SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





    QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
Quarterly Period Ended December 31, 2009





or





    TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
the transition period from
         
to





Commission
File Number 0-28585





AuraSource,
Inc.


(Exact
name of registrant as specified in its charter)








Nevada
              (State
      or Other Jurisdiction of Incorporation or Organization)
            68-0427395
              (IRS
      Employer Identification No.)





1490
South Price Rd. #219


Chandler, AZ
85286


(Address
of principal executive offices, zip code)





Registrant's
telephone number (including area code): (480)
292-7179





7377
E. Doubletree Ranch Rd. #288


Scottsdale, AZ
85258


(Former
Name or Former Address, if Changed Since Last Report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


YES x    
NO 





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


Large
Accelerated Filer  Accelerated Filer  Non-accelerated Filer x 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  No x





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





Class
            
            Outstanding
      at February 15, 2009Common
      Stock, $.001 par value
            
            27,979,693











AURASOURCE,
INC.








INDEX





PART
      I
            FINANCIAL
      INFORMATIONITEM
      1.
            CONSOLIDATED
      FINANCIAL STATEMENTS:Consolidated
      Balance Sheets — December 31, 2009 (Unaudited) and March 31,
      2009Consolidated
      Statements of  Operations (Unaudited) — Three and nine months
      ended December 31, 2009 and 2008Consolidated
      Statements of Cash Flows (Unaudited) —Nine months ended December 31, 2009
      and 2008Notes
      to Consolidated Financial StatementsITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONSITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM
      4.
            CONTROLS
      AND PROCEDURESPART
      II
            OTHER
      INFORMATIONITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM
      6.
            EXHIBITS














-
2 -





PART I -
FINANCIAL INFORMATION





ITEM I — CONSOLIDATED
FINANCIAL STATEMENTS





AuraSource,
Inc.


(A
Development Stage Enterprise)


Consolidated
Balance Sheets








December
      31,
            
            
            March
      31,2009
            
            
            2009ASSETS
            
            (Unaudited)Current
      assetsCash
      and cash equivalents
            
            $
            1,937,255
            
            
            $
            145,436Prepaid
      expense
            
            
            18,837
            
            
            
            -Total
      current assets
            
            
            1,956,092
            
            
            
            145,436Fixed
      assets, net of accumulated depreciation
            
            
            33,013
            
            
            
            1,716Total
      assets
            
            $
            1,989,105
            
            
            $
            147,152LIABILITIES
      AND SHAREHOLDERS' EQUITY (DEFICIT)Current
      liabilitiesAccounts
      payable
            
            $
            63,435
            
            
            $
            10,734Accrued interest payable, related party
            
            
            -
            
            
            
            10,447Notes payable, related party
            
            
            -
            
            
            
            253,965Total
      current liabilities
            
            
            63,435
            
            
            
            275,146Commitments
      and contingenciesShareholders'
      equity (deficit)Preferred
      stock, 10,000 shares authorized, no shares issued andoutstanding,
      no rights or privileges designated
            
            
            -
            
            
            
            -Common
      stock, $.001 par value, 150,000,000 shares authorized, 27,979,693 and
      20,350,000 shares issued and outstanding at December 31, 2009 and March
      31, 2009, respectively.
            
            
            27,979
            
            
            
            20,350Additional
      paid in capital
            
            
            4,245,503
            
            
            
            476,182Accumulated
      deficit
            
            
            (2,347,812
            )
            
            
            (624,526
            )Total
      shareholders' equity (deficit)
            
            
            1,925,670
            
            
            
            (127,994
            )Total
      liabilities and shareholders' equity (deficit)
            
            $
            1,989,105
            
            
            $
            147,152The
      accompanying notes are an integral part of these consolidated financial
      statements.





-
3 -


AuraSource,
Inc.


(A
Development Stage Enterprise)


Consolidated
Statements of Operations


For
the Three and Nine months Ended December 31, 2009 and 2008 and From
Inception


(Unaudited)





For
      the three months ended December 31,
            
            
            For
      the nine months ended December 31,
            
            
            From
      March 15, 1990 (Inception) to December 31,2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            2009Revenue,
      net
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Cost
      of revenue
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Gross
      profit
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      expenses:General
      & administrative expenses
            
            
            785,284
            
            
            
            43,161
            
            
            
            1,722,347
            
            
            
            132,310
            
            
            
            2,349,025Total
      operating expenses
            
            
            785,284
            
            
            
            43,161
            
            
            
            1,722,347
            
            
            
            132,310
            
            
            
            2,349,025Loss
      from operations
            
            
            (785,284
            )
            
            
            (43,161
            )
            
            
            (1,722,347
            )
            
            
            (132,310
            )
            
            
            (2,349,025
            )Other
      income (expenses):
            
            
            3,852
            
            
            
            (4,698
            )
            
            
            (939
            )
            
            
            (13,014
            )
            
            
            1,214Net
      loss applicable to common stockholders
            
            $
            (781,432
            )
            
            $
            (47,859
            )
            
            $
            (1,723,286
            )
            
            $
            (145,324
            )
            
            $
            (2,347,811
            )Basic
      & Diluted Loss per share
            
            $
            (0.03
            )
            
            $
            (0.00
            )
            
            $
            (0.08
            )
            
            $
            (0.01
            )Weighted
      average shares outstanding
            
            
            26,449,328
            
            
            
            20,300,000
            
            
            
            22,999,670
            
            
            
            13,724,500











*Weighted
average number of shares used to compute basic and diluted loss per share is the
same since the effect of dilutive securities is anti-dilutive.





The
accompanying notes are an integral part of these consolidated financial
statements.





-
4 -


AuraSource,
Inc.


(A
Development Stage Enterprise)


Consolidated
Statements of Cash Flows


For
the Nine months Ended December 31, 2009 and 2008


(Unaudited)





2009
            
            
            2008
            
            Cumulative
      from
              March
      15, 1990
              (Inception)
      to
              December
      31, 2009Cash
      flows from operating activities:Net
      loss
            
            $
            (1,723,286
            )
            
            $
            (145,324)
            
            (2,347,811)Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
            
            
            4,051
            
            
            
            171
            
            4,393Equity
      based compensation
            
            
            1,147,453
            
            
            
            -
            
            1,189,002Fair
      value of salaries donated as capital
            
            
            
            
            
            
            
            
            151,500Changes
      in operating assets and liabilities:Prepaid
      expense
            
            
            (18,837
            )
            
            
            -
            
            (18,837
            )Accounts
      payable and accrued expenses
            
            
            52,701
            
            
            
            17,506
            
            68,446Interest
      payable
            
            
            5,009
            
            
            
            (19,562)
            
            10,447None-refundable
      deposits
            
            
            -
            
            
            
            -
            
            (100,000)Net
      cash used in operating activities
            
            
            (532,909
            )
            
            
            (147,209)
            
            (1,042,860)Cash
      flows from investing activities :Advances
      from shareholders, net
            
            
            
            
            
            
            
            
            22,725Capital
      equipment purchases
            
            
            (35,348)
            
            
            
            (2,059)
            
            (37,406)Sale
      of assets to MongSource net of cash on hand
            
            
            (88,567)
            
            
            
            -
            
            (88,568)Net
      cash used in investing activities
            
            
            (123,915)
            
            
            
            (2,059)
            
            (103,249)Cash
      flows from financing activitiesNet
      proceeds from issuance of common stock
            
            
            2,600,937
            
            
            
            200,000
            
            3,144,193Offering
      costs
            
            
            (358,018)
            
            
            
            7,500
            
            (350,518)Proceeds
      from increase of note payable
            
            
            205,724
            
            
            
            202,043
            
            459,689Repayment
      of debt
            
            
            -
            
            
            
            (170,000)
            
            (170,000)Net
      cash provided by financing activities
            
            
            2,448,643
            
            
            
            239,543
            
            3,083,364Net
      change in cash and cash equivalents
            
            
            1,791,819
            
            
            
            90,275
            
            1,937,255Cash
      and cash equivalents - beginning balance
            
            
            145,436
            
            
            
            8,686
            
            -Cash
      and cash equivalents - ending balance
            
            $
            1,937,255
            
            
            $
            98,961
            
            1,937,255Supplemental
      disclosure of cash flows information:Cash
      received/(paid) during the period for:Interest
            
            $
            -
            
            
            $
            (32,576)Income
      taxes
            
            $
            -
            
            
            $
            -The
      accompanying notes are an integral part of these consolidated financial
      statements.
              
              NonCash
      Transaction – Cash flows from operating, investing and financing
      activities were from the following noncash transaction. On June 11,
      2009, the Company sold mineral rights to a related party for the
      cancellation of a note and related interest payable totaling
      $475,146.


-
5 -


AURASOURCE,
INC.


(A
Development Stage Enterprise)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





NOTE
1.    SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Current
Operations and Background— AuraSource, a Nevada corporation,
(“AuraSource” or the “Company”) focuses on clean energy technology
development.  AuraSource developed the AuraFuelTM and
AuraCoalTM
process. AuraSource plans to form a wholly owned foreign entity in China to
acquire these types of Hydrocarbon Clean Fuel (“HCF”) technologies, performing
research and development related to HCF technology and products based on this
technology, licensing HCF technology to third parties and selling services and
products derived from this technology.





Hydrocarbon Clean Fuel (HCF)
Technology





We
believe our HCF technology, AuraCoaltm,
will be the next generation of hydrocarbon clean fuel technology. It involves
grinding coal into very fine particles, mixing it with water and selected
chemicals to make a slurry mixture and using a proprietary biological treatment
of the coal slurry mixture to reduce heavy minerals, such as
sulfur.  We believe such slurry mixture will have sufficient fluidity
to move through pipelines, process delivery piping and burner injection nozzles.
Our goal is to demonstrate to power plants and similar users that our HCF
technology can convert their plants to use the technology at a lower cost than
any current alternative.  Given sufficient capital and development of
our HCF technology, we plan to market it to plants in China and the United
States with the objective of having a beta demonstration site in each
country.





Given
sufficient capital, development and protection of our HCF technology, among
other factors, AuraSource plans to utilize the HCF technology as
follows:






            license
      HCF technology to international clients in applicable industries, such as
      coal producers and power plants.






            develop
      strategic partnerships to deliver consulting services with respect to
      design, engineering, procurement and construction for HCF
      applications.






            enter
      into joint ventures with coal producers to supply HCF treated coal to
      power plants.






            process
      coal using HCF technology and sell such coal to end users at a marked-up
      price.






            assist
      customers to convert their plants to HCF rather than oil, gas or other
      natural resources in order to save energy
costs.






            establish
      centers for processing coal with our HCF technology to supply power plants
      and other customers.





AuraCoaltm
Clean Coal Technology





AuraCoal
is patent pending technology designed to remove sulfur and ash from coal
pre-combustion. This reduces energy costs and helps to eliminate harmful
emissions. This proprietary clean coal technology produces a coal water mixture,
which contains only trace amounts of sulfur and ash and constitutes a
superb alternative to oil or natural gas. AuraCoal can be delivered via pipeline
in a non-volatile state. The conversion to an AuraCoal system is designed to
deliver immediate and substantive reductions in harmful particle emissions
as well as savings in transportation, processing and safety costs. AuraSource
plans to construct its pilot plant in mid 2010 and distribute the coal
based clean industrial fuel produced by this proprietary new generation of clean
coal technology in 2011.





-
6 -


AuraCoaltm is a
new generation of HCF technology. With the adoption of our proprietary
AuraCoaltm
Clean Coal technology, we believe we will be able to convert old coal systems
into power generating systems that produce emissions containing only trace
amounts of sulfur and ash.  We believe AuraCoaltm
technology can:






            reduce
      harmful emissions and energy costs;






            reduce
      and/or eliminate the need for
scrubbers;






            reduce
      carbon dioxide (CO2) emissions before implementation of additional carbon
      recapture technology;






            reduce
      a power plant’s need for related precipitators and/or sulfur acceptors;
      and






            enable
      a power plant to effectively manage its carbon
  emissions.





AuraFueltm





AuraSource
has also licensed another proprietary hydrocarbon clean fuel technology,
AuraFuelTM,
which utilizes a low temperature catalytic process to convert oil shale, asphalt
shale and low-ranking coal to hydrocarbon clean fuel products in a highly
efficient manner. This technology was developed by EERI, a Chinese government
owned energy research institute. The Chinese government along with an
international technical firm validated the technology. EERI patented the
technology and the production process. AuraSource licensed this technology for
Guangxi province of China and the United States.  We are currently
developing our own intellectual property associated with this
technology.  AuraSource is partnering with three Chinese companies to
start construction on a pilot plant by mid 2010 with production starting in
2011. In the United States, we are currently in our planning stages and pursuing
a suitable site on public or private lands to start a pilot plant in
2011.





The
process is an above-ground retorting technology, which has a simple and robust
design, energy self-sufficiency, minimal water usage, and high oil
yields.





The
AuraFuel process consists of the following main steps:





1)
            Crushing.
      Before retorting, raw oil shale is crushed into fine
      particles.


2)
            Catalyst
      Spraying. Before entering the retort, oil shale feed is sprayed by a
      proprietary liquid catalyst.


3)
            Retorting.
      The AuraFuel process uses an annular rotary retort that heats raw oil
      shale. Due to the rotating feature, the retorting is a continuous process.
      The annular retort consists of several zones, including heating zone,
      reaction zone and heat recovery zone. Incoming raw shale goes into the
      heating zone in which the shale is heated. Then the shale enters the
      reaction zone in which pyrolysis of oil shale happens. Most of the
      pyrolysis is complete in the reaction zone. In the heat recovery zone, the
      spent shale is cooled and waste heat is recycled. After one cycle of
      motion, the retorting process is complete and spent shale is
      discharged.


4)
            Post-processing.
      Produced oil vapors and gases are cleaned and delivered to a condensation
      system where oil condenses and non-condensable gases are fed back to the
      retort as energy sources. The oil goes through a distillation process to
      produce gasoline, diesel or residual
oil.





There can be
no assurance we will be able to carry out our development plans for our HCF
technology, including AuraCoaltmand
AuraFueltm. Our
ability to pursue this strategy is subject to the availability of additional
capital and further development of our HCF technology.  We will also
need to finance the cost of pursuing a strategy to effectively protect our
intellectual property rights in the United States and abroad where we intend to
market our technology and products.


Going Concern— The accompanying consolidated financial statements have been prepared
assuming we will continue as a going concern.  We have suffered
recurring losses from operations since our inception and have an accumulated
deficit of $2,347,812 at December 31, 2009.  The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classifications of liabilities that might be necessary should we be unable to
continue our existence.  The recovery of our assets is dependent upon
continued operations of the Company.





In
addition, our recovery is dependent upon future events, the outcome of which is
undetermined.  We intend to continue to attempt to raise additional
capital, but there can be no certainty that such efforts will be
successful.





-
7 -


Basis of
Presentation and Principles of Consolidation — The accompanying
consolidated financial statements were prepared in conformity with accounting
principles generally accepted in the United States of America (“US
GAAP”).





The
unaudited consolidated financial statements were prepared by us pursuant to the
rules and regulations of the Securities and Exchange Commission (“SEC”). The
information furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) which are, in the opinion of management,
necessary to fairly present the operating results for the respective periods.
Certain information and footnote disclosures normally present in annual
consolidated financial statements prepared in accordance with US GAAP have been
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and footnotes for the year ended March 31, 2009 included in our
Annual Report on Form 10-K. The results of the nine months ended December 31,
2009 are not necessarily indicative of the results to be expected for the full
year ending March 31, 2010.





Use of Estimates— The preparation of consolidated financial statements in conformity with
US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.





Cash and Cash
Equivalents— We consider investments with original maturities of
90 days or less to be cash equivalents.





Income
Taxes — The Company accounts for income taxes in accordance with ASC
Topic 740.  Deferred tax assets and liabilities are recognized to reflect
the estimated future tax effects, calculated at currently effective tax rates,
of future deductible or taxable amounts attributable to events that have been
recognized on a cumulative basis in the financial statements. A valuation
allowance related to a deferred tax asset is recorded when it is more likely
than not that some portion of the deferred tax asset will not be
realized.





Stock-Based
Compensation— The Company recognizes the cost of employee services
received in exchange for an award of equity instruments in the consolidated
financial statements over the period the employee is required to perform the
services in exchange for the award.





Net Income (Loss)
Per Share — The Company computes basic and diluted net loss per share by
dividing the net loss available to common stockholders for the period by the
weighted average number of shares of common stock outstanding during the
period.  Common equivalent shares related to stock options and warrants
were excluded from the computation of basic and diluted earnings per share, for
the nine months ended December 31, 2008 and 2009 because their effect is
anti-dilutive.





Concentration of
Credit Risk — Financial instruments that potentially subject the Company
to a concentration of credit risk consist of cash.  The Company
maintains its cash with high credit quality financial institutions; at times,
such balances with any one financial institution may exceed FDIC insured
limits.





Financial
Instruments and Fair Value of Financial Instruments — Our financial
instruments consist of cash and accounts payable.  The carrying values
of cash, accounts payable, and notes payable are representative of their fair
values due to their short-term maturities. We measure the fair value of
financial assets and liabilities on a recurring basis. Fair value is defined as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. Fair value measurements are to be considered from the
perspective of a market participant that holds the asset or owes the liability.
We also establish a fair value hierarchy which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.




The
standard describes three levels of inputs that may be used to measure fair
value:





Level 1:
            
            Quoted
      prices in active markets for identical or similar assets and
      liabilities.Level 2:
            
            Quoted
      prices for identical or similar assets and liabilities in markets that are
      not active or observable inputs other than quoted prices in active markets
      for identical or similar assets and liabilities.Level 3:
            
            Unobservable
      inputs that are supported by little or no market activity and that are
      significant to the fair value of the assets or
  liabilities.





-
8 -


The
carrying amount of the Company’s financial assets and liabilities, including
cash and accrued expenses approximate fair value, without being discounted, due
to the short-term maturities during which these amounts are
outstanding.





Recent Accounting
Pronouncements





On July
1, 2009, the Company adopted Accounting Standards Update (“ASU”) No.
2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments
based on Statement of Financial Accounting Standards No. 168 , “The FASB
Accounting Standards CodificationTM and the Hierarchy of Generally Accepted
Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01
re-defines authoritative US GAAP for nongovernmental entities to be only
comprised of the FASB Accounting Standards CodificationTM (“Codification”) and,
for SEC registrants, guidance issued by the SEC.  The Codification is
a reorganization and compilation of all then-existing authoritative US GAAP for
nongovernmental entities, except for guidance issued by the SEC.  The
Codification is amended to effect non-SEC changes to authoritative US
GAAP.  Adoption of ASU No. 2009-01 only changed the referencing
convention of US GAAP in  Notes to the Consolidated Financial
Statements.





In April
2009, the Financial Accounting Standards Board (“FASB”) issued FSP
No. SFAS 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly” (“FSP No. SFAS 157-4”). FSP
No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and
820-10-50-2, provides additional guidance for estimating fair value and
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009.
This FSP had no material impact on the Company’s financial position, results of
operations or cash flows.




In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments,” which is
codified in FASB ASC Topic 320-10. This FSP modifies the requirements for
recognizing other-than-temporarily impaired debt securities and changes the
existing impairment model for such securities. The FSP also requires additional
disclosures for both annual and interim periods with respect to both debt and
equity securities. Under the FSP, impairment of debt securities will be
considered other-than-temporary if an entity (1) intends to sell the
security, (2) more likely than not will be required to sell the security
before recovering its cost, or (3) does not expect to recover the
security’s entire amortized cost basis (even if the entity does not intend to
sell). The FSP further indicates that, depending on which of the above
factor(s) causes the impairment to be considered other-than-temporary,
(1) the entire shortfall of the security’s fair value versus its amortized
cost basis or (2) only the credit loss portion would be recognized in
earnings while the remaining shortfall (if any) would be recorded in other
comprehensive income. This FSP requires entities to initially apply the
provisions of the standard to previously other-than-temporarily impaired debt
securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulated other comprehensive income. The Company adopted FSP
No. SFAS 115-2 and SFAS 124-2 beginning April 1, 2009. This
FSP had no material impact on the Company’s financial position, results of
operations or cash flows.




In
April 2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments,” which is codified in
FASB ASC Topic 825-10-50.  This FSP essentially expands the disclosure
about fair value of financial instruments that were previously required only
annually to also be required for interim period reporting. In addition, the FSP
requires certain additional disclosures regarding the methods and significant
assumptions used to estimate the fair value of financial instruments. These
additional disclosures are required beginning with the quarter ending
June 30, 2009.







In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” codified in FASB ASC
Topic 855-10-05, which provides guidance to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. SFAS
No. 165 also requires entities to disclose the date through which subsequent
events were evaluated as well as the rationale for why that date was selected.
SFAS No. 165 is effective for interim and annual periods ending after June 15,
2009, and accordingly, the Company adopted this pronouncement during the second
quarter of 2009. SFAS No. 165 requires that public entities evaluate subsequent
events through the date that the financial statements are issued. The Company
has evaluated subsequent events through the time of filing these financial
statements with the SEC on February 15, 2010.


-
9 -





In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets — an amendment of FASB Statement No. 140,”  codified as FASB
ASC Topic 860, which requires entities to provide more information regarding
sales of securitized financial assets and similar transactions, particularly if
the entity has continuing exposure to the risks related to transferred financial
assets. SFAS No. 166 eliminates the concept of a “qualifying special-purpose
entity,” changes the requirements for derecognizing financial assets and
requires additional disclosures. SFAS No. 166 is effective for fiscal years
beginning after November 15, 2009. The Company does not believe the adoption of
SFAS No. 166 will have an impact on its financial condition, results of
operations or cash flows.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R),” codified as FASB ASC Topic 810-10, which modifies how a company
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. SFAS No.
167 clarifies that the determination of whether a company is required to
consolidate an entity is based on, among other things, an entity’s purpose and
design and a company’s ability to direct the activities of the entity that most
significantly impact the entity’s economic performance. SFAS No. 167 requires an
ongoing reassessment of whether a company is the primary beneficiary of a
variable interest entity. SFAS No. 167 also requires additional disclosures
about a company’s involvement in variable interest entities and any significant
changes in risk exposure due to that involvement. SFAS No. 167 is effective for
fiscal years beginning after November 15, 2009. The Company does not believe the
adoption of SFAS No. 167 will have an impact on its financial condition, results
of operations or cash flows.





NOTE
2 – NOTE PAYABLE





On July
8, 2008, all debts and accrued interest were satisfied with C.W. Gilluly and
Affinity Financial Group, Inc. (“AFG”).





On July
11, 2008, we entered into a Revolving Promissory Note (the “Note”) with
Mongsource USA, LLC, the majority stockholder of the Company.  
Through June 11, 2009, Mongsource USA, LLC had advanced us approximately
$475,000.  Additionally, on September 6, 2008, we entered into an
Exploration Licenses Transfer Agreement, with Mongsource USA, LLC. , under which
Mongsource USA agreed to transfer to the Company three mineral exploration
licenses in Mongolia.





On June
11, 2009, we entered into an agreement with MongSource USA, LLC where by we
transferred all rights and ownership interests in our assets relating to the
exploration and development of mineral resources which includes all assets of
AuraSourse LLC, a Mongolian subsidiary, in exchange for the forgiveness of the
Note and all amounts due under the Note.  We recorded a capital
contribution of $386,578 to additional paid in capital to account for this
agreement.





NOTE
3 – DISCONTINUED OPERATIONS





As explained in Note 2, on June 11,
2009, we entered into an agreement with MongSource USA, LLC where by we
transferred all rights and ownership interests in our assets relating to the
exploration and development of mineral resources which includes all assets of
AuraSourse LLC, a Mongolian subsidiary, in exchange for the forgiveness of the
Note and all amounts due under the Note.





NOTE
4 - CONCENTRATION OF CREDIT RISK





We maintain our
cash balances in various financial institutions that from time to time exceed
amounts insured by the Federal Deposit Insurance Corporation (up to $250,000,
per financial institution as of December 31, 2009). As of December 31, 2009, our
deposits exceeded insured amounts by $1,687,255.  We have not
experienced any losses in such accounts and we believe we are not exposed to any
significant credit risk on cash.





On May 8, 2009, MongSource USA LLC on
behalf of AuraSource, Inc. transferred $200,000 to Timeway International Ltd.
(“TIL”) in Beijing, China to hold in trust for AuraSource.   TIL
is controlled by our CEO, Philip Liu.  TIL agrees to hold these funds
in trust at Bank of China and use for AuraSource business acitivities in
China.





-
10 -


NOTE
5 – STOCK ISSUANCE





On May
28, 2009, the Board of Directors granted Mr. Liu 1,000,000 restricted shares for
his services from July 8, 2008 until May 31, 2009.   During such time,
Mr. Liu received no other compensation. Additionally, the Board of Directors
granted Mr. Liu, Mr. Kohler and Mr. Stoppenhagen 100,000 shares of restricted
stock which vests the earlier of two years or termination from the
board.  The Company recorded stock compensation arising from the
grants of $13,407 and $650,000 during the three and nine months ended December
31, 2009, respectively.





On
October 22, 2009, the Company completed a private placement to certain
institutional and accredited investors (“Investors”) pursuant to which the
Company sold 5,279,693 shares of the Company’s common stock resulting in gross
proceeds of $2,639,847. The Company intends to use proceeds of the offering for
working capital and to develop a pilot plant in the Gulf of Tonkin Economic and
Development Area which utilizes a low temperature catalytic process to reform
oil shale, asphalt shale and low-ranking coal to hydrocarbon clean fuel products
in a highly-efficient manner. The Company has no material relationship with any
of the institutional and accredited investors participating in the private
placement offering other than in respect of the Subscription
Agreements.





In
connection with the closing of the private placement offering, the Company paid
a commission of $263,985 to Source Capital Group, Inc. as exclusive agents for
the private placement offering and will issue to Source Capital Group, Inc.
527,969 three year warrants.





On
November 2, 2009, the Board of Directors granted Mr. Liu, Mr. Kohler and Mr.
Stoppenhagen 100,000 shares of restricted stock which vests the earlier of two
years or termination from the board.  The Company recorded stock
compensation arising from the grants of $150,000 during the three and nine
months ended December 31, 2009.





On
December 18, 2009, the Board of Directors granted two consultants 800,000 shares
of restricted stock 600,000 of which vests immediately and 200,000 of which
vests quarterly over three years.  The Company recorded stock
compensation arising from the grants of $308,333 during the three and nine
months ended December 31, 2009.





NOTE
6 - STOCK OPTIONS





In
January 2009, we granted 60,000 options to purchase shares of our common stock
at an exercise price of $3.50 to our Board of Directors. The options vest
quarterly starting January 1, 2009 and have an expiration period of 10
years.  We will record compensation expense in the quarters in which the
options vest.  The Company has assumed all stock options issued during
the quarter will vest.   Though these expenses will result in a
deferred tax benefit, we have a full valuation allowance against the deferred
tax benefit.





The
Company adopted the detailed method provided in  ASC 718 for
calculating the beginning balance of the additional paid-in capital pool (“APIC
pool”) related to the tax effects of employee stock-based compensation, and to
determine the subsequent impact on the APIC pool and Consolidated Statements of
Cash Flows of the income tax effects of employee stock-based compensation awards
that are outstanding.





The fair
value of each stock option granted is estimated on the grant date using the
Black-Scholes option pricing model.  The Black-Scholes option pricing
model has assumptions for risk free interest rates, dividends, stock volatility
and expected life of an option grant.  The risk free interest rate is
based upon market yields for United States Treasury debt securities at a 7-year
constant maturity.  Dividend rates are based on the Company’s dividend
history.  The stock volatility factor is based on the last 60 days of
market prices prior to the grant date.  The expected life of an option
grant is based on management’s estimate.  The fair value of each
option grant, as calculated by the Black-Scholes method, is recognized as
compensation expense on a straight-line basis over the vesting period of each
stock option award.





-
11 -


The
following assumptions were used to determine the fair value of stock options
granted using the Black-Scholes option-pricing model:





2009Dividend
      yield
            
            
            0.0
            %Volatility
            
            
            25
            %Average
      expected option life
            
            5.00
      yearsRisk-free
      interest rate
            
            
            1.76
            %





The
following table summarizes activity in the Company's stock option grants for the
nine months ending December 31, 2009:





Number
      of
              Shares
            
            
            Weighted
      Average Price Per ShareBalance
      at March 31, 2008
            
            
            —
            
            
            $
            —Granted
            
            
            60,000
            
            
            
            3.50Balance
      at March 31, 2009
            
            
            60,000
            
            
            
            3.50Balance
      at December 31, 2009
            
            
            60,000
            
            
            $
            3.50





The
following summarizes pricing and term information for options issued to
employees and directors which are outstanding as of December 31,
2009:





Options
      Outstanding
            
            Options
      ExercisableRange
      of Exercise Prices
            
            Number
      Outstanding at December 31, 2009
            
            Weighted
      Average Remaining Contractual
              Life
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2009
            
            Weighted
      Average Exercise Price$3.50
            
            
            60,000
            
            
            9.00
            
            
            $3.50
            
            
            60,000
            
            
            $3.50





NOTE
7 - EARNINGS PER SHARE





The
following table sets forth common stock equivalents (potential common stock) for
the nine months ended December 31, 2009 and 2008 that are not included in the
loss per share calculation above because their effect would be anti-dilutive for
the periods indicated:





Nine
      months Ended December 31,2009
            
            
            2008Weighted
      average common stock equivalents:Non-Plan
      Stock Options
            
            
            60,000
            
            
            
            —





-
12 -


NOTE
8 – RELATED PARTY TRANSACTIONS





On July
11, 2008, we entered into a Revolving Promissory Notewith Mongsource, our
majority stockholder. Under the terms of the Note, Mongsource agreed to advance
to the Company, from time to time and upon request of the Company, amounts up to
$500,000 during the commitment period, commencing July 11, 2008 and expiring
December 31, 2009 (the “Expiration Date”). The Note accrues interest at 10%. All
advances made under the Note and all accrued and unpaid interest thereon due and
payable on the Expiration Date. The Note included customary default provisions
and provides that all obligations under the Note will accelerate and become
immediately due and payable upon the occurrence of an event of default,
including default in payment, breach by the Company of any material provisions
of the Note, or the commencement and continuation of a bankruptcy proceeding.
The Note provided that upon the occurrence of an event of default, Mongsource
will hold a first credit position on the entire amount owed on the Note,
including the all unpaid principal and interest and interest will continue to
accrue after the event of default at 10% or the legal rate of interest,
whichever is lower.





In
December 2008, we entered into an agreement with a firm affiliated with Mr. John
P. Boesel, III, who is a Senior Vice President and Branch Manager of Source
Capital Group which was paid a commission of $263,985 to Source Capital Group,
Inc., $52,797 for unaccountable expenses and was issued 527,969 three year
warrants.  Mr. Boesel is also a founding investor and director of
Mongsource BVI and a member, manager and founding investor of
Mongsource.





On June
11, 2009, we entered into an agreement with MongSource USA, LLC where by we
transferred all rights and ownership interests in our assets relating to the
exploration and development of mineral resources which includes all assets of
AuraSourse LLC, a Mongolian subsidiary, in exchange for the forgiveness of the
Note and all amounts due under the Note. We recorded a capital contribution of
$386,578 to additional paid in capital as of the result of this
agreement.





-
13 -


ITEM
2 .  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





The
information contained in this Form 10-Q is intended to update the information
contained in our Annual Report on Form 10-K for the year ended March 31, 2009
and presumes that readers have access to, and will have read, the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
other information contained in such Form 10-K.  The following
discussion and analysis also should be read together with our consolidated
financial statements and the notes to the consolidated financial statements
included elsewhere in this Form 10-Q.





The
following discussion contains certain statements that may be deemed
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995.  Such statements appear in a number of
places in this Report, including, without limitation, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”  These
statements are not guarantees of future performance and involve risks,
uncertainties and requirements that are difficult to predict or are beyond our
control.  Forward-looking statements speak only as of the date of this
quarterly report. You should not put undue reliance on any forward-looking
statements.  We strongly encourage investors to carefully read the
factors described in our Annual Report on Form 10-K for the year ended March 31,
2009 in the section entitled “Risk Factors” for a description of certain risks
that could, among other things, cause actual results to differ from these
forward-looking statements. We assume no responsibility to update the
forward-looking statements contained in this quarterly report on Form 10-Q. The
following should also be read in conjunction with the unaudited consolidated
financial statements and notes thereto that appear elsewhere in this
report.





Overview





AuraSource,
a Nevada corporation, focuses on clean energy technology
development.  AuraSource developed the AuraFuelTM and
AuraCoalTM
process. AuraSource plans to form a wholly owned foreign entity in China to
acquire these types of HCF technologies, performing research and development
related to HCF technology and products based on this technology, licensing HCF
technology to third parties and selling services and products derived from this
technology.





Hydrocarbon Clean Fuel (HCF)
Technology





We
believe our HCF technology, AuraCoaltm,
will be the next generation of hydrocarbon clean fuel technology. It involves
grinding coal into very fine particles, mixing it with water and selected
chemicals to make a slurry mixture and using a proprietary biological treatment
of the coal slurry mixture to reduce heavy minerals, such as
sulfur.  We believe such slurry mixture will have sufficient fluidity
to move through pipelines, process delivery piping and burner injection nozzles.
Our goal is to demonstrate to power plants and similar users that our HCF
technology can convert their plants to use the technology at a lower cost than
any current alternative.  Given sufficient capital and development of
our HCF technology, we plan to market it to plants in China and the United
States with the objective of having a beta demonstration site in each
country.





Given
sufficient capital, development and protection of our HCF technology, among
other factors, AuraSource plans to utilize the HCF technology as
follows:






            license
      HCF technology to international clients in applicable industries, such as
      coal producers and power plants.






            develop
      strategic partnerships to deliver consulting services with respect to
      design, engineering, procurement and construction for HCF
      applications.






            enter
      into joint ventures with coal producers to supply HCF treated coal to
      power plants.






            process
      coal using HCF technology and sell such coal to end users at a marked-up
      price.






            assist
      customers to convert their plants to HCF rather than oil, gas or other
      natural resources in order to save energy
costs.






            establish
      centers for processing coal with our HCF technology to supply power plants
      and other customers.





-
14 -





AuraCoaltm
Clean Coal Technology





AuraCoal
is patent pending technology designed to remove sulfur and ash from coal
pre-combustion. This reduces energy costs and helps to eliminate harmful
emissions. This proprietary clean coal technology produces a coal water mixture,
which contains only trace amounts of sulfur and ash and constitutes a superb
alternative to oil or natural gas. AuraCoal can be delivered via pipeline in a
non-volatile state. The conversion to an AuraCoal system is designed to
deliver and substantive reductions in harmful particle emissions as
well as savings in transportation, processing and safety costs. AuraSource plans
to construct its pilot plant in mid 2010 and distribute the coal based
clean industrial fuel produced by this proprietary new generation of clean coal
technology in 2011.





AuraCoaltm is a
new generation of HCF technology. With the adoption of our proprietary
AuraCoaltm
Clean Coal technology, we believe we will be able to convert old coal systems
into power generating systems that produce emissions containing only trace
amounts of sulfur and ash.  We believe AuraCoaltm
technology can:






            reduce
      harmful emissions and energy costs;






            reduce
      and/or eliminate the need for
scrubbers;






            reduce
      carbon dioxide (CO2) emissions before implementation of additional
      carbon recapture technology;






            reduce
      a power plant’s need for related precipitators and/or sulfur acceptors;
      and






            enable
      a power plant to effectively manage its carbon
  emissions.





AuraFueltm





AuraSource
has also licensed another proprietary hydrocarbon clean fuel technology,
AuraFuelTM,
which utilizes a low temperature catalytic process to convert oil shale, asphalt
shale and low-ranking coal to hydrocarbon clean fuel products in a highly
efficient manner. This technology was developed by EERI, a Chinese government
owned energy research institute. The Chinese government along with an
international technical firm validated the technology. EERI patented the
technology and the production process. AuraSource licensed this technology for
Guangxi province of China and the United States.  We are currently
developing our own intellectual property associated with this
technology.  AuraSource is partnering with three Chinese companies to
start construction on a pilot plant by mid 2010 with production starting in
2011. In the United States, we are currently in our planning stages and pursuing
a suitable site on public or private lands to start a pilot plant in
2011.





The
process is an above-ground retorting technology, which has a simple and robust
design, energy self-sufficiency, minimal water usage, and high oil
yields.





The
AuraFuel process consists of the following main steps:





1.
            Crushing.
      Before retorting, raw oil shale is crushed into fine
      particles.


2.
            Catalyst
      Spraying. Before entering the retort, oil shale feed is sprayed by a
      proprietary liquid catalyst.


3.
            Retorting.
      The AuraFuel process uses an annular rotary retort that heats raw oil
      shale. Due to the rotating feature, the retorting is a continuous process.
      The annular retort consists of several zones, including heating zone,
      reaction zone and heat recovery zone. Incoming raw shale goes into the
      heating zone in which the shale is heated. Then the shale enters the
      reaction zone in which pyrolysis of oil shale happens. Most of the
      pyrolysis is complete in the reaction zone. In the heat recovery zone, the
      spent shale is cooled and waste heat is recycled. After one cycle of
      motion, the retorting process is complete and spent shale is
      discharged.


4.
            Post-processing.
      Produced oil vapors and gases are cleaned and delivered to a condensation
      system where oil condenses and non-condensable gases are fed back to the
      retort as energy sources. The oil goes through a distillation process to
      produce gasoline, diesel or residual
oil.





There can
be no assurance we will be able to carry out our development plans for our HCF
technology, including AuraCoaltmand
AuraFueltm. Our
ability to pursue this strategy is subject to the availability of additional
capital and further development of our HCF technology.  We will also
need to finance the cost of pursuing a strategy to effectively protect our
intellectual property rights in the United States and abroad where we intend to
market our technology and products.


-
15 -





Critical Accounting Policies
and Estimates





The
preparation of our consolidated financial statements in conformity with US GAAP
requires management to make estimates, judgments and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amount of expenses during the reporting period. On an ongoing basis, we
evaluate our estimates which are based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances.
The result of these evaluations forms the basis for making judgments about the
carrying values of assets and liabilities and the reported amount of expenses
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions. The following accounting policies
require significant management judgments and estimates:





We
account for our business acquisitions under the purchase method of accounting.
The total cost of acquisitions is allocated to the underlying net assets, based
on their respective estimated fair values. The excess of the purchase price over
the estimated fair value of the tangible net assets acquired is recorded as
intangibles. Determining the fair value of assets acquired and liabilities
assumed requires management's judgment and often involves the use of significant
estimates and assumptions, including assumptions with respect to future cash
inflows and outflows, discount rates, asset lives, and market multiples, among
other items.





We assess
the potential impairment of long-lived assets and identifiable intangibles by
testing for recoverability whenever events or changes in circumstances indicate
that the carrying amount of the long-lived asset exceeds its fair value. An
impairment loss is recognized only if the carrying amount of the long-lived
asset exceeds its fair value and is not recoverable.





We base
out estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. There can be no assurance that
actual results will not differ from these estimates.





Results
of Operations





For the Three Month Ended
December 31, 2009 and 2008





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses were $785,284 and $43,161 for the three
months ended December 31, 2009 and 2008, respectively.  The increase
of $742,123 in expense was due to the commencement of operations in China and
stock based compensation.





Interest
Income, Interest Expense and Other





Interest
income/(expense) and other was $3,852 and $(4,698) for the quarters ended
December 31, 2009 and 2008, respectively.  The increase in interest
income is the result of higher cash balances.




For the Nine months Ended
December 31, 2009 and 2008





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses were $1,722,347 and $132,310 for the nine
months ended December 31, 2009 and 2008, respectively.  The increase
of $1,590,037in expense was due to the commencement of operations in China and
stock based compensation.





Interest
Income, Interest Expense and Other





Interest
expense and other was $939 and $13,014 for the nine months ended December 31,
2009 and 2008, respectively.  The decrease in interest expense is due
to the decrease in note payable and higher cash balances.


-
16 -





Liquidity and Capital
Resources





Net cash
used in operating activities was $532,909 and $147,209 in the nine months ended
December 31, 2009 and 2008, respectively.  The increase was primarily
due to the commencement of operations and stock based compensation.





Net cash
used in investing activities was $123,915 and 2,059 in the nine months ended
December 31, 2009 and 2008, respectively.  The increase was due to the
transferring of all rights and ownership interests in assets relating to the
exploration and development of mineral resources to Mongsource and the purchase
of capital equipment in China.





Net cash
provided by financing activities was $2,448,643 and $239,543 in the nine months
ended December 31, 2009 and 2008, respectively.  The difference of
$2,209,100 in cash provided by financing activities was primarily due to
proceeds from the issuance of common stock as discussed below.





On July
11, 2008, we entered into the Note with Mongsource USA the majority stockholder
of the Company.  Under the terms of the Note, Mongsource USA agreed to
advance to the Company, from time to time and at the request of the Company,
amounts up to an aggregate of $500,000 until March 31, 2009.  All
advances shall be paid on or before June 30, 2009 and interest shall accrue from
the date of any advances on any principal amount withdrawn, and on accrued and
unpaid interest thereon, at 10%. On June 11, 2009, we entered into an agreement
with MongSource USA, LLC where by we transferred all rights and ownership
interests in our assets relating to the exploration and development of mineral
resources which includes all assets of AuraSourse LLC, a Mongolian subsidiary,
in exchange for the forgiveness of the Note and all amounts due under the
Note.





On
October 22, 2009, the Company completed a private placement offering to certain
institutional Investors pursuant to which the Company sold an aggregate of
5,279,693 shares of the Company’s common stock resulting in gross proceeds of
$2,639,847 to the Company. The Company intends to use proceeds of the offering
for working capital and to develop a pilot plant in the Gulf of Tonkin Economic
and Development Area which utilizes a low temperature catalytic process to
reform oil shale, asphalt shale and low-ranking coal to hydrocarbon clean fuel
products in a highly-efficient manner. The Company has no material relationship
with any of the institutional and accredited investors participating in the
private placement offering other than in respect of the Subscription
Agreements.





The
Company suffered recurring losses from operations and has an accumulated deficit
of $2,347,812 at December 31, 2009.  Currently, we have not generated
any revenues. The Company is seeking various forms of
financing.





Inflation and
Seasonality





Inflation
has not been material to us during the past five years. Seasonality has not been
material to us.





Recent Accounting
Pronouncements







There
have been no recent accounting pronouncements





Off-Balance
Sheet Arrangements- We have no off-balance sheet
arrangements.





-
17 -


ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





As a “smaller reporting company” as
defined by Rule 229.10(f)(1), we are not required to provide the information
required by this Item 3.








ITEM
4 - CONTROLS AND PROCEDURES





EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES.   Our management, with the participation of our
president and our chief financial officer, carried out an evaluation of the
effectiveness of our "disclosure controls and procedures" (as defined in
the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e)
and 15-d-15(e)) as of the end of the period covered by this report (the
"Evaluation Date"). Based upon that evaluation, our President and our
Chief Financial Officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in the reports that we file or submit under
the Exchange Act (i) is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms and (ii) is
accumulated and communicated to our management, including our President and
our Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.





CHANGES IN INTERNAL CONTROL OVER
FINANCIAL REPORTING.   There were no changes in our internal
controls over financial reporting that occurred during the quarter ended
December 31, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting. We believe
that a control system, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the control system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within any company have been
detected.





PART II - OTHER
INFORMATION


ITEM
1 – LEGAL PROCEEDINGS





Not
applicable





ITEM 1A – RISK
FACTORS





In
addition to the other risk factors and information set forth in this
report, you should carefully consider the factors discussed in Part I, “Item 1A.
Risk Factors” in our Annual Report on Form 10-K for the year ended March 31,
2009, which could materially affect our business, financial condition or future
results. The risks described in our Annual Report on Form 10-K are not the only
risks facing the Company. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition, operating results and/or cash
flows.





ITEM 2
            -
      UNREGISTERED SALES OF EQUITY
SECURITIES





None





ITEM 3
            -
      DEFAULTS UPON SENIOR SECURITIES




None





ITEM
4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None





ITME
      5
            -
      OTHER INFORMATION




None


-
18 -





ITEM
6.


Exhibit
            
            Description31.1
            
            Certification
      of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14
      as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
      2002.31.2
            
            Certification
      of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14
      as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
      2002.32
            
            Certification
      of the Company’s Chief Executive Officer and Chief Financial Officer,
      pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.





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19 -





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.





AURASOURCE,
      INC.Date:
      February 15, 2009
            /s/ 
      PHILIP LIUName:
      PhilipTitle: Chief
      Executive OfficerDate:
      February 15, 2009
            /s/ 
      ERIC STOPPENHAGENName:
      Eric StoppenhagenTitle: Chief
      Financial Officer














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20 -


EXHIBIT
INDEX





Exhibit
            
            Description31.1
            
            Certification
      of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14
      as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
      2002.31.2
            
            Certification
      of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14
      as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
      2002.32
            
            Certification
      of the Company’s Chief Executive Officer and Chief Financial Officer,
      pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.