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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from
 

to
 Commission
File Number: 033-07075-LA
 THE FASHION HOUSE HOLDINGS, INC.
  Colorado
    
    33-1079781(State or Other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)6310 San Vicente Blvd., #275,
    
    90048-5499Los Angeles, California
    
    (Zip Code)(Address of principal executive offices)
 
 
 þ o
 
 o þ
   o þ




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PageItem 1. Financial StatementsCondensed Consolidate Balance Sheet as of March 31, 2006(unaudited)
    
    3Condensed Consolidated Statements of Operations for the three
month periods ended March 31, 2006 and March 31, 2005 (Unaudited)
    
    4Condensed Consolidated Statements of Cash flows for the three
month periods ended March 31, 2006 and March 31, 2005 (Unaudited)
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis or Plan of Operation
    
    20Item 3. Controls and Procedures
    
    34Part II Other Information
    
    34Item 1. Legal Proceedings
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    34Item 3. Defaults Upon Senior Securities
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    35Item 5. Other Information
    
    35Item 6. Exhibits
    
    35SIGNATURES
    
    36Exhibit 31.1Exhibit 31.2Exhibit 32.1
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THE FASHION HOUSE, INC.
 
 BALANCE SHEET

MARCH 31, 2006

(UNAUDITED)
 ASSETSCurrent assets:Cash
    
    $
    643,651Accounts receivable, net of allowance of $15,353
    
    
    399,997Prepaid expenses
    
    
    165,065Total current assets
    
    
    1,208,713Property and equipment, net
    
    
    563,186Deposits
    
    
    69,806$
    1,841,705LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable and accrued expenses
    
    $
    413,056Accrued payroll and related
    
    
    292,403Due to factor
    
    
    72,794Accrued interest
    
    
    137,860Note payable, net of discount of $6,533
    
    
    118,467Total current liabilities
    
    
    1,034,580Long-term liabilities:Notes payable to stockholder
    
    
    981,000Warrant liabilities
    
    
    3,755,000Total liabilities
    
    
    5,770,580Commitments
and contingenciesStockholders deficitCommon stock, no par value; 100,000,000 shares authorized;23,644,563 shares issued and outstanding
    
    
    9,135,756Accumulated deficit
    
    
    (13,064,631
    )Total stockholders deficit
    
    
    (3,928,875
    )Total liabilities and stockholders deficit
    
    $
    1,841,705
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THE FASHION HOUSE, INC.
 
 STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(UNAUDITED)
 March 31, 2006
    
    
    March 31, 2005Net sales
    
    $
    1,000,859
    
    
    $
    667,072Cost of sales
    
    
    774,700
    
    
    
    642,884Gross profit
    
    
    226,159
    
    
    
    24,188Operating expenses:Selling, general and administrative
    
    
    930,216
    
    
    
    335,557Payroll and related
    
    
    529,346
    
    
    
    181,359Royalties
    
    
    193,088
    
    
    
    173,438Total operating expenses
    
    
    1,652,650
    
    
    
    690,354Loss from operations
    
    
    (1,426,491
    )
    
    
    (666,166
    )Other expense:Interest expense
    
    
    (2,020,886
    )
    
    
    (26,122
    )Change in fair value of warrant liabilities
    
    
    (1,344,000
    )
    
    
    Total other expense
    
    
    (3,364,886
    )
    
    
    (26,122
    )loss before income taxes
    
    
    (4,791,377
    )
    
    
    (692,288
    )Income taxes
    
    
    800
    
    
    
    Net loss
    
    $
    (4,792,177
    )
    
    $
    (692,288
    )Basic and diluted net loss per share
    
    $
    (0.23
    )
    
    $
    (0.05
    )Weighted average shares outstanding  basic and diluted
    
    
    20,551,620
    
    
    
    14,114,200
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THE FASHION HOUSE, INC.
 
 STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2006 AND 2004

(UNAUDITED)
 March 31, 2006
    
    March 31, 2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (4,792,177
    )
    
    $
    (692,288
    )Adjustments to reconcile net loss to net
cash used in operating activities:Depreciation and amortization
    
    
    75,561
    
    
    
    11,201Amortization of estimated fair value of beneficial conversion
feature
    
    
    22,417
    
    
    
    Estimated fair value of stock issued for services
    
    
    12,250
    
    
    
    Amortization of estimated fair value of warrants
    
    
    466,383
    
    
    
    Estimated fair value of warrants issued as penalties
    
    
    1,014,000
    
    
    
    Estimated fair value of warrants issued for maturity extensions
    
    
    493,000Change in
fair value of warrant liabilities
    
    
    1,344,000
    
    
    
    Changes in
operating assets and liabilities:Accounts receivable
    
    
    68,020
    
    
    
    16,325Prepaid royalties and expenses
    
    
    28,253
    
    
    
    (114,388
    )Deposits
    
    
    4,067
    
    
    
    7,500Accounts payable and accrued expenses
    
    
    (137,310
    )
    
    
    282,255Accrued interest
    
    
    (34,219
    )
    
    
    18,729Net cash used in operating activities
    
    
    (1,435,755
    )
    
    
    (470,666
    )CASH FLOWS FROM INVESTMENT ACTIVITIES:Purchases of property and equipment
    
    
    (288,397
    )
    
    
    (8,185
    )Net cash used in investing activities
    
    
    (288,397
    )
    
    
    (8,185
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from notes payable to stockholders
    
    
    
    
    
    
    218,284Repayments of notes payable to stockholders
    
    
    (25,000
    )
    
    
    Advances from factor
    
    
    793,348
    
    
    
    386,227Payments to factor
    
    
    (1,042,042
    )
    
    
    (296,524
    )Proceeds from notes payable
    
    
    925,000
    
    
    
    Repayments of notes payable
    
    
    (925,000
    )
    
    
    Repayments of convertible notes payable
    
    
    (550,000
    )
    
    
    Proceeds from the issuance of common stock, net of issuance costs of $505,165
    
    
    3,114,817
    
    
    
    Net cash provided by financing activities
    
    
    2,291,123
    
    
    
    307,987Net increase (decrease) in cash
    
    
    566,971
    
    
    
    (170,864
    )Cash, beginning of the period
    
    
    76,680
    
    
    
    171,849Cash, end of the period
    
    $
    643,651
    
    
    $
    985SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    53,839
    
    
    $
    Cash paid during the period for income taxes
    
    $
    800
    
    
    $
    SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:Estimated fair value of warrants issued in connection with certain notes
payable
    
    $
    761,000
    
    
    $
    Estimated fair value of common stock issued for prepaid services
    
    $
    36,750
    
    
    $
    
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Interim Unaudited Condensed Financial Statements
  Organization and Nature of Operations
    Basis of Presentation
  6




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
 Principles of Consolidation
  Use of Estimates
  Going Concern
     7




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
 Risks and Uncertainties
 Credit Risk
     Merchandise Risk
   Inventories
  Property and Equipment
  8




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
 Long-Lived Assets
 Accounting for the
Impairment or Disposal of Long-Lived Assets,
 Fair Value of Financial Instruments
  Revenue Recognition
 Revenue Recognition
 Reporting Revenue Gross as a Principal Versus Net as an Agent,
  9




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
     Advertising
  Income Taxes
 Accounting for Income Taxes
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
 Loss Per Share
 Earnings Per Share,
  Three Months Ended March 31,2006
    
    
    
    
    
    
    
    
    
    2005Loss
    
    Shares
    
    Per-Share
    
    Loss
    
    Shares
    
    Per-Share(Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic EPSLoss available
to common
stockholders
    
    $
    (4,792,177
    )
    
    
    20,551,620
    
    
    $
    (0.23
    )
    
    $
    (692,288
    )
    
    
    14,114,200
    
    
    $
    (0.05
    )Effect of Dilutive
SecuritiesNone
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted EPSLoss available
to common
stockholders
    
    $
    (4,792,177
    )
    
    
    20,551,620
    
    
    $
    (0.23
    )
    
    $
    (692,288
    )
    
    
    14,114,200
    
    
    $
    (0.05
    )
 Stock-Based Compensation
  Share Based Payments
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
  Issuance of Stock for Non-cash Consideration
  Accounting for
Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees.
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued
 Derivative
Financial Instruments
 Accounting for
Derivative Instruments and Hedging Activities Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock,
   Beneficial Conversion Feature
 Accounting For Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratio Application of EITF Issue No. 98-5 To Certain Convertible Instruments,
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2  ACCOUNTS RECEIVABLE FACTORING
      Receivables assigned to factor
    
    $
    403,163Advances from factor
    
    
    (72,794
    )Amounts due from factor
    
    
    330,369Unfactored accounts receivable
    
    
    12,187Allowance for returns
    
    
    (15,353
    )$
    327,203
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3
 NOTE PAYABLE TO STOCKHOLDER
  NOTE 4
 COMMITMENTS AND CONTINGENCIES
 Licensing Agreements
     Years ending December 31,2006 (9 Months)
    
    $
    585,0002007
    
    
    1,067,0002008
    
    
    1,386,0002009
    
    
    1,792,0002010
    
    
    1,498,000Thereafter
    
    
    1,649,000$
    7,977,000
 Indemnities and Guarantees
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4
 COMMITMENTS AND CONTINGENCIES, continued
 Litigation
  Employment Agreements
  NOTE 5  NOTES PAYABLE
  16




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 5  NOTES PAYABLE, continued
    17




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 5  NOTES PAYABLE, continued
  NOTE 6  EQUITY TRANSACTIONS
 Common Stock
    Warrants
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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 6  EQUITY TRANSACTIONS, continued
     NOTE 7  SUBSEQUENT EVENTS
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Item 2. Managements Discussion and Analysis or Plan of Operation
  
    
    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.
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Overview
    Results of Operations for the Three Months Ended March 31, 2006 and March 31, 2005.
    21




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Accounting for
Derivative Instruments and Hedging Activities, Derivative Financial Indexed to, and Potentially Settled in, a Companys Own
Stock,
  Liquidity and Capital Resources
    Financing Activities
  22




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Licenses
  23




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Years ending December 31,2006 (9 months remaining)
    
    $
    585,0002007
    
    
    1,067,0002008
    
    
    1,386,0002009
    
    
    1,792,0002010
    
    
    1,498,000Thereafter
    
    
    1,649,000$
    7,977,000
 Future Liquidity
   CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
 Revenue
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Recognition
 Reporting Revenue
Gross as a Principal Versus Net as an Agent,
     Stock Based Compensation
  Share Based Payments
  25




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Derivative Financial Instruments
 Accounting for Derivative Instruments and Hedging
Activities Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock,
  Beneficial Conversion Feature
 Accounting For Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratio Application of EITF Issue No. 98-5 To Certain Convertible Instruments,
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Going Concern
  Risk Factors
  We require additional financing to sustain our operations and without it we may not be able to
continue operations.
  We have limited operating history on which potential investors may evaluate our operations and
prospects for profitable operations
 We plan to grow rapidly, which will place strains on our management team and other company
resources to both implement more sophisticated managerial, operational and financial systems,
procedures and controls and to train and manage the personnel necessary to implement those
functions
 Our strategy envisions growing our business by growing sales of our existing brands, acquiring
licenses for new brands, acquiring footwear and apparel companies that
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complement our existing brands and expanding our internet and catalog sales.
 We are also dependent for our success on our ability to attract and retain technical personnel,
sales and marketing personnel and other skilled management. Our success depends to a significant
degree upon our ability to attract, retain and motivate highly skilled and qualified personnel
 Our future success depends on our ability to respond to changing consumer demands, identify and
interpret fashion trends and successfully market new products.
 AS A COMPANY IN THE EARLY STAGE OF DEVELOPMENT WITH AN UNPROVEN BUSINESS STRATEGY, OUR LIMITED
HISTORY OF OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND PROSPECTS DIFFICULT.
 WE HAVE
AN ACCUMULATED DEFICIT OF $13,064,631 AS OF MARCH 31, 2006 AND HAVE RECEIVED AN OPINION
FROM OUR AUDITORS REGARDING OUR ABILITY TO CONTINUE AS A GOING CONCERN, AND WE MAY NEVER ACHIEVE
PROFITABILITY
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WE MAY REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT IT WE MAY NOT BE ABLE TO
CONTINUE OPERATIONS.
  OUR CONTINUED OPERATIONS DEPEND ON CURRENT FASHION TRENDS. IF OUR PRODUCTS AND DESIGN DO NOT
CONTINUE TO BE FASHIONABLE, OUR BUSINESS COULD BE ADVERSELY AFFECTED.
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OUR BUSINESS COULD SUFFER IF WE NEED TO ADD OR REPLACE MANUFACTURERS.
  OUR BUSINESS COULD SUFFER FROM THE FINANCIAL INSTABILITY OF OUR CUSTOMERS.
  IF OUR COMPETITORS MISAPPROPRIATE OUR PROPRIETARY KNOW-HOW AND TRADE SECRETS, IT COULD HAVE A
MATERIAL ADVERSE AFFECT ON OUR BUSINESS.
  WE DEPEND ON KEY PERSONNEL IN A COMPETITIVE MARKET FOR SKILLED EMPLOYEES, AND FAILURE TO RETAIN AND
ATTRACT QUALIFIED PERSONNEL COULD SUBSTANTIALLY HARM OUR BUSINESS.
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Our business and the success of our products could be harmed if we are unable to maintain their
brand image.
  OUR BUSINESS COULD BE HARMED IF WE FAIL TO MAINTAIN PROPER INVENTORY LEVELS.
  COMPETITION IN THE FOOTWEAR INDUSTRY IS FIERCE.
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Our operating results could be negatively impacted by our sales concentration in any one
brand.
  We may lose our exclusive licenses if we do not have sufficient funds to pay the minimum
required royalties.
  Our business model is dependent on our ability to secure and maintain licenses from major,
well-known designers.
  Our international manufacturing operations are subject to the risks of doing business abroad, which
could affect our ability to manufacture our products in international markets, obtain products from
foreign suppliers or control the costs of our products.
  -
    
    political and social unrest, including our military presence in Iraq;-
    
    changing economic conditions;-
    
    currency exchange rate fluctuations;-
    
    international political tension and terrorism;-
    
    work stoppages;-
    
    electrical shortages;-
    
    transportation delays;-
    
    loss or damage to products in transit;-
    
    expropriation;
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-
    
    nationalization;-
    
    the imposition of tariffs and trade duties both international and domestically;-
    
    import and export controls and other non-tariff barriers;-
    
    exposure to different legal standards (particularly with respect to intellectual property);-
    
    compliance with foreign laws; and-
    
    changes in domestic and foreign governmental policies.
   Our business could be harmed if our contract manufacturers or suppliers violate labor or other
laws.
  Foreign currency fluctuations could adversely affect our profitability.
  We experience seasonal and quarterly fluctuations in demand for our products
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Item 3. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
     34




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Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  35




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SIGNATURES
  The Fashion House Holdings, Inc.Dated: May 15, 2006
    
    /s/ John HannaBy: John HannaChief Executive Officer
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EXHIBIT INDEX2.1(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.
 37