**U.
      S. SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**


(Mark
      One)





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


For
      the
      fiscal year ended **March
      31, 2007**





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


For
      the
      transition period from ___________ to _____________





Commission
      File Number: **000-52413**





**ACTION
      FASHIONS, LTD**


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





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




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


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


Securities
      registered pursuant to Section 12(g) of the Act:  **$.001
      par value common stock**


___________________





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





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





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




Check
      if
      disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not
      contained in this form, and no disclosure will be contained, to the best of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. [ ]





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





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





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







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





Documents
      Incorporated by Reference: None.





Transitional
      Small Business Disclosure Format: No.





**PART
      I**





**Item
      1. Description of Business**





**The
      Company**





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





We
      were
      originally incorporated under the laws of the State of Colorado on June 22,
      1990, as U.S.A. Connection, Inc. Since inception, we did not have business
      operations and we lost our charter with the Colorado Secretary of State on
      April
      1, 2004. We began business operations on June 1, 2005 and our charter was
      reinstated on September 19, 2005. On October 28, 2005, we filed Articles of
      Amendment with the Colorado Secretary of State changing our name to Action
      Fashions, Ltd. Our fiscal year end is March 31 st .





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





**The
      Business**





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





**General
      Market**





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





**Merchandise/Product**




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





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





§
            **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:).





§
            **Elite
                Sportswear GK**-
                Elite Sportswear GKis
                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:).





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




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


**Business
      Strategy**





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





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





Currently,
      we do not market outside our embedded facility. We conduct limited marketing
      and
      advertising, relying more on our individual store displays, embedded location
      and word-of-mouth to attract customers. Our product lines are supported by
      visual merchandising, which consists of window displays, table layouts and
      various promotions. This type of marketing is an important component of our
      marketing and promotion strategies since our embedded location provides
      significant target customer foot traffic.





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





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


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





**Competitive
      Business Conditions**





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





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





**Distribution
      Methods of the Products**





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





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





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





**Dependence
      on One or a Few Major Customers**





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





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





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





**Effect
      of existing or probable governmental regulations on the
      business**





The
      effects of existing or probable government regulations are minimal.





**Research
      and Development**





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





**Costs
      and effects of compliance with environmental laws**





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





**Number
      of total employees and number of full time employees.**





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





**Item
      1a. Risk Factors**





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





**We
      have a limited operating history and may not succeed.**





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





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





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





**We
      may have insufficient funds to implement our expansion strategy.**





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





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





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





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





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





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





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





§
            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.**





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





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





In
      addition, being a public company could make it more difficult or more costly
      for
      us to obtain certain types of insurance, including directors' and officers'
      liability insurance, and we may be forced to accept reduced policy limits and
      coverage or incur substantially higher costs to obtain the same or similar
      coverage. The impact of these events could also make it more difficult for
      us to
      attract and retain qualified persons to serve on our board of directors, our
      board committees or as executive officers.





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





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





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





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


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





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





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





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





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





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





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





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





§
            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.**





Before
      this offering there has not been a public market for our common stock, and
      an
      active public market for our common stock may not develop or be sustained after
      this offering. Further, the market price of our common stock may decline below
      the price you paid for your shares.





Among
      the
      factors that could affect our stock price are:





§
            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.





**Cautionary
      Statement Concerning**


**Forward-Looking
      Statements**





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





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





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





**Item
      2. Description of Property**





**Real
      Property**





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





**Item
      3. Legal Proceedings**





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





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





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





**PART
      II**





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





**Market
      information**





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


**Holders**





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


**Dividends**





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




**Securities
      authorized for issuance under equity compensation
      plans**





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





**Item
      6. Management’s Discussion and Analysis**





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





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





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





**Critical
      Accounting Policies**





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





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





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





Revenue
      is recognized at the time of sale.





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





**Results
      of Operations**





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





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





**Liquidity
      and Capital Resources**





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





**Future
      Goals**





In
      the next
      12 months, our goal is to expand into 2-4 locations in dance and gymnastics
      studios and schools in Colorado. In the event that expansion is successful,
      we
      plan on adding additional locations in Colorado followed by the western United
      States.




We
      recently
      became a reporting company with the SEC, our next goal is to make a private
      placement of our securities to raise the funds for our initial expansion plans.
      The private placement should close within the next 12 months and we have
      contacted a securities firm to assist us with the private placement. Assuming
      the private placement is successful, we plan on expanding into the Loveland,
      Colorado location during the second half of our fiscal year and opening in
      another 2-4 locations thereafter. The opening of additional locations is
      dependant upon sufficient financing and the identification of suitable
      gymnastic/dance school facilities. We anticipate that each new location will
      require approximately $25,000 - $40,000 to open depending upon the
      location.




**Off-balance
      Sheet Arrangements**




We
      maintain no significant off-balance sheet arrangements





**Foreign
      Currency Transactions**





None.





**I** **tem
      7. Financial Statements**





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





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





None.





**Item
      8A. Controls and Procedures.**





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




**Item
      8B. Other Information.**





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








**PART
      III**





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





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




**NAME**
            
            **AGE**
            
            **POSITION**Phillip
                E. Koehnke
            
            44
            
            President,
                Chief Executive Officer, Chief Financial Officer, Secretary, and
                Director





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





**Phillip
      E. Koehnke**




Mr.
      Koehnke is an attorney with over 14 years of experience. His practice has
      focused on business law and corporate finance. Mr. Koehnke attended Colorado
      State University on a wrestling scholarship where he graduated with honors
      with
      a Bachelors of Science. He then obtained his J.D. from the University of
      Washington School of Law in 1992. From 1997 through 2001, Mr. Koehnke served
      as
      corporate counsel for Tradeway Securities Group, Inc. based in Carlsbad,
      California. From 2001 to 2003, Mr. Koehnke acted as corporate counsel for
      Finance 500, Inc. based in Irvine, California. From 2003 to the present, Mr.
      Koehnke operates a sole practitioner law practice providing legal services
      to
      small to midsize private companies and NASD broker dealers. Mr. Koehnke also
      represents several public companies assisting them with their financing, SEC
      reporting and general corporate matters. Mr. Koehnke is licensed to practice
      law
      in the states of California and Colorado.





**Information
      about our Board and its Committees.**





**Audit
      Committee**





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





**Compensation
      Committee**





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





**Advisory
      Board**





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





**Section
      16(a) Beneficial Ownership Reporting Compliance**





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





**Code
      of Ethics**





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





**Item
      10. Executive Compensation**





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





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





(1)  Under
      the
      terms of the Mr. Koehnke’s employment agreement, Mr. Koehnke is entitled to
      receive an annual base salary of $120,000. To date, Mr. Koehnke has not received
      any cash compensation under the terms of his employment agreement with the
      Company.





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





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





**Employment
      Agreement**





On
      December 6, 2003, we entered into a 48 month employment agreement, at a
      compensation rate of $10,000 per month, with Phillip E. Koehnke to act as our Director,
      President, Chief Executive Officer, Chief Financial Officer and Secretary.
      The
      agreement terminates on December 6, 2007 with an optional 12 month extension.
      Payment under the terms of the employment agreement was secured by a convertible
      promissory note.





**Compensation
      of Director**





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





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





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





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




·
            each
                of our directors and executive officers;
                and




·
            All
                of our Directors and Officers as a
                group




**Name
                And Address**
            **Number
                Of Shares Beneficially Owned**
            **Percentage
                Owned**Phillip
                E. Koehnke(1)
            135,025,000
            98%Total
            135,025,000
            98%





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





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





**Item
      12. Certain Relationships and Related Transactions.**





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




**Transactions
      with Promoters**





None.





**Item
      13. Exhibits.**




**Exhibit
                  #**
              
              **Description**3.1
              
              Articles
                  of Incorporation filed with the Secretary of State of Colorado
                  on June 22,
                  1990 (Filed as an exhibit to our registration statement on Form
                  10-SB file
                  on January 24, 2007).3.2
              
              Articles
                  of Amendment to the Articles of Incorporation filed with the Secretary
                  of
                  State of Colorado on October 17, 2006 (Filed as an exhibit to our
                  registration statement on Form 10-SB file on January 24,
                  2007).3.3
              
              Articles
                  of Amendment to Articles of Incorporation filed with the Secretary
                  of
                  State of the State of Colorado on January 25, 2007 (attached
                  hereto).3.4
              
              Amended
                  and Restated Bylaws dated December 30, 2005 (Filed as an exhibit
                  to our
                  registration statement on Form 10-SB file on January 24,
                  2007).4.1
              
              June
                  1, 2005, Promissory Note in the amount of $19,000 made by the Company
                  to
                  G.K.’s Gym, Inc. as payment for assets (Filed as an exhibit to our
                  registration statement on Form 10-SB file on January 24,
                  2007).4.2
              
              December
                  6, 2003, Convertible Promissory Note in the amount of $480,000
                  made by the
                  Company to Phillip E. Koehnke as payment under the terms of Mr.
                  Koehnke’s
                  employment agreement with the Company (Filed as an exhibit to our
                  registration statement on Form 10-SB file on January 24,
                  2007).10.1
              
              Employment
                  agreement dated December 6, 2003, between the Company and Phillip
                  E.
                  Koehnke (Filed as an exhibit to our registration statement on Form
                  10-SB
                  file on January 24, 2007).10.2
              
              June
                  1, 2005, Asset Purchase Agreement by and between the Company and
                  G.K.’s
                  Gymnastics, Inc. (Filed as an exhibit to our registration statement
                  on
                  Form 10-SB file on January 24, 2007).14.1
              
              Code
                  of Ethics (Attached hereto).31.1
              
              Certification
                  of Phillip E. Koehnke, pursuant to Rule 13a-14(a) (Attached
                  hereto).31.2
              
              Certification
                  of Phillip E. Koehnke, pursuant to Rule 13a-14(a) (Attached
                  hereto).32.1
              
              Certification
                  of Phillip E. Koehnke, pursuant to 18 U.S.C Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Attached
                  hereto).
 
 **Item
        14. Principal Accountant Fees and Services.**





**Appointment
      of Auditors**




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





**Audit
      Fees**





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





**Audit-Related
      Fees**




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





**Tax
      and All Other Fees**




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





**Pre-Approval
      Policies and Procedures**





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





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








**SIGNATURES**





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








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







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








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











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





F-1





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC**


**ACCOUNTING
      FIRM**














To
      the
      Board of Directors and Shareholders of


Action
      Fashions, Ltd.:





We
      have
      audited the balance sheet of Action Fashions, Ltd. as of March 31, 2007, and
      the
      related statements of operations, changes in shareholders’ deficit and cash
      flows for the year ended March 31, 2007 and the period from June 1, 2005 through
      March 31, 2006. These financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Action Fashions, Ltd. as of March
      31, 2007, and the results of its operations and its cash flows for the year
      ended March 31, 2007 and the period from June 1, 2005 through March 31, 2006
      in
      conformity with accounting principles generally accepted in the United States
      of
      America.





The
      accompanying financial statements have been prepared assuming the Company will
      continue as a going concern. As discussed in Note 2 to the financial statements,
      the Company has a limited operating history, limited funds, and a working
      capital deficit, which raises a substantial doubt about its ability to continue
      as a going concern. Management’s plans in regard to these matters are also
      described in Note 2. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.











/s/ Cordovano
      and Honeck, LLP


Cordovano
      and Honeck LLP


Englewood,
      Colorado


June
      18,
      2007








F-2








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














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








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








ACTION
                FASHIONS, LTD.STATEMENTS
                OF CASH FLOWSFor
                The
            
            June
                1, 2005Year
                Ended
            
            ThroughMarch
                31, 2007
            
            March
                31, 2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            $
            (116,198)
            $
            (98,255)Adjustments
                to reconcile net income tonet
                cash provided by operating activities:Stock-based
                compensation
            
            -
            
            5Changes
                in operating assets and liabilities:Prepaid
                Expenses
            
            120,000
            
            100,000Inventory
            
            1,613
            
            6,254Bank
                overdraft
            
            -
            
            -Accounts
                payable and accrued expenses
            
            3,875
            
            1,431NET
                CASH PROVIDED BY OPERATING ACTIVITIES
            
            9,290
            
            9,435CASH
                FLOWS FROM FINANCING ACTIVITIESPrincipal
                payments on notes payable
            
            (4,841)
            
            (8,023)NET
                CASH USED IN FINANCING ACTIVITIES
            
            (4,841)
            
            (8,023)NET
                CHANGE IN CASH
            
            4,449
            
            1,412CASH
                BALANCESBeginning
                of period
            
            1,412
            
            -End
                of period
            $
            5,861
            $
            1,412SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:CASH
                PAID DURING THE PERIOD FOR:Interest
            $
            -
            $
            -Income
                taxes
            $
            -
            $
            -NON-CASH
                INVESTING AND FINANCING TRANSACTIONS:Debt
                converted to common stock
            $
            -
            $
            5,000Inventory
                acquired for debt
            $
            -
            $
            19,000See
                notes to the 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. Since inception, the Company did
      not
      have business operations and it lost its charter with the Colorado Secretary
      of
      State on April 1, 2004. The Company began business operations on June 1, 2005
      and its charter was reinstated on September 19, 2005. On October 28, 2005,
      the
      Company filed Articles of Amendment with the Colorado Secretary of State
      changing its name to Action Fashions, Ltd. The Company’s executive offices are
      currently located at, P.O. Box 235472, Encinitas, California, 92024. The
      Telephone number is (858) 229-8116. The Company’s retail location is located at
      2026 Lowe Street, Fort Collins, CO 80525.





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





**b.
      Accounting Method**





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





**c.
      Cash and Cash Equivalents**





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





**d.
      Use of Estimates in Financial Statement Preparation**




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





**e.
      Inventories**





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





**f.
      Revenue Recognition**





Revenue
      is recognized at the time of sale.





**g.
      Expenses**





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





**h.
      Earnings per share**





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





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





**i.
      Income Taxes**





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





**j.
      Recent Accounting Pronouncements**




In
      December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No.
      123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” and
      supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS
      No. 123 (R) focuses primarily on the accounting for transactions in which an
      entity obtains employee services in share-based payment transactions. SFAS
      No.
      123 (R) requires companies to recognize in the statement of operations the
      cost
      of employee services received in exchange for awards of equity instruments
      based
      on the grant-date fair value of those awards (with limited exceptions). SFAS
      No.
      123 (R) is effective as of the first interim or annual reporting period that
      begins after June 15, 2005 for non-small business issuers and after December
      15,
      2005 for small business issuers. Accordingly, the Company has adopted SFAS
      No.
      123 (R) effective January 1, 2006. The Company has determined that the
      provisions of SFAS No. 123 (R) did not have any significant impact on its
      financial statement presentation or disclosures .





In
      May
      2005, the FASB issued SFAS No. 154 that establishes new standards on accounting
      for changes in accounting principals. Pursuant to the new rules, all such
      changes must be accounted for by retrospective application to the financial
      statements of prior periods unless it is impracticable to do so. SFAS No. 154
      completely replaces Accounting Principles Bulletin (APB) Opinion 20 and SFAS
      3,
      though it carries forward the guidance in those pronouncements with respect
      to
      accounting for changes in estimates, changes in the reporting entity, and the
      correction of errors. This statement is effective for accounting changes and
      corrections of errors made in fiscal years beginning after December 31,
      2005.





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





**NOTE
                2.**
            **GOING
                CONCERN**





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





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





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





**NOTE
                3.**
            **RELATED
                PARTY TRANSACTIONS**





**Employment
      Agreement**





On
      December 6, 2003, the Company entered into a 48 month employment agreement,
      at a
      compensation rate of $10,000 per month, with Phillip E. Koehnke to act as our Director,
      President, Chief Executive Officer, Chief Financial Officer and Secretary.
      Payment under the terms of the employment agreement was secured by a convertible
      promissory note. We have charged the compensation expense ratably over the
      term
      of the employment agreement (48 months).





On
      December 6, 2003, the Company entered into a 48 month zero interest convertible
      promissory note with Phillip E. Koehnke as security for Mr. Koehnke’s employment
      agreement with the Company. Beginning on December 1, 2003 and ending on November
      1, 2007, the Company is required to make monthly principal payments in the
      amount of $10,000 per month. At the option of the note holder, the monthly
      principal payments may be paid in cash or restricted shares of the Company’s
      common stock at a price per share equal to the Conversion Price equal to (i)
      $0.01 per share or, if the Company has its common stock trading in the public
      market, (ii) the current “Market Price,” which shall be equal to fifty percent
      (50%) of the average of the three lowest closing bid prices of the Company’s
      common stock as reported by the principal market for the thirty trading days
      preceding the date of conversion. The note contains an acceleration clause
      that,
      in the event of default, the entire outstanding principal of the note becomes
      due and payable and may be converted into restricted shares of the Company’s
      common stock at a price per share equal to the Conversion Price.





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





The
      Company issued the CEO 125,000,000 post split shares of its restricted common
      stock during March 2006 in exchange for payment of $5,000 of the convertible
      note, which reduced the balance owed on the note to $475,000.





**Asset
      Purchase Agreement**





On
      June
      1, 2005, the Company entered into an Asset Purchase Agreement with G.K.
      Gymnastics, Inc. a Colorado corporation. Pursuant to the terms of the agreement,
      the Company purchased all items of inventory, the name, and all accounting
      records of the Action Fashions business division for a purchase price of
      $19,000.





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





On
      June
      1, 2005, the Company entered into a 5 year, zero interest, promissory note
      with
      G.K. Gymnastics, Inc. The principal amount of the note is $19,000 and was used
      as payment for the Asset Purchase Agreement with G.K. Gymnastics, Inc. The
      Company paid $8,023 toward the note during the year ended March 31, 2006, which
      reduced the balance owed on the note to $10,977 as of March 31, 2006. The
      Company paid $4,841 toward the note during the year ended March 31, 2007, which
      reduced the balance owed on the note to $6,136.





**Office
      Lease**





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





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





March
                31,
            
            Amount2007...................................
            $
            -2008...................................
            
            2,0002009...................................
            
            2,4002010...................................
            
            2,4002011....................................
            
            400$
            7,200





**Legal
      Services**





Legal
                counsel to the Company is a firm controlled by an Officer and Director
                of
                the Company.







**NOTE
                4.**
            **STOCKHOLDERS’
                DEFICIT**









The
      stockholders’ equity section of the Company contains the following classes of
      capital stock as
      of
      March 31, 2007:




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




Common
      stock, no par value; 500,000,000 shares authorized: 136,475,000 shares issued
      and outstanding.




**Common
      Stock**




On
      September 16, 2005, the Company issues 125,000 (post split) shares of its
      restricted common stock to Mike Keefe as payment for services as a resident
      agent in the state of Colorado. The transaction was recorded at fair value,
      or
      $5.




On
      March
      28, 2006, the Company issued its CEO 125,000,000 (post split) shares of its
      restricted common stock under the terms of the convertible promissory note.
      The
      shares were converted at a price of $0.01 per share.




On
      January 25, 2007, a majority of the Company’s shareholders approved the
      resolution of the Company’s board of directors to amend the Company’s articles
      of incorporation to forward split the Company’s common stock on a 250 for 1
      basis. The split occurred for shareholders of record at the close of business
      on
      January 25, 2007. The
      number of shares issued on January 25, 2007, totaled 135,929,100 and increased
      the number of common shares outstanding to 136,475,000. Shares issued prior
      to
      January 25, 2007, have been retroactively restated to reflect the impact of
      the
      stock split.




**NOTE
      5.**  **INCOME
      TAXES**




A
      reconciliation of U.S. statutory federal income tax rate to the effective rate
      follows:






For
                The
            
            June
                1, 2005Year
                Ended
            
            ThroughMarch
                31, 2007
            
            March
                31, 2006U.S.
                statutory federal rate, graduated......................................
            
            22.91%
            
            20.88%State
                income tax rate, net of federal...........................................
            
            6.81%
            
            6.99%Net
                operating loss (NOL) for whichno
                tax benefit is currently
                available...........................................
            
            -29.72%
            
            -27.88%0.00%
            
            0.00%







At
      March
      31, 2007, deferred tax assets consisted of a net tax asset of $61,926 due to
      operating loss carryforwards of $214,453 which was fully allowed for, in the
      valuation allowance of $61,926. The valuation allowance offsets the net deferred
      tax asset for which it is more likely than not that the deferred tax assets
      will
      not be realized. The change in the valuation allowance for the year ended March
      31, 2007 and the period from June 1, 2005 through March 31, 2006 totaled $34,537
      and $27,389, respectively. The net operating loss carryforward expires through
      the year 2027.




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




**NOTE
      6.**  **CONCENTRATION
      OF CREDIT RISK**




The
      Company’s sole retail outlet is presently within the facilities of G.K.
      Gymnastics, Inc., a dance and gymnastics school/studio located in Fort Collins,
      Colorado. T he
      Company is dependent upon the clientele generated by the dance studio. If the
      business of the school/studio declines or ceases to exist, the Company’s sales
      could also decline or cease to exist.