UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(MARK ONE)
x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2008

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
	For the transition period from ______________ to ______________

Commission File Number: 033-07075-LA

THE FASHION HOUSE HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)

Colorado	33-1079781
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

16633 Ventura Blvd., 6th Floor

Encino, CA 91436

(Address of principal executive offices) (Zip Code)

(818) 907-0400

(Issuer’s telephone number including area code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated file o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company x

(Do not check if a smaller reporting company)

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock Outstanding as of May 20, 2008: 24,887,063 shares

Transitional Small Business Disclosure Format: Yes o No x

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The Fashion House Holdings, Inc

Index to Form 10-Q

		Page
Part I Financial Information

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheet as of March 31, 2008 (Unaudited) and December 31, 2007	3
	Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2008 and 2007 (Unaudited)	4
	Condensed Consolidated Statements of Cash flows for the three month periods ended March 31, 2008 and 2007 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis or Plan of Operation	16
Item 3.	Controls and Procedures	22

Part II Other Information

Item 1.	Legal Proceedings	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	24
Item 6.	Exhibits	24

SIGNATURES		25

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 and DECEMBER 31, 2007

	March 31,			December 31,
	2008			2007
	(Unaudited)
ASSETS
Current assets:
Cash	$	11,032		$	6,390
Accounts receivable, net of allowance of $46,918		110,905			1,230,969
Inventories		431,554			480,374
Prepaid expenses		44,200			109,164
Total current assets		597,691			1,826,897
Property and equipment, net		242,638			262,574
Restricted cash		136,847			136,847
Deposits		10,000			68,021
TOTAL ASSETS	$	987,176		$	2,294,339

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Due to related parties	$	11,949,457		$	11,724,991
Accounts payable and accrued expenses		3,224,701			3,153,672
Accrued payroll and related		239,377			239,377
Due to factor		80,737			1,066,630
Accrued interest		1,280,336			843,904
Notes payable		280,293			280,293
Total current liabilities		17,054,901			17,308,867
Long-term liabilities:
Notes payable to stockholders		1,090,100			1,090,100
Total liabilities		18,145,001			18,398,967
Commitments and contingencies
Stockholders’ deficit:
Common stock, no par value;
100,000,000 shares authorized;
24,887,063 shares issued and outstanding		17,847,701			17,847,701
Accumulated deficit		(35,005,526	)		(33,952,329	)
Total stockholders’ deficit		(17,157,825	)		(16,104,628	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	987,176		$	2,294,339

See accompanying notes to unaudited condensed consolidated financial statements.

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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	Three Months Ended March 31,
	2008			2007
Net sales	$	57,163		$	2,214,169
Cost of sales and returns		135,928			2,342,294
Gross (loss) profit		(78,765	)		(128,125	)
Operating expenses:
Selling, general and administrative		462,116			1,295,839
Payroll and related expenses		76,324			716,963
Royalties		-			360,983
Total operating expenses		538,440			2,373,785
Loss from operations		(617,205	)		(2,501,910	)
Other income (expense):
Interest expense, net of interest income		(436,432	)		(2,140,996	)
Other Income		440			-
Total other income (expense)		(435,992	)		(2,140,996	)
Loss before income taxes		(1,053,197	)		(4,642,906	)
Income taxes		-			800
Net loss	$	(1,053,197	)	$	(4,643,706	)
Basic and diluted net loss per share	$	(0.04	)	$	(0.19	)
Weighted average shares outstanding — basic and diluted		24,887,063			24,887,063

See accompanying notes to unaudited condensed consolidated financial statements.

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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	March 31, 2008			March 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,053,197	)	$	(4,643,706	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		21,217			38,363
Bad debt expense		46,918			30,548
Adjustments to fair value of warrants		-			1,768,000
Change in operating assets and liabilities:
Accounts receivable		1,073,147			665,444
Inventories		48,820			523,501
Prepaid expenses		64,964			2,425
Deposits		58,021			-
Accounts payable and accrued expenses		71,029			(1,712	)
Accrued interest		436,432			220,824
Net cash provided (used) in operating activities		767,351			(1,396,313	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,281	)		(6,476	)
Net cash used in investing activities		(1,281	)		(6,476	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable to stockholder		-			(4,000	)
Advances from related parties		224,466			1,751,520
Repayments of notes payable		-			(15,000	)
Repayments of capital lease		-			(682	)
Advances from factor		-			2,558,393
Payments to factor		(985,894	)		(2,914,180	)
Net cash provided (used) by financing activities		(761,428	)		1,376,051
Net change in cash		4,642			(26,738	)
Cash, beginning of the period		6,390			131,907
Cash, end of the period	$	11,032		$	105,169

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for interest	$	-	$	152,682

Cash paid during the period for income taxes	$	-	$	800

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Accrued liabilities converted to notes payable	$	-	$	191,393

See accompanying notes to unaudited condensed consolidated financial statements.

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THE FASHION HOUSE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008

(UNAUDITED)

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Unaudited Condensed Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared by The Fashion House Holdings, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. These principles are consistent in all material respects with those applied in the Company’s financial statements contained in the Company’s annual report on Form 10-KSB for the fiscal year ended December 31, 2007, and pursuant to the instructions to Form 10-Q and Item 310(b) of Regulation S-B promulgated by the Securities and Exchange Commission (“SEC”). Interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (all of which are of a normal recurring nature, including the elimination of intercompany accounts) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods indicated. Interim results of operations are not necessarily indicative of the results to be expected for the full year or any other interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and footnotes thereto contained in the Company’s annual report on Form 10-KSB for the year ended December 31, 2007.

Organization and Nature of Operations

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

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

On April 16, 2008, the Company and its wholly owned subsidiary filed voluntary petitions under Chapter 11 of the US Bankruptcy Code with the United States Bankruptcy Court, Central District of California, file numbers 1:08-BK-12363-KT and 1:08-BK-12359-KT, respectively.

Principles of Consolidation

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

Use of Estimates

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

Going Concern and Chapter 11 Bankruptcy Filed on April 16, 2008

The condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses for the three months ended March 31, 2008 and each year from 2004 through 2007, and as of March 31, 2008 the Company has a working capital deficit of $16,457,210 and a stockholders’ deficit of $17,157,825. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

The Company will require financing to repay its existing obligations and resume operating activities. There can be no assurance that additional funding will be adequate or will enable the Company to achieve or sustain profitable.

On January 15, 2008, the Company terminated a substantial portion of its operations because of its continuing cash flow deficits. Prior to that date, on December 15, 2007, in order to reduce its monthly rent obligation, the Company established a new corporate office by leasing space on a month to month basis at the office location of Westrec Capital Partners, LLC (“Westrec”) at 16633 Ventura Blvd., 6th Floor, Encino, CA 91436. On January 15, 2008, concurrent with the reduction of its business operations, the Company surrendered its San Vicente office space. Westrec is considered a control stockholder of the Company because of its warrant position, and the Company’s Interim Chief Financial Officer is a part-time and temporary employee of an affiliate of Westrec.

The Company plans to emerge from Chapter 11 proceedings operating two divisions, wholesale and retail. The reorganization plan includes resuming the Company’s historical wholesale business model of licensing, designing, manufacturing and marketing designer brand women’s footwear. The Company is presently in discussions with several haute couture designers to license their brands and plans to retain its strategy of producing high end footwear for these licensed brands and selling the product in domestic and international markets. The Company plans to also introduce diffusion lines for the same brands at more affordable price points of $79 to $ 150. The company will continue to limit business to designer brands that highlight design aspects in order to capitalize on brand recognition.

The Company’s first retail outlet opened on March 31, 2008 and is located at 607 West Knoll, West Hollywood California. This store operates under the name Shoe Bliss and occupies 1,500 square feet of retail space. The Company plans to expand its retail division by opening Shoe Bliss stores in the State of California and ultimately across the United States.

Risks and Uncertainties

Credit Risk

The Company maintains its cash accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to $100,000.

Three customers accounted for 94% of sales during the three months ended March 31, 2008. The three customers were: Amazon.com (23%), Loehman’s (41%), and Gateway (6%). One customer accounted for 25% of sales during the three months ended March 31, 2007.

The Company assigns the majority of its trade accounts receivable to a factor. The Company also makes sales to customers not approved by its factor at its own risk and monitors the outstanding receivable balance. At March 31, 2008, the Company established an allowance for doubtful accounts of $46,918.

Two customers accounted for 96% of accounts receivable as of March 31, 2008. The two customers were: Bergdorf Goodman (67%) and Winner’s merchant (29%).

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

Merchandise Risk

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

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Inventories

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

Property and Equipment

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

Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the carrying value of long-lived assets for impairment whenever events or change in circumstances indicate that such carrying values may not be recoverable. The Company estimates the future undiscounted cash flows derived from an asset to assess whether or not a potential impairment exists when events or circumstances indicate the carrying value of a long-lived asset may not be recoverable. An impairment loss is recognized when the discounted future cash flows are less than its carrying amount. If assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. At March 31, 2008, the Company’s management believes there is no impairment of its long-lived assets.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, restricted cash, accounts payable and accrued expenses, accrued payroll and related, due to factor, due to related parties, notes payable, notes payable stockholders and accrued interest. The carrying value for all such instruments approximates fair value at March 31, 2008 due to their short maturities.

Revenue Recognition

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

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

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

Revenue is recognized upon shipment of goods from the public warehouse to the customers, which is when title transfers to the customers. The accounts receivable factor approves credit to the customers and factors the sale. The factor charges the Company .85% of the sales which are factored. For sales that are not factor approved, the Company will ask the customer to prepay before shipment. In some instances, the Company will retain the accounts receivable.

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

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Loss Per Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential shares had been issued and if the additional common shares were dilutive. All potentially dilutive shares, 141,671,655 and zero at March 31, 2008 and 2007, respectively, have been excluded from diluted loss per share, as their effect would be anti-dilutive for the periods then ended.

Stock-Based Compensation

As of March 31, 2008, the Company had no stock-based compensation plans and has not issued any share-based payments to its employees.

Issuance of Stock for Non-cash Consideration

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

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

Derivative Financial Instruments

In connection with the issuance of warrants with certain notes payable (see Note 5), the Company was required to file a registration statement in November 2005 and have such registration statement declared effective no later than 180 days following the Merger (the “Effectiveness Deadline”) and to maintain the effectiveness of such registration. In addition, the Company was required to issue certain holders of convertible warrants for each subsequent 30-day period that such registration statement had not been filed and additional warrants for each 30-day period following the Effectiveness Deadline, in which the registration statement was not declared effective. On July 26, 2006, the Company filed the required registration statement. The Company’s registration statement became effective on January 23, 2007. The Company determined that the registration rights are an embedded derivative instrument pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended. Under the provisions of Emerging Issues Task Force (“ EITF ”) Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock and View A of EITF No. 05-4, The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, the accounting treatment of these derivative financial instruments required that the Company record the derivatives at their fair values as of the inception date of the note agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income.

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

In accordance with the provisions of FSP EITF 00-19-2, the Company elected early adoption of this statement. As of January 1, 2006, the Company recorded the warrant liability of $904,000 to equity since the only provision which caused the warrants issued to be accounted for as a derivative liability was the liquidated damages provision in the registration rights agreement. In recording the entry, the Company credited $688,000 to common stock which represents the estimated fair value of these warrants on the date of issuance recorded and a credit to accumulated deficit of $216,000 which represents the difference between the estimated fair value of these warrants at the date of issuance and the estimated fair value as of December 31, 2005. However, as retrospective application of FSP EITF 00-19-2 is prohibited, the Company has not restated the amounts presented as of March 31, 2008.

As a result of unsuccessful fund raising efforts, the Company modified an existing warrant (the “Modification”) and therefore did not have a sufficient number of authorized shares to settle outstanding and exercisable options, warrants and convertible instruments (see Note 7). Therefore, under the provisions of Emerging Issues Task Force ("EITF") Issue No. 00-19, Accounting For Derivative Financial Instruments Indexed To, And Potentially Settled In, A Company's Own Stock, as a result of the Modification, the Company was required to classify all non-employee options and warrants as derivative liabilities, totaling $9,147,000 as of the Modification date, and record them at their fair values at such date. Any change in fair value is required to be recorded as non-operating, non-cash income or expense at each subsequent balance sheet date until the Company has a sufficient number of authorized shares to settle its convertible instruments and non-employee options and warrants. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income. The Company recorded an additional $93,200 for the fair value of warrants issued during the fourth quarter of 2007. As a result of the Modification, the Company reclassified the fair value of non-employee options and warrants of $9,240,200 from additional paid-in capital to a derivative liability. During the year ended December 31, 2007, the Company recognized other income of $9,240,200 related to recording the derivative liability at fair value. At December 31, 2007, the warrants were deemed to be worthless as a result of the planned Chapter 11 filing, and therefore the derivative liability balance was reduced to zero.

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Recent Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurement. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The Statement does not require any new fair value measurements but could change the current practices in measuring current fair value measurements. The Statement is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of the adoption of this statement; however, it is not expected to have a material impact on our consolidated financial position, results of operation or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115, which permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of this Statement apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Management does not believe that the adoption of SFAS No. 159 will have a material effect on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141(revised 2007), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141R improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAF No. 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way—as equity in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The two statements are effective for fiscal years beginning after December 15, 2008. Management does not believe that the adoption of these statements will have a material effect on the Company’s financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows and (d) encourages, but does not require, comparative disclosures for earlier periods at initial adoption. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Management does not believe that the adoption of this statements will have a material effect on the Company’s financial statements.

NOTE 2 — ACCOUNTS RECEIVABLE FACTORING AND PURCHASE ORDER FINANCING

On May 3, 2006, the Company entered into a factoring agreement with CIT Commercial Services (“CIT”), as amended, which was terminated in July 2007 (see below). The Company was charged a factoring fee of 1% on gross invoice amounts. The Company agreed to sell and assign to CIT all accounts arising from the sale of inventory, including those under any trade name, through any divisions, and through any selling agent.

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

On July 25, 2007, the Company entered into a new accounts receivable factoring agreement with Ultimate Financial Solutions, LLC (“Ultimate”). The Company agreed to sell and assign to Ultimate all accounts arising from the sale of inventory. At the Company’s request, Ultimate may advance funds to the Company at up to 80% of the factor risk accounts. The Company is charged a factoring fee of .85% on gross invoice amounts. Interest is charged based on the daily debit balances in the funds in use account for the month, at a rate equal to 1.5% above the Prime Rate as published from time to time in the Wall Street Journal. In connection with this agreement, on July 30, 2007, Ultimate paid CIT for the outstanding balance of funds in use by the Company on that day. As a result, the Company’s liability for this amount was effectively transferred from CIT to Ultimate and the CIT agreement was terminated. The obligations under this agreement are secured by substantially all of the Company’s assets. The loans are personally guaranteed by the principal member of Westrec and a director and shareholder of the Company. The Company did not factor any receivables during the three months ended March 31, 2008 due to the reduction in operations on January 15, 2008 and the Chapter 11 reorganization filed on April 16, 2008.

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At March 31, 2008, the following summarizes the Company’s accounts receivable and related balances:

Receivables assigned to factor	$	57,258
Advances from factor		(80,737	)

Net amounts due to factor		(23,479	)

Unfactored accounts receivable		27,927
Non trade receivables		72,638
Allowance for bad debts		(46,918	)
Net receivable	$	30,168

During the three months ended March 31, 2008 and 2007, factoring fees incurred totaled $27,698 and $23,819 respectively.

On July 17, 2007, the Company entered into an agreement with Ashford Finance, LLC (“Ashford”), whereby Ashford will provide up to $5,000,000 of purchase order financing relating to the Company’s purchases of its products from foreign manufacturers. Ashford will finance an amount up to 90% of the Company’s end buyer’s purchase orders relating to the Company’s purchase order placed with the foreign manufacturer. The Company is charged an Account Management Fee equal to 1.5% per month for Letters of Credit opened by Ashford on behalf of the Company when the amount equals up to 75% of the Company’s related customer purchase orders. The Account Management Fee will increase to 2.5% for Letters of Credit when the amount is in excess of 75% of the related customer purchase order, but in no event will the Letter of Credit amount be greater than 90% of the related customer purchase orders. All loans will also bear interest at the rate of 2% per annum above the Prime Rate as published time to time by the Wall Street Journal. The agreement requires minimum usage during the first twelve months of $3,000,000. If the Company cancels the agreement or fails to open letter of credit that equal the minimum usage, the Company is required to pay all fees under the agreement for the full minimum amount. The loans are secured by virtually all of the Company’s assets. Transactions financed under this agreement are guaranteed by two of the Company’s directors and shareholders, but only in the event that fraud may have occurred. The Company did not execute any purchase order financing transactions during the three months ended March 31, 20008 due to the reduction in operations on January 15, 2008 and the Chapter 11 reorganization filed on April 16, 2008.

In connection with the July 20, 2007 agreement with Ultimate and the July 17, 2007 agreement with Ashford, Intercreditor Agreements were also entered into by and between Westrec, Comerica, Ultimate and Ashford to establish a priority for security interests in the Company’s assets. In these agreements, Comerica subordinated its security interest to Ultimate in accounts factored by Ultimate. Comerica also subordinated its security interest in all assets to Ashford. Ultimate subordinated its security interest in purchase orders financed by Ashford. Westrec subordinated its security interest to Ultimate in accounts factored by Ultimate. Westrec subordinated its security interest in receivables, as defined, to Ashford. Westrec subordinated to Ashford its security interest in inventory financed by Ashford. With regard to inventory other than inventory financed by Ashford, security interests of Ashford and Westrec rank pari passu with one another. Ashford’s lien and security interest in all other assets and collateral is subordinate to Westrec’s security interest (other than receivables or inventory).

NOTE 3 — NOTES PAYABLE TO STOCKHOLDERS

The Company borrowed funds from two founding stockholders for working capital purposes, which bear interest at 8% per annum and are due 13 months from the date of demand. As of March 31, 2008, outstanding borrowings totaled $1,090,100, net of a $4,000 payment made during 2007, and accrued interest totaled $315,618. As of March 31, 2008, no demand for repayment has been made. Interest expense on the notes totaled $21,747 and $22,255 for the three months ended March 31, 2008 and 2007, respectively. The balance above includes a note payable issued during the year ended December 31, 2007 totaling $121,100 in connection with payroll and bonus expense previously accrued.

NOTE 4 — COMMITMENTS AND CONTINGENCIES

Licensing Agreements

As a result of our continued cash flow deficits, our license agreements have either been terminated for non-payment of royalties (Isaac and Oscar), or have expired on their original termination date and have not been renewed (Tyler). Due to a continuing decline in the demand for Blass footwear, this license agreement was mutually terminated. At this time, we do not have any active license agreements in place. We are presently in discussions with several haute couture designers to license their brands. However, there can be no assurances that we will be successful in obtaining additional licenses.

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

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

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

On November 26, 2007, the Tyler licenses ended in accordance with the contract termination date. While a two year renewal was available in the agreement, the renewal option was not exercised.

The Company had experienced a declining market for its Blass footwear. As a result, during the fourth quarter of 2007, the Company and Bill Blass began negotiations to terminate the Blass license. While the Company and Blass had mutually agreed that the Company would discontinue the design, manufacture and sale of Blass footwear, a payment of $90,000 by the Company to Blass was to be made to relive the Company’s obligations under the license agreement for all future minimum payments. This payment has not been made as of the date of this filing.

On January 10, 2008, Oscar de la Renta issued a written notice of default for failure to pay minimum royalties under the Company’s licensing agreement with it.

On January 27, 2008 Isaac Mizrahi requested termination of the Company’s licensing agreement with it.

Royalty expense was zero and $360,983 for the three months ended March 31, 2008 and 2007, respectively.

Indemnities and Guarantees

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

Litigation

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

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

This matter was filed October 26, 2005, seeking damages for breach of contract and fraud regarding oral arrangements with the Company’s subsidiary. On April 10, 2007, a Notice of Entry of Judgment was filed with the court for the amount of $460,000, which includes interest at 10% per year. No appeal was filed. In connection with this judgment, the Company has accrued $300,000 in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet based on management’s best estimate of the ultimate settlement of this matter.

Artful Mind Industrial, Ltd.

On March 6, 2007, the Company was served with a complaint, which Artful Mind Industrial Ltd. (“Artful Mind”) filed on March 1, 2007 alleging that the Company failed to make payments owed under a Settlement Agreement (the “Agreement”) entered into between Artful Mind, Go Moda Limited and the Company in September 27, 2006. Artful Mind seeks judgment for the full amount of all payments due, which approximates $295,000, together with interest at a rate of 9% per annum beginning on January 14, 2007 and costs of collection, including reasonable attorneys’ fees incurred. Based on the event of a default, of not timely paying the final two payments, the entire balance of all payments due were accelerated and became immediately due and interest on all unpaid amounts accrued at a rate of 9% per annum. The complaint states that the Company is currently in default on the final two payments. On October 2, 2007, a default judgment was entered for $315,055, including interest and court costs. The Company has included this amount as accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet. A restraining order on $136,847 of the Company’s cash balances at Comerica Bank was obtained and is classified as restricted cash at March 31, 2008. The Company’s senior secured lender has filed a lawsuit to block payment of these funds to Artful Minds. The matter is currently pending.

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TCK Designs, LTD.

On May 11, 2007, a complaint was filed in New York by TCK Designs, LTD alleging breach of contract for terminating a purported one year agreement without making payment to the plaintiff. The plaintiff sought damages in the amount of $37,500, plus legal fees and interest. A default judgment was entered on September 24, 2007. On October 31, 2007, an Order to Show Cause with Temporary Restraints was filed in New Jersey, barring the Company’s public warehouse in New Jersey from moving goods stored at that location. On November 5, 2007, at the Company’s request, the Court granted a partial release on the restraining order allowing the Company to continue shipping goods from the public warehouse. The Company was required by the court to maintain $100,000 of goods at the warehouse and a cash deposit of $40,000 in its attorney’s trust account. The Company had the option of placing an additional $20,000 in the attorney trust account to fully release all goods in the warehouse. The Company’s senior secured lender filed a lawsuit subsequent to December 31, 2007 to block payment of these funds to TCK Designs, LTD. The court denied this request and the funds were remitted to the plaintiff.

Barry K. Rothman

On October 26, 2007, a complaint was filed in Los Angeles by Barry K. Rothman against the Company, John Hanna, Westrec Capital Partners, LLC and a principal of Westrec Capital Partners, LLC for breach of contract in the amount of $141,733 and appointment of receiver. The suit relates to failure to pay for legal services. The matter is currently pending.

Bowne of Los Angeles

On December 21, 2007 a complaint was filed in Los Angeles by Bowne of Los Angeles, Inc. for breach of contract in the approximate amount of $20,000. The matter is currently pending.

6310 San Vicente Associate, LLC

On February 15, 2008, a complaint was filed in Los Angeles against the Company by 6310 San Vicente Associates, Inc., the Company’s former landlord for breach of contract for failure to pay rent in the approximate amount of $26,000. The matter is currently pending.

Oscar De La Renta, Ltd

On February 19, 2008, a complaint was filed in New York by Oscar De La Renta Ltd. against the Company for breach of contract, unfair competition, and trademark infringement relating to failure to make royalty payments in connection with the Company’s license agreement with Oscar De La Renta, Ltd. The plaintiff seeks damages totaling $1,786,015. The matter is currently pending.

Employment Agreements

The Company has entered into employment agreements with certain of its management for services to be provided in the normal course of business. These agreements call for minimum salary levels and various payments upon termination of employment, as defined. In the event of termination for any reason, the Company is required to pay its CEO one year salary and bonus. The CEO’s salary for the year ending December 31, 2008 is $180,000 and the bonus was waived for 2007, 2006, and 2005.

NOTE 5 — NOTES PAYABLE

In July 2005, the Company issued a note payable totaling $550,000, bearing interest at 11 percent per annum (the “July 11% Note”). The July 11% Note and accrued interest were due in April 2006, as amended. In connection with the issuance of the July 11% Note, the Company issued warrants to purchase an aggregate of 1,100,000 shares of the Company’s common stock. The warrants vested upon grant, have an exercise price of $1.00 per share and expire in August 2008. In connection with the registration rights issued with the July 11% Notes and related warrants (see Note 1), the Company issued warrants to purchase an aggregate of zero and 110,000 shares of the Company’s common stock during the three months ended March 31, 2008 and 2007, respectively, as penalties for not registering the underlying shares timely, as defined (see Note 7). The penalty warrants ceased in January 2007, as the related registration statement was declared effective. The warrants issued during the three months ended March 31, 2008 and 2007, for penalties, had fair values totaling zero and $58,000, respectively, and recorded such as interest expense upon grant. The warrants vested upon grant, had an exercise price of $1.00 per share and expire in August 2015. The July 11% Note and accrued interest were repaid in March 2006.

On July 6, 2006, the Company issued a note payable totaling $300,000 with a maturity date of August 20, 2006, and bearing interest at the prime rate plus 5% (the “July Note”). In connection with the issuance of the July Note, the Company issued a warrant to purchase 60,000 shares of the Company’s common stock. The warrant is immediately exercisable, has an exercise price of $1.00 and expires in July 2016. The warrant had a relative fair value of $33,000, and the Company recorded such as debt discount. The Company amortized the debt discount to interest expense during 2006. The Company repaid $75,000 on the note and the maturity date was extended to August 20, 2007. On September 21, 2007, the Company received a written demand for payment on this note. As of the date of this filing, no payment has been made.

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On February 8, 2007, the Company issued a note payable totaling $70,293 in connection with services rendered, which bears interest at 1.5% per month. The Company is required to make monthly principal payments of $15,000 through maturity in July 2007. Only one monthly payment has been made on this note since its inception. As a result, the note is currently in default and a lawsuit was filed to recover the amount from the Company, along with accrued interest. At March 31, 2008, the outstanding principal balance was $55,293.

NOTE 6 – DUE TO RELATED PARTIES

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

On September 18, 2006, the Company entered into a Master Revolving Note (the “Note”) with a bank (the “Lender”) to borrow funds from time to time, at the Lender’s discretion, up to an aggregate of $5.0 million, payable in whole or in part upon demand, at a per annum rate equal to the Lender’s prime rate plus 1% per annum secured by deposits with the Lender. The note replaces previously issued notes by the lender. Upon default, the Company is required to pay an additional 3% interest per annum (the “Default Increase”). In connection with entering into the Note, the Company entered into a Credit Enhancement Agreement with Westrec pursuant to which each of the Guarantors agreed to guarantee the Company’s obligations existing on or before the date that is the earliest of (i) 180 days following the closing of the Note with the Lender, (ii) the termination of Guarantor’s obligations, or (iii) the Company’s repayment in full of the amounts outstanding under Note, as defined. Additionally, pursuant to the terms of the Credit Enhancement Agreement, the Company has agreed to pay the following fees: upon any issuance of a letter of credit by the Lender that is guaranteed by a Guarantor, the Company will pay Westrec 2% of the face amount of the letter of credit; as long as any amount is outstanding on the Note that is guaranteed by a Guarantor, revolving line-of-credit based fees equal to the difference between (a) the sum of 20%, plus (if applicable) the Default Increase (as noted above), or (b) the sum of the Lender’s prime rate plus11.75% per annum , plus (if applicable) the Default Increase (as noted above). In addition, the Company pays a monthly credit monitoring fee of $5,000 for each calendar month up to and including the month of termination. Effective June 1, 2007, the monthly monitoring fee was increased to $9,000 per month to compensate Westrec for the services if the Company’s Interim Chief Financial Officer, which is a part-time and temporary employee of Westrec. The total fee of $9,000 is being accrued and not paid at this time. Any payments that are deemed late are subject to an additional fee of 5% of each such late payment.

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

During the year ended December 31, 2006, in connection with the Credit Enhancement Agreement, the Company granted a seven-year warrant to purchase a total of 9,000,000 shares of common stock at a purchase price of $0.40 per share that expires in September 2013, as amended - see below. The warrant vested as follows: (i) 20% immediately, (ii) an additional 20% vests, as amended, 60 days after the date of the warrant, and on each succeeding 30th day thereafter such that the entire warrant will vest on the 151st day after the date of the warrant. The estimated fair value of the original warrant was $2,550,000 and the Company was amortizing such amount to interest expense on a straight line basis over the life of the guarantee, of which $1,710,000 was expensed during the year ended December 31, 2007. However, the amount of interest expense recognized at any date will be at least equal to the portion of the grant date fair value of the vested amount.

Effective December 20, 2006, the Company entered into an amended credit enhancement agreement with Westrec, in which, among other things, Westrec agreed to extend its guarantee on behalf of the Company to amounts owed to the Lender and include its guarantee on amounts owed to CIT, the Company’s factor (see Note 2). In exchange for the additional concessions, the Company modified the warrants originally granted to Westrec to increase the number of warrants granted from 5,000,000 to 9,000,000 and decrease the exercise price from $0.65 to $0.40 and extended the maturity date of the guarantee to September 2007. The estimated fair value of the modification was $2,200,000, of which the Company amortized $792,000 to interest expense during the year ended December 31, 2007 related to this warrant, which was fully vested at March 31, 2007.

As the termination of the Credit Enhancement Agreement did not occur on September 14, 2007, the number of shares underlying the Warrant was and will be increased in the following amounts, which shares will be immediately vested: (i) an additional number of shares equal to 3% of the shares based on the number of warrants earned, as defined, on September 14, 2007, plus (ii) an additional number of shares equal to 5% of the shares based on the number of warrants earned, as defined, on October 14, 2007, plus (iii) an additional number of shares equal to 8% of the shares based on the number of warrants earned, as defined, on November 13, 2007, plus (iv) an additional number of shares equal to 10% of the shares based on the number of warrants earned, as defined, on December 13, 2007, and (v) an additional number of shares equal to 10% of the shares based on the number of warrants earned, as defined, every 30th day thereafter until the Agreement Termination Date occurs. If the Company issues equity securities with a purchase price less than the current exercise price of the Warrant, then the exercise price of the Warrant will be reduced to such amount and the number of shares underlying the Warrant will be increased accordingly. There is no maximum number of warrants to be issued under this agreement. As of December 31, 2007, the Company issued warrants to purchase an aggregate of 23,455,101 shares of the Company’s common stock. The warrants are exercisable at $0.05, vested upon grant, were valued at $162,000 (based on the Black Scholes option pricing model), expire through September 15, 2013 and were expensed as additional interest expense during the year ended December 31, 2007.

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On February 27, 2007, the Company amended its Note to increase the borrowing base from an aggregate of $5.0 million to $6.5 million.

On April 10, 2007, the Company amended its Note (the “April Amendment”) to increase the borrowing base from an aggregate of $6.5 million to $8.5 million. In connection with the April Amendment, the Company entered into an amendment of the Credit Enhancement Agreement with Westrec pursuant to which each of the Guarantors agreed to guarantee additional advances under the Comerica Loan of up to an aggregate of $2,000,000, which advances are drawn no later than August 3, 2007, provided that at the time of each advance certain representations, warranties, and conditions are all satisfied. The additional advances of $2,000,000 were fully drawn by August 3, 2007.

In consideration for this agreement, the Company issued to Westrec an amended Warrant Agreement dated April 10, 2007, to purchase a total of 11,000,000 shares of common stock at an exercise price of $0.40 per share. The Warrant vested upon grant and expires on September 15, 2013. In connection with the warrant modification, the Company recorded $320,000 of interest expense upon grant. The Company agreed to increase the number of warrants issued under the April Amendment based on certain borrowing thresholds. During the year ended December 31, 2007, the Company issued warrants to purchase an aggregate of 2,706,901 shares of common stock. The warrants vested upon grant, had an exercise price of $0.05 per share, expire through September 15, 2013 and had a value of $47,200 (based on the Black Scholes option pricing model) and were recorded as additional interest expense during the year ended December 31, 2007.

On July 9, 2007, Westrec and the Company entered into a Letter Agreement to amend the Amended and Restated Credit Enhancement Agreement dated as of December 20, 2006 (the “Agreement”). The purpose of the Letter Agreement was to amend the Agreement to allow for direct loans to the Company in addition to the credit enchantment facility with Comerica Bank. Each Direct Loan shall be shall be due and payable on demand and shall bear interest at a rate equal to the greater of (i) twenty percent (20%) per annum, or (ii) the sum of (A) the prime rate, plus (B) 11.75% per annum. While there is no obligation to continue these loans, as of March 31, 2008, $3,352,483 of advances had been made under this amended Agreement.

In November 2007, the Master Revolving Note was assigned by Comerica Bank to Michael M. Sachs, the principal owner of Westrec Capital Partners, LLC.

During the three months ended March 31, 2008, the Company incurred total fees and interest to Westrec and its principal of approximately $435,660, paid zero and owes $1,124,728, which is included in accrued interest in the accompanying condensed consolidated balance sheet.

NOTE 7 — EQUITY TRANSACTIONS

Warrants

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

The Company failed to raise $4,000,000 of net proceeds from the sale of equity securities by August 3, 2007, as required by the amended Westrec warrant agreement. Accordingly, the exercise price of the warrant was reduced to $0.05 per share and the number of shares of common stock to be purchased was increased to 80,277,472. In connection with the warrant modification, the Company recognized as expense approximately $6,928,000 in August 2007. Based on the number of shares of common stock issuable upon exercise of the warrant and other potentially issuable shares, the Company determined that it does not have enough authorized shares to settle all such obligations and that feature was an embedded derivative instrument pursuant to SFAS No. 133. In addition, under the provisions of EITF Issue No. 00-19, the Company classified all other non-employee warrants as derivative liabilities and recorded them at their fair values at each balance sheet date until such time as the Company increased its authorized shares or it has enough authorized shares to settle the issuance of its convertible debt, options and warrants.

During the three months ended March 31, 2008, the company issued an additional 35,232,180 warrants to purchase common stock to Westrec under the amended Westrec warrant agreement. The Company did not recognize any expense for theses warrants as they were deemed worthless as a result of the Chapter 11 filing on April 16, 2008.

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As of March 31, 2008, Westrec had been granted a total of 141,769,424 warrants.

NOTE 8 — SUBSEQUENT EVENTS

On April 16, 2008, as a result of its continuing cash flow deficits, the Company and its wholly owned subsidiary filed voluntary petitions under Chapter 11 of the US Bankruptcy Code with the United States Bankruptcy Court, Central District of California, file numbers 1:08-BK-12363-KT and 1:08-BK-12359-KT, respectively.

The Company remains in default under an approximately $8.5 million line of credit initially provided to it by Comerica Bank which was subsequently assigned to Michael M. Sachs, the principal owner of Westrec Capital Partners, LLC. The Company is also in default of additional amounts owed to Westrec Capital Partners, LLC of approximately $3.4 million.

Item 2. Management’s Discussion and Analysis or Plan of Operation

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

•		our ability to finance our activities and maintain our financial liquidity;

•		our ability to enter into new licensing agreements and to maintain and renew existing licensing agreements;

•		changes in consumer preferences or fashion trends;

•		disruption in product shipment;

•		changes in import regulations;

•		our dependence on a small number of large customers;

•		changes in our relationships with vendors and other resources; and

•		intensely competitive industry conditions.

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

As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2007 financial statements, the Company had suffered recurring losses from operations, and had a working capital deficit that raises substantial doubt about our ability to continue as a going concern.

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Reduction of Operations, Chapter 11 Filing and Planned Operations

On January 15, 2008, the Company terminated a substantial portion of its operations because of its continuing cash flow deficits. Prior to that date, on December 15, 2007, in order to reduce its monthly rent obligation, the Company established a new corporate office by leasing space on a month to month basis at the office location of Westrec Capital Partners, LLC (“Westrec”). On January 15, 2008, concurrent with the reduction of its business operations, the Company surrendered its San Vicente office space. Westrec is considered a control stockholder of the Company and the Company’s Interim Chief Financial Officer is a part-time and temporary employee of an affiliate of Westrec.

Our current operations include sales at our retail outlet opened on March 31, 2008, located at 607 West Knoll, West Hollywood California. This store operates under the name Shoe Bliss and occupies 1,500 square feet of retail space. At Shoe Bliss, we sell well known designer brands at a discount between 50 to 75% of the retail prices. Our shoes sell in our retail store for $39 to $120, while similar shoes retail in the market place from $140 to $300. This retail division allows us to reduce warehousing expenses, produce current income, and keep our brand names in the market, thus preserving our goodwill.

We are also currently indentifying and negotiating new designer licenses to actively resume our women’s wholesale business, which was curtailed in January 2008 as part of our business reorganization plans.

We plan to emerge from Chapter 11 proceedings operating two divisions, wholesale and retail. Our reorganization plan includes resuming our historical wholesale business model of licensing, designing, manufacturing and marketing designer brand women’s footwear. We are presently in discussions with several haute couture designers to license their brands. We will retain our successful pattern of producing high end footwear for these licensed brands and selling the product in domestic and international markets. We will also introduce diffusion lines for the same brands at more affordable price points of $79 to $ 150. The Company will continue to limit business to designer brands that highlight design aspects in order to capitalize on brand recognition.

We plan to expand our retail division by opening Shoe Bliss stores in the State of California and ultimately across the United States.

Overview

We plan to design, develop, and market a diversified selection of women’s dress and casual fashion footwear with an emphasis on celebrity appeal, style, quality, and fit. We target moderate to premium priced categories of the women’s fashion footwear market. Our business centers on the licensing of recognized brand names. The practice of licensing, or the leasing of trademarked or copyrighted entity, including name, likeness, logo, graphic, saying, signature or character, has become an increasingly common practice among apparel and footwear companies, and the licensee typically pays royalties based upon product sales. We have sold over 100 different styles of designer footwear through independent retailers, specialty retailers and better department stores.

As a result of our continued cash flow deficits, most of our license agreements have either been terminated for non-payment of royalties (Isaac and Oscar), or have expired on their original termination date and have not been renewed (Tyler). Due to a continuing decline in the demand for Blass footware, this license agreement was mutually terminated. At this time, we do not have any active license agreements in place. We are presently in discussions with several haute couture designers to license their brands. However, there can be no assurances that we will be successful in obtaining additional licenses.

The footwear sales cycle is well entrenched and most of the industry’s infrastructure centers around four distinct selling seasons: Spring 1, Spring 2, Fall 1 and Fall 2. Spring 1 occurs in June and products are debuted at trade shows—such as the Fashion Footwear Association of New York—for introduction to retail stores in November. Spring 2 occurs in August and coincides with the industry’s largest trade show event—the World Shoe Association show in Las Vegas. Lines that debut in this venue appear on retail shelves and counters the following February and March. Fall 1 is a December event and translates to retail introductions in April and May. Fall 2 occurs in February and shoes ordered by buyers in this period are introduced to retail stores in July and August.

Results of Operations for the Three Months Ended March 31, 2008 and March 31, 2007.

Net sales for the three months ended March 31, 2008 were $57,163, a decrease of $2,157,006 or 97% lower than the net sales for the prior year quarter of $2,214,169. The net sales decrease of $2,157,006 was the result of the Company’s decision to curtail operations as a result of continuing cash flow deficits and plan to file Chapter 11 reorganization proceedings.

Gross loss for the three months ended March 31, 2008 was $78,765 or (137.8%) of net sales. This negative gross margin was primarily attributable to discounts and returns offered to customers as a result of the pending Chapter 11 filing. Gross loss for the three months ended March 31, 2007 was $128,125 or 5.7% of net sales. The gross loss in 2007 was the result of late product deliveries due to our negative cash flow and inability to pay suppliers on time.

Operating expenses include all costs associated with design, development, sales, marketing, distribution, purchasing, and corporate functions. Operating expenses decreased to $538,440 in the three months ended March 31, 2008 from $2,373,785 in 2006, for a decrease of $1,835,345. The decrease in operating expenses is also attributable to the reduction in operations in anticipation of the planned filing of the Chapter 11 reorganization.

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The net loss for the three months ended March 31, 2008 is $1,053,197 compared to a net loss of $4,643,706 for the same period in 2006 for a decreased loss of $3,590,509, primarily as a result of the reduction in operations and accounting for derivatives. The loss from operations was $617,205 during the three months ended March 31, 2008 compared to a loss from operations of $2,501,910 for the three months ended March 31, 2007. The decrease in the loss from operations of $1,884,705 was entirely due to the reduction of operations due to continuing cash flow deficits in anticipation of our filing for Chapter 11 reorganization. The Company recorded in other expenses for the three months ended March 31, 2008 charges totaling $435,992. These charges include $436,432 for interest expense and other income of $440. The company recorded in other expenses in the three months ended March 31, 2007 charges totaling $2,140,996. These charges included $1,710,000 to record the fair value of warrants issued as guarantees, $58,000 for stock warrants issued as penalties for late filing and late effectiveness of the Registration Statement on Form SB-2 with the SEC, and interest expense of $372,996.

Liquidity and Capital Resources

As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2007 and 2006 financial statements, the Company has suffered recurring losses from operations, and has a working capital deficit that raises substantial doubt about our ability to continue as a going concern.

During the three months ended March 31, 2008, Company’s net cash position increased by $4,642 to $11,032. During 2007, as a result of the Artful Minds lawsuit, a lien was placed on $136,847 of the Company’s cash and is classified as restricted cash as of March 31, 2008. The Company’s senior secured lender has filed a lawsuit to block the payment of these funds to Artful Minds.

The Company’s financing activity used net cash of $761,428 for the three month ended March 31, 2008, primarily due to the payment of $985,894 to our factor. The funds to pay the factor came primarily from collections of accounts receivable and also from borrowings from the Company’s senior secured lender of $224,466. These borrowing are classified as due from related parties at March 31, 2008. There were no advances from the factor during the three months ended March 31, 2008.

Net cash provided in operating activities for the three months ended March 31, 2008 was $767,351, an increase of $2,163,664 from the $1,396,313 used in operating activities in the prior year period. The increase in the cash provided by operating activities resulted from the cost savings associated with the reduction of operations and the collection of outstanding trade receivables.

The Company had cash used for investing activities of 1,281 relating to the purchase of property and equipment for the quarter ended March 31, 2008. In the 2006 period, the net cash used for investing was $288,397 for the purchase of property and equipment..

Financing Activities

We were financing our operations primarily with borrowings from our senior secured lender. With the exception of the year ended December 31, 2004, when we sold the Nicole Miller License resulting in a gain for the year, we have incurred net losses as a result of sales, design, and administrative staffing expenses in support of our operations.

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

On April 10, 2007, the Company amended its Note (the “April Amendment”) to increase the borrowing base from an aggregate of $6.5 million to $8.5 million. In connection with the April Amendment, the Company entered into an amendment of the Credit Enhancement Agreement with Westrec pursuant to which each of the Guarantors agreed to guarantee additional advances under the Comerica Loan of up to an aggregate of $2,000,000, which advances are drawn no later than August 3, 2007, provided that at the time of each advance certain representations, warranties, and conditions are all satisfied. This additional $2,000,000 was fully drawn by the Company as of July 12, 2007.

On July 9, 2007, Westrec and The Company entered into a Letter Agreement to amend the Amended and Restated Credit Enhancement Agreement dated as of December 20, 2006, as amended (the “Agreement”). The purpose of the Letter Agreement was to amend the Agreement to allow for direct loans to the Company in addition to the credit enchantment facility with Comerica Bank. Each direct loan shall be shall be due and payable on demand and shall bear interest at a rate equal to the greater of (i) twenty percent (20%) per annum, or (ii) the sum of (A) the prime rate, plus (B) 11.75% per annum. While there is no obligation to continue these loans, as of March 31, 2008, $3,352,483 of advances had been made under this amended Agreement.

On July 17, 2007, the Company entered into an agreement with Ashford Finance, LLC (“Ashford”), whereby Ashford will provide up to $5,000,000 of purchase order financing relating to the Company’s purchases of its products from foreign manufacturers. Ashford willl finance an amount up to 90% of the Company’s end buyer’s purchase orders relating to the Company’s purchase orders placed with the foreign manufacturer. The Company is charged an Account Management Fee equal to 1.5% per month for Letters of Credit opened by Ashford on behalf of the Company when the amount equals up to 75% of the Company’s related customer purchase orders. The Account Management Fee will increase to 2.5% for Letters of Credit when the amount is in excess of 75% of the related customer purchase order, but in no event will the Letter of Credit amount be greater than 90% of the related customer purchase orders. All loans will also bear interest at the rate of 2% per annum above the Prime Rate as published time to time by the Wall Street Journal. The agreement requires minimum usage during the first twelve months of $3,000,000. If the Company cancels the agreement or fails to open letter of credit that equal the minimum usage, the Company is required to pay all fees under the agreement for the full minimum amount. The loans are secured by virtually all of the Company’s assets. Transactions financed under this agreement are guaranteed by two of the Company’s directors and shareholders, but only in the event that fraud may have occurred. The Company did not execute any purchase order financing transactions during the three months ended March 31, 20008 due to the reduction in operations on January 15, 2008 and the Chapter 11 reorganization filed on April 16, 2008.

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On July 25, 2007, the Company entered into a new accounts receivable factoring agreement with Ultimate Financial Solutions, LLC (“Ultimate”). The Company agreed to sell and assign to Ultimate all accounts arising from the sale of inventory. At the Company’s request, Ultimate may advance funds to the Company at up to 80% of the factor risk accounts. The Company is charged a factoring fee of .85% on gross invoice amounts. Interest is charged based on the daily debit balances in the funds in use account for the month, at a rate equal to 1.5% above the Prime Rate as published from time to time in the Wall Street Journal. In connection with this agreement, on July 30, 2007, Ultimate paid CIT for the outstanding balance of funds in use by the Company on that day. As a result, the Company’s liability for this amount was effectively transferred from CIT to Ultimate and the CIT agreement was terminated. The loans under this agreement are secured by substantially all of the Company’s assets. The loans are personally guaranteed by the principal member of Westrec and a director and shareholder of the Company. The Company did not factor any receivables during the three months ended March 31, 20008 due to the reduction in operations on January 15, 2008 and the Chapter 11 reorganization filed on April 16, 2008.

In connection with the July 25, 2007 agreement with Ultimate and the July 17, 2007 agreement with Ashford, Intercreditor Agreements were also entered into by and between Westrec, Comerica, Ultimate and Ashford to establish a priority for security interests in the Company’s assets. In these agreements, Comerica subordinated its security interest to Ultimate in accounts factored by Ultimate. Comerica also subordinated its security interest in all assets to Ashford. Ultimate subordinated its security interest in purchase orders financed by Ashford. Westrec subordinated its security interest to Ultimate in accounts factored by Ultimate. Westrec subordinated its security interest in receivables, as defined, to Ashford. Westrec subordinated to Ashford its security interest in inventory financed by Ashford. With regard to inventory other than inventory financed by Ashford, security interests of Ashford and Westrec rank pari passu with one another. Ashford’s lien and security interest in all other assets and collateral is subordinate to Westrec’s security interest (other than receivables or inventory).

In November 2007, the Master Revolving Note was assigned by Comerica Bank to Michael M. Sachs, the principal owner of Westrec Capital Partners, LLC.

During the three months ended March 31, 2008, the Company incurred total fees and interest to Westrec and its principal of approximately $435,660, paid zero and owes $1,124,728, which is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet.

Licenses

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

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

On November 26, 2007, the Tyler licenses ended in accordance with the contract termination date. While a two year renewal was available in the agreement, the renewal option was not exercised.

On January 10, 2008, Oscar de la Renta issued a written notice of default for failure to pay minimum royalties under the Company’s licensing agreement with it.

On January 27, 2008 Isaac Mizrahi requested termination of the Company’s licensing agreement with it.

Royalty expense was zero and $360,983 for the months ended March 31, 2008 and 2007, respectively.

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Future Liquidity

Our principal sources of liquidity consist of existing cash balances. We believe the key factors to our liquidity in 2008 will be our ability to successfully emerge from Chapter 11 proceedings and execute on our plans to become profitable. There is no assurance that the Company will be able to achieve profitability. Our cash requirements will also depend on numerous other variable factors, including the rate of growth of sales, the timing and levels of products purchased, payment terms and credit limits from manufacturers, and the timing and level of accounts receivable collections.

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

CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

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

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

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

Revenue is recognized upon shipment of goods from the public warehouse to the customers, which is when title transfers to the customers. The Factor approves credit to the customers on the factored sales and charges us .85% of sales.

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

Stock Based Compensation

At March 31, 2008, the Company had no stock-based compensation plans and has not issued any share-based payments to its employees.

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Derivative Financial Instruments

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

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

In accordance with the provisions of FSP EITF 00-19-2, the Company elected early adoption of this statement. As of January 1, 2006, the Company recorded the warrant liability to equity since the only provision which caused the warrants issued to be accounted for as a derivative liability was the liquidated damages provision in the registration rights agreement. However, as retrospective application of FSP EITF 00-19-2 is prohibited, the Company has not restated the amounts presented as of December 31, 2007.

Going Concern

The condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses for the three months ended March 31, 2008 and each year from 2004 through 2007, and as of March 31, 2008 the Company has a working capital deficit of $16,457,210 and a stockholders’ deficit of $17,157,825. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

On January 15, 2008, the Company terminated a substantial portion of its operations because of its continuing cash flow deficits. Prior to that date, on December 15, 2007, in order to reduce its monthly rent obligation, the Company established a new corporate office by leasing space on a month to month basis at the office location of Westrec Capital Partners, LLC (“Westrec”). On January 15, 2008, concurrent with the reduction of its business operations, the Company surrendered its San Vicente office space. Westrec is considered a control stockholder of the Company and the Company’s Interim Chief Financial Officer is a part-time and temporary employee of an affiliate of Westrec.

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We plan to emerge from Chapter 11 proceedings operating two divisions, wholesale and retail. Our reorganization plan includes resuming our historical wholesale business model of licensing, designing, manufacturing and marketing designer brand women’s footwear. We are presently in discussions with several haute couture designers to license their brands. We will retain our successful pattern of building high end footwear for these licensed brands and selling the product in domestic and international markets. We will also introduce diffusion lines for the same brands at more affordable price points of $79 to $ 150. The company will continue to limit business to designer brands that highlight design aspects in order to capitalize on brand recognition.

We plan to expand our retail division by opening Shoe Bliss stores in the State of California and ultimately across the United

Item 3. Controls and Procedures

Evaluation of Disclosure and Procedures

The Company, under the supervision and with the participation of the Company's management, including the Company's principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of the Company's "disclosure controls and procedures," as such term is defined in Rules 13a-15e promulgated under the Exchange Act as of this report. Based upon that evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Limitations on the Effectiveness of Controls

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

Changes in Internal Controls

As discussed in detail in our annual report on Forms 10-KSB for the year ended December 31, 2006, and subsequent quarterly reports on Forms 10-QSB, during the second and third quarter of 2007 we undertook certain improvements to remediate material weaknesses related to our internal control over financial reporting that originally affected our year-end and quarterly filings for the period ended December 31, 2006. To remediate these material weaknesses, we made the following improvements:

During the year ended December 31, 2007, the Company retained qualified internal accounting personnel and actively engaged qualified external accounting professionals to provide the Company with up to date current guidance with respect to financial reporting and complex accounting issues affecting debt and equity-based transactions.

There were no other changes to the internal controls during the first quarter ended March 31, 2008 that have materially affected or that are reasonably likely to affect the internal controls.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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

Artful Mind Industrial, Ltd.

On March 6, 2007, the Company was served with a complaint, which Artful Mind Industrial Ltd. (“Artful Mind”) filed on March 1, 2007 alleging that the Company failed to make payments owed under a Settlement Agreement (the “Agreement”) entered into between Artful Mind, Go Moda Limited and the Company in September 27, 2006. Artful Mind seeks judgment for the full amount of all payments due, which approximates $295,000, together with interest at a rate of 9% per annum beginning on January 14, 2007 and costs of collection, including reasonable attorneys’ fees incurred. Based on the event of a default, of not timely paying the final two payments, the entire balance of all payments due were accelerated and became immediately due and interest on all unpaid amounts accrued at a rate of 9% per annum. The complaint states that the Company is currently in default on the final two payments. On October 2, 2007, a default judgment was entered for $315,055, including interest and court costs. The Company has included this amount as accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet. A restraining order on $136,847 of the Company’s cash balances at Comerica Bank was obtained and is classified as restricted cash at December 31, 2007. The Company’s senior secured lender filed a lawsuit subsequent to December 31, 2007 to block payment of these funds to Artful Minds. The matter is currently pending.

TCK Designs, LTD.

On May 11, 2007, a complaint was filed in New York by TCK Designs, LTD alleging breach of contract for terminating a purported one year agreement without making payment to the plaintiff. The plaintiff sought damages in the amount of $37,500, plus legal fees and interest. A default judgment was entered on September 24, 2007. On October 31, 2007, an Order to Show Cause with Temporary Restraints was filed in New Jersey, barring the Company’s public warehouse in New Jersey from moving goods stored at that location. On November 5, 2007, at the Company’s request, the Court granted a partial release on the restraining order allowing the Company to continue shipping goods from the public warehouse. The Company was required by the court to maintain $100,000 of goods at the warehouse and a cash deposit of $40,000 in its attorney’s trust account. The Company had the option of placing an additional $20,000 in the attorney trust account to fully release all goods in the warehouse. The Company’s senior secured lender filed a lawsuit subsequent to December 31, 2007 to block payment of these funds to Artful Minds. The court denied this request and the funds were remitted to the plaintiff.

Barry K. Rothman

Bowne of Los Angeles

On December 21, 2007 a complaint was filed in Los Angeles by Bowne of Los Angeles, Inc. for breach of contract in the approximate amount of $20,000. The matter is currently pending.

6310 San Vicente Associate, LLC

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Oscar De La Renta, Ltd

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March 31, 2008, the Company issued an additional 35,232,180 warrants to purchase common stock to Westrec under the amended Westrec warrant agreement. The Company did not recognize any expense related to these warrants they are deemed worthless due to the Chapter 11 filing on April 16, 2008.

As of March 31, 2008, Westrec had been granted a total of 141,769,424 warrants.

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

Item 3. Defaults Upon Senior Securities

The Company remains in default under an approximately $8.5 million line of credit initially provided to it by Comerica Bank which was subsequently assigned to Michael M. Sachs, the principal owner of Westrec. The Company is also in default of additional amounts owed to Westrec of approximately $3.4 Million.

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

Not Applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

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

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SIGNATURES

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


	The Fashion House Holdings, Inc.

Date: May 20, 2008	By:	/s/ John Hanna
		John Hanna
		Chief Executive Officer

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EXHIBIT INDEX

31.1		Certification of Chief Executive Officer
31.2		Certification of Interim Chief Financial Officer
32.1		Section 1350 Certifications of Chief Executive Officer and Interim Chief Financial Officer

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FASHION HOUSE HOLDINGS INC 10-Q