**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        DC 20549**
  **FORM
        10-QSB**
 (MARK
                    ONE)**x**
                **QUARTERLY REPORT UNDER
                    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                    1934****For
                    the quarterly period ended March 31,
                    2007****OR****o**
                **TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                    ACT****For
                    the transition period from  ______________ to
                    ______________**
  ***Commission
            File Number: 033-07075-LA***
  **THE
            FASHION HOUSE HOLDINGS, INC.**
 (Exact
            name of small business issuer as specified in its
            charter)
  **Colorado**
              **33-1079781**(State
                  or other jurisdictionofincorporation
                  or organization)
              (IRS
                  EmployerIdentification
                  No.)
  **6310
          San Vicente Blvd., #275**
 **Los
          Angeles, California 90048-5499**
 (Address
          of principal executive offices) 
(Zip
          Code)
 **(323)
          939-3031**
 (Issuer’s
          telephone number including area code)
 Check
            whether the issuer (1) filed all reports required to be filed by Section
            13 or
            15(d) of the Exchange Act during the past 12 months (or for such shorter
            period
            that the registrant was required to file such reports), and (2) has been
            subject
            to such filing requirements for the past 90 days.   Yes þNoo
  Indicate
            by check mark whether the registrant is a shell company (as defined in
            Rule
            12b-2 of the Exchange Act).    Yes oNoþ
  State
                the
                number of shares outstanding of each of the issuer’s classes of common stock, as
                of the latest practicable date.




Common
      Stock Outstanding as of May 11, 2006: 24,887,063 shares




Transitional
      Small Business Disclosure Format: Yes o No þ


Table
          of Contents




**The
      Fashion House Holdings, Inc**


**Index
      to Form 10-QSB**




**Part
              I Financial Information**Item 1.
                Financial StatementsCondensed
                Consolidated Balance Sheet as of March 31,
                2007(unaudited)
            3Condensed
                Consolidated Statements of Operations for the three
                month periods ended March 31, 2007 and March 31, 2006
                (Unaudited)
            4Condensed
                Consolidated Statements of Cash flows for the three
                month periods ended March 31, 2007 and March 31, 2006
                (Unaudited)
            5Notes
                to Unaudited Condensed Consolidated Financial
                Statements
            6Item 2.
                Management’s Discussion and Analysis or Plan of
                Operation
            17Item 3.
                Controls and Procedures
            23**Part
                II Other Information**Item 1.
                Legal Proceedings
            24Item 2.
                Unregistered Sales of Equity Securities
                and Use of Proceeds
            25Item 3.
                Defaults Upon Senior
                Securities
            25Item 4.
                Submission of Matters to a Vote of
                Security Holders
            25Item 5.
                Other Information
            25Item 6.
                Exhibits
            25SIGNATURES
            26Exhibit
                31.1Exhibit
                31.2Exhibit
                32.1




Table
          of Contents




**PART
        I — FINANCIAL INFORMATION**


**Item 1.
          FinancialStatements**


**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**CONDENSED
      CONSOLIDATED BALANCE SHEET**


**March
      31, 2007**


**(UNAUDITED)**





**ASSETS****Current
              assets:**Cash
            
            $
            105,169Accounts
                receivable, net of allowance of $40,000
            
            
            1,720,840Inventory
            
            
            1,061,701Prepaid
                expenses
            
            
            221,875**Total
                current assets**
            
            
            3,109,585Property
                and equipment, net
            
            
            431,474Deposits
            
            
            28,021**TOTAL
                ASSETS**
            
            $
            3,569,080**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT****Current
                liabilities:**Line
                of credit borrowings
            
            $
            5,724,944Accounts
                payable and accrued expenses
            
            
            3,115,118Accrued
                payroll and related
            
            
            200,356Due
                to factor
            
            
            1,211,490Accrued
                interest
            
            
            489,203Note
                payable
            
            
            280,293Current
                portion of capital lease obligations
            
            
            1,962**Total
                current liabilities**
            
            
            11,023,366Long-term
                liabilities:Notes
                payable to stockholder
            
            
            1,090,100Capital
                lease obligation, net of current portion
            
            
            8,286**Total
                liabilities**
            
            
            12,121,752Commitments
                and contingenciesStockholders’
                deficit:Common
                stock, no par value;1,000,000,000
                shares authorized;24,887,063
                shares issued and outstanding
            
            
            18,838,701Accumulated
                deficit
            
            
            (27,391,373
            )**Total
                stockholders’ deficit**
            
            
            (8,552,672
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT**
            
            $
            3,569,080






See
      accompanying notes to unaudited condensed consolidated financial
      statements




3
 Table
          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**CONDENSED
      CONSOLIDATED STATEMENTS OF
      OPERATIONS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**


**(UNAUDITED)**




**Three
                Months Ended March 31,****2007**
            
            
            **2006**Net
                sales
            
            $
            2,214,169
            
            $
            1,000,859Cost
                of Sales
            
            
            2,342,294
            
            
            774,700Gross
                (loss) profit
            
            
            (128,125
            )
            
            226,159Operating
                expenses:Selling,
                general and administrative
            
            
            1,295,839
            
            
            930,216Payroll
                and related
            
            
            716,963
            
            
            529,346Royalties
            
            
            360,983
            
            
            193,088**Total
                operating expenses**
            
            
            2,373,785
            
            
            1,652,650Loss
                from operations
            
            
            (2,501,910
            )
            
            (1,426,491
            )Other
                expense:Interest
                expense, net of interest income
            
            
            (2,140,996
            )
            
            (2,020,886)Change
                in fair value of derivative liabilities
            
            
            -
            
            
            (1,344,000)Total
                other expense
            
            
            (2,140,996
            )
            
            (3,364,886Loss
                before income taxes
            
            
            (4,642,906
            )
            
            (4,791,377
            )Income
                taxes
            
            
            800
            
            
            800Net
                loss
            
            $
            (4,643,706
            )
            $
            (4,792,177
            )Basic
                and diluted net loss per share
            
            $
            (0.19
            )
            $
            (0.23
            )Weighted
                average shares outstanding — basic and diluted
            
            
            24,887,063
            
            
            20,551,620




See
      accompanying notes to unaudited condensed consolidated financial
      statements




4
 Table
          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


**THREE
      MONTHS ENDED MARCH 31, 2007 AND 2006**


**(UNAUDITED)**


**March
                  31, 2007**
              
              **March
                  31, 2006****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (4,643,706
              )
              $
              (4,792,177
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              38,363
              
              
              75,561Bad
                  debt expense
              
              
              30,548
              
              
              -Estimated
                  fair value of stock issued for services
              
              
              -
              
              
              12,250Amortization
                  of estimated fair value of BCF
              
              
              -
              
              
              22,417Estimated
                  fair value of warrants
              
              
              1,768,000
              
              
              1,973,383Change
                  in fair value of warrant liabilities
              
              
              -
              
              
              1,344,000Change
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              665,444
              
              
              68,020Inventories
              
              
              523,501Prepaid
                  expenses
              
              
              2,425
              
              
              28,253Deposits
              
              
              -
              
              
              4,067Accounts
                  payable and accrued expenses
              
              
              (1,712
              )
              
              (137,310
              )Accrued
                  interest
              
              
              220,824
              
              
              (34,219
              )Net
                  cash used in operating activities
              
              
              (1,396,313
              )
              
              (1,435,755
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchases
                  of property and equipment
              
              
              (6,476
              )
              
              (288,397
              )Net
                  cash used in investing activities
              
              
              (6,476
              )
              
              (288,397
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Repayments
                  of notes payable to stockholder
              
              
              (4,000
              )
              
              (25,000
              )Proceeds
                  from issuance of common stock, net of issuance costs
              
              
              -
              
              
              3,114,817Proceeds
                  from line of credit, net
              
              
              1,751,520Proceeds
                  from notes payable
              
              
              (15,000
              )
              
              925,000Repayments
                  of capital lease
              
              
              (682
              )
              
              -Repayments
                  of notes payable
              
              
              -
              
              
              (1,475,000
              )Advances
                  from factor
              
              
              2,558,393
              
              
              793,348Payments
                  to factor
              
              
              (2,914,180
              )
              
              (1,042,042
              )Net
                  cash provided by financing activities
              
              
              1,376,051
              
              
              2,291,123**Net
                  change in cash**
              
              
              (26,738
              )
              
              566,971**Cash,
                  beginning of the period**
              
              
              131,907
              
              
              76,680**Cash,
                  end of the period**
              
              $
              105,169
              
              $
              643,651




**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid during the period for interest
            
            $
            152,682
            
            $
            53,839Cash
                paid during the period for income taxes
            
            $
            800
            
            $
            800**SUPPLEMENTAL
                SCHEDULE OF NONCASH INVESTING AND FINANCING
                ACTIVITIES:**Estimated
                fair value of warrants issued in connection with certain notes
                payable
            
            $
            -
            
            $
            761,000Estimated
                fair value of common stock issued for prepaid services
            
            $
            -
            
            $
            36,750Accrued
                liabilities converted to notes payable
            
            $
            191,393
            
            $
            -


See
      accompanying notes to unaudited condensed consolidated financial
      statements.


5
 Table
          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**




**Interim
      Unaudited Condensed Financial Statements**




The
      accompanying unaudited consolidated financial statements have been prepared
      by
      The Fashion House Holdings, Inc. (the “Company”) in accordance with accounting
      principles generally accepted in the United States of America for interim
      financial information. These principles are consistent in all material respects
      with those applied in the Company’s financial statements contained in the
      Company’s annual report on Form 10-KSB for the fiscal year ended December 31,
      2006, and pursuant to the instructions to Form 10-QSB and Item 310(b) of
      Regulation S-B promulgated by the Securities and Exchange Commission (“SEC”).
      Interim financial statements do not include all of the information and footnotes
      required by accounting principles generally accepted in the United States of
      America for complete financial statements. In the opinion of management, the
      accompanying unaudited consolidated financial statements contain all adjustments
      (all of which are of a normal recurring nature, including the elimination of
      intercompany accounts) necessary to present fairly the financial position,
      results of operations and cash flows of the Company for the periods indicated.
      Interim results of operations are not necessarily indicative of the results
      to
      be expected for the full year or any other interim periods. These unaudited
      consolidated financial statements should be read in conjunction with the
      financial statements and footnotes thereto contained in the Company’s annual
      report on Form 10-KSB for the year ended December 31, 2006.




**Organization
      and Nature of Operations**





On
      August
      19, 2005, TDI Holding Corporation (“TDI”) entered into an agreement of Plan of
      Reorganization (“Merger”) with The Fashion House, Inc. (“TFH”) in a tax free
      share exchange under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
      as amended. Immediately after the Merger, the officers and directors of TDI
      resigned and the management of TFH controlled such positions; therefore,
      effecting a change of control. As a result, the transaction was recorded as
      a
“reverse merger” whereby TFH was considered to be the accounting acquirer as it
      retained control of TDI after the Merger. Simultaneously with the Merger, TDI
      changed its name to The Fashion House Holdings, Inc.




TFH
      was
      incorporated under the laws of the State of Delaware on April 11, 2002 and
      commenced operations on January 1, 2003. TFH designs, develops and markets
      women’s dress footwear with an emphasis on celebrity appeal, style, quality and
      fit. The Company targets the moderate to premium-priced categories of the
      women’s footwear industry and implements its business model by licensing
      recognized brand names.




**Principles
      of Consolidation**




These
      condensed consolidated financial statements include the accounts of the Company
      and its wholly owned subsidiary. All material intercompany accounts have been
      eliminated in consolidation.




**Use
      of Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and judgments that affect the reported amounts of assets, liabilities
      and disclosure of contingent assets and liabilities at the date of the financial
      statements and reported amounts of revenues and expenses during the reporting
      periods. Significant estimates made by management include, among others,
      collectibility of receivables, recoverability of long-lived assets, valuation
      of
      warrants to purchase common stock and deferred tax assets. Actual results may
      differ from these estimates under different assumptions or
      conditions.




**Going
      Concern**




The
      condensed consolidated 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. The Company incurred net
      operating losses for the three months ended March 31, 2007 and the years
      ended December 31, 2006, 2005, and 2004 and has an accumulated deficit of
      $27,391,373 at March 31, 2007.




The
      Company’s success is dependent upon numerous items, among which are the
      Company’s successful growth of revenues from its products, its ability to obtain
      new customers in order to achieve levels of revenues adequate to support the
      Company’s current and future cost structure, and its ability to obtain financing
      for operations, for which there is no assurance. Unanticipated problems,
      expenses and delays are frequently encountered in establishing and maintaining
      profitable operations. These include, but are not limited to, competition,
      the
      need to develop customer support capabilities and market expertise, setbacks
      in
      product development, technical difficulties, market acceptance and sales and
      marketing. The failure of the Company to meet any of these conditions could
      have
      a materially adverse effect on the Company and may force the Company to reduce
      or curtail operations. No assurance can be given that the Company can achieve
      or
      maintain profitable operations.




6
 Table
          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,** **continued**




The
      Company believes it will have adequate cash to sustain operations until it
      achieves sustained profitability. However, until the Company has a history
      of
      maintaining revenue levels sufficient to support its operations and repay its
      current liabilities, the Company may require additional financing. There can
      be
      no assurance that additional funding will be adequate or will enable the Company
      to achieve or sustain profitable operations.




These
      factors raise substantial doubt about the Company’s ability to continue as a
      going concern. These consolidated financial statements do not include any
      adjustments that might be necessary if the Company is unable to continue as
      a
      going concern.




**Risks
      and Uncertainties**




*Credit
      Risk*




The
      Company maintains its cash accounts in financial institutions. Accounts at
      these
      institutions are insured by the Federal Deposit Insurance Corporation up to
      $100,000. At March 31, 2007, uninsured balances approximated
      $103,000.




One
      and
      two customers accounted for 25% and 58% of sales during the three months ended
      March 31, 2007 and 2006, respectively.




The
      Company assigns the majority of its trade accounts receivable to a factor (see
      Note 2). The Company also makes sales to customers not approved by its factor
      at
      its own risk and monitors the outstanding receivable balance. At March 31,
      2007,
      the Company established an allowance for doubtful accounts of $40,000.




The
      Company operates in an industry that is subject to intense competition. The
      Company’s operations are subject to significant risks and uncertainties
      including financial, operational, technological, regulatory and other risks
      associated with an operating business, including the potential risk of business
      failure.




**Merchandise
      Risk**




The
      Company’s success is largely dependent upon its ability to gauge the market
      trends and the tastes of its targeted consumers and provide merchandise that
      satisfies consumer demand. Any inability to provide appropriate merchandise
      in
      sufficient quantities in a timely manner could have a material adverse effect
      on
      the Company’s business, operating results and financial condition.




The
      Company purchases substantially all of its inventory from two vendors. The
      loss
      of either of these vendors could have a material adverse effect on the Company’s
      cash flow and financial position.




**Inventories**





Inventories
      consist almost entirely of footwear and are valued at the lower of cost or
      market. Cost is determined on a first-in, first-out basis. The Company
      periodically reviews its inventory quantities on hand and adjusts for excess
      and
      obsolete inventory based primarily on its estimated forecast of product demand.
      Actual demand may differ from the Company's estimates. Once established,
      write-downs of inventory are considered permanent adjustments to the basis
      of
      the excess or obsolete inventory.





7
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          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,** **continued**




**Property
      and Equipment**




Property
      and equipment are stated at cost. Depreciation of equipment is provided for
      by
      using the straight-line method over the estimated useful lives of the related
      assets, which are five years for machinery and equipment, seven years for
      furniture and fixtures, and the shorter of lease terms or estimated useful
      lives
      for leasehold improvements. Expenditures for maintenance and repairs are charged
      to expense as incurred; additions, renewals and betterments are capitalized.
      When property and equipment are retired or otherwise disposed of, the related
      cost and accumulated depreciation are removed from the respective accounts,
      and
      any gain or loss is included in operations.




**Long-Lived
      Assets**




In
      accordance with Statement of Financial Accounting Standards (“SFAS”)
      No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets,* the
      Company evaluates the carrying value of long-lived assets for impairment
      whenever events or change in circumstances indicate that such carrying values
      may not be recoverable. The Company estimates the future undiscounted cash
      flows
      derived from an asset to assess whether or not a potential impairment exists
      when events or circumstances indicate the carrying value of a long-lived asset
      may not be recoverable. An impairment loss is recognized when the discounted
      future cash flows are less than its carrying amount. If assets are considered
      to
      be impaired, the impairment to be recognized is measured by the amount by which
      the carrying amount exceeds the fair value of the assets. At March 31,
      2007, the Company’s management believes there is no impairment of its long-lived
      assets. There can be no assurance, however, that market conditions will not
      change or demand for the Company’s products or services will continue, which
      could result in future impairment of long-lived assets.




**Fair
      Value of Financial Instruments**




The
      Company’s financial instruments consist of cash, accounts receivable, accounts
      payable and accrued expenses, accrued payroll and related, due to factor,
      accrued interest and notes payable. The carrying value for all such instruments
      approximates fair value at March 31, 2007 due to their short
      maturities.




**Revenue
      Recognition**




SEC
      Staff
      Accounting Bulletin (“SAB”) 101, *Revenue
      Recognition* ,
      as
      amended by SAB 104, outlines the basic criteria that must be met to recognize
      revenue and provide guidance for presentation of revenue and for disclosure
      related to revenue recognition policies in financial statements filed with
      the
      Securities and Exchange Commission. Management believes that the Company’s
      revenue recognition policy conforms to SAB 104.




The
      Company evaluates the criteria of Financial Accounting Standards Board (“FASB”)
      Emerging Issues Task Force (“EITF”) Issue No. 99-19, *Reporting
      Revenue Gross as a Principal Versus Net as an Agent,* in
      determining whether it is appropriate to record the gross amount of revenue
      and
      related costs or the net amount earned as commissions. The Company is the
      primary obligor, is subject to inventory risk, has latitude in establishing
      prices and selecting suppliers, establishes product specifications, and has
      the
      risk of loss as it relates to cargo losses. Accordingly, the Company’s revenue
      is recorded on a gross basis.




The
      Company issues letters of credit in favor of the manufacturers in accordance
      with the information provided by the Company and the manufacturer. The Company
      imports the goods and pays the import and delivery costs and forwards the goods
      to a public warehouse. Goods are held by the Company at a public warehouse
      until
      the customers requested ship date. The Company arranges and maintains the Goods
      while in its warehouse at its expense. The Company has title to the Goods when
      shipped from the manufacturer and in the public warehouse.




8
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          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,** **continued**





Revenue
      is recognized upon shipment of goods from the public warehouse to the customers,
      which is when title transfers to the customers. The trading company approves
      credit to the customers and factors the sale. The trading company charges the
      Company 1% of the sales which are factored. For sales that are not factor
      approved, the Company will ask the customer to prepay before shipment. In some
      instances, the Company will retain the accounts receivable.




Shipping
      and handling costs billed to the customers are recorded in sales. Shipping
      and
      handling costs as incurred by the Company are recorded in cost of
      sales.




**Loss
      Per Share**





Basic
      loss per share is computed by dividing loss available to common stockholders
      by
      the weighted average number of common shares assumed to be outstanding during
      the period of computation. Diluted loss per share is computed similar to basic
      loss per share except that the denominator is increased to include the number
      of
      additional common shares that would have been outstanding if the potential
      shares had been issued and if the additional common shares were dilutive. All
      potentially dilutive shares, zero and approximately 3,525,000 of potentially
      dilutive shares as of March 31, 2007 and 2006, respectively, have been excluded
      from diluted loss per share, as their effect would be anti-dilutive for the
      periods then ended.




Basic
      and
      diluted loss per common share is computed as follows:


**Three
                  Months Ended March 31,****2007**
              
              **2006****Loss**
              
              **Shares**
              
              **Per-Share**
              
              **Loss**
              
              **Shares**
              
              **Per-Share****(Numerator)**
              
              **(Denominator)**
              
              **Amount**
              
              **(Numerator)**
              
              **(Denominator)**
              
              **Amount****Basic
                  EPS**Loss
                  available to common stockholders
              
              $
              (4,643,706
              )
              
              24,887,063
              
              $
              (0.19
              )
              $
              (4,792,177
              )
              
              20,551,620
              
              $
              (0.23
              )Effect
                  of Dilutive SecuritiesNone**Diluted
                  EPS**Loss
                  available to common stockholders
              
              $
              (4,643,706
              )
              
              24,887,063
              
              $
              (0.19
              )
              $
              (4,792,177
              )
              
              20,551,620
              
              $
              (0.23
              )
  **Stock-Based
        Compensation**




As
      of
      March 31, 2007, the Company had no stock-based compensation plans and has
      not issued any share-based payments to its employees.





The
      Company adopted SFAS No. 123(R), *Share-Based
      Payment,* on
      January 1, 2006 using the modified prospective method. SFAS No. 123(R) requires
      companies to recognize in the statement of operations the grant-date fair value
      of stock options and other equity-based compensation issued to employees. SFAS
      No. 123(R) also establishes accounting requirements for measuring, recognizing
      and reporting share-based compensation, including income tax considerations.
      Under the modified prospective application, the cost of new awards and awards
      modified, repurchased or cancelled after the required effective date and the
      portion of awards for which the requisite service has not been rendered
      (unvested awards) that are outstanding as of the required effective date are
      recognized as the requisite service is rendered on or after the required
      effective date. The compensation cost for that portion of awards is based on
      the
      grant-date fair value of those awards as calculated for either recognition
      or
      pro forma disclosures under SFAS No. 123.


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          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,** **continued**





The
      adoption of SFAS No. 123(R)’s fair value method will have a negative impact on
      the Company’s results of operations if the Company grants share-based payments
      to its employees in the future, although it will have no impact on its overall
      financial position. The impact of adopting SFAS No. 123(R) cannot be predicted
      at this time because it will depend on levels of share-based payments granted
      in
      the future. SFAS No. 123(R) also requires the benefits of tax deductions in
      excess of recognized compensation cost to be reported as a financing cash flow,
      rather than as an operating cash flow as required under current accounting
      literature. The requirement will reduce net operating cash flows and increase
      net financing cash flows in periods of adoption.




**Issuance
      of Stock for Non-cash Consideration**





All
      issuances of the Company’s common stock for non-cash consideration have been
      assigned a dollar amount equaling either the market value of the shares issued
      or the value of consideration received whichever is more readily determinable.
      The majority of the non-cash consideration received pertains to services
      rendered by consultants and others and has been valued at the market value
      of
      the shares issued. In certain issuances, the Company may discount the value
      assigned to the stock issued for illiquidity and restrictions on
      resale.





The
      Company’s accounting policy for equity instruments issued to consultants and
      vendors in exchange for goods and services follows the provisions of EITF Issue
      No. 96-18, *Accounting
      for Equity Instruments That are Issued to Other*  *Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services* and EITF
      Issue No. 00-18, *Accounting
      Recognition for Certain Transactions*  *Involving
      Equity Instruments Granted to Other Than Employees.* The
      measurement date for the fair value of the equity instruments issued is
      determined at the earlier of (i) the date at which a commitment for performance
      by the consultant or vendor is reached or (ii) the date at which the consultant
      or vendor’s performance is complete. In the case of equity instruments issued to
      consultants, the fair value of the equity instrument is recognized over the
      term
      of the consulting agreement.




**Derivative
      Financial Instruments**





In
      connection with the issuance of warrants with certain notes payable (see Note
      7)
      the Company was required to file a registration statement in November 2005
      and
      have such registration statement declared effective no later than 180 days
      following the Merger (the “Effectiveness Deadline”) and to maintain the
      effectiveness of such registration. In addition, the Company was required to
      issue certain holders of convertible warrants for each subsequent 30-day period
      that such registration statement had not been filed and additional warrants
      for
      each 30-day period following the Effectiveness Deadline, in which the
      registration statement was not declared effective. On July 26, 2006, the Company
      filed the required registration statement. The Company’s registration statement
      became effective on January 23, 2007. The Company determined that the
      registration rights are an embedded derivative instrument pursuant to SFAS
      No.
      133, *Accounting
      for Derivative*  *Instruments
      and Hedging Activities* ,
      as
      amended. Under the provisions of Emerging Issues Task Force (“ EITF ”)
      Issue
      No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed to and Potentially Settled in
      a
      Company’s Own Stock* and
      View
      A of EITF No. 05-4, *The
      Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument
      Subject to EITF Issue No. 00-19, Accounting for Derivative Financial Instruments
      Indexed to, and Potentially Settled in, a Company’s Own Stock* *,* the
      accounting treatment of these derivative financial instruments required that
      the
      Company record the derivatives at their fair values as of the inception date
      of
      the note agreements and at fair value as of each subsequent balance sheet date.
      Any change in fair value was recorded as non-operating, non-cash income or
      expense at each balance sheet date. If the fair value of the derivatives was
      higher at the subsequent balance sheet date, the Company recorded a
      non-operating, non-cash charge. If the fair value of the derivatives was lower
      at the subsequent balance sheet date, the Company recorded non-operating,
      non-cash income.





In
      December 2006, the FASB issued
      Staff Position EITF 00-19-2, *Accounting
      for Registration Payment Arrangements* (“ FSP
      EITF
      00-19-2” ).
      FSP
      EITF 00-19-2 specifies that the contingent obligation to make future payments
      or
      otherwise transfer consideration under a registration payment arrangement,
      whether issued as a separate agreement or included as a provision of a financial
      instrument or other agreement, should be separately recognized and measured
      in
      accordance with FASB Statement No. 5, *Accounting
      for Contingencies* .
      FSP
      EITF 00-19-2 further clarifies that a financial instrument subject to a
      registration payment arrangement should be accounted for in accordance with
      applicable generally accepted accounting principles without regard to the
      contingent obligation to transfer consideration pursuant to the registration
      payment arrangement.




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**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,** **continued**





In
      accordance with the provisions of FSP EITF 00-19-2, the Company elected early
      adoption of this statement. As of January 1, 2006, the Company recorded the
      warrant liability of $904,000 to equity since the only provision which caused
      the warrants issued to be accounted for as a derivative liability was the
      liquidated damages provision in the registration rights agreement. In recording
      the entry, the Company credited $688,000 to common stock which represents the
      estimated fair value of these warrants on the date of issuance and a credit
      to
      accumulated deficit of $216,000 which represents the difference between the
      estimated fair value of these warrants at the date of issuance and the estimated
      fair value as of December 31, 2005. However, as retrospective application of
      FSP
      EITF 00-19-2 is prohibited, the Company has not restated the amounts presented
      as of March 31, 2006.





**Reclassifications**





Certain
      reclassifications have been made to the 2006 financial statement presentation
      to
      correspond to the 2006 format.





**Recent
      Accounting Standards**





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities — Including an
      Amendment of FASB Statement No. 115.* SFAS
      No. 159 permits entities to choose to measure many financial instruments
      and certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting provisions. SFAS No. 159
      also establishes presentation and disclosure requirements designed to facilitate
      comparison between entities that choose different measurement attributes for
      similar types of assets and liabilities. The Company will adopt SFAS
      No. 159 in the first quarter of 2008, is still evaluating the effect, if
      any, on its consolidated financial position and consolidated results of
      operations and has not yet determined its impact.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109* (“FIN
      48”), which clarifies the accounting and disclosure for uncertainty in tax
      positions, as defined. FIN 48 seeks to reduce the diversity in practice
      associated with certain aspects of the recognition and measurement related
      to
      accounting for income taxes. The Company is subject to the provisions of FIN
      48
      as of January 1, 2007. The Company believes that its income tax filing positions
      and deductions will be sustained on audit and does not anticipate any
      adjustments that will result in a material change to its financial position.
      Therefore, no reserves for uncertain income tax positions have been recorded
      pursuant to FIN 48. The cumulative effect, if any, of applying FIN 48 is to
      be
      reported as an adjustment to the opening balance of retained earnings in the
      year of adoption. The Company did not record a cumulative effect adjustment
      related to the adoption of FIN 48. Tax years since 1992 remain subject to
      examination by the major tax jurisdictions in which the Company is subject
      to
      tax. The Company's policy for recording interest and penalties associated with
      income-based tax audits is to record such items as a component of income
      taxes.




**NOTE
      2 — ACCOUNTS RECEIVABLE FACTORING**




On
      May 3,
      2006, the Company entered into a factoring agreement with CIT Commercial
      Services (“CIT”), as amended. The Company is charged a factoring fee of 1% on
      gross invoice amounts. The Company agreed to sell and assign to CIT all accounts
      arising from the sale of inventory, including those under any trade name,
      through any divisions, and through any selling agent.




At
      the
      Company’s request, and at CIT’s sole discretion, CIT may advance funds to the
      Company at up to 80% of the factor risk accounts. The advance request form
      must
      be fully executed by the Company and Westrec Capital Partners, LLC (see Note
      8).
      Interest is charged based on the daily debit balances in the funds in use
      account for the month, at a rate equal to the greater of the sum of 2% plus
      the
      J P Morgan Rate, or 6% per annum.




11
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          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      2 — ACCOUNTS RECEIVABLE FACTORING, continued**





During
      the three months ended March 31, 2007 and 2006, factoring fees incurred totaled
      $23,819 and $24,176 respectively.




At
      March 31, 2007, the following summarizes the Company’s accounts receivable
      and related balances:


Receivables
                  assigned to factor
              
              $
              1,648,994Advances
                  from factor
              
              
              (1,211,490
              )Amounts
                  due from factor
              
              
              437,504Unfactored
                  accounts receivable
              
              
              111,846Allowance
                  for returns
              
              
              (40,000
              )$
              509,350
 **NOTE
        3 — NOTES PAYABLE TO STOCKHOLDERS**




From
      time
      to time, the Company borrows funds from two founding stockholders for working
      capital purposes, which bear interest at 8% per annum and are due 13 months
      from the date of demand. As of March 31, 2007, outstanding borrowings
      totaled $1,090,100, and accrued interest totaled $159,073. As of April 30,
      2007, no demand for repayment has been made. Interest expense on the notes
      totaled $22,255 and $19,351 for the three months ended March 31, 2007 and
      2006, respectively.  The
      balance above includes a note payable issued during the three months ended
      March
      31, 2007 totaling $121,100 in connection with amounts previously
      accrued.




**NOTE
      4 — COMMITMENTS AND CONTINGENCIES**




**Licensing
      Agreements**





For
      the
      rights to use trademarks, the Company has entered into licensing agreements
      with
      various licensors.





The
      agreements enable the Company to sell products using the name of the licensors
      in return for a licensing fee based upon sales of the products using the
      licensors’ names.





As
      of
      March 31, 2007, the Company has rights to use ten trademarks as evidenced by
      licensing agreements entered into with Richard Tyler, Tyler, Oscar by Oscar
      de
      la Renta, O Oscar by Oscar de la Renta, Blass by Bill Blass, Bill Blass Couture,
      Blassport and Bill Blass Collection, Isaac Isaac Mizrahi and a new couture
      brand
      which expire through March 2011. Under these licensing agreements, the
      Company agreed to pay the greater of between 3% and 8% of net sales of the
      licensed products or guaranteed minimums ranging from $70,000 to $1,000,000
      per
      annum, per contract. The licensors may terminate the licensing agreements upon
      events of default, as defined.





Minimum
      annual guaranteed royalty payments on the above licenses are as follows:





**Years
                ending December 31,**2007
                (9 months)
            
            $
            853,0002008
            
            
            1,510,0002009
            
            
            1,935,0002010
            
            
            1,625,0002011
            
            
            1,748,000$
            7,671,000




12
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**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      4 — COMMITMENTS AND CONTINGENCIES, continued**




**Indemnities
      and Guarantees**




The
      Company has made certain indemnities and guarantees, under which it may be
      required to make payments to a guaranteed or indemnified party, in relation
      to
      certain actions or transactions. The Company indemnifies its directors,
      officers, employees and agents, as permitted under the laws of the State of
      Delaware. In connection with its facility lease, the Company has indemnified
      its
      lessors for certain claims arising from the use of the facilities. Additionally,
      the Company indemnifies its factor and licensors under the factoring and license
      agreements, respectively, against certain claims as a result of the violation
      of
      any law. The duration of the guarantees and indemnities varies, and is generally
      tied to the life of the agreement. These guarantees and indemnities do not
      provide for any limitation of the maximum potential future payments the Company
      could be obligated to make. Historically, the Company has not been obligated
      nor
      incurred any payments for these obligations and, therefore, no liabilities
      have
      been recorded for these indemnities and guarantees in the accompanying condensed
      consolidated balance sheet.




**Litigation**




The
      Company is, from time to time, involved in various legal and other proceedings
      which arise in the ordinary course of operating its business. In the opinion
      of
      management, the amount of ultimate liability, if any, with respect to these
      actions will not materially affect the consolidated financial position or
      consolidated results of operations of the Company except as disclosed
      below.





William
      Bradhan and Richard Traweek v. The Fashion House, Inc., John Hanna





This
      matter was filed October 26, 2005, seeking damages for breach of contract and
      fraud regarding oral arrangements with the Company’s subsidiary. On April 10,
      2007, a Notice of Entry of Judgment was filed with the court for the amount
      of
      $460,000, which includes interest at 10% per year. The Company has 60 days
      from
      April 10, 2007 to file an appeal. The Company is in the process of negotiating
      a
      reduced settlement and expects that the matter can be resolved. If an agreeable
      settlement can not be reached, the Company will consider appealing the judgment.
      In connection with this judgment, the Company has accrued $300,000 in accounts
      payable and accrued expenses in the accompanying condensed consolidated balance
      sheet based on management’s best estimate of the ultimate settlement of this
      matter.





Artful
      Mind





On
      March
      6, 2007, the Company was served with a complaint, which Artful Mind Industrial
      Ltd. (“Artful Mind”) filed on March 1, 2007 alleging that the Company failed to
      make payments owed under a Settlement Agreement (the “Agreement”) entered into
      between Artful Mind, Go Moda Limited and the Company in September 27, 2006.
      Artful Mind seeks judgment for the full amount of all payments due, which
      approximates $295,000, together with interest at a rate of 9% per annum
      beginning on January 14, 2007 and costs of collection, including reasonable
      attorneys’ fees incurred. Based on the event of a default, of not timely paying
      the final two payments, the entire balance of all payments due were accelerated
      and became immediately due and interest on all unpaid amounts accrued at a
      rate
      of 9% per annum. The complaint states that the Company is currently in default
      on the final two payments. The Company has included the $295,000 due as accounts
      payable and accrued expenses in the accompanying condensed consolidated balance
      sheet.




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**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      4 — COMMITMENTS AND CONTINGENCIES, continued**




**Employment
      Agreements**




The
      Company has entered into employment agreements with certain of its management
      for services to be provided in the normal course of business. These agreements
      call for minimum salary levels and various payments upon termination of
      employment, as defined. In the event of termination for any reason, the Company
      is required to pay its CEO one year salary and bonus. The CEO’s salary for the
      year ended December 31, 2007 is $180,000 and the bonus was waived for
      2006.




**NOTE
      5 — NOTES PAYABLE**





In
      July 2005, the Company issued a note payable totaling $550,000, bearing
      interest at 11 percent per annum (the “July 11% Note”). The
      July 11% Note and accrued interest are due in April 2006, as amended. In
      connection with the issuance of the July 11% Note, the Company issued a
      warrant to purchase an aggregate of 1,100,000 shares of the Company’s common
      stock. The warrants vested upon grant, have an exercise price of $1.00 per
      share
      and expire in August 2008. In connection with the registration rights
      issued with the July 11% Notes and related warrants (see Note 1), the Company
      issued warrants to purchase an aggregate of 110,000 and 275,000 shares of the
      Company’s common stock during the three months ended March 31, 2007 and 2006,
      respectively, as penalties for not registering the underlying shares timely,
      as
      defined (see Note 6). The warrants issued during 2007 and 2006, for penalties,
      had fair values totaling $58,000 and $377,000, respectively, as determined
      under
      SFAS No. 123 and recorded such as interest expense upon grant. The warrants
      vested upon grant, had an exercise price of $1.00 per share and expire in
      August 2015. The July 11% Note and accrued interest were repaid in
      March 2006.





On
      July
      6, 2006, the Company issued a note payable totaling $300,000 with a maturity
      date of August 20, 2006, and bearing interest at the prime rate plus 5% (the
      “July Note”). In connection with the issuance of the July Note, the Company
      issued a warrant to purchase 60,000 shares of the Company’s common stock. The
      warrant is immediately exercisable, has an exercise price of $1.00 and expires
      in July 2016. The warrant had a relative fair value of $33,000, as determined
      under SFAS No. 123 and the Company recorded such as debt discount. The Company
      amortized the debt discount to interest expense during 2006. The Company repaid
      $75,000 on the note and the maturity date was extended to August 20,
      2007.





On
      February 8, 2007, the Company issued a note payable totaling $70,293 in
      connection with services rendered, which bears interest at 1.5% per annum.
      The
      Company is required to make monthly principal payments of $15,000 through
      maturity in July 2007. At March 31, 2007, the outstanding balance was
      approximately $55,000.




**NOTE
      6 - LINE OF CREDIT**





On
      July
      27, 2006, the Company and Westrec Capital Partners, LLC (“Westrec”) entered into
      an agreement whereby Westrec and its managing partner (“Guarantors”) have
      provided credit guarantees to a bank sufficient to enable the bank to make
      advances to the Company (see below). In connection with each advance, the
      Company paid a fee of 5.0% of each draw to Westrec.




14
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**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)






**NOTE
      6 - LINE OF CREDIT, continued**




On
      September 18, 2006, the Company entered into a Master Revolving Note (the
“Note”) with a Bank to borrow funds from time to time, at the lender’s
      discretion, up to an aggregate of $5.0 million, payable in whole or in part
      upon
      demand, at a per annum rate equal to the lender’s prime rate plus 1% per annum
      secured by deposits with the Lender. The note replaces previously issued notes
      by the bank. Upon default, the Company is required to pay an additional 3%
      interest per annum (the “Default Increase”). In connection with entering into
      the Note, the Company entered into a Credit Enhancement Agreement with Westrec
      pursuant to which each of the Guarantors agreed to guarantee the Company’s
      obligations existing on or before the date that is the earliest of (i) 180
      days
      following the closing of the Note with the Lender, (ii) the termination of
      Guarantor’s obligations, or (iii) the Borrower’s repayment in full of the
      amounts outstanding under Note, as defined. Additionally, pursuant to the terms
      of the Credit Enhancement Agreement, the Company has agreed to pay the following
      fees: upon any issuance of a letter of credit by the Lender that is guaranteed
      by a Guarantor, the Company will pay Westrec 2% of the face amount of the letter
      of credit; as long as any amount is outstanding on the Note that is guaranteed
      by a Guarantor, revolving line-of-credit based fees equal to the difference
      between (a)
      the
      sum of 20%, *plus* (if
      applicable) the Default Increase (as noted above), or (b) the sum of the Lender’s
      prime rate plus  11.75%
      per annum , *plus* (if
      applicable) the Default Increase (as noted above). In addition, the Company
      pays
      a monthly credit monitoring fee of $5,000 for each calendar month up to and
      including the month of termination. Any
      payments that are deemed late are subject to an additional fee of 5% of each
      such late payment.




The
      Company also granted the Guarantors a security interest in all of the Company’s
      tangible and intangible property and assets, for the duration of the Credit
      Enhancement Agreement. In addition, the Chief Executive Officer of the Company
      granted a security interest and pledge of all shares of the Company’s common
      stock, options, warrants and other equity securities held by him. Furthermore,
      each draw under the Note with the Lender is subject to the prior approval of
      the
      Guarantors at their discretion. The Credit Enhancement Agreement terminates
      upon
      repayment in cash of all amounts payable and the delivery of certain written
      releases by the Lender and the Company.





During
      the year ended December 31, 2006, in connection with the Credit Enhancement
      Agreement, the Company granted a seven-year warrant to purchase a total of
      9,000,000 shares of common stock at a purchase price of $0.40 per share and
      expires in September 2013, as amended - see below. The warrant vested as
      follows: (i) 20% immediately, (ii) an additional 20% vests, as amended, 60
      days
      after the date of the warrant, and on each succeeding 30 th day
      thereafter such that the entire warrant will vest on the 151 st day
      after the date of the warrant. The estimated fair value of the original warrant
      was $2,550,000, as determined under SFAS 123 and the Company was amortizing
      such
      amount to interest expense on a straight line basis over the life of the
      guarantee. However, the amount of interest expense recognized at any date will
      be at least equal to the portion of the grant date fair value of the vested
      amount.




Effective
      December 20, 2006, the Company entered into an amended credit enhancement
      agreement with Westrec, in which, among other things, Westrec agreed to extend
      its guarantee on behalf of the Company to amounts owed to a bank and include
      its
      guarantee on amounts owed to CIT, the Company’s factor (see Note 2). In exchange
      for the additional concessions, the Company modified the warrants originally
      granted to Westrec to increase the number of warrants granted from 5,000,000
      to
      9,000,000 and decrease the exercise price from $0.65 to $0.40 and extended
      the
      maturity date of the guarantee to September 2007. During the three month period
      ended March 31, 2007, the Company amortized $1,710,000 to interest expense
      in
      the accompanying statements of operations related to this warrant, which was
      fully vested at March 31, 2007.


15
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          of Contents




**THE
      FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


March 31,
      2007


(UNAUDITED)




**NOTE
      6 - LINE OF CREDIT, continued**





In
      addition, if the termination of the Credit Enhancement Agreement does not occur
      on the dates below, then the number of shares underlying the Warrant will be
      increased in the following amounts, which shares will be immediately vested:
      (i)
      an additional number of shares equal to 3% of the shares vested on the
      180 th day
      following the closing of the Note, plus (ii) an additional number of shares
      equal to 5% of the shares vested on the 210 th day
      following the closing of the Note is not terminated, plus (iii) an additional
      number of shares equal to 10% of the shares vested under the on the
      270 th day
      following the closing of the Note plus on each 30 days thereafter until the
      termination of the Credit Enhancement Agreement occurs. If Company issues equity
      securities with a purchase price less than the current exercise price of the
      Warrant, then the exercise price of the Warrant will be reduced to such amount
      and the number of shares underlying the Warrant will be increased accordingly.
      However, Westrec cannot earn warrants to purchase more than an aggregate of
      9,000,000 shares in connection with the agreement, including all additional
      warrants earned under the aforementioned provisions.





On
      February 27, 2007, the Company amended their Master Revolving Note (the “Note”)
      dated September 18, 2006, to increase the borrowing base from an aggregate
      of
      $5.0 million to $6.5 million.




During
      the three months ended March 31, 2007, the Company incurred fees of
      approximately $212,181, paid $65,444 and owes $146,738, which is included in
      accounts payable and accrued expenses in the accompanying condensed consolidated
      balance sheet.




**NOTE
      7 — EQUITY TRANSACTIONS**




*Warrants*




During
      the three months ended March 31, 2007, the Company issued warrants to purchase
      approximately 110,000 shares of the Company’s common stock (see Note 5) in
      connection with liquidated damages clauses of certain registration rights
      agreements (see Note 1).




**NOTE
      8 — SUBSEQUENT EVENTS**




On
        April
        10, 2007, the Company amended their Master Revolving Note (the “Note”) dated
        September 18, 2006, to increase the borrowing base from an aggregate of $6.5
        million to $8.5 million.  In connection with entering into the Note, on
        April 10, 2007, the Company entered into an Amended and Restated Credit
        Enhancement Agreement with Westrec Capital Partners, LLC (“ Westrec ”)
        pursuant to which each of the Guarantors agreed to guarantee additional advances
        under the Comerica Loan of up to an aggregate of $1,000,000, which advances
        are
        drawn no later than August 3, 2007, provided that at the time of each advance
        certain representations, warranties,




In
        consideration for this agreement, the Company issued to Westrec an Amended
        and
        Restated Warrant Agreement dated April 10, 2007, to purchase a total of
        11,000,000 shares of common stock at a purchase price of $0.40 per share.
        The
        Warrant vests on the date of this agreement and expires on September 15,
        2013.
        In connection with the modification, the Company will record additional expense
        for the amount in excess of the fair value of the modified warrant over the
        fair
        value of the original warrant at the date of modification.


16
 Table
          of Contents


**Item 2.
      Management’sDiscussion and Analysis or Plan of
      Operation**




Some
      of
      the statements made by us in this Quarterly Report on Form 10-QSB are
      forward-looking in nature, including but not limited to, statements relating
      to
      our future revenue and expenses, licensing agreements, product development,
      market acceptance, and our management’s plans and objectives for our current and
      future operations, and other statements that are not historical facts.
      Forward-looking statements include, but are not limited to, statements that
      are
      not historical facts, and statements including forms of the words “intend”,
“believe”, “will”, “may”, “could”, “expect”, “anticipate”, “plan”, “possible”,
      and similar terms. Actual results could differ materially from the results
      implied by the forward looking statements due to a variety of factors, many
      of
      which are discussed throughout this Quarterly Report and in our SEC filings.
      Readers are cautioned not to place undue reliance on these forward-looking
      statements, which speak only as of the date hereof. We undertake no obligation
      to publicly release any revisions to these forward-looking statements that
      may
      reflect events or circumstances after the date hereof or to reflect the
      occurrence of unanticipated events, unless required by law. Factors that could
      cause actual results to differ materially from those expressed in any
      forward-looking statement made by us include, but are not limited
      to:





**•**
            
            our
                ability to finance our activities and maintain our financial
                liquidity;**•**
            
            our
                ability to enter into new licensing agreements and to maintain and
                renew
                existing licensing agreements;**•**
            
            changes
                in consumer preferences or fashion trends;**•**
            
            disruption
                in product shipment;**•**
            
            changes
                in import regulations;**•**
            
            our
                dependence on a small number of large customers;**•**
            
            changes
                in our relationships with vendors and other resources;
                and**•**
            
            intensely
                competitive industry conditions.




In
      this
      document, the words “we,” “our,” “ours,” and “us” refers to The Fashion House
      Holdings, Inc. and our wholly owned subsidiary The Fashion House, Inc., a
      Delaware corporation.





On
      August
      19, 2005, TDI Holding Corporation (“TDI”) entered into an agreement of Plan of
      Reorganization (“Merger”) with The Fashion House, Inc. (“TFH”) in a tax free
      share exchange under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
      as amended. Immediately after the Merger, the officers and directors of TDI
      resigned and the management of TFH controlled such positions; therefore,
      effecting a change of control. As a result, the transaction was recorded as
      a
“reverse merger” whereby TFH was considered to be the accounting acquirer as it
      retained control of TDI after the Merger. Simultaneously with the Merger, TDI
      changed its name to The Fashion House Holdings, Inc.





TFH
      was
      incorporated under the laws of the State of Delaware on April 11, 2002 and
      commenced operations on January 1, 2003. TFH designs, develops and markets
      women’s dress footwear with an emphasis on celebrity appeal, style, quality and
      fit. The Company targets the moderate to premium-priced categories of the
      women’s footwear industry and implements its business model by licensing
      recognized brand names.




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As
      reported in the Report of Independent Registered Public Accounting Firm on
      our
      December 31, 2006 financial statements, the Company had suffered recurring
      losses from operations, and had a working capital deficit that raises
      substantial doubt about our ability to continue as a going concern.




**Overview**




We
      design, develop, and market a diversified selection of women’s dress and casual
      fashion footwear with an emphasis on celebrity appeal, style, quality, and
      fit.
      We target moderate to premium priced categories of the women’s fashion footwear
      market. Our business centers on the licensing of recognized brand names. The
      practice of licensing, or the leasing of trademarked or copyrighted entity,
      including name, likeness, logo, graphic, saying, signature or character, has
      become an increasingly common practice among apparel and footwear companies,
      and
      the licensee typically pays royalties based upon product sales. Our licensed
      brands include Richard Tyler Couture, tyler Richard Tyler, Oscar by Oscar de
      la
      Renta and O Oscar by Oscar de la Renta.  In 2006,
      the Company acquired rights to use four trademarks as evidenced by a licensing
      agreement entered into with Bill Blass Limited to design, manufacture and
      distribute women’s footwear under the brand names Blass by Bill Blass, Bill
      Blass Couture, Blassport and Bill Blass Collection. Both the Bill Blass Couture
      and the Blass by Bill Blass brands were launched in February 2006 at the
      World Shoe Association show in Las Vegas. The agreements expire in
      March 2011, with an automatic extension through 2016.




In
      March 2006, the Company acquired rights to use two trademarks as evidenced
      by a licensing agreement entered into with Isaac Mizrahi to design, manufacture
      and distribute women’s footwear under the brand names Isaac Isaac Mizrahi and a
      new couture brand. We will take over the license for the existing Isaac Isaac
      Mizrahi bridge collection. The line is currently available at specialty
      retailers, major department stores and on the internet. The agreement expires
      in
      March 2011, with an automatic extension through 2016.




**Results
      of Operations for the Three Months Ended March 31, 2007 and March 31,
      2006.**




Net
      sales
      for the three months ended March 31, 2007 were $2,214,169, an increase of
      $1,213,310 or 121% over net sales for the prior year quarter of $1,000,859.
      The
      net sales increase of $1,213,310 was attributable to the 5 new brands launched
      in the third quarter of 2006 contributing the following sales; O Oscar by Oscar
      de la Renta $576,665, Blass by Bill Blass $493,708, Isaac Isaac Mizrahi
      $339,099, Bill Blass Couture $85,582, Oscar by Oscar de la Renta $18,754, and
      Private Label sales of $38,506. Net sales for the tyler Richard Tyler brand
      in
      the first quarter of 2007 were $631,172 compared to $970,175 in the first
      quarter of 2006 for a decrease of $339,003. The sales decrease in the tylor
      brand was due to late product deliveries from our factories.




Gross
      loss for the three months ended March 31, 2007 was $128,125 or (5.8%) of
      net sales. This loss in gross margin was caused primarily by late deliveries
      from our suppliers, which was caused by the Company’s inability to open Letters
      of Credit to the factories on a timely basis due to lack of availability in
      our
      line of credit, which forced the Company to significantly discount wholesale
      prices to our customers. Also contributing to the negative gross margin in
      the
      2007 period, the tyler brand sold prior seasons inventory at sales prices that
      were below cost. Gross profit for the three months ended March 31, 2006 was
      $226,159 or 22.6% of net sales and was also impacted by late deliveries from
      our
      Chinese suppliers forcing us to discount wholesale prices but not as deep a
      discounting as in the first quarter 2007.




Operating
      expenses include all costs associated with design, development, sales,
      marketing, distribution, purchasing, and corporate functions. Operating expenses
      increased to $2,373,785 in the three months ended March 31, 2007 from
      $1,652,650 in 2006, for an increase of $721,135. The increase in operating
      expenses is attributable primarily to an increase in payroll costs of $187,617
      as the result of building a sales and administrative staff. In support of the
      additional brands, Design expenses (including samples) increased by $98,198
      and
      licensing expenses increased by $167,895. Legal and professional fees increased
      by $86,977, trade show expenses increased by $74,737, and insurance cost
      increased by $21,635.




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In
      December 2006, the FASB issued Staff Position EITF 00-19-2, *Accounting
      for Registration Payment Arrangements* (“FSP
      EITF 00-19-2”). FSP EITF 00-19-2 specifies that the contingent obligation to
      make future payments or otherwise transfer consideration under a registration
      payment arrangement, whether issued as a separate agreement or included as
      a
      provision of a financial instrument or other agreement, should be separately
      recognized and measured in accordance with FASB Statement No. 5, *Accounting
      for Contingencies* .
      FSP
      EITF 00-19-2 further clarifies that a financial instrument subject to a
      registration payment arrangement should be accounted for in accordance with
      applicable generally accepted accounting principles without regard to the
      contingent obligation to transfer consideration pursuant to the registration
      payment arrangement. In accordance with the provisions of FSP EITF 00-19-2,
      we
      have elected early adoption and, effective January 1, 2006, reclassified our
      warrant liability to equity. Accordingly, there was no current year
      income/expense associated with such warrants. However, in accordance with FSP
      EITF 00-19-2, retrospective application is prohibited and therefore all amounts
      recorded during the period ended March 31, 2006 have not been
      restated.




The
      net
      loss for the three months ended March 31, 2007 is $4,643,706 compared to a
      loss of $4,792,177 for the same period in 2006 for a decreased loss of $148,471.
      The loss from operations was $2,373,785 in the three months ended March 31,
      2007 compared to loss from operations of $1,426,491 for the three months ended
      March 31, 2006. The increase in the loss from operations was primarily due
      to the negative gross margin for the three months ended March 31, 2007 of
      $128,125, as a result of the significant discounting of the wholesale price
      because of the late deliveries, and an increase operating expenses in the period
      of $721,135, compared to the same period in 2006. The company recorded in other
      expenses in the three months ended March 31, 2007 charges totaling
      $2,140,996. These charges included $1,710,000 to record the fair value of
      warrants issued as guarantees, $58,000 for stock warrants issued as penalties
      for late filing and late effectiveness of the Registration Statement on Form
      SB-2 with the SEC, and interest expense of $372,996. In the three month period
      ended March 31, 2006, the Company recorded in other expenses charges totaling
      $3,364,886 associated with the issuance of stock warrants. These charges
      included $1,344,000 to record derivative stock warrant liability, $1,014,000
      for
      stock warrants issued as penalties for late filing and late effectiveness of
      the
      Registration Statement on Form SB-2 with the SEC, $493,000 for warrants issued
      in connection with maturity extensions and $513,886 for amortization of the
      estimated fair value of stock warrants to purchase common stock and beneficial
      conversion features.




**Liquidity
      and Capital Resources**




During
      the three months ended March 31, 2007, the Company’s net cash position
      decreased by $26,738 to $105,169. The Company’s financing activity provided net
      cash of $1,376,051 for the three months ended March 31, 2007, primarily
      through borrowings on the line of credit of $1,751,520. Advances from the factor
      in the three month period were $2,558,393 and payments to the factor were
      $2,914,180.




Net
      cash
      used in operating activities for the three months ended March 31, 2007 was
      $1,396,313 a decrease of $39,442 from the $1,435,755 used by operating
      activities in the prior year period. The net loss of $4,643,706 was the major
      contributor to the use of cash in the three month period ending March 31,
      2007.




The
      Company had investing activities for the three months ended March 31, 2007
      of
      $6,476. In the 2006 period, the net cash used was $288,397.




**Financing
      Activities**




We
      are
      financing our operations primarily with the proceeds from our private placement
      and our line of credit. With the exception of 2004, when we sold the Nicole
      Miller License resulting in a gain for the year, we have incurred net losses
      as
      a result of sales, design, and administrative staffing expenses in support
      of
      our operations.




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On
      February 27, 2007, the Company amended their Master Revolving Note (the “Note”)
      dated September 18, 2006, to increase the borrowing base from an aggregate
      of
      $5.0 million to $6.5 million, payable in whole or in part upon demand at a
      per
      annum rate equal to the Lender’s prime rate plus 1% per annum secured by
      deposits with the Lender. The note replaces previously issued notes by the
      bank.
      Upon default, the Company is required to pay an additional 3% interest per
      annum.




Based
      on
      our current operating plan and our available cash and cash equivalents, we
      expect that we will need to obtain additional financing in the very near future
      through the sale of equity securities, private placements, and loans to fund
      our
      cash needs and continue our presently planned operations. Additional financing,
      whether through public or private equity or debt financing, arrangements with
      stockholders or other sources to fund operations, may not be available, or
      if
      available, may be on terms unacceptable to us. Our ability to maintain
      sufficient liquidity is dependent on our ability to raise additional capital.
      If
      we issue additional equity securities to raise funds, the ownership percentage
      of our existing stockholders would be reduced. New investors may demand rights,
      preferences or privileges senior to those of existing holders of our common
      stock. Debt incurred by us would be senior to equity in the ability of debt
      holders to make claims on our assets. The terms of any debt issued could impose
      restrictions on our operations. If adequate funds are not available to satisfy
      either short or long-term capital requirements, our operations and liquidity
      could be materially adversely affected and we could be forced to cease
      operations.




**Licenses**




For
      the
      rights to use trademarks, the Company has entered into licensing agreements
      with
      various licensors. The agreements enable the Company to sell products using
      the
      name of the licensors in return for a licensing fee based upon sales of the
      products using the licensors’ names.




As
      of March 31, 2007, the Company has rights to
      use ten trademarks as evidenced by licensing agreements entered into with
      Richard Tyler, Tyler, Oscar by Oscar de la Renta, O Oscar by Oscar de la Renta,
      Blass by Bill Blass, Bill Blass Couture, Blassport and Bill Blass Collection,
      Isaac Isaac Mizrahi and a new couture brand which expire through
      March 2011. Under these licensing agreements, the Company agreed to pay the
      greater of between 3% and 8% of net sales of the licensed products or guaranteed
      minimums ranging from $70,000 to $1,000,000 per annum, per contract. The
      licensors may terminate the licensing agreements in the event of default, as
      defined.




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Minimum
      annual guaranteed royalty payments are as follows:




**Years
                ending December 31,**2007
                (9 months remaining)
            
            $
            853,0002008
            
            
            1,510,0002009
            
            
            1,935,0002010
            
            
            1,625,0002011
            
            
            1,748,000$
            7,671,000




**Future
      Liquidity**




Our
      principal sources of liquidity consist of existing cash balances and funds
      expected to be generated from future operations. We believe the key factors
      to
      our liquidity in 2007 will be our ability to successfully execute on our plans
      to increase sales levels. There is no assurance that the Company will be able
      to
      increase sales levels. Our cash requirements will also depend on numerous other
      variable factors, including the rate of growth of sales, the timing and levels
      of products purchased, payment terms and credit limits from manufacturers,
      and
      the timing and level of accounts receivable collections.




We
      will
      require additional financing in the next twelve months. We cannot assure you
      that additional financing (public or private) will be available on acceptable
      terms or at all. If we issue additional equity securities to raise funds, the
      ownership percentage of our existing stockholders would be reduced. New
      investors may demand rights, preferences or privileges senior to those of
      existing holders of common stock. If we cannot raise any needed funds, we might
      be forced to make further substantial reductions in our operating expenses,
      which could adversely affect our ability to implement our current business
      plan
      and ultimately our viability as a company.




**CRITICAL
      ACCOUNTING POLICIES**




In
      preparing our financial statements, we make estimates, assumptions and judgments
      that can have a significant effect on our revenues, income/loss from operations,
      and net income/loss, as well as on the value of certain assets on our
      consolidated balance sheet. We believe that there are several accounting
      policies that are critical to an understanding of our historical and future
      performance as these policies affect the reported amounts of revenues, expenses,
      and significant estimates and judgments applied by management. While there
      are a
      number of accounting policies, methods and estimates affecting our consolidated
      financial statements, areas that are particularly significant include revenue
      recognition and stock-based compensation. In addition, please refer to Note
      1 to
      the accompanying consolidated financial statements for further discussion of
      our
      significant accounting policies.




**Revenue
      Recognition**




Securities
      and Exchange Commission Staff Accounting Bulletin (“SAB”) 101, *Revenue*  *Recognition* , as
      amended by SAB 104, outlines the basic criteria that must be met to recognize
      revenue and provide guidance for presentation of revenue and for disclosure
      related to revenue recognition policies in financial statements filed with
      the
      Securities and Exchange Commission. Management believes that our revenue
      recognition policy conforms to SAB 104.




We
      evaluate the criteria of the FASB Emerging Issues Task Force (“EITF”) 99-19, *Reporting
      Revenue Gross as a Principal Versus Net as an Agent,* in
      determining whether it is appropriate to record the gross amount of revenue
      and
      related costs or the net amount earned as commissions. We are is the primary
      obligor, is subject to inventory risk, has latitude in establishing prices
      and
      selecting suppliers, establishes product specifications, and has the risk of
      loss as it relates to cargo losses. Accordingly, our revenue is recorded on
      a
      gross basis.




We
      utilize a trading company to provide trade finance and factoring services in
      connection with the manufacture, distribution and sale of our products (referred
      to hereinafter as the “Goods”) to customers. The trading company issues letters
      of credit in favor of the manufacturers at our request and in accordance with
      the information provided in such requests. The trading company imports and
      delivers Goods, as instructed by us, to a public warehouse and pays the
      manufacturers for the cost of Goods and the related costs covered by the
      requests.




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We
      issue
      letters of credit in favor of the manufacturers in accordance with the
      information provided by us and the manufacturer. We import the goods and pay
      the
      import and delivery costs and forwards the goods to a public warehouse. Goods
      are held by us at a public warehouse until the customers requested ship date.
      We
      arrange and maintain the Goods while in our warehouse at our expense. The
      Company has title to the Goods when shipped from the manufacturer and in the
      public warehouse.





Revenue
      is recognized upon shipment of goods from the public warehouse to the customers,
      which is when title transfers to the customers. The Factor approves credit
      to
      the customers on the factored sales and charges us 1% of sales.





Shipping
      and handling costs billed to the customers are recorded in sales. Shipping
      and
      handling costs as incurred by us for the imported goods are recorded in cost
      of
      sales.




**Stock
      Based Compensation**




At
      March 31, 2007, the Company had no stock-based compensation plans and has
      not issued any share-based payments to its employees.




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of SFAS No. 123(R), *Share
      Based Payment* ,
      using
      the modified-prospective transition method. Under this transition method,
      compensation cost required to be recognized in the periods ended subsequent
      to
      January 1, 2006 will include: (a) compensation cost for all
      share-based payments granted subsequent to December 31, 2005 based on the
      grant-date fair value estimated in accordance with the provisions of SFAS
      No. 123(R).




The
      Company will calculate stock-based compensation by estimating the fair value
      of
      each option using the Black-Scholes option pricing model. The Company’s
      determination of fair value of share-based payment awards will be made as of
      their respective dates of grant using that option pricing model and is affected
      by the Company’s stock price as well as assumptions regarding a number of
      subjective variables. These variables include, but are not limited to the
      Company’s expected stock price volatility over the term of the awards and actual
      and projected employee stock option exercise behavior. The Black-Scholes option
      pricing model was developed for use in estimating the value of traded options
      that have no vesting or hedging restrictions and are fully transferable. Because
      the Company’s employee stock options will have certain characteristics that are
      significantly different from traded options, the existing valuation models
      may
      not provide an accurate measure of the fair value of the Company’s employee
      stock options. Although the fair value of employee stock options will be
      determined in accordance with SFAS No. 123(R) using an option-pricing
      model, that value may not be indicative of the fair value observed in a willing
      buyer/willing seller market transaction. The calculated compensation cost will
      be recognized on a straight-line basis over the vesting period of the
      option.





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**Going
      Concern**




The
      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. The Company incurred a net loss of $4,643,706
      for
      the three months ended March 31, 2007, and had an accumulated deficit of
      $27,391,373 at March 31 2007. These factors raise substantial doubt about
      the Company’s ability to continue as a going concern where it raises capital in
      very near future. The ability of the Company to continue as a going concern
      is
      dependent on achieving profitable operations and obtaining sufficient debt
      or
      equity financing in the future. These financial statements do not include any
      adjustments that might be necessary if the Company is unable to continue as
      a
      going concern.




Our
      business and results of operations are affected by a wide variety of factors,
      as
      we discuss in Item 1A. “Risk Factors” of our Annual Report on Form 10-KSB filed
      with the U.S. Securities and Exchange Commission, which could materially and
      adversely affect us and our actual results. As a result of these factors, we
      may
      experience material fluctuations in future operating results on a quarterly
      or
      annual basis, which could materially and adversely affect our business,
      financial condition, operating results and stock price.




**Item 3.
      Controlsand Procedures**




The
      following material weaknesses in our internal control over financial reporting
      were reported in our 2006 Annual Report on Form 10-K filed with the United
      States Securities and Exchange Commission on March 16, 2007:





·
            The
                lack of adequate controls over the financial closingand
                reporting process, including controls over disclosures, non-routine
                transactions and significant estimates. Specifically, these deficiencies
                were primarily attributable to (1) inability to ensure that the accounting
                for our debt and equity-based transactions is accurate and complete.
                In
                recent years, we have consummated a series of complex debt and equity
                transactions involving the application of highly specialized accounting
                principles, and (2) lack of comprehensive documentation of accounting
                policies and procedures.




The
      material weakness described above could result in a misstatement of the
      aforementioned accounts or disclosures that would result in a material
      misstatement to the annual or interim consolidated financial statements that
      would not be prevented or detected.





We
      are
      evaluating certain corrective measures we may take including the possibility
      of
      hiring an outside consultant to provide us with the guidance we need at such
      times that we may engage in these complex transactions at such time as our
      working capital permits.





The
      Company, under the supervision and with the participation of the Company's
      management, including the Company's principal executive officer and principal
      financial officer, has evaluated the effectiveness of the design and operation
      of the Company's "disclosure controls and procedures," as such term is defined
      in Rules 13a-15e promulgated under the Exchange Act as of this report. Based
      upon that evaluation, the principal executive officer and principal financial
      officer have concluded that the Company's disclosure controls and procedures
      were not effective as of the end of the period covered by this report to provide
      reasonable assurance that information required to be disclosed by the Company
      in
      reports that it files or submits under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in SEC rules and
      forms.




Given
      these reportable conditions and material weaknesses, management devoted
      additional resources to resolving questions that arose during the period covered
      by this report. As a result we are confident our condensed consolidated
      financial statements as of March 31, 2007 and for the each of the three month
      periods ended March 31, 2007 and 2006 fairly present in all material respects
      our financial condition and results of operations.




There
      were no other changes to the internal controls during the quarter ended March
      31, 2007 that have materially affected or that are reasonably likely to affect
      the internal controls.


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Limitations on the Effectiveness of
      Controls




The
      Company's management, including the CEO and CFO, does not expect that our
      disclosure controls and procedures or our internal control over financial
      reporting will necessarily prevent all fraud and material error. An internal
      control system, no matter how well conceived and operated, can provide only
      reasonable, not absolute, assurance that the objectives of the control system
      are met. Further, the design of the control system must reflect the fact that
      there are resource constraints, and the benefits of controls must be considered
      relative to their costs. Because of the inherent limitations in all control
      systems, no evaluation of controls can provide absolute assurance that all
      control issues and instances of fraud, if any, within the Company have been
      detected. These inherent limitations include the realities that judgments in
      decision-making can be faulty, and that breakdowns can occur because of simple
      error or mistake. Additionally, controls can be circumvented by the individual
      acts of some persons, by collusion of two or more people, or by management
      override of the internal control. The design of any system of controls also
      is
      based in part upon certain assumptions about the likelihood of future events,
      and there can be no assurance that any design will succeed in achieving its
      stated goals under all potential future conditions. Over time, control may
      become inadequate because of changes in conditions, and/or the degree of
      compliance with the policies or procedures may deteriorate.




**PART
      II — OTHER INFORMATION**




**Item 1.Legal
      Proceedings**




William
      Bradhan and Richard Traweek v. The Fashion House, Inc., John Hanna





This
      matter was filed October 26, 2005, seeking damages for breach of contract and
      fraud regarding oral arrangements with the Company’s subsidiary. In March of
      2007, a judgment against the Company was made but not entered in the amount
      of
      $400,000. The Company is in the process of negotiating a reduced settlement
      and
      expects that the matter can be resolved. If an agreeable settlement can not
      be
      reached, the Company will consider appealing the judgment. In connection with
      this judgment, the Company has accrued $300,000 in accounts payable and accrued
      expenses in the accompanying consolidated balance sheet based on management’s
      best estimate of the ultimate settlement of this matter. On April 10, 2007,
      a
      Notice of Entry of Judgment was filed with the court for the amount of $460,000,
      which includes interest at 10% per year. The Company has 60 days from April
      10,
      2007 to file an appeal.





Artful
      Mind





On
      March
      6, 2007, the Company was served with a complaint, which Artful Mind Industrial
      Ltd. (“Artful Mind”) filed on March 1, 2007 alleging that the Company failed to
      make payments owed under a Settlement Agreement (the “Agreement”) entered into
      between Artful Mind, Go Moda Limited and the Company in September 27, 2006.
      Artful Mind seeks judgment for the full amount of all payments due, which
      approximates $295,000, together with interest at a rate of 9% per annum
      beginning on January 14, 2007 and costs of collection, including reasonable
      attorneys’ fees incurred. Pursuant to the Agreement regarding late delivery of
      product, the Company agreed to pay Artful Mind a total sum of $739,000 for
      the
      procurement and manufacturing of shoes. The Company was to pay the $739,000
      as
      follows: (i) $148,000 on execution of the agreement; (ii) $148,000 on October
      30, 2006; $148,000 on November 30, 2006; $148,000 on December 30, 2006; and
      $148,000 on January 30, 2007. Based on the event of a default, of not timely
      paying the final two payments, which was not cured within 14 days of the date
      payment was due, the entire balance of all payments due were accelerated and
      became immediately due and interest on all unpaid amounts accrued at a rate
      of
      9% per annum. The complaint states that the Company is currently in default
      on
      the final two payments. The Company has included the $295,000 due as accounts
      payable and accrued expenses in the accompanying consolidated balance
      sheet.




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**Item 2.
        UnregisteredSales of Equity Securities and Use
        of Proceeds**




In
      January 2007, the Company issued warrants to purchase an aggregate of 110,000
      shares of the Company’s common stock. The warrants vested upon grant, had an
      exercise price of $1.00 per share and expire in August 2015.




The
      issuances of securities described above were deemed to be exempt from
      registration under the Securities Act in reliance on Section 4(2) of the
      Securities Act as transactions by an issuer not involving any public offering.
      The recipients of securities in each such transaction represented their
      intention to acquire the securities for investment only and not with a view
      to
      or for sale in connection with any distribution thereof and appropriate legends
      were affixed to the share certificates and other instruments issued in such
      transactions. The sales of these securities were made without general
      solicitation or advertising.




**Item 3.
      DefaultsUpon Senior
      Securities**




Not
      Applicable




**Item 4.
      Submissionof Matters to a Vote of Security
      Holders**




Not
      Applicable




**Item 5.
      OtherInformation**




Not
      applicable




**Item 6.
      Exhibits**




The
      exhibits listed in the Exhibit Index are filed as part of this
      report.




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**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, thereunto
      duly
      authorized.




**The
                Fashion House Holdings, Inc.**Date: May
              15,
              2007
            By:
            /s/ John
              HannaJohn HannaChief
              Executive Officer






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**EXHIBIT
        INDEX**




2.1
                  (1)
              
              Reverse
                  Share Exchange Agreement by and among the registrant, The Fashion
                  House,
                  Inc., a Delaware corporation, and shareholders of Fashion House,
                  Inc.,
                  dated as of August 19, 2005.3.1
                  (i) (2)
              
              Certificate
                  of incorporation of the registrant, as currently in
                  effect3.1
                  (ii) (3)
              
              Bylaws
                  of the registrant, as currently in effect31.1
              
              Certification
                  of Chief Executive Officer31.2
              
              Certification
                  of Chief Financial Officer32.1
              
              Section
                  1350 Certifications of Chief Executive Officer and Chief Financial
                  Officer




(1)
              Incorporated
                  by reference to Registrant’s Form 8-K filed with the SEC on August 22,
                  2005.(2)
              Incorporated
                  by reference to Registrant’s Report on Form 10-KSB for the year ended
                  March 31, 2001, and Form 8-K filed with the SEC on August 24,
                  2005.(3)
              Incorporated
                  by reference to Registrant’s Report on Form 10-KSB for the year ended
                  March 31, 2001.
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              of Contents