaring or paying any cash dividends in the foreseeable future. 

We currently have no Equity Compensation Plans.

Item 2.   Legal Proceedings
 
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.  Our operations are subject to federal, state and local laws and regulations. Currently, we are not involved, or the subject of, any pending or existing litigation.

Item 3.   Changes in and Disagreements with Accountants.

None.

Item 4.   Recent Sales of Unregistered Securities.

On September 16, 2005 we issued 500 shares of our common stock to Mike Keefe who was then acting as our Resident Agent in the State of Colorado. Those shares were issued to Mr. Keefe in connection with his services as compensation for services rendered to us. For that transaction, we relied on Section 4(2) of the Securities Act of1933, as amended (“the “Act”) because the transaction did not involve a public offering and was therefore exempt from the registration requirements of Section 5 of the Securities Act of 1933.

On March 28, 2006, we issued 500,000 shares of our common stock to Phillip E. Koehnke who is our President, Chief Executive Officer, Chief Financial Officer, Secretary, and Director. Those shares were issued to Mr. Koehnke upon conversion of principal of a convertible note held by Mr. Koehnke. For that transaction, we relied on Section 4(2) of the Securities Act of 1933, as amended because the transaction did not involve a public offering and was therefore exempt from the registration requirements of Section 5 of the Securities Act of 1933.

Item 5.   Indemnification of Directors and Officers.

Colorado Statutes

The Colorado Corporations Code provides for indemnification of officers, directors and employees as follows:

7-109-102. Authority to indemnify directors

(1) Except as provided in subsection (4) of this section, a corporation may indemnify a person made a party to a proceeding because the person is or was a director against liability incurred in the proceeding if:

(a) The person's conduct was in good faith; and

(b) The person reasonably believed:

(I) In the case of conduct in an official capacity with the corporation, that such conduct was in the corporation's best interests; and

(II) In all other cases, that such conduct was at least not opposed to the corporation's best interests; and

(c) In the case of any criminal proceeding, the person had no reasonable cause to believe the person's conduct was unlawful.

(2) A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (II) of paragraph (b) of subsection (1) of this section. A director's conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirements of paragraph (a) of subsection (1) of this section.

(3) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this section.

(4) A corporation may not indemnify a director under this section:

(a) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or

(b) In connection with any other proceeding charging that the director derived an improper personal benefit, whether or not involving action in an official capacity, in which proceeding the director was adjudged liable on the basis that the director derived an improper personal benefit.

(5) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.


7-109-102. Authority to indemnify directors

(1) Except as provided in subsection (4) of this section, a corporation may indemnify a person made a party to a proceeding because the person is or was a director against liability incurred in the proceeding if:

(a) The person's conduct was in good faith; and

(b) The person reasonably believed:

(I) In the case of conduct in an official capacity with the corporation, that such conduct was in the corporation's best interests; and

(II) In all other cases, that such conduct was at least not opposed to the corporation's best interests; and

(c) In the case of any criminal proceeding, the person had no reasonable cause to believe the person's conduct was unlawful.

(2) A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (II) of paragraph (b) of subsection (1) of this section. A director's conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirements of paragraph (a) of subsection (1) of this section.

(3) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this section.

(4) A corporation may not indemnify a director under this section:

(a) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or

(b) In connection with any other proceeding charging that the director derived an improper personal benefit, whether or not involving action in an official capacity, in which proceeding the director was adjudged liable on the basis that the director derived an improper personal benefit.

(5) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.


7-109-107. Indemnification of officers, employees, fiduciaries, and agents

(1) Unless otherwise provided in the articles of incorporation:

(a) An officer is entitled to mandatory indemnification under section 7-109-103, and is entitled to apply for court-ordered indemnification under section 7-109-105, in each case to the same extent as a director;

(b) A corporation may indemnify and advance expenses to an officer, employee, fiduciary, or agent of the corporation to the same extent as to a director; and

(c) A corporation may also indemnify and advance expenses to an officer, employee, fiduciary, or agent who is not a director to a greater extent, if not inconsistent with public policy, and if provided for by its bylaws, general or specific action of its board of directors or shareholders, or contract.

Charter Provisions

Our Amended Articles of Incorporation provide for indemnification of our officers and directors as follows:

Article IX: Limitation of Liability

To the fullest extent permitted by Colorado law, as the same exists or may hereafter be amended, a director or officer of this corporation shall not be liable to the corporation or it’s stockholders for monetary damages as a result of any act or failure to act in his capacity as a director or officer; provided, however, that this article shall not eliminate or limit the liability of a director or officer if it is proven that his act or failure to act constituted a breach of his fiduciary duties and such breach involved intentional misconduct, fraud or a knowing violation of the law.

Article X: Indemnification

This corporation is authorized to provide indemnification of any person who was or is a party to any proceeding (other than an action by, or in the right of, the corporation), by reason of the fact that he is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceedings, including any appeal thereof, through bylaw provisions, or though agreements with such persons, or both, to the fullest extent permitted by Colorado law.

Bylaws
 
Our bylaws provide for the indemnification of our officers and directors as follows:

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS

Section 1   ACTIONS OTHER THAN BY THE CORPORATION . The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.

Section2     ACTIONS BY THE CORPORATION . The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees, actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

Section 3   SUCCESSFUL DEFENSE . To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.

Section 4   REQUIRED APPROVAL . Any indemnification under Sections 1 and 2, unless ordered by a court or advanced pursuant to Section 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:
(a) By the stockholders;

(b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding;

(c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or

(d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.

Section 5   ADVANCE OF EXPENSES . The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this section do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.

Section 6   OTHER RIGHTS . The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article VI:
Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to Section 2 or for the advancement of expenses made pursuant to Section 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.

Section 7   INSURANCE . The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.

Section 8   RELIANCE ON PROVISIONS . Each person who shall act as an authorized representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Article.

Section 9   SEVERABILITY . If any of the provisions of this Article are held to be invalid or unenforceable, this Article shall be construed as if it did not contain such invalid or unenforceable provision and the remaining provisions of this Article shall remain in full force and effect.

Section 10   RETROACTIVE EFFECT . To the extent permitted by applicable law, the rights and powers granted pursuant to this Article VI shall apply to acts and actions occurring or in progress prior to its adoption by the board of directors

Agreements

Pursuant to compensation agreements with selected officers and directors, we have agreed, to the maximum extent permitted by law, to defend, indemnify and hold harmless the officers and directors against any costs, losses, claims, suits, proceedings, damages or liabilities to which our officers and directors become subject to which arise out of or are based upon or relate to our officers and directors engagement by the company.


 
PART F/S

ACTION FASHIONS, LTD.
         
       
Page
     
Report of Independent Registered Public Accounting Firm...............................................................
 
F-2
         
Balance Sheets at September 30, 2006 (unaudited) and
   
 
March 31, 2006..............................................................................................................................
 
F-3
         
Statements of Operations for the six months ended
   
 
September 30, 2006 (unaudited) and 2005 (unaudited),
   
 
and the year ended March 31, 2006...........................................................................................
 
F-4
         
Statement of Changes in Shareholders' Deficit for the year
   
 
ended March 31, 2006 and for the six months ended
   
 
September 30, 2006 (unaudited)..................................................................................................
 
F-5
         
Statements of Cash Flows for the six months ended
   
 
September 30, 2006 (unaudited) and 2005 (unaudited),
   
 
and the year ended March 31, 2006............................................................................................
 
F-6
         
Notes to Financial Statements...................................................................................................................
 
F-7
         
F-1




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

To the Board of Director and Shareholders
Action Fashions, Ltd.:


We have audited the balance sheet of Action Fashions, Ltd. as of March 31, 2006, and the related statements of operations, changes in shareholders’ deficit and cash flows for the year ended March 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Action Fashions, Ltd. as of March 31, 2006, and the results of its operations and its cash flows for the year ended March 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a limited operating history and limited funds, which raises a substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

Cordovano and Honeck LLP
Englewood, Colorado
November 16, 2006


F-2





ACTION FASHIONS, LTD.
BALANCE SHEETS
     
             
       
September 30, 2006
 
March 31, 2006
       
(Unaudited)
   
ASSETS
       
             
Current assets:
       
 
Cash
$
$
1,412
 
Inventory
 
11,493
 
12,746
   
Total current assets
 
11,493
 
14,158
             
             
TOTAL ASSETS
$
11,493
$
14,158
             
LIABILITIES AND STOCKHOLDERS' DEFICIT
       
             
Current liabilities:
       
 
Bank overdraft
$
702
$
 
Accounts payable
 
1,680
 
1,431
 
Income tax liability (Note 5)
 
557
 
557
   
Total current assets
 
2,939
 
1,988
             
Long-term Liabilities:
       
 
Note Payable to officer (Note 3)
 
475,000
 
475,000
 
Note Payable to affiliate (Note 3)
 
4,906
 
10,977
             
TOTAL LIABILITIES
 
482,845
 
487,965
             
STOCKHOLDERS' DEFICIT (Note 4)
       
 
Preferred stock, 10,000,000 shares authorized, no par value,
       
   
-0- and -0- shares issued and outstanding, respectively
 
 
 
Common stock, 500,000,000 shares authorized, no par value,
       
   
545,900 and 545,900 shares issued and outstanding, respectively
 
7,405
 
7,405
 
Retained deficit
 
(478,757)
 
(481,212)
             
TOTAL STOCKHOLDERS' DEFICIT
 
(471,352)
 
(473,807)
             
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$
11,493
$
14,158
             
See notes to the financial statements
   
             
F-3
   




 
ACTION FASHION, LTD.
STATEMENTS OF OPERATIONS
               
     
Six Months Ended
 
Year Ended
     
September 30, 2006
 
September 30, 2005
 
March 31, 2006
     
(Unaudited)
 
(Unaudited)
   
Revenues:
           
 
Sales
$
11,334
$
4,870
$
14,984
Total revenues
 
11,334
 
4,870
 
14,984
               
Expenses:
           
 
Cost of Goods Sold
 
8,817
 
3,619
 
11,853
 
General and administrative
 
62
 
47
 
1,386
Total operating expenses
 
8,879
 
3,666
 
13,239
     
 
 
 
 
 
Income from operations
 
2,455
 
1,204
 
1,745
               
Provision for Income Taxes (Note 5)
 
0
 
0
 
557
               
NET INCOME
$
2,455
$
1,204
$
1,188
               
Basic income per common share
$
0.00
$
0.00
$
0.02
Diluted income per common share
$
0.00
$
0.00
$
0.00
               
Weighted average common shares outstanding - Basic
 
545,900
 
45,400
 
51,990
Weighted average common shares outstanding - Diluted
 
48,045,900
 
47,545,400
 
47,551,990
               
See notes to the financial statements
F-4





ACTION FASHION LTD
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
               
               
 
Common Stock
     
Total
         
Retained
 
Stockholders'
 
Shares
 
Amount
 
Deficit
 
Deficit
               
Balance at March 31, 2005
45,400
$
2,400
$
(482,400)
$
(480,000)
               
Common shares issued to CEO as
             
payment for $5,000 in convertible debt
500,000
 
5,000
 
 
5,000
               
Common shares issued in exchange for services
500
 
5
 
 
5
               
Net income for the year ended
             
March 31, 2006
 
 
1,188
 
1,188
               
Balance at March 31, 2006
545,900
 
7,405
 
(481,212)
 
(473,807)
               
Net Income for the six months ended
             
September 30, 2006 (unaudited)
 
 
2,455
 
2,455
               
Balance at September 30, 2006 (unaudited)
545,900
$
7,405
$
(478,757)
$
(471,352)
               
               
See notes to the financial statements
F-5





ACTION FASHION, LTD.
STATEMENTS OF CASH FLOWS
               
     
For the Six Months Ended
 
For the Year Ended
     
September 30,2006
 
September 30, 2005
 
March 31, 2006
     
(Unaudited)
 
(Unaudited)
   
CASH FLOWS FROM OPERATING ACTIVITIES
           
 
Adjustments to reconcile net income to
           
 
net cash provided by operating activities:
           
 
Net Income
$
2,455
$
1,204
$
1,188
 
Stock-based compensation
 
-
 
0
 
5
 
Changes in operating assets and liabilities:
           
 
Inventory
 
1,252
 
(511)
 
6,254
 
Bank overdraft
 
702
 
0
 
-
 
Accounts payable and accrued expenses
 
250
 
(628)
 
1,988
               
NET CASH PROVIDED BY OPERATING ACTIVITIES
 
4,659
 
65
 
9,435
               
CASH FLOWS FROM FINANCING ACTIVITIES
           
 
Principal payments on notes payable
 
(6,071)
 
0
 
(8,023)
               
NET CASH USED IN FINANCING ACTIVITIES
 
(6,071)
 
0
 
(8,023)
               
NET CHANGE IN CASH
 
(1,412)
 
65
 
1,412
               
CASH BALANCES
           
 
Beginning of period
 
1,412
 
1,398
 
-
 
End of period
$
0
$
1,463
$
1,412
               
CASH PAID DURING THE PERIOD FOR:
           
 
Interest
$
-
$
-
$
-
 
Income taxes
$
-
$
-
$
-
               
NON-CASH ACTIVITIES
           
 
Debt converted to common stock
$
-
$
-
$
5,000
 
Inventory acquired for debt
$
-
$
19,000
$
19,000
               
               
               
               
See notes to the financial statements
F-6

 


Action Fashions, Ltd.
Notes to the Financial Statements


NOTE 1.   SUMMARY OF ACCOUNTING POLICIES

a.   Organization

The Company was originally incorporated under the laws of the State of Colorado on June 22, 1990, as U.S.A. Connection, Inc. Since inception, the Company had no business operations and lost its charter with the Colorado Secretary of State on April 1, 2004. The Company’s charter was reinstated on September 19, 2005 and on October 28, 2005, the Company filed the Articles of Amendment with the Colorado Secretary of State changing its name to Action Fashions, Ltd. The Company’s fiscal year end is March 31 st . The Company’s executive offices are currently located at, P.O. Box 235472, Encinitas, California, 92024. The Telephone number is (858) 229-8116. The Company’s retail location is located at 2026 Lowe Street, Fort Collins, CO 80525.

b. Accounting Method

The Company’s policy is to use the accrual method of accounting to prepare and present financial statements, which conform to generally accepted accounting principles (“GAAP”). The company has elected a March 31, year-end.

c. Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased, to be cash equivalents.

d. Use of Estimates in Financial Statement Preparation
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company's financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates.

e. Inventories

Inventories are valued at the lower of average cost (which approximates computation on a first-in, first-out basis) or market (net realizable value or replacement cost).

f. Revenue Recognition

For product sales, revenue is recognized at the time of shipment, and reserves are established for price protection and cooperative marketing programs with distributors.

g. Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued.

At March 31, 2006 and September 30, 2006, the Company had approximately 47,500,000 and 47,500,000 (unaudited), respectively, potentially dilutive common shares related to the convertible promissory note held by the CEO.

h. Income Taxes

The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

i. Recent Accounting Pronouncements
 
In December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No. 123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS No. 123 (R) focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123 (R) requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). SFAS No. 123 (R) is effective as of the first interim or annual reporting period that begins after June 15, 2005 for non-small business issuers and after December 15, 2005 for small business issuers. Accordingly, the Company will adopt SFAS No. 123 (R) in its period ending December 31, 2005. The Company is currently evaluating the provisions of SFAS No. 123 (R) and has not yet determined the impact, if any, that SFAS No. 123 (R) will have on its financial statement presentation or disclosures .

In May 2005, the FASB issued SFAS No. 154 that establishes new standards on accounting for changes in accounting principals. Pursuant to the new rules, all such changes must be accounted for by retrospective application to the financial statements of prior periods unless it is impracticable to do so. SFAS No. 154 completely replaces Accounting Principles Bulletin (APB) Opinion 20 and SFAS 3, though it carries forward the guidance in those pronouncements with respect to accounting for changes in estimates, changes in the reporting entity, and the correction of errors. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 31, 2005.

The adoption of these pronouncements will not have a material effect on the Company’s financial position or results of operation.

j. Interim Financial Statements
 
In the opinion of management, the September 30, 2006 unaudited, interim financial statements include all adjustments which are necessary in order to make the financial statements not misleading.


NOTE 2.
  GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has a limited operating history and limited funds. These factors, among others, may indicate that the Company will be unable to continue as a going concern.

The Company is dependent upon outside financing to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s plans to raise necessary funds via a private placement of its common stock to satisfy the expense requirements of the Company. There is no assurance that the Company will be able to raise necessary funds, or that if it is successful in raising the necessary funds, that the Company will successfully operate its business plan.

The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to meet our obligations on a timely basis, and, ultimately to attain profitability.

NOTE 3.
  RELATED PARTY TRANSACTIONS

Employment Agreement

On December 6, 2003, the Company entered into a 48 month employment agreement, at a compensation rate of $10,000 per month, with Phillip E. Koehnke to act as our Director, President, Chief Executive Officer, Chief Financial Officer and Secretary. Payment under the terms of the employment agreement was secured by a convertible promissory note.

On December 6, 2003, the Company entered into a 48 month zero interest convertible promissory note with Phillip E. Koehnke as security for Mr. Koehnke’s employment agreement with the Company. Beginning on December 1, 2003 and ending on November 1, 2007, the Company is required to make monthly principal payments in the amount of $10,000 per month. At the option of the note holder, the monthly principal payments may be paid in cash or restricted shares of the Company’s common stock at a price per share equal to the Conversion Price equal to (i) $0.01 per share or, if the Company has its common stock trading in the public market, (ii) the current “Market Price,” which shall be equal to fifty percent (50%) of the average of the three lowest closing bid prices of the Company’s common stock as reported by the principal market for the thirty trading days preceding the date of conversion. In the event of default, the entire outstanding principal of the note is convertible into restricted shares of the Company’s common stock at a price per share equal to the Conversion Price.

The Company issued the CEO 500,000 shares of its restricted common stock during March 2006 in exchange for payment of $5,000 of the convertible note, which reduced the balance owed on the note to $475,000 as of March 31, 2006 and September 30, 2006 (unaudited).

Asset Purchase Agreement

On June 1, 2005, the Company entered into an Asset Purchase Agreement with G.K. Gymnastics, Inc. a Colorado corporation, and affiliate to Action Fashions, Ltd. Pursuant to the terms of the agreement, the Company purchased all items of inventory, the name, and all accounting records of the Action Fashions business division for a purchase price of $19,000.

On June 1, 2005, the Company entered into a 5 year, zero interest, promissory note with G.K. Gymnastics, Inc. The principal amount of the note is $19,000 and was used as payment for the Asset Purchase Agreement with G.K. Gymnastics, Inc. The Company paid $8,023 toward the note during the year ended March 31, 2006, which reduced the balance owed on the note to $10,977 as of March 31, 2006. The Company paid $6,071 (unaudited) toward the note during the period ended September 30, 2006, which reduced the balance owed on the note to $4,906 (unaudited).

Office Lease

On June 1, 2005, we entered into a lease with G.K.’s Gym, Inc. for our retail space. Unless terminated earlier, the lease ends on May 31, 2010. Monthly rent is $200 per month commencing on June 1, 2007.

Legal Services

 
L egal counsel to the Company is a firm controlled by an Officer and Director of the Company.

NOTE 4.
  STOCKHOLDERS’ DEFICIT

The stockholders’ equity section of the Company contains the following classes of capital stock as of March 31, 2006 and September 30, 2006 (unaudited):

Preferred stock, no par value; 10,000,000 shares authorized, no shares issued and outstanding.

Common stock, no par value; 500,000,000 shares authorized: 545,900 shares issued and outstanding.

Common Stock

On September 16, 2005, the Company issues 500 shares of its restricted common stock to Mike Keefe as payment for services as a resident agent in the state of Colorado.

On March 28, 2006, the Company issued its CEO 500,000 shares of its restricted common stock under the terms of the convertible promissory note. The shares were converted at a price of $0.01 per share.

NOTE 5.
  INCOME TAXES

A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:
 
   
March 31,
   
2006
U.S. Federal statutory graduated rate……………………..
 
15.00%
State income tax rate, net of Federal benefit……………..
 
3.94%
Permanent differences……………………………………….
 
13.02%
   
31.96%
     
The provision of income taxes consists of the following:
   
     
   
March 31,
   
2006
Current income taxes:
   
Federal income tax…………………………………………..
$
421
State income tax……………………………………………..
$
136
Total provision for income taxes………………………………
$
557




F-6




PART III

Item 1.   Index to Exhibits and Item 2. Description of Exhibits
 

Exhibit #
 
Description
     
3.1  
 
Articles of Incorporation filed with the Secretary of State of Colorado on June 22, 1990 (attached hereto).
     
3.2  
 
Articles of Amendment to the Articles of Incorporation filed with the Secretary of State of Colorado on October 17, 2006 (attached hereto).
     
3.3
 
Amended and Restated Bylaws dated December 30, 2005 (attached hereto).
     
4.1
 
June 1, 2005, Promissory Note in the amount of $19,000 made by the Company to G.K.’s Gym, Inc. as payment for assets (attached hereto).
     
4.2
 
December 6, 2003, Convertible Promissory Note in the amount of $480,000 made by the Company to Phillip E.Koehnke as payment under the terms of Mr. Koehnke’s employment agreement with the Company (attached hereto).
     
10.1
 
Employment agreement dated December 6, 2003, between the Company and Phillip E. Koehnke (attached hereto).
     
10.2
 
June 1, 2005, Asset Purchase Agreement by and between the Company and G.K.’s Gymnastics, Inc (attached hereto).
     
23.1
 
Consent of Cordovano and Honeck LLP, dated January 16, 2007 (attached hereto).

SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
 
ACTION FASHIONS, LTD.


                             Date: January 23, 2007                 By : /s/  Phillip E. Koehnke      
Phillip E. Koehnke
Chief Executive Officer

Exhibit 3.1

ARTICLES OF INCORPORATION
OF
U.S.A. CONNECTION, INC.

The undersigned incorporator, being a natural person of the age of 18 years or more, and desiring to form a body corporate under the laws of the State of Colorado, does hereby sign, verify and deliver in duplicate to the Secretary of State of the State of Colorado these Articles of Incorporation:

ARTICLE I

NAME: The name of the Corporation shall be: U.S.A. Connection, Inc.

ARTICLE II

PERIOD OF DURATION: This Corporation shall exist in perpetuity unless dissolved according to law.

ARTICLE III

PURPOSES AND POWERS: This Corporation is organized to carry on all lawful business for which Corporations may be incorporated pursuant to the Colorado Corporation Code.

ARTICLE IV

CAPITAL: The aggregate number of shares which this Corporation shall have authority to issues is Fifty Thousand (50,000) shares, without par value, which shares shall be designated “Common Stock.”

1.   Dividends :   Dividends may be paid upon the Common Stock, as and when declared by the Board of Directors, out of the funds of the Corporation to the extent and in the manner permitted by law.

2.   Distribution and Liquidation :   Upon any liquidation, dissolution or winding up of the Corporation, and after paying or adequately providing for the payment of all outstanding obligations, the remainder of the assets of the Corporation shall be distributed, either in cash or in kind, prorated to the holders of the Common Stock. A Board of Directors may, from time to time, distribute to the shareholders in partial liquidation, out of stated capital or capital surplus of the Corporation, a portion of its assets, in cash or property, in the manner permitted and upon compliance with the limitations imposed by law.

3.   Voting Rights; Cumulative Voting :   Each outstanding share of Common Stock shall be entitled to one vote and each fractional share of Common Stock shall be entitled to a corresponding fractional vote on each matter submitted to a vote of shareholders. Cumulative voting shall not be allowed in the election of director of the Corporation and every shareholders entitled to vote at such election shall have the right to vote the number of shares owned by him for as many person as there are directors to be elected, and for whose election he as a right to vote.
 
4.   Preemptive Rights :   The holders of Common Stock of the Corporation shall have the preemptive and preferential right, in proportion to their respective holdings of the Common Stock, to purchase or subscribe for any shares of the Corporation, whether now or hereafter authorized, and any bonds, debentures, notes or other securities convertible into or carrying options, warrants or privileges to purchase any shares of the Corporation, whether now or hereafter authorized (including an such shares, bonds, debentures, notes or other securities held I the treasury of the Corporation). This preemptive rights shall extend, without limitation, to shares issued for property or services, to shares issued on exercise of stock rights an options to all or any of the directors, officers and employees of the Corporation, or any subsidiary thereof, into shares issued pursuant to stock bonus plans and other incentive plans for their benefit.

ARTICLE V

RIGHTS OF DIRECTORS AND OFFICERS TO CONTRACT WITH CORPORATION:   Any of the Directors or Officers of this Corporation shall not, in the absence of fraud, be disqualified by his office from dealing or contracting with this Corporation either as vendor, purchaser or otherwise, nor shall a firm, association, or Corporation of which he shall be a member, or in which he may be pecuniarily interested in any manner be so disqualified. No director or officer, nor any firm, association or Corporation with which he is connected as aforesaid, shall be liable to account to this Corporation or its shareholders for any profit realized by him from or through any such transaction or contract, it being the express purpose and intent of this Article to permit this Corporation to buy from, sell to, or otherwise deal with partnerships, firms or Corporations of which the directors and officers of this Corporation, or any one or more of them, may be members, directors, or officers, or in which they or any of them may have a pecuniary interest; and the contracts of this Corporation, in absence of fraud, shall not be void or voidable or affected in any manner by reason of any such position. Furthermore, directors of this Corporation may be counted for a quorum of the Board of Directors of this Corporation at any meeting even though they may be pecuniarily interested in manners considered at such meeting, and any action taken at such meeting with reference to such matters by majority of the disinterested directors should not be void or voidable by this Corporation in the absence of fraud.

ARTICLE VI

REGISTERED OFFICE AND REGISTERED AGENT: The address of the initial registered office of the Corporation is 3905 Mason Street, Fort Collins, Colorado 80525, and the name of the initial registered agent at such address is Eugene Koehnke. Either the registered office or the registered agent may be changed in the manner permitted by law.

ARTICLE VIII

INITIAL BOARD OF DIRECTORS:   The initial Board of Directors of the Corporation shall consist of three (3) directors and the names and addresses of the persons who shall serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are as follows:

Eugene Koehnke
3905 South Mason Street
Fort Collins, Colorado 80525

Lorraine Koehnke
3905 South Mason Street
Fort Collins, Colorado 80525



Geza Pozsar
3419 Arden Way
Sacramento, California 95825

ARTICLE VIII

INCORPORATOR:   The name and address of the incorporator is R. William Wawro, 215 West Oak Street, Fort Collins, Colorado 80521.

IN WITNESS WHEREOF: the above incorporator has signed these Articles of Incorporation this 19 th day of June, 1990.

/s/ R. William Wawro
R. William Wawro



Exhibit 3.2


ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
ACTION FASHIONS, LTD.

Pursuant to § 7-110-106 of the Colorado Revised Statutes, the individual named below causes these Articles of Amendment to its Articles of Incorporation to be delivered to the Colorado Secretary of State of filing, and states as follows:

ARTICLE I
NAME OF CORPORATION

The name of the Corporation shall be “Action Fashions, Ltd.”

ARTICLE II
PURPOSE OF CORPORATION

The purpose for which this corporation is organized is to transact any lawful business, or to promote or conduct any legitimate object or purpose, under and subject to the laws of the State of Colorado.

ARTICLE III
AUTHORIZED CAPITAL STOCK

1.       Authorized Stock . The total number of shares which the Corporation shall be authorized to issue shall be 510,000,000 of which 500,000,000 shares shall be common shares, no par value per share (the "Common Stock"), and 10,000,000 shares shall be preferred shares, no par value per share (the "Preferred Stock.").

2.     Preferred Stock . The Preferred Stock may be issued from time to time in one or more series. The board of directors is authorized to fix the number of shares of any series of Preferred Stock, to determine the designation of any such series and to determine or alter the rights, preferences, privileges, qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and, within the limits and restrictions stated in any resolution or resolutions of the board of directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series.

ARTICLE IV
PERPETUAL DURATION

The Corporation shall exist in perpetuity unless dissolved according to law.

ARTICLE V
PREEMPTIVE RIGHTS

The shareholders of the Corporation shall have no preemptive rights.
 
ARTICLE VI
VOTING

Cumulative voting shall not be permitted by the Corporation.

ARTICLE VII
SHAREHOLDER MEETINGS

Meetings of shareholders may be held within or without the State of Colorado, as the bylaws may provide. The books of the corporation may be kept (subject to any provision of Colorado law) outside the State of Colorado at such place or places as may be designated from time to time by the board of directors or in the bylaws of the corporation. In accordance with § 7-107-104 of the Colorado Revised Statues, shareholder action may be taken without a meeting if shareholders holding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted consent to such action in writing.

ARTICLE VIII
PURCHASE OF OWN SHARES

The Corporation, by action of its directors, and without action by its shareholders, may purchase its own shares in accordance with the provisions of the law of the State of Colorado. Such purchases may be made either in the open market or at public or private sale, in such manner and amounts, from such holder or holders of outstanding shares of the Corporation, and at such prices as the directors shall from time to time determine.

ARTICLE IX
LIMITATION OF LIABILITY

To the fullest extent permitted by Colorado law, as the same exists or may hereafter be amended, a director or officer of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages as a result of any act or failure to act in his capacity as a director or officer; provided, however, that this Article shall not eliminate or limit the liability of a director or officer if it is proven that his act or failure to act constituted a breach of his fiduciary duties and such breach involved intentional misconduct, fraud or a knowing violation of law.

ARTICLE X
INDEMNIFICATION

This corporation is authorized to provide indemnification of any person who was or is a party to any proceeding (other than an action by, or in the right of, the corporation), by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceeding, including any appeal thereof, through bylaw provisions, or through agreements with such persons, or both, to the fullest extent permitted by Colorado law.

ARTICLE XI
NUMBER OF DIRECTORS ON BOARD

The Board of Directors shall consist of no fewer than one (1) member and no more than fifteen (15) members.

ARTICLE XII
POWERS OF THE BOARD OF DIRECTORS

In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors of directors is expressly authorized as follows:

(a)      Subject to the bylaws, if any, adopted by the stockholders, to make, alter or amend the bylaws of the Corporation.
 
(b)      To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this Corporation.
 
(c)      By resolution passed by the board of directors, to designate one or more committees, each committee to consist of one or more of the directors of the Corporation, which, to the extent provided in the resolution or in the bylaws of the Corporation, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name and names as may be stated in the bylaws of the Corporation or as may be determined from time to time by resolution adopted by the board of directors of directors.

(d)      When and as authorized by the affirmative vote of stockholders holding stock entitling them to exercise at least a majority of the voting power given at a stockholders’ meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the board of directors of directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions as the board of directors deem expedient and for the best interest of the Corporation.

ARTICLE XIII
AMENDMENT TO BYLAWS

In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, repeal, alter, amend and rescind the bylaws of this corporation, subject to any limitations expressed in such bylaws.

ARTICLE XIV
AMENDMENT TO ARTICLES OF INCORPORATION

The corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.

IN WITNESS WHEREOF, these Amended Articles of Incorporation are hereby made effective October 11, 2006

/s/ Phillip E. Koehnke
Secretary

Exhibit 3.3
AMENDED AND RESTATED BYLAWS
OF
ACTION FASHIONS, LTD.
A Colorado Corporation

ARTICLE I   

OFFICES

Section 1.    PRINCIPAL OFFICES . The principal office shall be 580 Second Street, Suite 102, Encinitas, CA 92024

Section 2.    OTHER OFFICES . The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
 
ARTICLE II   

MEETINGS OF STOCKHOLDERS

Section 1.    PLACE OF MEETINGS . Meetings of stockholders shall be held at any place within or without the State of Colorado designated by the board of directors. In the absence of any such designation, stockholders’ meetings shall be held at the principal executive office of the corporation.

Section 2.    ANNUAL MEETINGS . The annual meetings of stockholders shall be held at a date and time designated by the board of directors. (At such meetings, directors shall be elected and any other proper business may be transacted by a plurality vote of stockholders.)

Section 3.    SPECIAL MEETINGS . A special meeting of the stockholders, for any purpose or purposes whatsoever, unless prescribed by statute or by the articles of incorporation, may be called at any time by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders holding shares in the aggregate entitled to cast not less than a majority of the votes at any such meeting.

The request shall be in writing, specifying the time of such meeting, the place where it is to be held and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president or the secretary of the corporation. The officer receiving such request forthwith shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held.

Section 4.    NOTICE OF STOCKHOLDERS’ MEETINGS . All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting being noticed. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting the general nature of the business to be transacted, or (ii) in the case of the annual meeting those matters which the board of directors, at the time of giving the notice, intends to present for action by the stockholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees which, at the time of the notice, management intends to present for election.

If action is proposed to be taken at any meeting for approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, (ii) an amendment to the articles of incorporation, (iii) a reorganization of the corporation, (iv) dissolution of the corporation, or (v) a distribution to preferred stockholders, the notice shall also state the general nature of such proposal.

Section 5.    MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . Notice of any meeting of stockholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the stockholder at the address of such stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice. If no such address appears on the corporation’s books or is given, notice shall be deemed to have been given if sent by mail or telegram to the corporation’s principal executive office, or if published at least once in a newspaper of general circulation in the county where this office is located. Personal delivery of any such notice to any officer of a corporation or association or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting, it shall not be necessary to deliver or mail notice of the meeting to the transferee.

If any notice addressed to a stockholder at the address of such stockholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the stockholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the stockholder upon written demand of the stockholder at the principal executive office of the corporation for a period of one year from the date of the giving of such notice.

An affidavit of the mailing or other means of giving any notice of any stockholders’ meeting shall be executed by the secretary, assistant secretary or any transfer agent of the corporation giving such notice, and shall be filed and maintained in the minute book of the corporation.

Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 6.    QUORUM . The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of stockholders shall constitute a quorum for the transaction of business, except as otherwise provided by statute or the articles of incorporation. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 7.    ADJOURNED MEETING AND NOTICE THEREOF . Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting.

When any meeting of stockholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at a meeting at which the adjournment is taken. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

Section 8.    VOTING . Unless a record date set for voting purposes be fixed as provided in Section 1 of Article VIII of these bylaws, only persons in whose names shares entitled to vote stand on the stock records of the corporation at the close of business on the business day next preceding the day on which notice is given (or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held) shall be entitled to vote at such meeting. Any stockholder entitled to vote on any matter other than elections of directors or officers, may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the stockholder fails to specify the number of shares such stockholder is voting affirmatively, it will be conclusively presumed that the stockholder’s approving vote is with respect to all shares such stockholder is entitled to vote. Such vote may be by voice vote or by ballot; provided, however, that all elections for directors must be by ballot upon demand by a stockholder at any election and before the voting begins.

When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation.

Section 9.    WAIVER OF NOTICE OR CONSENT BY ABSENT   STOCKHOLDERS . The transactions at any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes thereof. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any regular or special meeting of stockholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice if such objection is expressly made at the meeting.

Section 10.    STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any stockholder giving a written consent, or the stockholder’s proxy holders, or a transferee of the shares of a personal representative of the stockholder of their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the secretary.

Section 11.    PROXIES . Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless revoked by the person executing it, prior to the vote pursuant thereto, by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by the person executing the proxy; provided, however, that no such proxy shall be valid after the expiration of six (6) months from the date of such proxy, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. Subject to the above and Colorado Law, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation.

Section 12.    INSPECTORS OF ELECTION . Before any meeting of stockholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are appointed, the chairman of the meeting may, and on the request of any stockholder or his proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more stockholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors before the meeting, or by the chairman at the meeting.

The duties of these inspectors shall be as follows:

(a)    Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b)    Receive votes, ballots, or consents;
(c)    Hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d)    Count and tabulate all votes or consents;
(e)    Determine the election result; and
(f)    Do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

ARTICLE III   

DIRECTORS

Section 1.    POWERS . Subject to the provisions of Colorado Law and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the power and authority to:

(a)    Select and remove all officers, agents, and employees of the corporation, prescribe such powers and duties for them as may not be inconsistent with law, with the articles of incorporation or these bylaws, fix their compensation, and require from them security for faithful service.
(b)    Change the principal executive office or the principal business office from one location to another; cause the corporation to be qualified to do business in any other state, territory, dependency, or foreign country and conduct business within or without the State; designate any place within or without the State for the holding of any stockholders’ meeting, or meetings, including annual meetings; adopt, make and use a corporate seal, and prescribe the forms of certificates of stock, and alter the form of such seal and of such certificates from time to time as in their judgment they may deem best, provided that such forms shall at all times comply with the provisions of law.
(c)    Authorize the issuance of shares of stock of the corporation from time to time, upon such terms as may be lawful, in consideration of money paid, labor done or services actually rendered, debts or securities cancelled, tangible or intangible property actually received.
(d)    Borrow money and incur indebtedness for the purpose of the corporation, and cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, or other evidences of debt and securities therefor.

Section 2.    NUMBER OF DIRECTORS . The number of directors which shall constitute the whole board shall not be less than one (1) nor more than seven (7). The exact number of authorized directors shall be set by resolution of the board of directors, within the limits specified above. The maximum or minimum number of directors cannot be changed, nor can a fixed number be substituted for the maximum and minimum numbers, except by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw.

Section 3.    QUALIFICATION, ELECTION AND TERM OF OFFICE OF DIRECTORS . Directors shall be elected at each annual meeting of the stockholders to hold office until the next annual meeting, but if any such annual meeting is not held or the directors are not elected at any annual meeting, the directors may be elected at any special meeting of stockholders held for that purpose, or at the next annual meeting of stockholders held thereafter. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified or until his earlier resignation or removal or his office has been declared vacant in the manner provided in these bylaws. Directors need not be stockholders.

Section 4.    RESIGNATION AND REMOVAL OF DIRECTORS . Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation, in which case such resignation shall be effective at the time specified. Unless such resignation specifies otherwise, its acceptance by the corporation shall not be necessary to make it effective. The board of directors may declare vacant the office of a director who has been declared of unsound mind by an order of a court or convicted of a felony. Any or all of the directors may be removed without cause of such removal is approved by the affirmative vote of a majority of the outstanding shares entitled to vote. No reduction of the authorized number of directors shall have the effect of removing any director before his term of office expires.

Section 5.    VACANCIES . Vacancies in the board of directors, may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director. Each director so elected shall hold office until the next annual meeting of the stockholders and until a successor has been elected and qualified.

A vacancy in the board of directors exists as to any authorized position of directors which is not then filled by a duly elected director, whether caused by death, resignation, removal, increase in the authorized number of directors or otherwise.

The stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.

If after the filling of any vacancy by the directors, the directors then in office who have been elected by the stockholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of five percent or more of the total number of shares at the time outstanding having the right to vote for such directors may call a special meeting of the stockholders to elect the entire board. The term of office of any director not elected by the stockholders shall terminate upon the election of a successor.

Section 6.    PLACE OF MEETINGS . Regular meetings of the board of directors shall be held at any place within or without the State of Colorado that has been designated from time to time by resolution of the board. In the absence of such designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or without the State of Colorado that has been designated in the notice of the meeting or, if not stated in the notice or there is not notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in such meeting can hear one another, and all such directors shall be deemed to be present in person at such meeting.

Section 7.    ANNUAL MEETINGS . Immediately following each annual meeting of stockholders, the board of directors shall hold a regular meeting for the purpose of transaction of other business. Notice of this meeting shall not be required.

Section 8.    OTHER REGULAR MEETINGS . Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice, provided the notice of any change in the time of any such meetings shall be given to all of the directors. Notice of a change in the determination of the time shall be given to each director in the same manner as notice for special meetings of the board of directors.

Section 9.    SPECIAL MEETINGS . Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board or the president or any vice president or the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at his or her address as it is shown upon the records of the corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours prior to the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated to either the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation.

Section 10.    QUORUM . A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

Section 11.    WAIVER OF NOTICE . The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. The waiver of notice of consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.

Section 12.    ADJOURNMENT . A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

Section 13.    NOTICE OF ADJOURNMENT . Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment.

Section 14.    ACTION WITHOUT MEETING . Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to such action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board.

Section 15.    FEES AND COMPENSATION OF DIRECTORS . Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for such services. Members of special or standing committees may be allowed like compensation for attending committee meetings.

Section 16.    DETERMINATION OF MAJORITY OF AUTHORIZED NUMBER OF DIRECTORS . Two (2) directors shall constitute a majority of the authorized number of directors when the whole board of directors consists of two (2) directors pursuant to Article III, Section 2.

ARTICLE IV   

COMMITTEES

Section 1.    COMMITTEES OF DIRECTORS . The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of one or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committees, who may replace any absent member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with regard to:

(a)    the approval of any action which, under Colorado Law, also requires stockholders’ approval or approval of the outstanding shares;
(b)    the filing of vacancies on the board of directors or in any committees;
(c)    the fixing of compensation of the directors for serving on the board or on any committee;
(d)    the amendment or repeal of bylaws or the adoption of new bylaws;
(e)    the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;
(f)    a distribution to the stockholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or
(g)    the appointment of any other committees of the board of directors or the members thereof.

Section 2.    MEETINGS AND ACTION BY COMMITTEES . Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III, Sections 6 (place of meetings), 8 (regular meetings), 9 (special meetings and notice), 10 (quorum), 11 (waiver of notice), 12 (adjournment), 13 (notice of adjournment) and 14 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members, except that the time or regular meetings of committees may be determined by resolutions of the board of directors and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. The committees shall keep regular minutes of their proceedings and report the same to the board when required.

ARTICLE V   

OFFICERS

Section 1.    OFFICERS . The officers of the corporation shall be a president, a secretary and a treasurer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any two or more offices may be held by the same person.

Section 2.    ELECTION OF OFFICERS . The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a vice president, a secretary and a treasurer, none of whom need be a member of the board. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.

Section 3.    SUBORDINATE OFFICERS, ETC . The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine.

Section 4.    REMOVAL AND RESIGNATION OF OFFICERS . The officers of the corporation shall hold office until their successors are chosen and qualify. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power or removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

Section 5.    VACANCIES IN OFFICES . A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to such office.

Section 6.    CHAIRMAN OF THE BOARD . The chairman of the board, if such an officer be elected, shall, if present, preside at all meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the bylaws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V.

Section 7.    PRESIDENT . Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence of the chairman of the board, of if there be none, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.

Section 8.    VICE PRESIDENTS . In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or the bylaws, the president or the chairman of the board.

Section 9.    SECRETARY . The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and shall record, keep or cause to be kept, at the principal executive office or such other place as the board of directors may order, a book of minutes of all meetings of directors, committees of directors and stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors’ and committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of stockholders and of the board of directors required by the bylaws or by law to be given, and he shall keep the seal of the corporation in safe custody, as may be prescribed by the board of directors or by the bylaws.

Section 10.    TREASURER . The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director.

The treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws.

If required by the board of directors, the treasurer shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

ARTICLE VI   

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS

Section 1.    ACTIONS OTHER THAN BY THE CORPORATION . The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.

Section 2.    ACTIONS BY THE CORPORATION . The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees, actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

Section 3.    SUCCESSFUL DEFENSE . To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.

Section 4.    REQUIRED APPROVAL . Any indemnification under Sections 1 and 2, unless ordered by a court or advanced pursuant to Section 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:

(a)    By the stockholders;
(b)    By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding;
(c)    If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or
(d)    If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.

Section 5.    ADVANCE OF EXPENSES . The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this section do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.

Section 6.    OTHER RIGHTS . The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article VI:

(a)    Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to Section 2 or for the advancement of expenses made pursuant to Section 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
(b)    Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.
Section 7.    INSURANCE . The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.

Section 8.    RELIANCE ON PROVISIONS . Each person who shall act as an authorized representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Article.

Section 9.    SEVERABILITY . If any of the provisions of this Article are held to be invalid or unenforceable, this Article shall be construed as if it did not contain such invalid or unenforceable provision and the remaining provisions of this Article shall remain in full force and effect.

Section 10.    RETROACTIVE EFFECT . To the extent permitted by applicable law, the rights and powers granted pursuant to this Article VI shall apply to acts and actions occurring or in progress prior to its adoption by the board of directors.

ARTICLE VII   

RECORDS AND BOOKS

Section 1.    MAINTENANCE OF SHARE REGISTER . The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the board of directors, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of shares held by each stockholder.

Section 2.    MAINTENANCE OF BYLAWS . The corporation shall keep at its principal executive office, or if its principal executive office is not in this State at its principal business office in this State, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the stockholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, the secretary shall, upon the written request of any stockholder, furnish to such stockholder a copy of the bylaws as amended to date.

Section 3.    MAINTENANCE OF OTHER CORPORATE RECORDS . The accounting books and records and minutes of proceedings of the stockholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.

Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of this corporation and any subsidiary of this corporation. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. The foregoing rights of inspection shall extend to the records of each subsidiary of the corporation.

Section 4.    ANNUAL REPORT TO STOCKHOLDERS . Nothing herein shall be interpreted as prohibiting the board of directors from issuing annual or other periodic reports to the stockholders of the corporation as they deem appropriate.

Section 5.    FINANCIAL STATEMENTS . A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months.

Section 6.    ANNUAL LIST OF DIRECTORS, OFFICERS AND RESIDENT AGENTS . The corporation shall file with the Secretary of State of the State of Colorado, on the prescribed form, a list of its officers and directors and a designation of its resident agent in Colorado.

ARTICLE VIII   

GENERAL CORPORATE MATTERS

Section 1.    RECORD DATE . For purposes of determining the stockholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of any such meeting nor more than sixty (60) days prior to any other action, and in such case only stockholders of record on the date so fixed are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date fixed as aforesaid, except as otherwise provided in Colorado Law.

 
 

 

If the board of directors does not so fix a record date:

(a)    The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(b)    The record date for determining stockholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the board has been taken, shall be the day on which the first written consent is given.

(c)    The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later.

Section 2.    CLOSING OF TRANSFER BOOKS PROHIBITED . In connection with the determination of stockholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any right in respect of any other lawful action, the board of directors shall not close the stock transfer books of the corporation for any reason but shall instead fix a record date for such determination in the manner provided in Section 1 of Article VIII of these bylaws.

Section 3.    REGISTERED STOCKHOLDERS . The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Colorado.

Section 4.    CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS . All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors.

Section 5.    CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED . The board of directors, except as in the bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors or within the agency power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.

Section 6.    STOCK CERTIFICATES . A certificate or certificates for shares of the capital stock of the corporation shall be issued to each stockholder when any such shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that such certificates shall state the amount of the consideration to be paid therefor and the amount paid thereon. All certificates shall be signed in the name of the corporation by the president or vice president and by the treasurer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the stockholder. When the corporation is authorized to issue shares of more than one class or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholders upon request and without charge, a full or summary statement of the designations, preferences and relatives, participating, optional or other special rights of the various classes of stock or series thereof and the qualifications, limitations or restrictions of such rights, and, if the corporation shall be authorized to issue only special stock, such certificate must set forth in full or summarize the rights of the holders of such stock. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

No new certificate for shares shall be issued in place of any certificate theretofore issued unless the latter is surrendered and cancelled at the same time; provided, however, that a new certificate may be issued without the surrender and cancellation of the old certificate if the certificate thereto fore issued is alleged to have been lost, stolen or destroyed. In case of any such allegedly lost, stolen or destroyed certificate, the corporation may require the owner thereof or the legal representative of such owner to give the corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 7.    DIVIDENDS . Dividends upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the articles of incorporation.

Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserves in the manner in which it was created.

Section 8.    FISCAL YEAR . The fiscal year of the corporation shall be fixed by resolution of the board of directors.

Section 9.    SEAL . The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation and the words “Corporate Seal, Colorado.”

Section 10.    REPRESENTATION OF SHARES OF OTHER CORPORA-TIONS . The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the board of directors by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority herein granted to said officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any such officer in person or by any person authorized to do so by proxy duly executed by said officer.

Section 11.    CONSTRUCTION AND DEFINITIONS . Unless the context requires otherwise, the general provisions, rules of construction, and definitions in Colorado Law shall govern the construction of the bylaws. Without limiting the generality of the foregoing, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE IX   

AMENDMENTS

Section 1.    AMENDMENT BY STOCKHOLDERS . New bylaws may be adopted or these bylaws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote, or by the written assent of stockholders entitled to vote such shares, except as otherwise provided by law or by the articles of incorporation.

Section 2.    AMENDMENT BY DIRECTORS . Subject to the rights of the stockholders as provided in Section 1 of this Article, bylaws may be adopted, amended or repealed by the board of directors.

 
 

 

C E R T I F I C A T E O F S E C R E T A R Y

I, the undersigned, do hereby certify:

1.   That I am the duly elected and acting secretary of Action Fashions, Ltd., a Colorado corporation; and

2.   That the foregoing Bylaws constitute the Bylaws of said corporation as duly adopted by the board of directors of said corporation by a Unanimous Written Consent dated as of December 30, 2005.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said corporation this 30th day of December, 2005.

Phillip E. Koehnke
Secretary


Exhibit 4.1

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE .

U.S.A. CONNECTION, INC.

PROMISSORY NOTE
(Zero Interest)

$19,000

Dated:     June 1, 2005
Maturity Date:   June 1, 2010


U.S.A. Connection, Inc. (the “Company”) hereby promises to pay to the order of G.K.’S Gym, Inc. (“Noteholder”) at such place as Noteholder may from time to time designate, in lawful money of the United States of America, and in immediately payable funds, Nineteen Thousand Dollars ($19,000) (zero interest) which shall become due and payable on June 1, 2010 .

1.   PREPAYMENT . This Convertible Promissory Note (the “Note”) may be prepaid, in whole or in part, by the Company without the prior written consent of the Noteholder.

2.   TRANSFER and ASSIGNMENT . This Note shall be freely transferable and assignable by the Noteholder provided such transfer is in compliance with applicable federal and state securities laws.

3.   DEFAULT .   The occurrence of any one of the following events shall constitute an Event of Default:

a.   The non-payment by the Company of the required principal payment for more than twenty days after the due date.

b.   The commencement by the Company of any voluntary proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment or debt, receivership, dissolution, or liquidation law or statute or any jurisdiction, whether now or hereafter in effect; or the adjudication of the Company as insolvent or bankrupt by a decree of a court of competent jurisdiction; or the petition or application by the Company for, acquiescence in, or consent by the Company to, the appointment of any receiver or trustee for the Company or for all or a substantial part of the property of the Company; or the assignment by the Company for the benefit of creditors; or the written admission of the Company of its inability to pay its debts as they mature;

c.   The commencement against the Company of any proceeding relating to the Company under any bankruptcy, reorganization, arrangement, insolvency, adjustment of debt, receivership, dissolution or liquidation law or statute or any jurisdiction, whether now or hereafter in effect, provided, however, that the commencement of such a proceeding shall not constitute an Event of Default unless the Company consents to the same or admits in writing the material allegations of same, or said proceeding shall remain undismissed for 20 days; or the issuance of any order, judgment or decree for the appointment of a receiver or trustee for the Company or for all or a substantial part of the property of the Company, which order, judgment or decree remains undismissed for 20 days; or a warrant of attachment, execution, or similar process shall be issued against any substantial part of the property of the Company; or

4.   ACCELERATION .   Upon the occurrence of an Event of Default as described under subsections (a), (b) and (c) of Section 3, Noteholder, upon written notice to the Company, shall be entitled to declare all unpaid past, and all future payments required under the Note, immediately due and payable and which shall be paid by the Company within 30 days of the Company’s receipt of the written notice.

5.   NOTICES . Notices to be given hereunder shall be in writing and shall be deemed to have been sufficiently given if delivered personally or sent by overnight courier or messenger or sent by registered or certified mail (air mail if overseas), return receipt requested, or by telex, facsimile transmission, telegram or similar means of communication. Notice shall be deemed to have been received on the date of personal delivery, telex, facsimile transmission, telegram or similar means of communication, or if sent by overnight courier or messenger, shall be deemed to have been received on the next delivery day after deposit with the courier or messenger, or if sent by certified or registered mail, return receipt requested, shall be deemed to have been received on the third business day after the date of mailing. The address of the Company and the Noteholder is as set forth in the Subscription Agreement.

6.   GOVERNING LAW . THIS NOTE HAS BEEN DELIVERED IN THE STATE OF COLORADO AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACT MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT GIVING EFFECT TO THE RULES AND CONFLICTS OF LAW.

7.   ATTORNEYS FEES . In the event any holder hereof shall refer this Note to an attorney for collection, the Company agrees to pay all the costs and expenses incurred in attempting or effecting collection hereunder, including reasonable attorney's fees, whether or not suit is instituted.

8.   CONFORMITY WITH LAW . It is the intention of the Company and of the Noteholder to conform strictly to applicable usury and similar laws. Accordingly, notwithstanding anything to the contrary in this Note, it is agreed that the aggregate of all charges which constitute interest under applicable usury and similar laws that are contract for, chargeable or receivable under or in respect of this Note, shall under no circumstances exceed the maximum amount of interest permitted by such laws, and any excess, whether occasioned by acceleration or maturity of this Note or otherwise, shall be canceled automatically, and if theretofore paid, shall be either refunded to the Company or credited on the principal amount of this Note.

9.   MISCELLANEOUS. This Note may only be changed, modified or amended in writing by the mutual consent of Noteholder and the Company. The provisions of this Note may only be waived in or by a writing signed by the party against whom enforcement of any waiver is sought. This Note embodies the entire understanding between Noteholder and the Company and merges all prior discussions or communications between them. Time is of the essence of this Note and of each and every provisions thereof.


IN WITNESS WHEREOF, the Company has signed and sealed this Note and delivered it in Colorado as of June 1, 2005.



U.S.A Connection, Inc.



By:            
   





Exhibit 4.2

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE .

U.S.A. CONNECTION, INC.

CONVERTIBLE PROMISSORY NOTE
(Zero Interest)

$480,000

Dated: December 6, 2003


IN CONSIDER FOR SERVICES to be provided by Phillip E. Koehnke to U.S.A. Connections, Inc., a Colorado corporation (the “Company”) to serve as the Company’s director, President, Chief Executive Officer, Chief Financial Officer and Secretary, the Company hereby promises to pay to the order of Phillip E. Koehnke (the “Noteholder”), at such place as Noteholder may from time to time designate, in lawful money of the United States of America, and in immediately payable funds, Four Hundred and Eighty Thousand Dollars ($480,000) payable on the first day of each month, beginning on December 1, 2003 ending on November 1, 2007, the amount of $10,000 per month. At the option of the Noteholder, the monthly principal payments may be paid in cash or restricted shares of the Company’s common stock at a price per share equal to the Conversion Price as defined herein.

1.   PREPAYMENT . This Convertible Promissory Note (the “Note”) may be prepaid, in whole or in part, by the Company without the prior written consent of the Noteholder.

2.   TRANSFER and ASSIGNMENT . This Note shall be freely transferable and assignable by the Noteholder provided such transfer is in compliance with applicable federal and state securities laws.

3.   CONVERSION OF NOTE .   The Noteholder shall have the right from and after the date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, into fully paid and nonassessable shares of the common stock of the Company as such stock exists on the date of issuance of this Note, or is hereafter be changed or reclassified, at a “Conversion Price” equal to (i) $0.01 per share or, if the Company has its common stock trading in the public market, (ii) the current “Market Price,” which shall be equal to fifty percent (50%) of the average of the three lowest closing bid prices of the Company’s common stock as reported by the principal market for the thirty trading days preceding the date of conversion. The Conversion Price shall be subject to proportional adjustment for reclassification, Stock Splits, Combinations and Dividends.

4.   CONVERSION PRIVILEGES . The conversion privileges of this Note shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default.

5.   DEFAULT .   The occurrence of any one of the following events shall constitute an Event of Default:

a.   The non-payment by the Company of the required principal payment in an aggregate monetary amount in excess of $30,000 for more than twenty days after the due date.

b.   The commencement by the Company of any voluntary proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment or debt, receivership, dissolution, or liquidation law or statute or any jurisdiction, whether now or hereafter in effect; or the adjudication of the Company as insolvent or bankrupt by a decree of a court of competent jurisdiction; or the petition or application by the Company for, acquiescence in, or consent by the Company to, the appointment of any receiver or trustee for the Company or for all or a substantial part of the property of the Company; or the assignment by the Company for the benefit of creditors; or the written admission of the Company of its inability to pay its debts as they mature;

c.   The commencement against the Company of any proceeding relating to the Company under any bankruptcy, reorganization, arrangement, insolvency, adjustment of debt, receivership, dissolution or liquidation law or statute or any jurisdiction, whether now or hereafter in effect, provided, however, that the commencement of such a proceeding shall not constitute an Event of Default unless the Company consents to the same or admits in writing the material allegations of same, or said proceeding shall remain undismissed for 20 days; or the issuance of any order, judgment or decree for the appointment of a receiver or trustee for the Company or for all or a substantial part of the property of the Company, which order, judgment or decree remains undismissed for 20 days; or a warrant of attachment, execution, or similar process shall be issued against any substantial part of the property of the Company; or

6.   ACCELERATION .   Upon the occurrence of an Event of Default as described under subsections (a), (b) and (c) of Section 5, Noteholder, upon written notice to the Company, shall be entitled to declare all unpaid past, and all future payments required under the Note, immediately due and payable and which shall be paid by the Company within 30 days of the Company’s receipt of the written notice.

7.   NOTICES . Notices to be given hereunder shall be in writing and shall be deemed to have been sufficiently given if delivered personally or sent by overnight courier or messenger or sent by registered or certified mail (air mail if overseas), return receipt requested, or by telex, facsimile transmission, telegram or similar means of communication. Notice shall be deemed to have been received on the date of personal delivery, telex, facsimile transmission, telegram or similar means of communication, or if sent by overnight courier or messenger, shall be deemed to have been received on the next delivery day after deposit with the courier or messenger, or if sent by certified or registered mail, return receipt requested, shall be deemed to have been received on the third business day after the date of mailing. The address of the Company and the Noteholder is as set forth in the Subscription Agreement.

8.   GOVERNING LAW . THIS NOTE HAS BEEN DELIVERED IN THE STATE OF COLORADO AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACT MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT GIVING EFFECT TO THE RULES AND CONFLICTS OF LAW.

9.   ATTORNEYS FEES . In the event any holder hereof shall refer this Note to an attorney for collection, the Company agrees to pay all the costs and expenses incurred in attempting or effecting collection hereunder, including reasonable attorney’s fees, whether or not suit is instituted.

10.   CONFORMITY WITH LAW . It is the intention of the Company and of the Noteholder to conform strictly to applicable usury and similar laws. Accordingly, notwithstanding anything to the contrary in this Note, it is agreed that the aggregate of all charges which constitute interest under applicable usury and similar laws that are contract for, chargeable or receivable under or in respect of this Note, shall under no circumstances exceed the maximum amount of interest permitted by such laws, and any excess, whether occasioned by acceleration or maturity of this Note or otherwise, shall be canceled automatically, and if theretofore paid, shall be either refunded to the Company or credited on the principal amount of this Note.

11.   MISCELLANEOUS. This Note may only be changed, modified or amended in writing by the mutual consent of Noteholder and the Company. The provisions of this Note may only be waived in or by a writing signed by the party against whom enforcement of any waiver is sought. This Note embodies the entire understanding between Noteholder and the Company and merges all prior discussions or communications between them. Time is of the essence of this Note and of each and every provisions thereof.














[ Signature Page Follows ]

 
 

 


IN WITNESS WHEREOF, the Company has signed and sealed this Note and delivered it in Colorado as of December 6, 2003.



U.S.A. CONNECTION, INC.



By:            
Phillip E. Koehnke
President



ATTEST



By: ___________________________________
Phillip E. Koehnke
Secretary




Exhibit 10.1
 
EMPLOYMENT AGREEMENT
 
This Employment Agreement, is made as of December 6, 2003 (the “Effective Date”), by and between Phillip E. Koehnke (“Employee”) and U.S.A. Connection, Inc. , a Colorado corporation (the “Company”). In consideration of the premises and for other good and valuable consideration, and with the intent to be legally bound, the parties hereto agree as follows:
 
RECITALS

A.   WHEREAS, the Company desires to employ Employee on the terms and conditions herein stated and Employee accepts such terms of employment.
 
1.    Position . During the term of this Agreement, the Company will employ the Employee, and the Employee will serve the Company in the capacity of Director, President, Chief Executive Officer, Chief Financial Officer and Secretary.
 
2.    Duties . The Employee will perform duties described in Exhibit “A,” attached to this Agreement and incorporated by this reference, together with such additional reasonably related duties assigned by the President or Board of Directors.
 
3.    Service . Except with respect to the matters specified below, Employee will devote substantial working time and efforts to the business and affairs of the Company. The foregoing shall not, however, preclude the Employee: (a) from engaging in appropriate civic, charitable or religious activities; (b) from serving on the boards of directors of other entities, with the consent of the Company, which consent shall not be unreasonably withheld; (c) from providing incidental assistance to family members on matters of family business, so long as the foregoing activities and service do not conflict with the Employee's responsibilities to the Company; and (d) from completing, managing and supervising Employee’s personal business affairs.
 
4.      Term of Agreement . The Company agrees to continue the Employee's employment, and the Employee agrees to remain in the employ of the Company, pursuant to the terms of this Agreement for a period of forty eight (48) months , but this Agreement shall be subject to extension for and up to an additional twelve (12) months after the Effective Date, unless the Employee’s employment is earlier terminated pursuant to the provisions of this Agreement.
 
5.    Compensation and Benefits .
 
5.1    C ompensation .
 
5.2    B ase Salary . Employee shall receive a salary of $10,000 per month (the “Base Salary”), payable in monthly installments of $10,000 in accordance with the general payroll practices of the Company.
 
5.3    Expenses . The Company will reimburse (monthly) the Employee for all reasonable and necessary expenses incurred by the Employee in connection with the Company's business, entertainment, airfare, automobile, hotel and miscellaneous expenses incurred by Employee.
 
5.4    Security . This Agreement shall be secured by a Convertible Promissory Note (the “Note”) made by the Company in favor of Employee. The Note is attached hereto as Exhibit “B” and incorporated herein by reference.
 
6.    Termination .
 
6.1    Events of Termination . The Employee's employment with the Company shall terminate upon any one of the following:
 
6.1.1    Thirty (30) days after the date of a written notice sent to the Employee stating the Company's determination made in good faith that it is terminating the Employee for “Cause” as defined under Section 6.2 below (“Termination for Cause”); or
 
6.1.2    Thirty (30) days after the date of a written notice sent to the Employee stating the Company's determination made in good faith that, due to a mental or physical incapacity, the Employee has been unable to perform his duties under this Agreement for a period of not less than six (6) consecutive months (“Termination for Disability”); or
 
6.1.3    Upon the Employee's death (“Termination Upon Death”); or
 
6.1.4    Upon the date of a written notice sent to the Company stating the Employee's determination made in good faith of “Constructive Termination” by the Company, as defined under Section 6.3 below (“Constructive Termination”); or
 
6.1.5    Thirty (30) days after the date of a notice sent to the Employee stating that the Company is terminating his employment, without Cause, which notice can only be given by the Company at any time after the Effective Date at the Company's sole discretion, for any reason or for no reason (“Termination Without Cause”); or
 
6.1.6    The date of a notice sent to the Company from the Employee stating that the Employee is electing to terminate his employment with the Company (“Voluntary Termination”).
 
6.2    Cause” Defined . For purposes of this Agreement, “Cause” for the Employee's termination will exist at any time after the occurrence of one or more of the following events:
 
6.2.1    Any willful act or acts of dishonesty undertaken by the Employee intended to result in substantial gain or personal enrichment of the Employee at the expense of the Company;
 
6.2.2    Any willful act of gross misconduct which could reasonably be expected to materially and demonstrably result in damage to the Company. No act, or failure to act, by the Employee shall be considered “willful” if done, or omitted to be done, by him in good faith and in the reasonable belief that his act or omission was in the best interest of the Company and/or required by applicable law, or
 
6.2.3    Employee is charged with the commission of a felony involving moral turpitude.
 
6.3    Constructive Termination” Defined . “Constructive Termination” shall mean:
 
6.3.1    A material reduction in the Employee's salary or benefits not agreed to by the Employee;
 
6.3.2    A material change in the Employee's responsibilities not agreed to by the Employee;
 
6.3.3    The Company's breach or failure to comply in any material respect with any material term of this Agreement after thirty (30) days written notice of the Employee’s claim of such failure; or
 
6.3.4    A requirement that the Employee relocate to an office that would increase the Employee's one-way commute distance by more than thirty (30) miles from his home.
 
6.4    Termination Without Cause ” shall mean:
 
6.4.1    Termination of the Employee’s employment with the Company for any reason other than Cause.
 
7.    Effect of Termination .
 
7.1    Termination for Cause or Voluntary Termination . In the event of any termination of the Employee's employment pursuant to Section 6.1.1 or Section 6.1.6, the Company shall immediately pay to the Employee the compensation and benefits accrued and otherwise payable to the Employee under Section 5 through the date of termination. The Employee's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
 
7.2    Termination for Disability . In the event of termination of employment pursuant to Section 6.1.2:
 
7.2.1    The Company shall immediately pay to the Employee the compensation and benefits accrued and otherwise payable to the Employee under Section 5 through the date of termination; and
 
7.2.2    The Employee shall receive any other benefit payments as provided in the Company's standard benefit plans applicable to disability.
 
7.3    Termination Upon Death . In the event of termination of employment pursuant to Section 6.1.3, all obligations of the Company and the Employee shall cease, except the Company shall immediately pay to the Employee (or to the Employee's estate) the compensation and benefits accrued and otherwise payable to the Employee under Section 5 through the date of termination.
 
7.4    Constructive Termination or Termination Without Cause . In the event of any termination of this Agreement pursuant to Section 6.1.4 or Section 6.1.5:
 
7.4.1    The Company shall immediately pay to the Employee the compensation and benefits accrued and otherwise payable to the Employee under entire term of this Agreement.
 
8.    Nondisclosure. The Employee acknowledges that during the course of his employment by the Company, the Company will provide, and the Employee will acquire, knowledge of special and unique value with respect to the Company's business operations, including, by way of illustration, the Company's existing and contemplated product line, trade secrets, compilations, business and financial methods or practices, plans, hardware and software technology products, systems, programs, projects and know-how, pricing, cost of providing service and equipment, operating and maintenance costs, marketing and selling techniques and information, customer data, customer names and addresses, customer service requirements, supplier lists, and confidential information relating to the Company's policies, employees, and/or business strategy (all of such information herein referenced to as the “Confidential Information”). The Employee recognizes that the business of the Company is dependent upon Confidential Information and that the protection of the Confidential Information against unauthorized disclosure or use is of critical importance to the Company. The Employee agrees that, without prior written authorization of the President of the Company, the Employee will not, during his employment, divulge to any person, directly or indirectly, except to the Company or its officers and agents or as reasonably required in connection with the Employee’s duties on behalf of the Company, or make any independent use of, except on behalf of the Company, any of the Company's Confidential Information, whether acquired by the Employee during his employment or not. The Employee further agrees that the Employee will not, at any time after his employment has ended, use or divulge to any person directly or indirectly any Confidential Information, or use any Confidential Information in subsequent employment of any nature. If the Employee is subpoenaed, or is otherwise required by law to testify concerning Confidential Information, the Employee agrees to notify the Company upon receipt of a subpoena, or upon belief that such testimony shall be required. This nondisclosure provision shall survive the termination of this Agreement for any reason. The Employee acknowledges that the Company would not employ the Employee but for his covenants and promises contained in this Section 8.
 
9.    Return of Documents. The Employee agrees that if the Employee’s relationship with the Company is terminated (for whatever reason), the Employee shall not remove or take with the Employee, but will leave with the Company or return to Company, all Confidential Information, records, files, data, memoranda, reports, customer lists, customer information, product information, price lists, documents and other information, in whatever form (including on computer disk), and any and all copies thereof, or if such items are not on the premises of the Company, the Employee agrees to return such items immediately upon the Employee's termination or the request of the Company. The Employee acknowledges that all such items are and remain the property of the Company.
 
10.   No Interference or Solicitation. The Employee agrees that during his employment, and for a period of six (6) months following the termination of his employment (for whatever reason), that neither he nor any individual, partner(s), limited partnership, corporation or other entity or business with which he is in any way affiliated, including, without limitation, any partner, limited partner, director, officer, shareholder, employee, or agent of any such entity or business, will: (i) request, induce or attempt to influence, directly or indirectly, any employee of the Company to terminate their employment with the Company; or (ii) employ any person who as of the date of this Agreement was, or after such date is or was, an employee of the Company. The Employee further agrees that during the period beginning with the commencement of the Employee’s engagement with the Company and ending six (6) months after the termination of the Employee’s employment with the Company (for whatever reason), he shall not, directly or indirectly, as an employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity of the Company or of any other person, entity or business, solicit or encourage any present or future customer, supplier, contractor, partner or investor of the Company to terminate or otherwise alter his, his or its relationship with the Company. This provision shall survive the termination of this Agreement for any reason.

11.   Injunctive Relief. The Employee acknowledges and agrees that the agreements and covenants contained in this Agreement are essential to protect the Confidential Information, business, and goodwill of the Company. The Employee further acknowledges that the breach of any of the agreements contained herein, including, without limitation, the confidentiality covenants specified in Section 8 and the non-solicitation covenants specified in Section 10 will give rise to irreparable injury to the Company, inadequately compensable in damages. Accordingly, the Company shall be entitled to injunctive relief to prevent or cure breaches or threatened breaches of the provisions of this Agreement and to enforce specific performance of the terms and provisions hereof in any court of competent jurisdiction, in addition to any other legal or equitable remedies which may be available. The Employee further acknowledges and agrees that in the event of the termination of the Employee's employment with the Company, whether voluntary or involuntary, that the enforcement of a remedy hereunder by way of injunction shall not prevent the Employee from earning a reasonable livelihood. The Employee further acknowledges and agrees that the covenants contained herein are necessary for the protection of the Company's legitimate business interests ad are reasonable in scope and content.

12.   Miscellaneous .

12.1   Indemnification . The Company agrees to indemnify and defend the Employee to the full extent provided by Florida law, and on terms no less favorable than any indemnification agreement the Company has at any time during the term of this Agreement with an executive or officer of the Company. The Company agrees to reimburse Employee upon demand for any costs incurred in requesting or obtaining indemnification under this paragraph.

12.2   Arbitration . The Employee and the Company shall submit to mandatory binding arbitration before a sole arbitrator, in any controversy or claim arising out of, or relating to, this Agreement or any breach hereof. The arbitrator is hereby authorized to permit discovery, including deposition testimony and award to the prevailing party the costs (including reasonable attorneys' fees and expenses) of any such arbitration.

12.3   Severability . If any provision of this Agreement shall be found by any arbitrator or court of competent jurisdiction to be invalid or unenforceable, then the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable and to the extent that to do so would not deprive one of the parties of the substantial benefit of its bargain. Such provision shall, to the extent allowable by law and the preceding sentence, be modified by such arbitrator or court so that it becomes enforceable and, as modified, shall be enforced as any other provision hereof, all the other provisions continuing in full force and effect.
12.4   No Waiver . The failure by either party at any time to require performance or compliance by the other of any of its obligations or agreements shall in no way affect the right to require such performance or compliance at any time thereafter. The waiver by either party of a breach of any provision hereof shall not be taken or held to be a waiver of any preceding or succeeding breach of such provision or as a waiver of the provision itself. No waiver of any kind shall be effective or binding, unless it is in writing and is signed by the party against whom such waiver is sought to be enforced.

12.5   No Assignment . This Agreement and all rights hereunder are personal to the Employee and may not be transferred or assigned by the Employee at any time. The Company may assign its rights, together with its obligations hereunder, to any parent, subsidiary, affiliate or successor, or in connection with any sale, transfer or other disposition of all or substantially all of its business and assets, provided, however, that any such assignee assumes the Company's obligations hereunder.

12.6   Withholding . All sums payable to the Employee hereunder shall be reduced by all federal, state, local and other withholding and similar taxes and payments required by applicable law.

12.7   Entire Agreement . This Agreement constitutes the entire and only agreement between the parties relating to employment of the Employee with the Company, and this Agreement supersedes and cancels any and all previous contracts, arrangements or understandings with respect thereto.

12.8   Amendment . This Agreement may be amended, modified, superseded, cancelled, renewed or extended only by an agreement in writing executed by both parties hereto.

12.9   Notices . All notices and other communications required or permitted under this Agreement shall be in writing and hand delivered, sent by telecopier, sent by registered first class mail, postage pre-paid, or sent by nationally recognized express courier service. Such notices and other communications shall be effective upon receipt if hand delivered or sent by telecopier, five (5) days after mailing if sent by mail.

12.10   Binding Nature . This Agreement shall be binding upon, and inure to the benefit of, the successors and personal representatives of the respective parties hereto.

12.11   Headings . The headings contained in this Agreement are for reference purposes only and shall in no way affect the meaning or interpretation of this Agreement. In this Agreement, the singular includes the plural, the plural included the singular, the masculine gender includes both male and female referents, and the word “or” is used in the inclusive sense.

12.12   Counterparts and Fax Signatures . This Agreement may be executed by Fax and in two or more counterparts, each of which shall be deemed to be an original but all of which, taken together, constitute one and the same agreement.

12.13   Governing Law . This Agreement and the rights and obligations of the parties hereto shall be construed in accordance with the laws of the State of Florida.

12.14   Attorneys' Fees . In the event of any claim, demand or suit arising out of or with respect to this Agreement, the prevailing party shall be entitled to reasonable costs and attorneys' fees, including any such costs and fees upon appeal.

 
 

 

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written.


“COMPANY”
 
U.S.A. Connection, Inc.
A Colorado corporation
 
 
 
 
 
By:
Phillip E. Koehnke, President
“Employee”
 
 
 
 
 
 
 
 
Phillip E. Koehnke


 
 

 



EXHIBIT “A”
TO
EMPLOYMENT AGREEMENT

DUTIES OF EMPLOYEE



1.  
Act as the Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company and to perform such duties as described in the Bylaws of the Company.
 

 
 

 

EXHIBIT “B”
TO
EMPLOYMENT AGREEMENT
 
(CONVERTIBLE PROMISSORY NOTE)

Exhibit 10.2
 
ASSET PURCHASE AGREEMENT
 
THIS ASSET PURCHASE AGREEMENT (“Agreement”) is entered into as of June 1, 2005, by and between G.K. Gymnastics, Inc. a Colorado corporation (“Seller”), and U.S.A. Connection, Inc., a Colorado Corporation (“Buyer”).
 
R E C I T A L S
 
Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, the Assets (as defined in Section 1), subject to and upon the terms and conditions hereinafter set forth.
 
A G R E E M E N T
 
It is agreed as follows:
 
1.   Sale and Purchase of Assets . Subject to and upon the terms and conditions set forth herein, Seller agrees to sell, assign, convey, transfer and deliver (“Transfer”) to Buyer and Buyer agrees to purchase from Seller, on the Closing Date (as defined in Section 10), the following assets (“Assets”):
 
(a)   All items of inventory, including, but not limited to goods for sale, supplies and inventory of equipment held for rental to customers, kits, and spare parts;
 
(b)   The right to use the name “Action Fashions” and all intangible rights thereto and all trade secrets, know how, customer lists, inventions and other intangible property used in the business of Seller; and
 
(c)   All computer printouts, software, databases and related items, copies of books and records and files related to the business of Seller and any of the Assets.
 
Buyer acknowledges that the Assets do not include any cash, cash equivalents, accounts receivable or tax or other refunds due to Seller.
 
2.   Consideration .
 
(a)   In consideration of the Assets to be transferred by Seller, Buyer shall deliver to Seller a promissory note in the amount of $19,000 on the Closing Date.
 
(b)   The parties agree that the total consideration paid by Buyer shall be allocated among the Assets as follows: $19,000 shall be allocated towards the purchase of the inventory for sale.
 
3.   No Assumption of Indebtedness; Payment of Sales Tax .
 
(a)   Buyer is not assuming any liabilities or indebtedness of Seller in connection with the transactions contemplated hereby and shall have no liability for any such liabilities or indebtedness by reason of this Agreement or the transactions contemplated hereby.
 
(b)   Buyer shall be responsible for all sales and use taxes due with respect to this Agreement.
 
4.   Bulk Sales Law Compliance;Instruments of Transfer, Etc .
 
(a)   Buyer shall have given notice in compliance with the Colorado Commercial Code if required. Seller shall furnish to Buyer all information necessary to prepare the notice, including the names and business addresses used by Seller within the last three (3) years and the location of all of the assets to be transferred under this Agreement at least fifteen (15) business days before the Closing Date.
 
(b)   Seller shall deliver to Buyer on the Closing Date and thereafter upon Buyer’s request such bills of sale, assignments and other good and sufficient instruments of Transfer in form and substance satisfactory to Buyer and its counsel as are necessary to effectively Transfer all of Seller’s right, title and interest in the Assets to Buyer. At any time after the Closing Date, Seller shall execute, acknowledge and deliver to Buyer any further documents, assurances or other matters, and will take any other action consistent with the terms of this Agreement that may reasonably be requested by Buyer and as are necessary or desirable to carry out the purpose of this Agreement.
 
5.   Representations and Warranties of Seller . Seller represents, warrants and covenants to Buyer as of the date hereof and as of the Closing Date as follows:
 
5.1   Corporate Organization . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado.
 
5.2   Power and Authority . Seller has all corporate power and authority to enter into and to carry out all of the terms of this Agreement and all other documents executed and delivered in connection herewith, including, but not limited to, those instruments of Transfer described in Section 4 of this Agreement (collectively “Documents”). All corporate action on the part of Seller, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of the Documents by Seller has been taken and no further corporate or other authorization on the part of Seller is required to consummate the transactions provided for in the Documents. When executed and delivered by Seller, the Documents shall constitute the valid and legally binding obligations of Seller enforceable in accordance with their respective terms. Neither the execution, delivery nor performance of the Documents by Seller shall (i) violate or result in a breach of any provisions of Seller’s articles of incorporation or bylaws, (ii) constitute a default or result in a breach of any contract or agreement to which it is a party or its assets or properties are bound, or (iii) violate any order, writ, injunction, decree, judgment or other restriction of any court, administrative agency or governmental body.
 
5.3   Title to Assets . Seller has and will Transfer to Buyer good and marketable title to the Assets, free and clear of all mortgages, pledges, security interests, liens, claims, charges, restrictions and encumbrances.
 
5.4   Inventory . The inventory, including the inventory of rental equipment on Schedule 5.4 hereto is of merchantable quality, free of defects and salable (or usable) in the ordinary course of business of Seller.
 
5.5   Furniture and Equipment . All of the items of furniture and equipment set forth on the Schedule 5.5 hereto are suitable for the purpose or purposes for which it is being used and is in such good and proper condition and repair as to permit the continued use by Buyer in accordance with its intended purpose.
 
5.6   Lease . None.
 
5.7   Liabilities . Seller is paying and will pay all of its liabilities, debts and obligations outstanding as of the Closing Date.
 
5.8   No Governmental or Other Proceeding or Litigation . No order of any court or administrative agency is in effect which restrains or prohibits the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or other person, or legal or administrative proceeding has been instituted or threatened which questions the validity or legality of the transactions contemplated hereby. There are no actions or proceedings pending or threatened arising out of or related to the Assets. There is no voluntary action or proceeding affecting the Assets pending or the commencement of which is contemplated by Seller, and to the best knowledge of Seller there is no involuntary action or proceeding pending or the commencement of which is threatened or contemplated affecting the Assets against Seller, under any federal, state or local bankruptcy, insolvency, reorganization, receivership, attachment or other similar law.
 
5.9   Approvals and Consents . There are no permits, consents or approvals of public authorities, federal, state or local, or of any third party necessary for the consummation of the transactions contemplated hereby.
 
5.10   Financial Statements . Seller has delivered to Buyer the unaudited financial statements of Seller and such financial statements are complete and correct, and fairly and accurately presents the financial position of Seller as of the date or periods indicated.
 
5.11   Absence of Undisclosed Liabilities . Except as previously disclosed to Buyer in writing, Seller has no material liabilities or material obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, which are not reflected in the Seller Balance Sheet. There is no fact known to Seller which materially adversely affects or in the future is likely to materially adversely affect the businesses, properties, the Assets or operations of Seller which has not been set forth in the Seller Balance Sheet or previously disclosed to Buyer in writing.
 
5.12   Survival of Representations and Warranties . The representations and warranties of Seller made herein shall not be affected by any information furnished to or investigations made by Buyer, or any of its employees or representatives in connection with the subject matter of this Agreement and shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby for a period commencing with the date hereof and expiring on December 31, 2005.
 
6.   Representations and Warranties of Buyer . Buyer represents, warrants and covenants to Seller as of the date hereof and as of the Closing Date as follows:
 
6.1   Organization . Buyer is a Colorado Corporation validly existing and in good standing under the laws of the State of Colorado.
 
6.2   Power and Authority . Buyer has all requisite partnership power and authority to enter into and to carry out all of the terms of this Agreement and the other Documents executed and delivered in connection herewith. All corporate action on the part of Buyer and its partners necessary for the authorization, execution, delivery and performance of the Documents by Buyer has been taken and no further authorization on the part of Buyer is required to consummate the transactions provided for in the Documents. When executed and delivered by Buyer, the Documents shall constitute the valid and legally binding obligations of Buyer enforceable in accordance with their respective terms.
 
6.3   Survival of Representations and Warranties . The representations and warranties of Buyer made herein shall not be affected by any information furnished to or investigations made by Seller, or any of its employees or representatives in connection with the subject matter of this Agreement and shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby for a period commencing with the date hereof and expiring on December 31, 2005.
 
7.   Certain Additional Understandings and Agreements .
 
7.1   [Intentionally Omitted]
 
7.2   Assignment and Amendment to Lease . None.
 
7.3   Prorations . None.
 
7.4   Agreement to Perform Necessary Acts . Each party agrees to perform any further acts and execute and deliver any documents which may be reasonably necessary to carry out the provisions and purposes of this Agreement, including, but not limited to, the relinquishment or changing of Seller’s dba to “Deep Six Enterprises” or a similar name.
 
7.5   Notification of Creditors . On the Closing Date, Buyer shall notify the creditors listed on Schedule 7.6 that Seller is not responsible for goods ordered by Buyer after the Closing Date.
 
8.   Conditions to Buyer’s Obligations . Buyer’s obligations hereunder are subject to the fulfillment, on or before the Closing Date, of the following conditions (any of which may be waived in writing by Buyer):
 
8.1   Representations and Warranties . The representations and warranties of Seller contained herein shall have been true and correct in all material respects as of the Closing Date.
 
8.2   Performance of Covenants . Seller shall have performed and complied in all material respects with all covenants, agreements, terms and conditions and executed all documents required by this Agreement to be performed, complied with or executed by it prior to or on the Closing Date.
 
8.3   Instruments of Transfer . Seller shall have delivered to Buyer a bill of sale for the Assets and such other good and sufficient instruments of Transfer in form and substance satisfactory to Buyer and its counsel as shall be necessary to effectively Transfer all of the Seller’s right, title and interest in the Assets to Buyer.
 
8.4   No Governmental or Other Proceeding or Litigation . No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or other person or legal or administrative proceeding shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby.
 
8.5   Bulk Sale Compliance . The Notice to Creditors of Bulk Sale shall have been published and all requirements of the California Commercial Code relating to “Bulk Sales” shall have been complied with by the parties.
 
8.6   [Intentionally Omitted]
 
8.7   Approval and Consents . All permits, consents or approvals of applications to public authorities, federal, state or local, and all approvals of any third persons, the granting of which are necessary for the consummation of the transactions contemplated hereby shall have been obtained.
 
9.   Conditions to Seller’s Obligations . Seller’s obligations hereunder are subject to the fulfillment, on or before the Closing Date, of the following conditions (any of which may be waived in writing by Seller):
 
9.1   Representations and Warranties . The representations and warranties of Buyer contained herein shall have been true and correct in all material respects as of the Closing Date.
 
9.2   Performance of Covenants . Buyer shall have performed and complied in all material respects with all covenants, agreements, terms and conditions and executed all documents required by this Agreement to be performed, complied with or executed by it prior to or on the Closing Date.
 
10.   Closing . The closing of the sale and purchase of the Assets and the other transactions contemplated by this Agreement shall take place at the offices of Seller (“Closing Date”).
 
11.   Indemnification by Seller .
 
11.1   General . Seller agrees to indemnify, defend and hold harmless Buyer against and in respect of any and all claims, demands, losses, costs, expenses, liabilities and damages, including interest, penalties, and reasonable attorneys’ fees, that Buyer shall incur or suffer which: (i) arise, result from or relate to any material inaccuracy in or material breach or nonfulfillment of any of the representations, warranties, covenants or agreements made by Seller in this Agreement, the schedules and exhibits hereto or in any other Document furnished to such party under this Agreement; and (ii) any liability of Seller or Seller’s business arising out of events occurring, products or services sold or any activities of Seller prior to the Closing Date whenever such liabilities may arise.
 
11.2   Procedures; Rights to Separate Counsel . In the event Buyer receives a complaint, claim or other notice of any loss, claim or damage, liability or action, giving rise to a claim for indemnification under this Section 11, Buyer shall promptly notify the Seller of such complaint, notice, claim or action, and Seller shall have the right to investigate and defend any such loss, claim, damage, liability or action. Buyer shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall not be at the expense of Seller, unless Seller fails to promptly defend, in which case the fees and expenses of such separate counsel shall be borne by Seller. In no event shall Seller be obligated to indemnify Buyer for any settlement of any claim or action effected without Seller’s prior written consent.
 
12.   General .
 
12.1   Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered personally or, if mailed, three (3) business days after having been mailed by registered or certified mail with return receipt requested, postage prepaid, addressed:
 
(a)   If to Buyer:   U.S.A. Connections, Inc.
PO Box 235472
Encinitas, CA 92024    

(b)   If to Seller:   G.K. Gymnastics, Inc.
2026 Lowe
Fort Collins, CO 80525  

or at such other address as shall have been furnished to the other in writing.

12.2   Successors and Assigns . Neither this Agreement nor the rights or obligations of Seller under this Agreement shall be assignable without the written consent of Buyer and any such purported assignment without the written consent of Buyer shall be void and with effect. Except as otherwise provided herein, this Agreement and all covenants and agreements contained herein shall be binding upon and inure to the benefit of the parties hereto, their respective successors, representatives and assigns.

12.3   Arbitration . Any controversy or claim arising out of or relating to this Agreement or the breach hereof, except as stated below, shall be settled by arbitration in accordance with the rules of the American Arbitration Association then in effect. The decision of the arbitrator shall, except for mistakes of law, be final and binding upon the parties hereto, and judgment upon the award rendered by the arbitrator, which shall, in the case of damages, be limited to actual damages proven in the arbitration, may be entered in any court having jurisdiction thereof.

There shall be a single arbitrator who shall be an existing or former judge of a court of record within the United States or an attorney in good standing admitted to practice for a period of at least ten (10) years within the United States. No arbitration shall involve parties other than the parties hereto and their respective successors and assigns or be in any respect binding with respect to any such other parties. The situs of the arbitration will be in the State of Colorado.

The parties to any arbitration arising hereunder shall have the right to take depositions and to obtain discovery regarding the subject matter of the arbitration and to use and exercise all of the same rights, remedies and procedures, and be subject to all of the same duties, liabilities, and obligations in the arbitration with respect to the subject matter thereof, as if the subject matter of the arbitration were pending in a civil action before a court of highest jurisdiction in the state where the arbitration is held. The arbitrator shall have the power to enforce said discovery by imposition of same terms, conditions, consequences, liabilities, sanctions and penalties as can be or maybe imposed in like circumstances in a civil action by a court of highest jurisdiction of the state in which the arbitration is held, except the power to order the arrest or imprisonment of a person.

If any party commences an action, either arbitration or court proceedings, against any other party arising out of or in connection with this Agreement, the prevailing party or parties shall be entitled from the losing party or parties, both attorney’s fees and costs of the arbitration and/or suit as part of the judgment rendered.
 
12.4   Attorneys’ Fees . If any legal action or any mutually agreed upon arbitration or other proceeding is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.
 
12.5   Entire Agreement . This Agreement embodies the entire agreement and understanding among the parties hereto with respect to the subject matter hereof.
 
12.6   Modification . This Agreement may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
 
12.7   Governing Law . This Agreement shall be construed in accordance with and governed by the laws of the State of Colorado.
 
12.8   Counterparts . This Agreement may be executed in several counterparts, each of which is an original but all of which shall constitute one and the same instrument.
 

 
 

 


 
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed on the day and year first hereinabove written.
 
“BUYER”
 
U.S.A. Connections, Inc.
a Colorado corporation


__________________________________________
By:
Its:



“SELLER”

G.K. Gymnastics, Inc.
a Colorado corporation


__________________________________________
By:
Its:



Exhibit 23.1


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS


Securities and Exchange Commission
Washington, DC


As the independent public accountants, we hereby consent to the inclusion of our audit report dated November 16, 2006, relating to the financial statements of Action Fashions, Ltd. in this Registration Statement on Form 10-SB. It should be noted that we have not audited any financial statements of the Company subsequent to March 31, 2006 or performed any audit procedures subsequent to the date of our report.




/s/ Cordovano and Honeck LLP
Cordovano and Honeck LLP
Englewood, Colorado
January 16, 2007