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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
   o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
  Commission File Number: 033-07075-LA
 THE FASHION HOUSE HOLDINGS, INC.
  Colorado
    
    33-1079781(State or Other jurisdiction of
incorporation or organization)
    
    (IRS Employer
Identification No.)6310 San Vicente Blvd., #330,
Los Angeles, California
(Address of principal executive offices)
    
    90048-5499
(Zip Code)
 (323) 939-3031
 
 o x
  o x
   o x




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PageItem 1.
    
    Financial Statements
    
    
    2Condensed Consolidate Balance Sheet as of September 30, 2005(unaudited)
    
    
    2Condensed Consolidated Statements of Operations for the nine month periods ended September, 2005 and September 30, 2004 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the three month periods ended September, 2005 and September 30, 2004 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash flows for the nine month periods ended September 30, 2005 and September 30, 2004 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    16Item 3.
    
    Controls and Procedures
    
    
    22Part II
    
    Other Information
    
    
    23Item 1.
    
    Legal Proceedings
    
    
    23Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.
    
    Defaults Upon Senior Securities
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    23SIGNATURES
    
    
    24




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 THE FASHION HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2005
(UNAUDITED)
 ASSETSCurrent assets:Cash
    
    $
    536,884Accounts receivable
    
    
    328,583Prepaid expenses
    
    
    120,152Total current assets
    
    
    985,619Property and equipment, net
    
    
    306,284Deposits
    
    
    47,373$
    1,339,276LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable and accrued expenses
    
    $
    480,118Accrued payroll and related
    
    
    295,245Due to factor
    
    
    210,475Accrued interest
    
    
    228,382Convertible notes payable, net of debt discount of $321,000
    
    
    229,000Note payable to stockholder
    
    
    769,000Warrant liability
    
    
    712,000Total current liabilities
    
    
    2,924,220Commitments
and ContingenciesStockholders deficit:Common stock, no par value; 100,000,000 shares authorized;
18,733,737 shares issued and outstanding
    
    
    4,146,894Accumulated deficit
    
    
    (5,731,838
    )Total stockholders deficit
    
    
    (1,584,944
    )$
    1,339,276
  2




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THE FASHION HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
 2005
    
    
    2004Net sales
    
    $
    1,202,192
    
    
    $
    4,362,098Cost of sales
    
    
    1,096,169
    
    
    
    2,799,496Gross profit
    
    
    106,023
    
    
    
    1,562,602Operating expenses:Selling, general and administrative
    
    
    2,168,444
    
    
    
    1,234,684Payroll and related
    
    
    756,034
    
    
    
    365,875Royalties
    
    
    421,563
    
    
    
    312,116Total
operating expenses
    
    
    3,346,041
    
    
    
    1,912,675Loss from operations
    
    
    (3,240,018
    )
    
    
    (350,073
    )Other income (expense):Gain on sale of license
    
    
    
    
    
    
    1,350,000Interest expense
    
    
    (1,122,410
    )
    
    
    (117,841
    )Total other
income (expense), net
    
    
    (1,122,410
    )
    
    
    1,232,159Net income (loss)
    
    $
    (4,362,428
    )
    
    $
    882,086Basic and diluted net income (loss) per share
    
    $
    (0.29
    )
    
    $
    0.06Weighted average shares oustanding:Basic and diluted
    
    
    14,826,416
    
    
    
    13,041,862
  3




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THE FASHION HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
 2005
    
    
    2004Net sales
    
    $
    455,867
    
    
    $
    1,407,856Cost of sales
    
    
    294,623
    
    
    
    792,119Gross profit
    
    
    161,244
    
    
    
    615,737Operating expenses:Selling, general and administrative
    
    
    707,951
    
    
    
    476,662Payroll and related
    
    
    375,486
    
    
    
    135,306Royalties
    
    
    74,688
    
    
    
    108,227Total
operating expenses
    
    
    1,158,125
    
    
    
    720,195Loss from operations
    
    
    (996,881
    )
    
    
    (104,458
    )Other income (expense):Gain on sale of license
    
    
    
    
    
    
    1,350,000Interest expense
    
    
    (504,864
    )
    
    
    (69,470
    )Total other
income (expense), net
    
    
    (504,864
    )
    
    
    1,280,530Net income (loss)
    
    $
    (1,501,745
    )
    
    $
    1,176,072Basic and diluted net income (loss) per share
    
    $
    (0.09
    )
    
    $
    0.09Weighted average shares oustanding:Basic and diluted
    
    
    16,207,951
    
    
    
    13,041,862
  4




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THE FASHION HOUSE HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
 2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (4,362,428
    )
    
    $
    882,086Adjustments to reconcile net income (loss)
to net cash used in operating activities:Depreciation and amortization
    
    
    33,604
    
    
    
    24,670Gain on sale of license
    
    
    
    
    
    
    (1,350,000
    )Amortization of estimated fair value of beneficial conversion
features
    
    
    631,000
    
    
    
    Amortization of estimated fair value of warrants
    
    
    358,000
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (112,424
    )
    
    
    (2,674
    )Prepaid expenses
    
    
    (96,988
    )
    
    
    (104,359
    )Deposits
    
    
    (34,021
    )
    
    
    (4,311
    )Accounts payable and accrued expenses
    
    
    271,185
    
    
    
    157,276Settlement payable
    
    
    (135,000
    )
    
    
    135,000Accrued payroll and related
    
    
    12,284
    
    
    
    Accrued interest
    
    
    158,640
    
    
    
    117,637Net cash used in operating activities
    
    
    (3,276,148
    )
    
    
    (144,675
    )CASH FLOWS FROM INVESTMENT ACTIVITIES:Purchases of property and equipment
    
    
    (191,739
    )
    
    
    (125,768
    )Proceeds from sales
of license
    
    
    
    
    
    
    1,350,000Net cash provided by (used in) investing activities
    
    
    (191,739
    )
    
    
    1,224,232CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from note payable to stockholder
    
    
    370,000
    
    
    
    141,634Repayments of notes payable to stockholder
    
    
    (161,000
    )
    
    
    Proceeds from convertible notes payable
    
    
    1,750,000
    
    
    
    Repayments of convertible notes payable
    
    
    (625,000
    )
    
    
    Due to
factor, net
    
    
    96,382
    
    
    
    Proceeds from the issuance of common stock,
net of issuance costs of $486,210
    
    
    2,402,540
    
    
    
    Net cash provided by financing activities
    
    
    3,832,922
    
    
    
    141,634Net increase in cash
    
    
    365,035
    
    
    
    1,221,191Cash, beginning of the period
    
    
    171,849
    
    
    
    10,639Cash, ending of the period
    
    $
    536,884
    
    
    $
    1,231,830SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    38,324
    
    
    $
    50,100Cash paid
during the period for income taxes
    
    $
    
    
    
    $
    
  5




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THE FASHION HOUSE HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
 2005
    
    
    2004Supplemental Schedule of Noncash Investing and Financing Activities:Issuance of common stock on conversion of debt and accrued interest
    
    $
    579,554
    
    
    $
    Esitmated fair value of beneficial conversion features of certain convertible
notes payable
    
    $
    788,000
    
    
    $
    Estimated fair value of warrants issued in connection with certain convertible
notes payable
    
    $
    522,000
    
    
    $
    Estimated fair value of warrants issued in connection with private placement
    
    $
    190,000
    
    
    $
    
  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
  Organization and Nature of Operations
    Basis of Presentation
  Principles of Consolidation
  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
 Use of Estimates
  Going Concern
  Risks and Uncertainties
 Credit Risk
    Merchandise Risk
   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
 Property and Equipment
  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
  Earnings Per Share
 Earnings Per Share
 10




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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
 Stock-Based Compensation
  Accounting For Equity Instruments That Are Issued To
Other Than Employees For Acquiring, Or In Conjunction With Selling Goods Or Services
 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,
 11




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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
   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,
 Recent Accounting Pronouncements
 Exchanges of Nonmonetary Assets, an amendment of APB
29, Accounting for Nonmonetary Transactions
 Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 NOTE 2  ACCOUNTS RECEIVABLE FACTORING
  12




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2  ACCOUNTS RECEIVABLE FACTORING, continued
    NOTE 3  NOTEPAYABLE TO STOCKHOLDER
  NOTE 4  COMMITMENTS AND CONTINGENCIES
 Licensing Agreements
    13




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  COMMITMENTS AND CONTINGENCIES, continued
  Years ending December 31,2005
    
    $
    429,0002006
    
    
    593,0002007
    
    
    832,0002008
    
    
    1,007,0002009
    
    
    1,384,000Thereafter
    
    
    510,000$
    4,825,000
 Indemnities and Guarantees
  Litigation
  NOTE 5  CONVERTIBLE NOTES PAYABLE
   14




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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 5  CONVERTIBLE NOTES PAYABLE, continued
  NOTE 6  EQUITY TRANSACTIONS
 Common Stock
   Warrants
   15




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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.
  Overview
     16




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Results of Operations for the Three Months Ended September 30, 2005 and September 30, 2004.
       17




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Results of Operations for the Nine Months Ended September 30, 2005 and September 30, 2004.
       Liquidity and Capital Resources
      18




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CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
 Revenue Recognition
 Reporting Revenue
Gross as a Principal Versus Net as an Agent,
   19




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Stock-Based Compensation
  Accounting For Equity Instruments That Are Issued To
Other Than Employees For Acquiring, Or In Conjunction With Selling Goods Or Services
 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
  20




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Accounting For Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratio Application of EITF Issue No. 98-5 To Certain Convertible Instruments,
 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 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
 21




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Our future success depends on our ability to respond to changing consumer demands, identify and
interpret fashion trends and successfully market new products.
 
 Item 3. Controls and Procedures
   22




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
         
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  23




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SIGNATURES
  The Fashion House Holdings, Inc.Dated: December 30, 2005
    /s/ John HannaBy:
    John HannaChief Executive Officer 24




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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. 25