U.
S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-K


(Mark
One)





[X]
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
fiscal year ended March 31,
2009





[  ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
transition period from ___________ to _____________





Commission
File Number: 000-52413





ACTION
FASHIONS, LTD.


(Name of
small business issuer as specified in its charter)





Colorado
            20-4092640(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer
              Identification
      No.)P.O.
      Box 235472
              Encinitas,
      CA 92024
              ________________________________________________________________________
              (Address
      of principal executive offices, including zip
  code)





Registrant’s
telephone number, including area
code:                          (858) 229-8116


Securities
registered pursuant to Section 12(b) of the
Act:                 None


Securities
registered pursuant to Section 12(g) of the
Act:                 common stock, no par
value


___________________





Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act Yes [  ] No[X]





Indicate
by check mark whether the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes [ ] No [X]





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.  Yes [X]  No
[  ]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment of this Form 10-K.  Yes [ ]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange
Act.





Large
      accelerated filer  [   ]
              
              Accelerated
      filer    [    ]Non-accelerated
      filer    [   ] (Do not check if smaller
      reporting company)
              
              Smaller
      reporting company    [X]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes
[  ] No [X]





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates on September 30, 2008, based upon the $0.00 per shares closing
price for our common stock on the OTC Bulletin Board was $0.00.





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court. Yes
[  ]  No [  ]





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:  As of  March 31,
2009,  There were 136,505,000 shares of our common stock were issued
and outstanding.





DOCUMENTS
INCORPORATE BY REFERENCE





List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.  The listed documents should be
clearly described for identification purposes (e.g., annual report to securities
holders for fiscal year ended December 24, 1980).





PART
I





Item
1.   Business





Cautionary
Statement Concerning Forward-Looking Statements





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





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





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





The
Company





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





We were
originally incorporated under the laws of the State of Colorado on June 22,
1990, as U.S.A. Connection, Inc.  On June 1, 2005, we entered into an
arms length asset purchase agreement with G.K. Gymnastics, Inc. to purchase the
retail inventory of G.K. Gymnastics, Inc. for a total purchase price of $19,000
which was wholesale value of the goods purchased.  The $19,000
purchase price was paid for with a five year, zero interest, $19,000 promissory
note.  October 28, 2005, we filed Articles of Amendment with the
Colorado Secretary of State changing our name to Action Fashions, Ltd. to better
reflect our business operations.  Our fiscal year end is March 31st.





The
Business





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





Merchandise/Product





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





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





§
            Capezio (Ballet Makers, Inc.)
      - Ballet Makers Incorporated is one of the leading manufactures of
      clothing for the performer in dance, theater and recreation. For over 100
      years, they have been committed to providing exceptional service to
      customers with innovative, quality products and services, while
      continuously advancing market research and technologies
      (Source:  www.Capeziodance.com).





§
            Elite Sportswear GK-
      Elite Sportswear GK is a well recognized manufacturer of gymnastics
      apparel around the world. Elite Sportswear is recognized around the globe
      for superior quality, styling, and fit, and friendly, knowledgeable
      customer service. With the release of ten catalogs a year and Custom
      Design Services, Elite Sportswear offers more Workout and Team apparel
      choices than anyone else. Since 2000, Elite Sportswear in affiliation with
      Addidas America has been manufacturing the United States National, World,
      and Olympic Team Apparel
      (Source:  www.gk-elitesportswear.com).





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





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





§
            Foxy’s Fitness Fashions
      – Foxy's Fitness Fashions is a manufacturer and retailer of gymnastic
      apparel which has been in the business for almost two decades. The company
      specializes in design, specialty fabrics, quality and
      fit.   The company’s leotards are made in the USA and are
      sized true to actual clothing sizes which makes for a better
      fit.  The company offers six different sizes for children and
      five different sizes for adults.  Foxy’s Fitness Fashions offers
      a consignment program to us and other retailers (Source:  www.foxysfitnessfashions.com).





We purchase our entire inventory from
the above suppliers and manufacturers. We do not own or operate any
manufacturing facilities.  We believe that we have established
sufficient relationships with these suppliers and manufactures to meet our
ongoing and future inventory needs.  We do not have long-term
contracts with the suppliers and manufactures and we transact business
principally on account on an order-by-order basis.





Business
Strategy





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





Our retail location is situated near
the main entrance of the G. K. Gymnastics, Inc. facility and has its own
separate entrance.  By embedding the retail facility internally at the
school/studio we are able to market to a captive audience of dance and
gymnastics students with minimal outside competition. We have found that the
relationship between our retail store and the school/studio has both increased
store sales and satisfied a consumer need for the studio/school and its
members.  In addition, we believe that our relationship with the
school/studio gives us an advantage over our competitors because most sales
outlets for dance and gymnastics apparel exist in larger sporting goods stores,
department stores and a limited number of specialty athletic clothing stores. By
focusing our sales inside the school/studio we can target our market when the
customer enters and exits the school/facility and we believe we will be able to
compete more efficiently with larger retail competitors. By placing our store
front locations in areas of high target customer traffic with highly visible
product placement and creative store displays, we hope to attract an increased
customer sales base.  Our staff are typically experienced dance and
gymnastics instructors that are usually familiar with the customer and
understand the customer’s needs.





We conduct limited marketing and
advertising utilizing the local Yellow Pages, various mailings and
fliers.  We primarily rely upon our individual store displays,
embedded location and word-of-mouth to attract customers. Our product lines are
supported by visual merchandising, which consists of window displays, table
layouts and various promotions. This type of marketing is an important component
of our marketing and promotion strategies since our embedded location provides
significant target customer foot traffic.





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





In addition to our existing location in
Fort Collins, Colorado, within the next 12 months, we plan to expand our
business into 2 to 4 new locations in existing gymnastics and dance schools and
studios in the state of Colorado.


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





Competitive
Business Conditions





The retail gymnastics and dance apparel
industry is competitive and highly fragmented with no standout industry leaders.
This type of apparel is usually sold though sporting goods stores, department
stores and a limited number of specialty athletic clothing stores. We believe
our target customers choose to purchase apparel based on the following factors:
style and fashion, fit and comfort, customer service, shopping convenience and
environment and value and we believe that we have advantages over our
competitors in meeting these needs. Specifically, by locating our store within
dance and gymnastics studios, we are able to make the sale immediately before or
after the customer participates in the activity in which the apparel is
used.





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





Distribution
Methods of the Products





We currently market our products to a
limited captive market based on our current location. Products are sold on site
with little distribution and shipping costs. We project revenue increase from
future expansion by adding additional retail outlets in various target market
areas throughout the country.  There is no assurance of the revenue
increase from future expansion or that expansion will occur at all.





General
Market





The gymnastics and dance markets
continue to grow each year in the United States. According to the website (www.usa-gymnastics.org)
of USA Gymnastics, the sole national governing body for the sport of artistic
and rhythmic gymnastics in the United States, USA Gymnastics currently maintains
a grass roots membership base of approximately 3,000,000 recreational gymnasts,
85,000 competitive gymnasts, 15,000 professional members and 4,000 gymnastic
clubs in throughout the United States.  General public interest for
gymnastics has continued to maintain record highs over the last few years and
Gymnastics continues to be the most popularly viewed Olympic sport. Over 40
million households tuned into USA gymnastics telecasts on NBC Sports during the
2000 Olympic season. (Source:  www.usa-gymnastics.org).
Dance studios and schools as well continue to maintain a significant presence.
The US Census Bureau’s 2002 Economic Census reported approximately 6,504 dance
schools in the United States.





Our
founder and majority shareholder, Phillip E. Koehnke holds 98% of the
outstanding shares and exercises control of the company.





Our founder and majority shareholder,
Phillip E. Koehnke, holds 98% of the outstanding shares and exercises control of
the company.  Accordingly, our other shareholders will have little or
no control of the company.





Dependence
on One or a Few Major Customers





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





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





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





Effect
of existing or probable governmental regulations on the business





The effects of existing or probable
government regulations on our business are minimal.





Research
and Development





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





Costs
and effects of compliance with environmental laws





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





Number
of total employees and number of full time employees.





We have two part-time staff
workers.  We do not have any full time employees and do not expect to
hire any new employees within the next 12 months. Ms. Susie Johnson is our sole
officer and director.





Item
1A.  Risk Factors





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





We
have a limited operating history and may not succeed.





We have a
limited operating history and may not succeed.  Our plans and
businesses are “proposed” and “intended” but we may not be able to successfully
implement them.  Our primary business purpose is the expansion of our
retail sports apparel sales business. We expect that unanticipated expenses,
problems, and technical difficulties will occur and that they will result in
material delays in the operation of our business.  We may not obtain
sufficient capital or achieve a significant level of operations and, even if we
do, we may not be able to conduct such operations on a profitable
basis.





Our
majority shareholder, Phillip E. Koehnke, holds 98% of the outstanding shares
and exercises control of the company.





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





We
may have insufficient funds to implement our expansion strategy.





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





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





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





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





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





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





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





§
            general
      business conditions;


§
            interest
      rates;


§
            inflation;


§
            consumer
      debt levels;


§
            the
      availability of consumer credit;


§
            the
      number of new and second home
purchases;


§
            taxation;


§
            energy
      prices;


§
            unemployment
      trends; and


§
            other
      matters that influence consumer confidence and
  spending.





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





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





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





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





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





In addition, compliance with reporting
and other requirements applicable to public companies such as Sarbanes Oxley
will create additional costs for us, will require the time and attention of
management and will require thehiring of additional
personnel and outside consultants. We cannot predict or estimate the amount of
the additional costs we may incur, the timing of such costs or the degree of
impact on our management's attention to these matters will have on our
business.





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





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





We depend on a number of suppliers and any failure by any
of them to supply us with products may impair our inventory and adversely affect
our ability to meet customer demands, which could result in a decrease in net
sales.





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





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





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





Any
projections used in this registration statement may not be accurate and our
actual performance may not match or approximate the projections.





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





Our
estimates may prove to be inaccurate and future net cash flows are
uncertain.  Any significant variance from these assumptions could
greatly affect our estimates.





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





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





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





§
            cash
      provided by operating activities;


§
            available
      cash and cash investments; and


§
            capital
      raised through debt and equity
offerings.





The uncertainties and risks associated
with future performance and revenues will ultimately determine our liquidity and
our ability to meet anticipated capital requirements.  If declining
prices cause our anticipated revenues to decrease, we may be limited in our
ability to replace our inventory.  As a result, our production and
revenues would decrease over time and may not be sufficient to satisfy our
projected capital expenditures.  We may not be able to obtain
additional financing in such a circumstance.





Our
stock price could be extremely volatile and, as a result, you may not be able to
resell your shares at or above the price you paid for them.





Only recently has our stock been
trading in the public market.  An active public market for our common
stock may not develop or be sustained.  Further, the market price of
our common stock may decline below the price you paid for your
shares.





Among the factors that could affect our
stock price are:





§
            industry
      trends and the business success of our
vendors;


§
            actual
      or anticipated fluctuations in our quarterly financial and operating
      results, including our comparable store
sales;


§
            our
      failure to meet the expectations of the investment community and changes
      in investment community recommendations or estimates of our future
      operating results;


§
            strategic
      moves by our competitors, such as product announcements or
      acquisitions;


§
            regulatory
      developments;


§
            litigation;


§
            general
      market conditions;


§
            other
      domestic and international macroeconomic factors unrelated to our
      performance; and


§
            additions
      or departures of key personnel.





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





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





Issuing preferred stock with rights senior to those of our
common stock could adversely affect holders of common stock.





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





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





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





Item
1B.  Unresolved Staff Comments.





None.





Item
2.  Properties





Real Property





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





Item
3.  Legal Proceedings





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





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





None.








PART
II





Item
5.  Market for Registrant’s Common Equity and Related Stockholder
Matters and Issuer Purchases of Equity Securities.




Market
information





Our
common stock only recently became quoted on the Over The Counter Bulletin Board
(OTC.BB AFSN).  As of the date of this report we are unable to provide
any high and low bid information for our common stock for any quarter subject to
this report.  Currently, there are 47,500,000 shares of our common
stock issuable upon conversion of outstanding convertible securities held in the
name of an affiliate and 1,456,000 shares of our common stock which can be sold
by non-affiliates pursuant to Rule 144 of the Securities Act.





Holders





We have approximately 37 holders of
record of our common stock.





Dividends





We have
not declared any cash dividends on any class of our securities and we do not
have any restrictions that currently limit, or are likely to limit, our ability
to pay dividends now or in the future.





Securities
authorized for issuance under equity compensation plans





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





Item
6.  Selected Financial Data.





As a smaller reporting company, we are
not required to provide the information required by this item.





Item
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations





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





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





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





Critical
Accounting Policies





Our policy is to use the accrual method
of accounting to prepare and present financial statements, which conform to
generally accepted accounting principles. The company has elected a March 31,
year-end.





We consider all highly liquid
investments with maturities of three months or less when purchased, to be cash
equivalents.





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





Revenue is recognized at the time of
sale.





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




Results
of Operations





For the year ended March 31, 2009, we
had revenues of $22,065 compared to $20,367 for the year ended March 31,
2008.  We attribute this slight increase in sales due to increased
enrolment in the gymnastics facility and the recent 2008 summer Olympics which
sparked greater interest in gymnastics in young children.





For the year ended March 31, 2009, we
had total operating expenses of $43,039 and an operating loss of ($20,974)
compared to total operating expenses of $114,820 and an operating loss of
($94,453) for the year ended March 31, 2008.  The substantial decrease
in operating expenses for the year ended March 31, 2009,  is
attributable to the expiration of the employment agreement with Mr. Koehnke,
thus reducing our quarterly operating expenses by $30,000.  In
addition, we saw increased sales for the year.





Generally, our cost of goods, wholesale
prices and inventory have remained stable over the past 12 months.





As expected, our sales increase this
year primarily due to the 2008 summer Olympics in Beijing, China and the
increased enrolment in gymnastics students at the facility in which we are
located.  Historically, national interest in the summer Olympics has
significantly increased enrolment in gymnastics schools throughout the United
States and we experienced this trend this summer.  While summer
enrolment in the gymnastics school is generally down due to competing summer
activities available to children, this year, due to the summer Olympics,
enrolment in the gymnastics school remained stable which helped our
sales.  We anticipate that our sales will increase through 2009 and
then level off or even drop slightly to the pre-Olympic levels.





Liquidity
and Capital Resources





At March 31, 2009, we had cash of
$3,478 compared to $2,327 at March 31, 2008.





Future
Goals





Since our inception, our goal has been
to expand our business into new locations.  Our goal was to be a fully
reporting company with our shares of common stock trading in the public market
prior to the beginning of the 2008 summer Olympics.  With the
increased interest in gymnastics following the summer Olympics, we believed that
this would be a catalyst to begin our expansion plan.  However,
although we were successful in becoming a reporting company in a timely fashion,
we had continuing difficulties in filing our 211 application with FINRA and only
completed this process during the last month of our fiscal year.  As
of March 2009, our common stock will be  trading on the Over the
Counter Bulletin Board (OTC.BB AFSN)





Now that our common stock will be
trading in the public market, management is considering whether it remains a
valid business goal to continue with our original business plan and to seek
financing for our expansion goals whether it be through bank loans or a private
placement of our securities.   Management is concerned that the
“window of opportunity” may have passed in regard to expanding in conjunction
with the summer Olympics  and that the “window” will not occur for
another four years.  Alternatively, management is not opposed to
changing directions with the business if suitable ideas or business partners
present themselves.





Assuming management goes forward with
our original business plan and we are successful in obtaining financing, we plan
on expanding into the Loveland, Colorado location during the second half of our
fiscal year and opening additional locations in Colorado
thereafter.  The opening of additional locations is dependent upon
sufficient financing and the identification of suitable gymnastic/dance school
facilities.  We anticipate that each new location will require
approximately $25,000 - $40,000 to open depending upon the
location.





Off-balance
Sheet Arrangements





We maintain no significant off-balance
sheet arrangements





Foreign
Currency Transactions





None.





Item 7A.  Quantitative and Qualitative Disclosures
About Market Risk





We
currently do not utilize sensitive instruments subject market risk in our
operations.





Item
8.   Financial Statements and Supplementary Data.





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





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





None.





Item
9A.  Controls and Procedures.





In
accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934,as of the
end of the period covered by this Report on Form 10-K, our  management
evaluated, with the participation of our principal executive and financial
officer, the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule
15d-15(e) under the Exchange Act). Disclosure controls and procedures are
defined as those controls and other procedures of an issuer that are designed to
ensure that the information required to be disclosed by the issuer in the
reports it files or submits under the Act is recorded, processed, summarized and
reported, within the time periods specified in the Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Act is accumulated and
communicated to the issuer's management, including its principal executive
officer and principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. Based on their evaluation of these disclosure controls and
procedures, our chairman of the board and chief executive and financial officer
has concluded that the disclosure controls and procedures were effective as of
the date of such evaluation to ensure that material information relating to the
company, was made known to them by others within those entities, particularly
during the period in which this Annual Report on Form 10-K was being
prepared.





Item
9A(T). Controls and Procedures.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company's internal control over financial
reporting has been designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles generally accepted in the United States of America. The Company's
internal control over financial reporting includes policies and procedures that
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect transactions and dispositions of assets of the Company; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures are being made only in accordance with authorization of management
and directors of the Company; and provide reasonable assurance regarding
prevention or timely detection of  unauthorized acquisition, use or
disposition of the Company's assets that could have a material effect on the
Company's financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





Management
assessed the effectiveness of the Company's internal control over financial
reporting at March 31, 2009.  In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") in Internal Control--Integrated Framework. Based on
that assessment under those criteria, management has determined that, at March
31, 2009, the Company's internal control over financial reporting was
effective.





This
Annual Report on Form 10-K does not include an attestation report of the
Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management's report in this annual
report.




Inherent
Limitations of Internal Controls




Our
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. Our internal control over financial reporting
includes those policies and procedures that:




●
            
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;●
            
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and●
            
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of our assets that could
      have a material effect on the financial
  statements.




Our
management does not expect that our internal controls will prevent or detect all
errors and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a 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 internal controls
can provide absolute assurance that all control issues and instances of fraud,
if any, have been detected. Also, any evaluation of the effectiveness of
controls in future periods are subject to the risk that those internal controls
may become inadequate because of changes in business conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.







Item
9B.  Other Information.





None.





PART
III





Item
      10.
            Directors,
      Executive Officers and Corporate
Governance.





The
following table sets forth, as of the date of this registration statement, the
name, age and position of our sole director/executive officer.





NAME
            
            AGE
            
            POSITIONSusie
      L.G. Johnson
            
            42
            
            President,
      Chief Executive Officer, Chief Financial Officer, Secretary, and
      Director





The
background of our sole director/executive officer is as follows:





Susie
L.G. Johnson





Ms. Johnson is our President, Chief
Executive Officer and Secretary.  Ms. Johnson’s career has been
focused on management.  She served as a Production Control Analyst for
US Air in Reno and San Diego California for 9 years and thereafter managed a
cellular retail outlet in Kingsville, Texas.  She is a licensed
cosmetologist and has owned and operated a sole proprietor hair salon business
since 2001.





Information
about our Board and its Committees.





Audit Committee





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





Compensation Committee





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





Advisory Board





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





Section
16(a) Beneficial Ownership Reporting Compliance





Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires our directors,
executive officers, and stockholders holding more than 10% of our outstanding
common stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in beneficial ownership of our
common stock.  Executive officers, directors and greater-than-10%
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file.  To our knowledge, based solely
on review of the copies of such reports furnished to us for the period ended
March 31, 2009, the Section 16(a) reports required to be filed by our
executive officers, directors and greater-than-10% stockholders were filed on a
timely basis.





Code
of Ethics





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




Item
11. Executive Compensation





The
following table sets forth the compensation paid to Ms. Susie L.G. Johnson, who
is our sole executive officer, for services rendered, and to be
rendered.  No restricted stock awards, long-term incentive plan
payouts or other types of compensation, other than the compensation identified
in the chart below, were paid to Ms. Johnson during the fiscal years
presented.





Summary
      Compensation TableNon-Equity
            
            Nonqualified
            AllName
      and
            
            
            
            
            
            
            
            
            
            
            
            Incentive
            
            Deferred
            OtherPrincipal
            
            
            
            
            
            
            
            Stock
            
            Option
            
            Plan
            
            Compensation
            CompenPosition
            
            Year
            
            Salary
            
            Bonus
            
            Awards
            
            Awards
            
            Compensation
            
            Earnings
            -sation
            TotalSusie
      L.G. Johnson
            
            2009
            
            0
            
            0
            
            24,000(1)
            
            0
            
            0
            
            0
            0
            $24(2)President,
      Chief Executive Officer, Chief Financial Officer, Secretary, and
      Director
            
            2008
            
            0
            
            0
            
            6,000(1)
            
            0
            
            0
            
            0
            0
            $6(2)





(1)           Ms.
Johnson receives 2,000 restricted shares of our common stock for each month she
serves as an officer of the company.





(2)           Based
upon restricted shares of our common stock issued annually at $.001 per
share.





Employment
Agreements





We currently do not have an employment
agreement with Ms. Johnson, our sole officer and director.  Our board
of directors has authorized Ms. Johnson to be compensated for her services at a
rate of 2,000 restricted shares of our common stock for each month she serves as
an officer of the corporation.





Compensation
of Director





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





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




The
following table sets forth certain information regarding the beneficial
ownership of the 136,481,000 issued and outstanding shares of our common stock
as of March 31, 2009, by the following persons:





·
            each
      person who is known to be the beneficial owner of more than five percent
      (5%) of our issued and outstanding shares of common
  stock;




·
            each
      of our directors and executive officers;
and




·
            All
      of our Directors and Officers as a
group




Name
      And Address
            Number
      Of Shares Beneficially Owned
            Percentage
      OwnedPhillip
      E. Koehnke (1)
            135,025,000
            98%Susie
      L.G. Johnson (1)
            30,000
            *All
      Officers and Directors as Group
            30,000
            *Total
            135,055,000
            98%





*           Less
than 1%


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





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





Item
13. Certain Relationships and Related Transactions.





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





Transactions with
Promoters





None.





Item
      14.  Principal Accountant Fees and
  Services.





Appointment
of Auditors




Our Board
of Directors selected Cordovano and Honeck, LLP as our auditors for the year
ended March 31, 2009.





Audit
Fees





Cordovano and Honeck, LLP billed us
$10,274 in audit fees during the year ended March 31, 2009 and $10,523 in audit
fees during the year ended March 31, 2008.





Audit-Related
Fees




We
did not pay any fees to Cordovano and Honeck, LLP for assurance and related
services that are not reported under Audit Fees above, during our fiscal years
ending March 31, 2009 and March 31, 2008.





Tax
and All Other Fees




We did not pay any fees to Cordovano
and Honeck, LLP for tax compliance, tax advice, tax planning or other work
during our fiscal years ending March 31, 2009 and March 31, 2008.





Pre-Approval
Policies and Procedures





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





With
respect to the audit of our financial statements as of March 31, 2009, and for
the year then ended, none of the hours expended on Cordovano and Honeck, LLP’s
engagement to audit those financial statements were attributed to work by
persons other than Cordovano and Honeck, LLP’s full-time, permanent
employees.





Item
15. Exhibits, Financial Statement Schedules.





StatementsReport
      of Independent Registered Public Accounting FirmBalance
      Sheets at March 31, 2009 and 2008Statements
      of Operations for the years ended March 31, 2009 and 2008Statement
      of Changes in Shareholders' Deficit for the years ended March 31, 2009 and
      2008Statements
      of Cash Flows for the years ended March 31, 2009 and 2008Notes
      to Financial StatementsSchedulesAll
      schedules are omitted because they are not applicable or the required
      information is shown in the Financial Statements or notes
      thereto.Exhibit
              Form
              Filing
              Filed
      withExhibits
              #
              Type
              Date
              This
      ReportArticles
      of Incorporation filed with the Secretary of State of Colorado on June 22,
      1990
              3.1
              10-SB
              1/24/2007Articles
      of Amendment to the Articles of Incorporation filed with the Secretary of
      State of Colorado on October 17, 2006
              3.2
              10-SB
              1/24/2007Articles
      of Amendment to Articles of Incorporation filed with the Secretary of
      State of the State of Colorado on January 25, 2007
              3.3
              10KSB
              6/29/2007Amended
      and Restated Bylaws dated December 30, 2005
              3.3
              10-SB
              1/24/2007Code
      of Ethics
              14.1
              10-KSB
              6/29/2007Certification
      of Susie L.G. Johnson, pursuant to Rule 13a-14(a)
              31.1
              
              
              XCertification
      of Susie L.G. Johnson pursuant to 18 U.S.C Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              32.1
              
              
              X








SIGNATURES





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








ACTION
      FASHIONS, LTD.
                    
                    /s/  Susie L.G. Johnson
                    By:  Susie
      L.G. Johnson
                    Its:   President








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








Signatures
            
            Title
            
            Date/s/ Susie L.G. Johnson
              Susie
      L.G. Johnson
            
            Director,
      President, Chief Executive Officer, and Chief Financial
      Officer
            
            June
      25, 2009








ACTION
      FASHIONS, LTD.PageReport
      of Independent Registered Public Accounting Firm:
                F-2Balance
      Sheets for March 31, 2009 and 2008:
                F-3Statements
      of Operations for the years ended March 31, 2009 and 2008:
                F-4Statement
      of Changes in Shareholders'  Deficit for the years ended March
      31, 2009 and 2008:
                F-5Statement
      of Cash Flows for the years ended March 31, 2009 and 2008:
                F-6Notes
      to Financial Statements:
                F-7F-1








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Director and Shareholders
 Action
Fashions, Ltd.:
 
 
 We have
audited the balance sheet of Action Fashions, Ltd. as of March 31, 2009, and the
related statements of operations, changes in shareholders’ deficit and cash
flows for the years ended March 31, 2009 and 2008.  These financial
statements are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Action Fashions, Ltd. as of March
31, 2009, and the results of its operations and its cash flows for the years
ended March 31, 2009 and 2008 in conformity with accounting principles generally
accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 2 to the financial
statements, the Company has a limited operating history, limited funds, and a
working capital deficit, which raises a substantial doubt about its ability to
continue as a going concern.  Management’s plans in regard to these
matters are also described in Note 2.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 Cordovano
and Honeck LLP
 Englewood,
Colorado
 June 22,
2009





ACTION
      FASHIONS, LTD.Balance
      SheetsMarch
      31, 2009
                
                March
      31, 2008ASSETSCurrent
      assets:Cash
                $
                3,478
                $
                2,327Due
      from related party (Note 6)
                
                4,347
                
                2,652Inventory
                
                10,230
                
                10,219Total
      current assets
                
                18,055
                
                15,198TOTAL
      ASSETS
                $
                18,055
                $
                15,198LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
                $
                750
                $
                —Accounts
      payable to related party (Note 3)
                
                8,400
                
                6,000Sales
      tax payable
                
                288
                
                406Loans
      payable to related party (Note 3)
                
                38,462
                
                17,687Note
      payable to related party (Note 3)
                
                475,000
                
                475,000Total
      current liabilities
                
                522,900
                
                499,093STOCKHOLDERS'
      DEFICIT (Note 4)Preferred
      stock, 10,000,000 shares authorized, no par value,
                
                
                
                —-0-
      shares issued and outstanding
                
                —Common
      stock, 500,000,000 shares authorized, no par value,136,481,000
      shares issued and outstanding as at March 31, 2008136,505,000
      shares issued and outstanding as at March 31, 2009
                
                7,435
                
                7,411Retained
      deficit
                
                (512,280)
                
                (491,306)TOTAL
      STOCKHOLDERS' DEFICIT
                
                (504,845)
                
                (483,895)TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                $
                18,055
                $
                15,198See
      notes to the accompanying  financial statementsF-3





ACTION
      FASHION, LTD.STATEMENTS
      OF OPERATIONSFor
      the
                
                For
      theYear
      Ended
                
                Year
      EndedMarch
      31, 2009
                
                March
      31, 2008Revenues:Sales
                $
                22,065
                $
                20,367Total
      revenues
                
                22,065
                
                20,367Expenses:Cost
      of Goods Sold
                
                15,131
                
                14,671General
      and administrative
                
                27,884
                
                20,149Compensation
      expense (Notes 3 and 4)
                
                24
                
                80,000Total
      operating expenses
                
                43,039
                
                114,820Loss
      from operations
                
                (20,974)
                
                (94,453)Provision
      for Income Taxes (Note 5)
                
                -
                
                -NET
      LOSS
                $
                (20,974)
                $
                (94,453)Basic
      loss per common share
                $
                (0.00)
                $
                (0.00)Diluted
      loss per common share
                $
                (0.00)
                $
                (0.00)Weighted
      average common shares outstanding - Basic
                
                136,488,231
                
                136,475,256Weighted
      average common shares outstanding - Diluted
                
                136,488,231
                
                136,475,256See
      notes to the accompanying financial statementsF-4





ACTION
      FASHION LTD.STATEMENT
      OF CHANGES IN STOCKHOLDERS' DEFICITTotalCommon
      Stock
                
                
                
                Retained
                
                Stockholders'Shares
                
                Amount
                
                Deficit
                
                DeficitBalance
      at March 31, 2007
                136,475,000
                $
                7,405
                $
                (396,853)
                $
                (389,448)Shares
      issued for services
                6,000
                
                6
                
                —
                
                6Net
      loss for the period from April 1, 2007through
      March 31, 2008
                —
                
                —
                
                (94,453)
                
                (94,453)Balance
      at March 31, 2008
                136,481,000
                $
                7,411
                $
                (491,306)
                $
                (483,895)Shares
      issued to existing shareholders inexchange
      for existing shares on a one-for-onebasis
      (Note 4)
                136,481,000
                
                —
                
                —
                
                —Shares
      returned and cancelled from existingshareholders
      due to exchange of common shareson
      a one-for-one basis (Note 4)
                (136,481,000)
                
                —
                
                —
                
                —Shares
      issued for services
                24,000
                
                24
                
                —
                
                24Net
      loss for the period April 1, 2008through
      March 31, 2009
                —
                
                —
                
                (20,974)
                
                (20,974)Balance
      at March  31, 2009
                136,505,000
                $
                7,435
                $
                (512,280)
                $
                (504,845)See
      notes to the accompanying financial statementsF-5





ACTION
      FASHION, LTD.STATEMENTS
      OF CASH FLOWSFor
      the
                
                For
      TheYear
      Ended
                
                Year
      EndedMarch
      31, 2009
                
                March
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                $
                (20,974)
                $
                (94,453)Adjustments
      to reconcile net income to net cashprovided
      by (used in) operating activities:Stock
      based compensation
                
                24
                
                6Changes
      in operating assets and liabilities:Receivable
      from GK Gym
                
                0
                
                0Prepaid
      Expenses
                
                -
                
                80,000Inventory
                
                (11)
                
                913Accounts
      payable and accrued expenses
                
                3,032
                
                1,100NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
                
                (17,929)
                
                (12,434)CASH
      FLOWS FROM FINANCING ACTIVITIESPrincipal
      payments on notes payable
                
                -
                
                (6,135)Proceeds
      received from notes payable
                
                20,776
                
                17,687Due
      from GK Gym
                
                (1,696)
                
                (2,652)NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                
                19,080
                
                8,900NET
      CHANGE IN CASH
                
                1,151
                
                (3,534)CASH
      BALANCESBeginning
      of year
                
                2,327
                
                5,861End
      of year
                $
                3,478
                $
                2,327SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:CASH
      PAID DURING THE YEAR FOR:Interest
                $
                -
                $
                -Income
      taxes
                $
                -
                $
                -See
      notes to the accompanying financial statementsF-6





ACTION
FASHIONS, LTD.


Notes
to Financial Statements





NOTE
1.                      SUMMARY
OF ACCOUNTING POLICIES





a.           Organization





The
Company was originally incorporated under the laws of the State of Colorado on
June 22, 1990, as U.S.A. Connection, Inc.  On October 28, 2005, the
Company filed Articles of Amendment with the Colorado Secretary of State
changing its name to Action Fashions, Ltd.  The Company’s executive
offices are currently located at, P.O. Box 235472, Encinitas, California,
92024.  The Telephone number is (858) 229-8116.  The
Company’s retail location is located at 2026 Lowe Street, Fort Collins, CO
80525.





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





b.  Accounting
Method





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





c.  Cash
and Cash Equivalents





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





d.  Use
of Estimates in Financial Statement Preparation





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





e.  Inventories





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





f.  Revenue
Recognition





Revenue
is recognized at the time of sale.




g.  Expenses





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





h.  Earnings
per share





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





As of
March 31, 2009, there were approximately 47,500,000 potentially dilutive common
shares related to the convertible promissory note held by our former CEO, which
were excluded from the calculation of net loss per share-diluted because they
were anti-dilutive.





i.  Income
Taxes





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





j.  Recent
Accounting Pronouncements




In
March 2008, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards 161, “Disclosures about Derivative
Instruments and Hedging Activities", which amends the disclosure
requirements of SFAS
133. SFAS 161 provides an enhanced understanding about how and why
derivative instruments are used, how they are accounted for and their effect on
an entity’s financial position, performance and cash flows. SFAS 161, which is
effective for fiscal years beginning after November 15, 2008, will require
additional disclosure in future filings, but will have no financial impact to
the Company’s results of operations, cash flows or financial
position.





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 159”). SFAS No. 159
permits entities to choose to measure many financial instruments and certain
other items at fair value. This provides entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without being required to apply complex hedge accounting
provisions. The provisions of SFAS No. 159 are effective as of the
beginning of fiscal years that start after November 15, 2007 (fiscal year
March 31, 2009).





Effective
March 26, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement 109(“FIN 48”). FIN 48 requires
that a position taken or expected to be taken in a tax return be recognized in
the financial statements when it is more likely than not (i.e. a likelihood of
more than fifty percent) that the position would be sustained upon examination
by tax authorities. A recognized tax position is then measured at the largest
amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlements. Upon adoption, the Company does not have any material
uncertain tax positions.





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which clarifies the definition of fair value, establishes a framework for
measuring fair value within GAAP and expands the disclosures regarding fair
value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007. In
February 2008, the FASB issued FSP 157-2 “Partial Deferral of the Effective
Date of Statement 157” (FSP 157-2). FSP 157-2 delays the effective date of SFAS
157, for all nonfinancial assets and nonfinancial liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually) to fiscal years beginning after
November 15, 2008.





The
adoption of these pronouncements has not made a material effect on the Company’s
financial position or results of operations.





NOTE
2.                      GOING
CONCERN





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





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





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





NOTE
      3.
            RELATED
      PARTY TRANSACTIONS





Employment
Agreement





On
December 6, 2003, the Company entered into a 48 month employment agreement with
Phillip E. Koehnke, our former sole officer and Director.  The Company
charged the compensation expense ratably over the term of the 48 month
employment agreement.   Payment under the terms of the employment
agreement was secured by a $480,000, 48 month, zero interest convertible
promissory note.  The Company issued Mr. Koehnke 125,000,000 post
split shares of its restricted common stock during March 2006 in exchange for
payment of $5,000 of the convertible note, which reduced the balance owed on the
note to $475,000.  The note is due on demand and is thus classified as
a current liability at March 31, 2009.





Loans
Payable to Related Party





On March
31, 2008, the Company made a two year zero interest promissory note payable to
Phillip E. Koehnke, APC, our majority shareholder, in the amount of
$17,687.





On June
30, 2008 the Company made a two year zero interest promissory note payable to
Phillip E. Koehnke, APC, our majority shareholder, in the amount of
$4,271.





On
September 30, 2008, the Company made a two year zero interest promissory note
payable to Phillip E. Koehnke, APC, our majority shareholder, in the amount of
$4,722.





On
December 31, 2008 the company made a two year zero interest promissory note
payable to Phillip E. Koehnke, APC, our majority shareholder in the amount of
$3,135.





On March
31, 2009 the company made a two year zero interest promissory note payable to
Phillip E. Koehnke, APC, our majority shareholder in the amount
$8,647.





Line
of Credit





Effective,
April 1, 2007, the Company entered into a line of credit agreement with G.K.’s
Gym, Inc. establishing a $15,000 line of credit for purchasing of
inventory.  The line of credit agreement bears an interest rate of 6%
on outstanding principle, expires on March 31, 2009 and has a balance of $0 as
of March 31, 2009.





Accounts
Payable





The
company had a payable balance due to G.K.’s Gym, Inc., a related party owned by
the parents of Phillip E. Koehnke, as of March 31, 2009 and 2008.  At March
31, 2009 and 2008 the company owed $8,400 and $6,000 to G.K.’s Gym, Inc.
respectively for rent and other operating expenses.





Office
Lease





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





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





Date
                    
                    Amount2010
      minimum lease payments:
                    $
                    2,4002011
      minimum lease payments:
                    $
                    400Total
      future minimum lease payments:
                    $
                    2,800





Legal
Services





Legal
      counsel to the Company is a firm controlled by our majority
      shareholder.





NOTE
      4.
            STOCKHOLDERS’
      DEFICIT





The
stockholders’ equity section of the Company contains the following classes of
capital stock as of March 31, 2009:





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





Common
stock, no par value; 500,000,000 shares authorized: 136,505,000 shares issued
and outstanding.





Common
Stock Transactions





On or
about March 31, 2008 the Company issued 6,000 shares of its restricted common
stock to Susie Johnson, the Company’s President, as payment for services
rendered during the three months ended March 31, 2008.  The
transaction was recorded at fair value, or $6.





On or
about June 30, 2008 the Company issued 6,000 shares of its restricted common
stock to Susie Johnson, the Company’s President, as payment for services
rendered during the three months ended June 30, 2008.  The transaction
was recorded at fair value, or $6.





On or
about September 30, 2008 the Company issued 6,000 shares of its restricted
common stock to Susie Johnson, the Company’s President, as payment for services
rendered during the three months ended September 30, 2008.  The
transaction was recorded at fair value, or $6.





On or
about December 31, 2008 the Company issued 6,000 shares of its restricted common
stock to Susie Johnson, the Company’s President, as payment for services
rendered during the three months ended December 31, 2008.  The
transaction was recorded at fair value, or $6.





On or
about March 31, 2009 the Company issued 6,000 shares of its restricted common
stock to Susie Johnson, the Company’s President, as payment for services
rendered during the three months ended March 31, 2009.  The
transaction was recorded at fair value, or $6.





Exchange
of Shares with Existing Shareholders





On April
1, 2008 the Company issued 136,481,000 shares to its existing shareholders in
exchange for their existing (old) shares on a 1 for 1 basis.  No value
was assigned to the exchange of shares.  The old shares were returned
to treasury and cancelled.  The purpose of the exchange was to replace
the previously issued shares of common stock which FINRA had deemed were not
subject to the exemptions provided by Rule 144 of the Securities Act of
1933.





NOTE
      5.
            INCOME
      TAXES





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





Deferred
tax assets and liabilities at the end of each period are determined using the
currently effective tax rates applied to taxable income in the periods in which
the deferred tax assets and liabilities are expected to be settled or realized.
The reconciliation of enacted rates the years ended March 31, 2009 and March 31,
2008 is as follows:





March
      31,
              2009
            
            March
      31,
              2008U.S.
      statutory federal rate, graduated......................................
            
            15.00%
            
            20.35%State
      income tax rate, net of federal.......................................
            
            7.51%
            
            7.04%Net
      operating loss (NOL) for whichno
      tax benefit is currently
      available...........................................
            
            -22.51%
            
            -27.39%0.00%
            
            0.00%





At March
31, 2009 and March 31, 2008, the Company had a net operating loss carry forwards
of $329,874 and $308,900  respectively that may be offset against
future taxable income subject to limitations imposed by the Internal Revenue
Service. This carryforward is subject to review by the Internal Revenue Service
and, if allowed, may be offset against taxable income through 2029.  A
portion of the net operating loss carryovers begin expiring in
2026.




Deferred
tax assets are as follows:





March
      31,
              2009
            
            March
      31,
              2008Deferred
      tax asset due to net operating loss.................................
            $
            92,500
            $
            87,798Valuation
      Allowance........................
            
            (92,500)
            
            (87,798)-
            
            -




The
deferred tax asset relates principally to the net operating loss carryforward. A
valuation allowance was established at March 31, 2009 and March 31, 2008 to
eliminate the deferred tax benefit that existed at that time since it is
uncertain if the tax benefit will be realized. The deferred tax asset (and the
related valuation allowance) increased by $4,722 and $25,872 for the years ended
March 31, 2009 and March 31, 2008, respectively.





The
valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the deferred tax asset will be
realized.  At that time, the allowance will either be increased or
reduced; reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax assets is no
longer impaired and the allowance is no longer required.





NOTE
      6.
            CONCENTRATION
      OF CREDIT RISK





The
Company’s sole retail outlet is presently within the facilities of G.K.
Gymnastics, Inc. (“GK”), a dance and gymnastics school/studio located in Fort
Collins, Colorado.  The Company is dependent upon the clientele
generated by the gymnastics and dance studio. If the business of the
school/studio declines or ceases to exist, the Company’s sales could also
decline or cease to exist.





GK is a
related party to the Company.  The owners of GK are the parents of Phillip
E. Koehnke, the Company’s majority shareholder.  As of March 31, 2009
and 2008, G.K.’s Gym, Inc. owed to the Company $4,347 and $2,652
respectively.








F-6