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

FORM 10-KSB
(Mark One)

[ X ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2007

[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________

Commission File Number: 000-52413

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

Colorado
20-4092640
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
P.O. Box 235472
Encinitas, CA 92024
________________________________________________________________________
(Address of principal executive offices, including zip code)
 
Registrant’s telephone number, including area code:     ( 858) 229-8116
Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:   $.001 par value common stock
___________________

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [ X ] No [ ]
 
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

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

The issuer’s revenues for the most recent fiscal year were $21,907

The aggregate market value, based upon par value, of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $1,450 as of June 29, 2007. Shares of common stock held by each officer and director and by each person or group who owns 10% or more of the outstanding common stock amounting to 135,025,000 shares have been excluded in that such persons or groups may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 
As of June 29, 2007, there were 136,475,000 shares of our common stock were issued and outstanding.

Documents Incorporated by Reference: None.

Transitional Small Business Disclosure Format: No.



PART I

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, we did not have business operations and we lost our charter with the Colorado Secretary of State on April 1, 2004. We began business operations on June 1, 2005 and our charter was reinstated on September 19, 2005. On October 28, 2005, we filed Articles of Amendment with the Colorado Secretary of State changing our name to Action Fashions, Ltd. Our fiscal year end is March 31 st .

We began operations on June 1, 2005, via an arms length asset purchase agreement with G.K. Gymnastics, Inc. Pursuant to the asset purchase agreement, we purchased the retail inventory of G.K. Gymnastics, Inc. for a total purchase price of $19,000 which was wholesale value of the goods purchased. The $19,000 purchase price was paid for with a five year, zero interest, $19,000 promissory note.

The Business

We are an apparel company specializing in the retail sales of exercise, gymnastics, and dance apparel including clothing, outfits, shoes and related accessories. Our sole 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 facility internally at the school/studio we have been able to market to a captive audience of dance and gymnastics students with minimal outside competition. Our goal is to expand our retail outlet from the current location to multiple dance and gymnastics schools throughout the country beginning with the State of Colorado. Our auditors have expressed concern about our ability to continue as a going concern.

General Market

The gymnastics and dance markets continue to grow each year in the United States. According to the website ( www.usa-gymnastics.org ) of USA Gymnastics, the sole national governing body for the sport of artistic and rhythmic gymnastics in the United States, USA Gymnastics currently maintains a grass roots membership base of approximately 3,000,000 recreational gymnasts, 85,000 competitive gymnasts, 15,000 professional members and 4,000 gymnastic clubs in throughout the United States. General public interest for gymnastics has continued to maintain record highs over the last few years and 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. (Source: www.usa-gymnastics.org ). Dance studios and schools as well continue to maintain a significant presence. The US Census Bureau’s 2002 Economic Census reported approximately 6,504 dance schools in the United States.

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, consignment or similar wholesale supply relationships with the following manufacturers of dance and gymnastics apparel. These relationships allow us to buy products at wholesale, team and quantity discount prices.

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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 (Source: ).

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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 (Source: www.gk-elitesportswear.com).

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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 (Source: www.tighe.com).

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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 (Source: ).

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Foxy’s Fitness Fashions - Foxy's Fitness Fashions is a manufacturer and retailer of gymnastic apparel which has been in the business for almost two decades. The company specializes in design, specialty fabrics, quality and fit. The company’s leotards are made in the USA and are sized true to actual clothing sizes which makes for a better fit. The company offers six different sizes for children and five different sizes for adults. Foxy’s Fitness Fashions offers a consignment program to us and other retailers (Source: ).
 
We purchase our entire inventory from the above suppliers and manufacturers. We do not own or operate any manufacturing facilities. We believe that we have established sufficient relationships with these suppliers and manufactures to meet our ongoing and future inventory needs. We do not have long-term contracts with the suppliers and manufactures and we transact business principally on account on an order-by-order basis.
Business Strategy

Our retail location is presently located within the 30,000 square foot building of the G.K. Gymnastics, Inc. dance and gymnastics school/studio in Fort Collins, Colorado. The G.K. Gymnastics, Inc. facility has over 700 students, not including their families. These students and their families serve as our customer base.

Our retail location is situated near the main entrance of the G. K. Gymnastics, Inc. facility and has its own separate entrance. By embedding the retail facility 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 relationship between our retail store and the school/studio has both increased store sales and satisfied a consumer need for the studio/school and its members. In addition, we believe that our relationship with the school/studio gives us an advantage over our competitors because 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 inside the school/studio we can target our market when the customer enters and exits the school/facility and 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. Our staff are typically experienced dance and gymnastics instructors that are usually familiar with the customer and understand the customer’s needs.

Currently, we do not market outside our embedded facility. We conduct limited marketing and advertising, relying more on our individual store displays, embedded location 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 location provides significant target customer foot traffic.

We have found that many schools and studios throughout the country already maintain in-store retail sales departments. However, these “stores” are usually poorly run, unorganized and not properly inventoried. Our goal is to offer school/studio owners a profit center without the headache and hassle of merchandizing, inventorying and returning products.

In addition to our existing location in Fort Collins, Colorado, within the next 12 months, we plan to expand our business into 2 to 4 new locations in existing gymnastics and dance schools and studios in the state of Colorado.
Our goal is to offer other gymnastic and dance schools a “pre-packaged” retail store whereby we will design and construct small retail outlets within the school/studio, supply the inventory on an ongoing basis and train the school/studio’s existing staff to sell the products. We will split the profits from the sales with the school/studios on a negotiated basis pursuant to contractual agreements. The pre-packaged program that will allow the studios and schools to offer their captive customers dance and gymnastics apparel from within their existing facility without the cost and burden of establishing the store, seeking vendors and/or purchasing large amounts of inventory. We estimate the cost for each location to be approximately $25,000 - $40,000 depending on the location, and plan on raising the funds by a private placement of our securities.

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 store within dance and gymnastics studios, we are able to make the sale immediately before or after the customer participates in the activity in which the apparel is used.

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 our 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. There is no assurance of the revenue increase from future expansion or that expansion will occur at all.

Our sole officer/director holds 98% of the outstanding shares and exercises control of the company.

Our sole officer/director, Phillip E. Koehnke, holds 98% of the outstanding shares and exercises control of the company. Accordingly, our other shareholders will have little or no control of the company.

Dependence on One or a Few Major Customers

We are highly dependent on our customer base derived from the location of our facility. By its nature, our competitive advantage of our internal store location places us at the mercy of the studios/schools where our facility is 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 full time employees and do not expect to hire any new employees within the next 12 months. Mr. Koehnke is our sole officer and director.

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.

We have a limited operating history and may not succeed.

We have a limited operating history and may not succeed. 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. We expect that unanticipated expenses, problems, and technical difficulties will occur and that they will result in material delays in the operation of our business. 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.

Our sole officer/director holds 98% of the outstanding shares and exercises control of the company.

Our sole officer/director, Phillip E. Koehnke, holds 98% of the outstanding shares and exercises control of the company. In addition, Mr. Koehnke is our sole employee. Accordingly, our other shareholders will have little or no control of the company.

We may have insufficient funds to implement our expansion strategy.

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 .

Customer tastes and fashion trends are volatile and may prove difficult to respond to.

Our success depends in part on our 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.

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:

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general business conditions;
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interest rates;
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inflation;
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consumer debt levels;
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the availability of consumer credit;
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the number of new and second home purchases;
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taxation;
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energy prices;
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unemployment trends; and
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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.
 
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 to 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.

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.

Our planned growth, if any, together with our added obligations of being a public company may strain our business infrastructure, which could adversely affect our operations and financial condition.

If 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 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.
Costs of legal matters and regulation could exceed estimates and adversely affect our business.

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 and our actual performance may not match or approximate the projections.

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. Any significant variance from these assumptions could greatly affect our estimates.

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 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.

We require substantial capital requirements to finance our operations. Our inability to obtain financing will adversely impact our business.

We will require additional capital for future operations. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources:

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

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:

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

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 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.

Cautionary Statement Concerning
Forward-Looking Statements

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes included in this report. This report contains “forward-looking statements.” 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 report.

The forward-looking events discussed in this report, 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.

Item 2. 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 3. Legal Proceedings

Currently, we are not a party to any pending legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

On January 25, 2007, a majority of our shareholders approved the resolution of our board of directors to amend our articles of incorporation to forward split our common stock on a 250 for 1 basis.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.
 
Market information

There is no public trading market for our securities. Currently, there are 47,500,000 shares of our common stock issuable upon conversion of outstanding convertible securities held in the name of an affiliate and 1,450,000 shares of our common stock which can be sold by non-affiliates pursuant to Rule 144 of the Securities Act.
Holders

We have approximately 36 holders of record of our common stock.
Dividends

We have not declared any cash dividends on any class of our securities and we do not have any restrictions that currently limit, or are likely to limit, our ability to pay dividends now or in the future.
 
Securities authorized for issuance under equity compensation plans

We do not have any securities authorized for issuance under equity compensation plans.

Item 6. Management’s Discussion and Analysis

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.” 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.

Critical Accounting Policies

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. The company has elected a March 31, year-end.

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

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).

Revenue is recognized at the time of sale.

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.

Results of Operations

For the year ended March 31, 2007, we had revenues of $21,907, operating expenses of $138,105 and an operating loss of ($116,198) The slight increase in revenues for the year ended March 31, 2007 was due primarily to accounting for the entire year over the previous year reported which included just 10 months. The slight increase in our sales were offset by an increase in our cost of goods and operating expenses for the year. We attribute the increase in cost of goods to minor increases on the wholesale prices of our inventory. The increased overall loss from operations for the year ended March 31, 2007, resulted mainly from the increased compensation expense accounted for in regard to payments to Mr. Phillip E. Koehnke, our sole officer and director.

We expect to increase sales over the next 18 months due primarily to the upcoming summer Olympics in 2008 in Beijing. Historically, national interest in the summer Olympics has significantly increased enrolment in gymnastics schools throughout the United States. We anticipate that our sales will increase through the end of 2007 and though 2008 with the increased advertising of the summer Olympics and the anticipated increased enrollment in the gymnastic school facility in which our business is located.

Liquidity and Capital Resources

At March 31, 2007, we had cash of $5,861 compared to $1,412 at March 31, 2006. As at June 29, 2007, we have $1,719 cash on hand.

Future Goals

     In the next 12 months, our goal is to expand into 2-4 locations in dance and gymnastics studios and schools in Colorado. In the event that expansion is successful, we plan on adding additional locations in Colorado followed by the western United States.
 
     We recently became a reporting company with the SEC, our next goal is to make a private placement of our securities to raise the funds for our initial expansion plans. The private placement should close within the next 12 months and we have contacted a securities firm to assist us with the private placement. Assuming the private placement is successful, we plan on expanding into the Loveland, Colorado location during the second half of our fiscal year and opening in another 2-4 locations thereafter. The opening of additional locations is dependant upon sufficient financing and the identification of suitable gymnastic/dance school facilities. We anticipate that each new location will require approximately $25,000 - $40,000 to open depending upon the location.
 
Off-balance Sheet Arrangements
 
We maintain no significant off-balance sheet arrangements

Foreign Currency Transactions

None.

I tem 7. Financial Statements

Our financial statements and related explanatory notes can be found on the “F” Pages at the end of this Report.

Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 8A. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”) we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2007, being the date of our most recently completed year end. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer. Based upon that evaluation, our sole officer has concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to them to allow timely decisions regarding required disclosure. There were not any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Item 8B. Other Information.

On January 25, 2007, a majority of our shareholders approved the resolution of our board of directors to amend our articles of incorporation to forward split our common stock on a 250 for 1 basis.




PART III

Item 9.
Directors, Executive Officers, Promoters And Control Persons; Compliance With Section 16(a) Of The Exchange Act

The following table sets forth, as of the date of this registration statement, the name, age and position of our sole director/executive officer.
 
NAME
 
AGE
 
POSITION
         
Phillip E. Koehnke
 
44
 
President, Chief Executive Officer, Chief Financial Officer, Secretary, and Director

The background of our sole director/executive officer is 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.

Information about our Board and its Committees.

Audit Committee

We currently do not have an audit committee although we intend to create one as the need arises. Currently, our Board of Directors serves as our audit committee.

Compensation Committee

We currently do not have a compensation committee although we intend to create one as the need arises. Currently, our Board of Directors serves as our Compensation Committee.

Advisory Board

We currently do not have an advisory board although we intend to create one as the need arises.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on review of the copies of such reports furnished to us for the period ended March 31, 2007, the Section 16(a) reports required to be filed by our executive officers, directors and greater-than-10% stockholders were filed on a timely basis.

Code of Ethics

Effective February 22, 2006, our board of directors adopted the Action Fashions, Ltd. Code of Business Conduct and Ethics. The board of directors believes that our Code of Business Conduct and Ethics provides standards that are reasonably designed to deter wrongdoing and to promote the following: (1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submits to, the Securities and Exchange Commission ; (3) compliance with applicable governmental laws, rules and regulations; the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons; and (4) accountability for adherence to the Code of Business Conduct and Ethics. We will provide a copy of our Code of Business Conduct and Ethics by mail to any person without charge upon written request to us at: P.O. Box 235472, Encinitas, CA 92024.

Item 10. Executive Compensation

The following table sets forth the cash compensation paid to our Chief Executive Officer, which is our sole executive officer, for services rendered, and to be rendered:

Summary Compensation Table
                                 
                       
Non-Equity
 
Nonqualified
All
 
Name and
                     
Incentive
 
Deferred
Other
 
Principal
             
Stock
 
Option
 
Plan
 
Compensation
Compen
 
Position
 
Year
 
Salary
 
Bonus
 
Awards
 
Awards
 
Compensation
 
Earnings
-sation
Total
                                 
Phillip E. Koehnke
 
2006
 
120,000 (1)
 
0
 
0
 
0
 
0
 
0
(2)
$475,000 (3)
President, Chief Executive Officer, Chief Financial Officer, Secretary, and Director
 
2005
 
120,000 (1)
 
0
 
0
 
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.

(2)   Mr. Koehnke’s employment agreement was secured by a zero interest convertible promissory note in the amount of $480,000. Under the terms of the note, the note became fully due and payable as of 2005. In March 2006, Mr. Koehnke converted $5,000 of the note into shares of our common stock. The remaining $475,000 of the promissory note is due and payable as of the date of this registration statement.

(3)   Represented by a zero interest convertible promissory note in the amount of $475,000 payable to Mr. Koehnke. To date, Mr. Koehnke has not received any cash compensation under the terms of the note.

Employment Agreement

On December 6, 2003, we 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. The agreement terminates on December 6, 2007 with an optional 12 month extension. Payment under the terms of the employment agreement was secured by a convertible promissory note.

Compensation of Director

We currently do not compensate our director. In the future, we may compensate our current director or any additional 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 directors for their services at rates no more favorable than could be obtained from unaffiliated parties.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth certain information regarding the beneficial ownership of the 135,025,000 issued and outstanding shares of our common stock as of June 29, 2007, by the following persons:

·  
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;
 
·  
each of our directors and executive officers; and
 
·  
All of our Directors and Officers as a group
 
 
Name And Address
Number Of Shares Beneficially Owned
 
Percentage Owned
Phillip E. Koehnke (1)
135,025,000
98%
     
Total
135,025,000
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 12. Certain Relationships and Related Transactions.

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

None.

Item 13. Exhibits.
 
Exhibit #
 
Description
     
3.1  
 
Articles of Incorporation filed with the Secretary of State of Colorado on June 22, 1990 (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
3.2  
 
Articles of Amendment to the Articles of Incorporation filed with the Secretary of State of Colorado on October 17, 2006 (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
3.3
 
Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the State of Colorado on January 25, 2007 (attached hereto).
     
3.4
 
Amended and Restated Bylaws dated December 30, 2005 (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
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 (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
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 (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
10.1
 
Employment agreement dated December 6, 2003, between the Company and Phillip E. Koehnke (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
10.2
 
June 1, 2005, Asset Purchase Agreement by and between the Company and G.K.’s Gymnastics, Inc. (Filed as an exhibit to our registration statement on Form 10-SB file on January 24, 2007).
     
14.1
 
Code of Ethics (Attached hereto).
     
31.1
 
Certification of Phillip E. Koehnke, pursuant to Rule 13a-14(a) (Attached hereto).
     
31.2
 
Certification of Phillip E. Koehnke, pursuant to Rule 13a-14(a) (Attached hereto).
     
32.1
 
Certification of Phillip E. Koehnke, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Attached hereto).

Item 14. Principal Accountant Fees and Services.

Appointment of Auditors
 
Our Board of Directors selected Cordovano and Honeck, LLP as our auditors for the year ended March 31, 2007.

Audit Fees
                 
               Cordovano and Honeck, LLP billed us $9,900 in audit fees during the year ended March 31, 2007.

Audit-Related Fees
 
    We did not pay any fees to Cordovano and Honeck, LLP for assurance and related services that are not reported under Audit Fees above, during our fiscal year ending March 31, 2007.

Tax and All Other Fees
 
We did not pay any fees to Cordovano and Honeck, LLP for tax compliance, tax advice, tax planning or other work during our fiscal year ending March 31, 2007.

Pre-Approval Policies and Procedures

We have implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, our board of directors pre-approves all services to be provided by Cordovano and Honeck, LLP, and the estimated fees related to these services.

With respect to the audit of our financial statements as of March 31, 2007, and for the year then ended, none of the hours expended on Cordovano and Honeck, LLP’s engagement to audit those financial statements were attributed to work by persons other than Cordovano and Honeck, LLP’s full-time, permanent employees.




SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.


ACTION FASHIONS, LTD.
 
/s/ Phillip E. Koehnke
By: Phillip E. Koehnke
Its: President

 
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant on the capacities and on the dates indicated.


Signatures
 
Title
 
Date
         
/s/ Phillip E. Koehnke  
Phillip E. Koehnke
 
Director, President, Chief Executive Officer, and Chief Financial Officer
 
June 29, 2007





ACTION FASHIONS, LTD.
         
       
Page
         
Report of Independent Registered Public Accounting Firm
 
F-2
         
Balance Sheet at March 31, 2007
 
F-3
         
Statements of Operations for the year ended March 31, 2007 and for the period from June 1, 2005 through March 31, 2006
 
F-4
       
Statement of Changes in Shareholders' Deficit for the period from June 1, 2005 through March 31, 2007
 
F-5
       
Statements of Cash Flows for the year ended March 31, 2007 and for the period from June 1, 2005 through March 31, 2006
 
F-6
       
Notes to Financial Statements
 
F-7

F-1



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM




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

We have audited the balance sheet of Action Fashions, Ltd. as of March 31, 2007, and the related statements of operations, changes in shareholders’ deficit and cash flows for the year ended March 31, 2007 and the period from June 1, 2005 through 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, 2007, and the results of its operations and its cash flows for the year ended March 31, 2007 and the period from June 1, 2005 through 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, limited funds, and a working capital deficit, 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.



/s/ Cordovano and Honeck, LLP
Cordovano and Honeck LLP
Englewood, Colorado
June 18, 2007


F-2




ACTION FASHIONS, LTD.
BALANCE SHEET
March 31, 2007
         
         
ASSETS
   
         
Current assets:
   
 
Cash
$
5,861
 
Inventory
 
11,133
 
Prepaid compensation (Note 3)
 
80,000
   
Total current assets
 
96,994
         
         
TOTAL ASSETS
$
96,994
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
   
         
Current liabilities:
   
 
Accounts payable
$
4,893
 
Note payable to officer (Note 3)
 
475,000
 
Sales tax payable
 
413
   
Total current liabilities
 
480,306
         
Long-term Liabilities:
   
 
Note payable to affiliate (Note 3)
 
6,136
         
TOTAL LIABILITIES
 
486,442
         
STOCKHOLDERS' DEFICIT (Note 4)
   
 
Preferred stock, 10,000,000 shares authorized, no par value,
   
   
-0- shares issued and outstanding
 
 
Common stock, 500,000,000 shares authorized, no par value,
   
   
136,475,000 shares issued and outstanding
 
7,405
 
Retained deficit
 
(396,853)
         
TOTAL STOCKHOLDERS' DEFICIT
 
(389,448)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$
96,994
         
See notes to the financial statements
         
F-3






ACTION FASHIONS, LTD.
STATEMENTS OF OPERATIONS
           
           
     
For The
 
June 1, 2005
     
Year Ended
 
Through
     
March 31, 2007
 
March 31, 2006
           
Revenues:
       
 
Sales
$
21,907
$
14,984
Total revenues
 
21,907
 
14,984
           
Expenses:
       
 
Cost of Goods Sold (Note 1)
 
15,539
 
11,853
 
General and administrative (Note 1)
 
2,566
 
1,386
 
Compensation expense (Note 3)
 
120,000
 
100,000
Total operating expenses
 
138,105
 
113,239
     
 
 
 
Loss from operations
 
(116,198)
 
(98,255)
           
Provision for Income Taxes (Note 5)
 
-
 
-
           
NET LOSS
$
(116,198)
$
(98,255)
           
Basic loss per common share
$
(0.00)
$
(0.01)
Diluted loss per common share
$
(0.00)
$
(0.01)
           
Weighted average common shares outstanding - Basic
 
136,475,000
 
12,997,500
Weighted average common shares outstanding - Diluted
 
136,475,000
 
12,997,500
           
See notes to the financial statements
F-4




ACTION FASHIONS, LTD
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                 
                 
               
Total
   
Common Stock
 
Retained
 
Stockholders'
   
Shares
 
Amount
 
Deficit
 
Deficit
                 
Balance at June 1, 2005
*
11,350,000
$
2,400
$
(182,400)
$
(180,000)
                 
Common shares issued to CEO as
               
payment for $5,000 in convertible debt
*
125,000,000
 
5,000
 
 
5,000
                 
Common shares issued in exchange for services
*
125,000
 
5
 
 
5
                 
Net loss for the period from June 1, 2005
               
through March 31, 2006
 
 
 
(98,255)
 
(98,255)
                 
Balance at March 31, 2006
*
136,475,000
 
7,405
 
(280,655)
 
(273,250)
                 
Net loss for the year ended
               
March 31, 2007
 
 
 
(116,198)
 
(116,198)
                 
Balance at March 31, 2007
*
136,475,000
$
7,405
$
(396,853)
$
(389,448)
                 
                 
* Shares restated to reflect 250 for 1 common stock split (Note 4)
           
                 
See notes to the financial statements
                 
F-5




ACTION FASHIONS, LTD.
STATEMENTS OF CASH FLOWS
           
           
     
For The
 
June 1, 2005
     
Year Ended
 
Through
     
March 31, 2007
 
March 31, 2006
           
CASH FLOWS FROM OPERATING ACTIVITIES
       
 
Net loss
$
(116,198)
$
(98,255)
 
Adjustments to reconcile net income to
       
 
net cash provided by operating activities:
       
 
Stock-based compensation
 
-
 
5
 
Changes in operating assets and liabilities:
       
 
Prepaid Expenses
 
120,000
 
100,000
 
Inventory
 
1,613
 
6,254
 
Bank overdraft
 
-
 
-
 
Accounts payable and accrued expenses
 
3,875
 
1,431
           
NET CASH PROVIDED BY OPERATING ACTIVITIES
 
9,290
 
9,435
           
CASH FLOWS FROM FINANCING ACTIVITIES
       
 
Principal payments on notes payable
 
(4,841)
 
(8,023)
           
NET CASH USED IN FINANCING ACTIVITIES
 
(4,841)
 
(8,023)
           
NET CHANGE IN CASH
 
4,449
 
1,412
           
CASH BALANCES
       
 
Beginning of period
 
1,412
 
-
 
End of period
$
5,861
$
1,412
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     
CASH PAID DURING THE PERIOD FOR:
       
 
Interest
$
-
$
-
 
Income taxes
$
-
$
-
           
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
       
 
Debt converted to common stock
$
-
$
5,000
 
Inventory acquired for debt
$
-
$
19,000
           
           
See notes to the financial statements
F-6



ACTION FASHIONS, LTD.
Notes to 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 did not have business operations and it lost its charter with the Colorado Secretary of State on April 1, 2004. The Company began business operations on June 1, 2005 and its charter was reinstated on September 19, 2005. On October 28, 2005, the Company filed Articles of Amendment with the Colorado Secretary of State changing its name to Action Fashions, Ltd. 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.

The Company is an apparel company specializing in the retail sales of exercise, gymnastics, and dance apparel including clothing, outfits, shoes and related accessories. The Company’s sole 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 the Company’s retail facility internally at the school/studio the Company has been able to market to a captive audience of dance and gymnastics students with minimal outside competition. The Company’s goal is to expand its retail outlet from the current location to multiple dance and gymnastics schools throughout the country beginning with the State of Colorado. The Company’s auditors have expressed concern about our ability to continue as a going concern.

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

Revenue is recognized at the time of sale.

g. Expenses

Our cost of goods sold line item includes inventory and freight costs. Our General and Administrative line item includes all bank charges, returned check fees, general office, and permits and licensing expenses.

h. 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.

As of March 31, 2007, there were approximately 47,500,000 potentially dilutive common shares related to the convertible promissory note held by the CEO, which were excluded from the calculation of net loss per share-diluted because they were anti-dilutive.

i. 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.

j. 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 has adopted SFAS No. 123 (R) effective January 1, 2006. The Company has determined that the provisions of SFAS No. 123 (R) did not have any significant impact 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 has not made a material effect on the Company’s financial position or results of operations.

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 capital requirements of the Company’s business plan. 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. We have charged the compensation expense ratably over the term of the employment agreement (48 months). 

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. The note contains an acceleration clause that, in the event of default, the entire outstanding principal of the note becomes due and payable and may be converted into restricted shares of the Company’s common stock at a price per share equal to the Conversion Price.

We have classified the entire note payable balance of $475,000 to current liabilities due to the acceleration clause included in the note. Due to the acceleration clause and recording of the entire note payable balance, the difference between the note payable balance and the amount of compensation expense incurred through the respective periods has been capitalized to prepaid compensation in the financial statements. 

The Company issued the CEO 125,000,000 post split 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.

Asset Purchase Agreement

On June 1, 2005, the Company entered into an Asset Purchase Agreement with G.K. Gymnastics, Inc. a Colorado corporation. 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.

G.K. Gymnastics, Inc. is a related party to the Company.  The owners of G.K. Gymnastics, Inc. are the parents of Phillip E. Koehnke, the Company’s majority shareholder and sole officer and director

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 $4,841 toward the note during the year ended March 31, 2007, which reduced the balance owed on the note to $6,136.

Office Lease

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

Future minimum lease payments required under the arrangement are as follows:

March 31,
 
Amount
     
2007……………………………..
$
-
     
2008……………………………..
 
2,000
     
2009……………………………..
 
2,400
     
2010……………………………..
 
2,400
     
2011……………………………...
 
400
     
 
$
7,200

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, 2007:
 
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: 136,475,000 shares issued and outstanding.
 
Common Stock
 
On September 16, 2005, the Company issues 125,000 (post split) shares of its restricted common stock to Mike Keefe as payment for services as a resident agent in the state of Colorado. The transaction was recorded at fair value, or $5.
 
On March 28, 2006, the Company issued its CEO 125,000,000 (post split) 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.
 
On January 25, 2007, a majority of the Company’s shareholders approved the resolution of the Company’s board of directors to amend the Company’s articles of incorporation to forward split the Company’s common stock on a 250 for 1 basis. The split occurred for shareholders of record at the close of business on January 25, 2007. The number of shares issued on January 25, 2007, totaled 135,929,100 and increased the number of common shares outstanding to 136,475,000. Shares issued prior to January 25, 2007, have been retroactively restated to reflect the impact of the stock split.
 
NOTE 5.   INCOME TAXES
 
A reconciliation of U.S. statutory federal income tax rate to the effective rate follows:
 
 
   
For The
 
 
June 1, 2005
 
   
Year Ended
 
 
Through
 
   
March 31, 2007
 
 
March 31, 2006
 
         
U.S. statutory federal rate, graduated………………………………..
 
 
22.91%
 
 
20.88%
 
State income tax rate, net of federal…………………………………….
 
 
6.81%
 
 
6.99%
 
Net operating loss (NOL) for which
 
       
no tax benefit is currently available……………............................
 
 
-29.72%
 
 
-27.88%
 
   
0.00%
 
 
0.00%
 

 
At March 31, 2007, deferred tax assets consisted of a net tax asset of $61,926 due to operating loss carryforwards of $214,453 which was fully allowed for, in the valuation allowance of $61,926. The valuation allowance offsets the net deferred tax asset for which it is more likely than not that the deferred tax assets will not be realized. The change in the valuation allowance for the year ended March 31, 2007 and the period from June 1, 2005 through March 31, 2006 totaled $34,537 and $27,389, respectively. The net operating loss carryforward expires through the year 2027.
 
The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the deferred tax asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.
 
NOTE 6.   CONCENTRATION OF CREDIT RISK
 
The Company’s sole retail outlet is presently within the facilities of G.K. Gymnastics, Inc., a dance and gymnastics school/studio located in Fort Collins, Colorado. T he Company is dependent upon the clientele generated by the dance studio. If the business of the school/studio declines or ceases to exist, the Company’s sales could also decline or cease to exist.
 
Exhibit 3.3


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.

3.   Forward Split . Each one (1) share of Common Stock outstanding on the effective date of these Articles of Amendment shall be automatically converted into two hundred and fifty (250) shares of Common Stock and in lieu of fractional shares, each share so converted shall be rounded up to the next highest number of full shares of Common Stock.

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 January 26, 2007.


/s/ Phillip E. Koehnke
Secretary

ACTION FASHIONS, LTD

CODE OF BUSINESS CONDUCT AND ETHICS


INTRODUCTION:

All employees, officers and directors of Action Fashions, Ltd. (the “Company”) are responsible for conducting themselves in compliance with this Code of Business Conduct and Ethics (the “Code”). The Company adopted this Code in order to assist the Company and its employees, officers and directors with the Company’s goals of conducting its business and affairs in accordance with applicable laws, rules and regulations and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.

The Company expects that any consultants or other service providers it retains will adhere to the Code. In addition, for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission promulgated thereunder, Sections I through IV of the Code shall constitute the Company’s code of ethics for “Senior Financial Officers” (as defined in Section I below).

I.   Compliance and Reporting

Employees, officers and directors should strive to identify and raise potential issues before they lead to problems for the Company and should ask about the application of the Code whenever there is a question as to whether a violation of the Code has occurred or will occur. Any employee or officer who becomes aware of any existing or potential violation of the Code should promptly notify the appropriate supervisor. Should the Chief Executive Officer, the Chief Financial Officer and the Principal Accounting Officer (collectively, the “Senior Financial Officers”) or any director become aware of an existing or potential violation of the Code, he or she should promptly notify the Company’s General Counsel or outside counsel, if no general counsel exists. The Company shall take such disciplinary, corrective or preventative action as it deems appropriate to address any existing or potential violation of this Code brought to its attention.

Confidentiality regarding those who make compliance reports and those potentially involved is maintained to the extent possible during a compliance investigation. The Company does not tolerate retribution, retaliation or adverse personnel action of any kind against any person for lawfully reporting a situation of potential noncompliance with the Code, or providing to the Company or any law enforcement or other governmental agency any information or assistance relating to the commission or possible commission of any federal or state offense.

The Senior Financial Officers have a responsibility to create an environment within the Company in which compliance with the Code is treated as a serious obligation and in which violations Of the Code are not tolerated. The Senior Financial Officers will establish and, if necessary, modify the procedures by which violations of the Code are to be reported.

II.   Conflicts of Interest

All business decisions must be made in the Company’s best interest. A “conflict of interest” arises when an individual’s judgment is or may be influenced by considerations of improper personal gain or benefit to the individual or another person. Even if no actual conflict of interest occurs, situations that create the appearance of a conflict may harm the Company’s public relations or cause other problems damaging to the Company, and, as such, also should be avoided. Conflicts of interest are prohibited as a matter of Company policy, unless they have been approved in advance by the Company.

For example, an employee, officer or director must never use or attempt to use his or her position at the Company to obtain any improper personal benefit for himself or herself, for his or her family members or for any other person, including loans or guarantees of obligations, from any other person or entity. In this regard, service to the Company should never be subordinated to personal gain and advantage. To the extent possible, conflicts of interest always should be avoided. Any employee, officer or director who is aware of a material transaction or relationship that could reasonably be expected to give rise to a conflict of interest should promptly discuss the matter with the General Counsel.

Transactions with outside firms must be conducted within a framework established and controlled by the executive level of the Company. Business dealings with outside firms should not result in unusual gains for those firms or their employees. Unusual gain refers to bribes, product bonuses, special fringe benefits, unusual price breaks, and other windfalls designed to ultimately benefit either the outside firm, its employee, or both. Promotional plans that could be interpreted to involve unusual gain require specific executive-level approval.

An actual or potential conflict of interest occurs when an employee is in a position to influence a decision that may result in a personal gain for that employee or for a relative as a result of the Company’s business dealings. For the purposes of this policy, a relative is any person who is related by blood or marriage, or whose relationship with the employee is similar to that of persons who are related by blood or marriage.

No “presumption of guilt” is created by the mere existence of a relationship with outside firms. However, if employees have any influence on transactions involving purchases, contracts, or leases, it is imperative that they disclose to an officer of the Company as soon as possible the existence of any actual or potential conflict of interest so that safeguards can be established to protect all parties.

Personal gain may result not only in cases where an employee or relative has an ownership interest in a firm with which the Company does business, but also when an employee or relative receives any kickback, bribe, substantial gift or special consideration from any Company, customer or vendor. Any employee who receives a gift from a customer or vendor must advise his or her supervisor immediately. If the supervisor determines that the gift is of a normal and customary nature (e.g., not excessively expensive), the employee may retain the gift. If the gift is determined by the supervisor to be excessive, the employee must return the gift with a brief explanation that it is against the Company’s policy for employees to accept gifts of an excessive nature. Employees who do not report the receipt of gifts to their immediate supervisor will be subject to disciplinary action up to and including termination. In addition, employees who solicit gifts will be subject to disciplinary action, up to and including termination.

In addition, as a result of their close relationships to the Company and its business, the Senior Financial Officers have a special responsibility to: refrain, without the approval of the Board of directors, from transacting business with the Company through any entity in which the officer or a member of his or her immediate family owns all or a controlling interest; refrain, without the approval of the Board of directors, from participating in other employment or serving as a director for other organizations if such activity reasonably could be expected to interfere with the officer’s ability to act in the best interests of the Company or reasonably could be expected to require the officer to use proprietary, confidential or non-public information of the Company; refuse gifts, favors or hospitality that would influence or appear to influence the recipient to act other than in the best interests of the Company; and report to the Board of directors any existing or potential director positions they hold, including positions on non-profit or charitable organization boards of directors.

III.   Public Disclosure

It is the Company’s policy that the information in its public communications and disclosures, including its filings with the SEC, be full, fair, accurate, timely and understandable. All employees, officers and directors who are involved in the Company’s disclosure process, including the Senior Financial Officers, are responsible for acting in furtherance of this policy. Specifically, these individuals are required to maintain familiarity with the disclosure requirements applicable to the Company and are prohibited from knowingly misrepresenting, omitting or causing others to misrepresent or omit, material facts regarding the Company to others, whether within or outside the Company, including the Company’s independent accountants. In addition, any employee, officer or director who has a supervisory role in the Company’s disclosure process has an obligation to diligently discharge his or her responsibilities.

The Senior Financial Officers, in particular, must act in good faith and with due care and diligence in connection with the preparation of the Company’s public disclosures. The Senior Financial Officers must ensure that the financial statements and reports submitted to the SEC are full, fair, accurate, timely and understandable. The Senior Financial Officers must also promptly report any irregularities or deficiencies in the Company’s internal controls for financial reporting to the Board of directors.

IV.   Compliance with Laws, Rules and Regulations

It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations.

It is both illegal and against Company policy for any employee, officer or director who is aware of material, nonpublic information relating to the Company, any of the Company’s customers or clients or any other private or governmental issuer or securities, to purchase or sell any securities of those issuers, or recommend that another person purchase, sell or hold the securities of those issuers.

In general, information is “material” if it could affect a person’s decision to purchase, sell or hold a company’s securities. Material information includes, for example, a company’s anticipated earnings, plans to acquire or sell significant assets and changes in senior executives. Employees, officers and directors should try to limit transactions to times when it can reasonably be assumed that all material information about a company has been disclosed. All employees, and officers and directors of the Company in particular, should consult with the General Counsel regarding the safest times to trade in the Company’s securities. In addition, employees, officers and directors may not disclose material, nonpublic information about the Company or another company to any person (i) inside the Company, unless they need to know the information for legitimate business purposes, or (ii) outside of the Company, unless prior approval is obtained from management in consultation with the General Counsel. Bear in mind that this information belongs to the Company and no person may misappropriate it for anyone’s benefit. Providing a “tip” based on material, nonpublic information is unethical and illegal, and is prohibited, even if you do not profit from it. All employees must obtain clearance from the General Counsel prior to trading in the Company’s securities.

Other laws, rules, regulations and Company policies to which employees, officers and directors are subject relate to business practices. For example, employees, officers and directors may not misrepresent facts, contractual terms or Company policies to a stockholder, service provider or regulator. Even if done inadvertently, you must correct the misrepresentation as soon as possible after consulting with the General Counsel. In addition, employees, officers and directors must adhere to appropriate procedures governing the retention and destruction of the Company’s records, consistent with applicable laws, regulations, Company policies and business needs. No person should destroy, alter or falsify any document that may be relevant to a threatened or pending lawsuit or governmental investigation. You should consult with, and follow the instructions of, the General Counsel in these situations.

Employees, officers and directors must also comply with the U.S. Foreign Corrupt Practices Act, which prohibits American businesses, and in many cases their foreign subsidiaries, from offering, paying or authorizing payment to foreign government officials, political parties or their officials, or political candidates.

The Senior Financial Officers, in particular, have a responsibility to ensure Compliance with the applicable rules and regulations of federal, state and local governments and of appropriate public and private regulatory agencies or organizations.

In addition to adhering to established Company policies and procedures, these individuals must take steps to ensure that other employees and officers follow such policies and procedures.

Any employee, officer or director who is uncertain about the Legal rules and regulations to which he or she or the Company is subject should consult with the General Counsel.
V.   Employment Practices

In making employment and personnel decisions, the company employment decisions must be based only on an employee’s or applicant’s qualifications, demonstrated skills and achievements without regard to race, color, sex, religion, national origin, age, disability, veteran status, citizenship, sexual orientation, gender identity or marital status.

All employees are entitled to be treated with respect and dignity. Management must not tolerate harassment of, or by, any employee in situations involving another employee, stockholder, service provider or business associate.

Employees, officers and directors must not engage in conduct that could be construed as sexual harassment, which may include, for example, unwelcome sexual advances, offensive touching, sexually suggestive statements, offensive jokes, requests for sexual favors or other verbal or physical conduct of a sexual nature.

Any person who believes he or she has been harassed in the course of performing his or her employment with the Company should notify the General Counsel. Company policy prohibits retaliation against any individual who complains of, or reports an instance of, harassment or participates in an investigation of a harassment complaint.

VI.   Corporate Opportunities

Employees, officers and directors owe a duty to the Company to advance the Company’s legitimate business interests when the opportunity to do so arises. In this regard, employees, officers and directors are prohibited from (i) taking for themselves personally (or directing to a third party) business opportunities that are discovered through the use of Company property, information or position (unless the Company has already been offered the opportunity and rejected it); (ii) using Company property, information or position for improper personal gain; and (iii) competing with the Company.

It may be difficult to decipher whether or not a particular personal benefit is proper, as sometimes both personal and Company benefits may be derived from certain activities. The best course of action in these circumstances is to consult with the General Counsel.

VII.   Confidentiality

In carrying out the Company’s business, employees, officers and directors may learn confidential or proprietary information about the Company or third parties. Employees, officers and directors must maintain the confidentiality of all information entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information includes, for example, any nonpublic information concerning the Company, including its business, properties, financial performance, results or prospects, and any nonpublic information provided by a third party with the expectation or contractual agreement that the information will be kept confidential and used solely for the business purpose for which it was conveyed. Employees, officers and directors are required to secure from unauthorized access and public view documents under their control that contain confidential or proprietary information. When such information is discarded, appropriate steps must be taken to ensure proper and complete destruction.

In addition, employees, officers and directors are prohibited from taking confidential or proprietary information with them upon termination of employment with the Company or from using or disclosing such information for any purpose elsewhere, including with a different employer or company. Any confidential or proprietary information must be promptly returned to the Company upon termination of employment or affiliation with the Company.

VIII.   Fair Dealing

Company policy is to conduct business fairly through honest business competition and the Company does not seek competitive advantages through unethical or illegal business practices. Each employee, officer and director should endeavor to deal fairly with the Company’s stockholders, service providers, competitors and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation or omission of material facts or any other practice involving unfair dealing.
 
IX.   Protection and Proper Use of Company Assets

All employees, officers and directors should protect the Company’s assets and ensure their efficient use. It is important to bear in mind that theft, carelessness and waste have a direct impact on the Company’s profitability. Thus, all assets of the Company should be used only for legitimate business purposes.

X.   Waivers of the Code

The Company may elect to waive certain provisions of the Code on a case-by-case basis. Any employee, officer or director who would like to request a waiver of one or more of the Code’s provisions must discuss the matter with the General Counsel. Waivers for executive officers and directors of the Company only may be granted by the board of directors or a committee of the Board.

XI.   Specific Written Agreements

To the extent there is any conflict or inconsistency between the provisions of this Code and any specific written agreements with the Company (which agreements are, have been or will be approved by the Company’s board of directors), the terms of such written agreements will control the conduct of the parties and such conduct will not be considered to be in conflict with any provisions of this Code.



Exhibit 31.1
 
I, Phillip E. Koehnke, certify that:
 
 
1.    I have reviewed this Form 10-KSB of Action Fashions, Ltd.;
 
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
 
4.    The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
 
 
a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.    Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.    Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
 
 
5.    The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
 
 
a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
 
 
b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:   June 29, 2007

/s/ Phillip E. Koehnke
Phillip E. Koehnke
     Chief Executive Officer
Exhibit 31.2
 
I, Phillip E. Koehnke, certify that:
 
 
1.    I have reviewed this Form 10-KSB of Action Fashions, Ltd.;
 
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
 
4.    The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
 
 
a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.    Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.    Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
 
 
5.    The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
 
 
a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
 
 
b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: June 29, 2007

/s/ Phillip E. Koehnke
Phillip E. Koehnke
          Chief Financial Officer

Exhibit 32.1


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Action Fashions, Ltd., a Colorado Corporation, (the “Company”) on Form 10-KSB for the year ended March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip E. Koehnke, President, Chief Executive Officer and Chief Financial Officer of the Company, certify the following pursuant to Section 18, U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

1.  
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.  
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Phillip E. Koehnke
Phillip E. Koehnke
President, Chief Executive Officer and
Chief Financial Officer

June 29, 2007