UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-K




(Mark
One)




x
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
fiscal year ended December 31,
2009




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




For the
transition period from 
to __________




Commission
File Number:  000-53643




Aurios
Inc.


(Exact
name of registrant as specified in its charter)




Arizona
              86-1037558(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)





1741 W. University Drive, Suite
      146
              Tempe,
      AZ 85281(Address
      of principal executive offices)(602)
      321-1313(Registrant’s
      telephone number, including area code)___________________________________________________________(Former
      name, former address and former fiscal year, if changed since last
      report)




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




Securities
registered pursuant to Section 12(g) of the Act:




Common
      Stock, no par value(Title
      of class)




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.    Yes    ̈   No x




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




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  ̈    No
 ̈




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




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   ̈ (Do not check if
      a smaller reporting company)
              
              Smaller reporting company  x




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




As of
June 30, 2009, the last business day of the registrant’s most recently
completed second fiscal quarter, there was no aggregate market value of the
registrant’s common stock held by non-affiliates of the registrant because the
registrant’s common stock was not yet trading or listed on the OTC Bulletin
Board.




There
were 3,678,000 shares of the registrant’s common stock issued and outstanding as
of March 29, 2010.




Documents
Incorporated by Reference:  None.





FORM
10-K


AURIOS
INC.


DECEMBER
31, 2009




Table
of Contents




PagePART IItem
      1.
                      Business
                      1Item
      1a.
                      Risk
      Factors
                      7Item
      1b.
                      Unresolved
      Staff Comments
                      12Item
      2.
                      Properties
                      12Item
      3.
                      Legal
      Proceedings
                      12Item
      4.
                      [Reserved]
                      12PART IIItem
      5.
                      Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                      12Item
      6.
                      Selected
      Financial Data
                      13Item
      7.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      13Item
      7a.
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      16Item
      8.
                      Financial
      Statements and Supplementary Data
                      16Item
      9.
                      Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure
                      16Item
      9A(T).
                      Controls
      and Procedures
                      16Item
      9B.
                      Other
      Information
                      17PART IIIItem
      10.
                      Directors,
      Executive Officers and Corporate Governance
                      17Item
      11.
                      Executive
      Compensation
                      21Item
      12.
                      Security
      Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters
                      23Item
      13.
                      Certain
      Relationships and Related Transactions, and Director
      Independence
                      24Item
      14.
                      Principal
      Accounting Fees and Services
                      25PART IVItem
      15.
                      Exhibits,
      Financial Statement Schedules
                      26Signature
      Page
                      28










Note
Regarding Forward Looking Statements




This
Annual Report contains forward-looking statements as that term is defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,” “expects,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,”
“continue,” “intends,” and other variations of these words or comparable words.
In addition, any statements that refer to expectations, projections or other
characterizations of events, circumstances or trends and that do not relate to
historical matters are forward-looking statements. These forward-looking
statements are based largely on our expectations or forecasts of future events,
can be affected by inaccurate assumptions, and are subject to various business
risks and known and unknown uncertainties, a number of which are beyond our
control. Therefore, actual results could differ materially from the
forward-looking statements contained in this document, and readers are cautioned
not to place undue reliance on such forward-looking statements. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled “Risk Factors” that
may cause our or our industry’s actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.




Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. Except as required
by law, we do not undertake to update or revise any of the forward-looking
statements to conform these statements to actual results, whether as a result of
new information, future events or otherwise.




As used
in this annual report, “Aurios,” the “Company,” “we,” “us,” or “our” refer to
Aurios Inc., unless otherwise indicated.




PART
I




ITEM
1. BUSINESS.




We
produce, market and distribute vibration isolation products to the high-end
audio and video markets in the United States and in certain foreign countries.
Our products are the following: the Aurios Classic Media Isolation Bearing (the
“Classic MIB”), the Aurios Pro Max Media Isolation Bearing (the “Pro Max MIB”),
and the Aurios Isotone Media Isolation Bearing (the “Isotone MIB”); the Series
100 Component Shelf, a shelf product; and Pivot Points, a spike mount product.
We sell the last of the foregoing bearings products to one distributor and it is
a variation of the Classic MIB. The manner in which the bearings alter body wave
transmissions is a function of material selection, surface harness and material
volume, to name just a few of the parameters that will impact how the sound is
reproduced.




The Pro
Max MIB replaces the Aurios Pro bearing, and is engineered to offer the same
performance and at an attractive wholesale price of between $250 and $349 for a
package of three. The size of the Pro Max MIB is approximately one inch high and
two and one-half inches in diameter. The Pro Max MIB:




•
            re-configures
      the effective mass of the original Pro bearing and adds 2% more mass to
      the critical wave pathway;




•
            reduces
      the critical surface contact areas by 25%, thus enhancing the level of
      decoupling; and




•
            reduces
      costs through its new symmetrical
design.




The Pro
Max MIB is the largest bearing that we offer and is ideal for large speakers.
These bearings can be used in a home, in a recording studio and on stage. The
weight capacity per bearing is 500 lbs (227 kgs). The Pro Max MIB can be used
under DVD/CD players, amps, preamps, turntables and power
conditioners.




The
Classic MIB lacks the girth of the Pro Max MIB bearings. This slimmed down model
is the most popular bearing in the Aurios product line. These bearings are also
placed under amps, preamps, CD/DVD players, turntables, speakers and power
conditioners. The price of the Classic MIB is from $99 to $199 on a wholesale
basis for a box of three.The size of the Classic MIB is approximately one inch high and one and
one-half inches in diameter.


1




We also
offer a shelf product,the Series 100 Component Shelf,that incorporates our
bearings products and a spike mount that is used to support equipment and reduce
the effects of vibrations. The shelf product incorporates four bearings, is
placed on the floor and a speaker is placed on the shelf. The Series 100
Component Shelf provides the same level of isolation as our bearings product.
Our spike mounts, Pivot Points, are used to support equipment and reduce the
effects of vibrations. The Pivot Points product is not as effective as our Media
Isolation Bearing products, but it can be sold at a much lower
price.




Our
vibration isolation products produce superior sound quality by sharpening, not
softening, the sound. Advanced Vibration Technologies Inc., an Arizona
corporation (“AVT”), holds the patents respecting our products in the United
States and Taiwan. AVT has granted us a non-exclusive world-wide license to sell
the products under the patents (the “AVT License”). The AVT License
automatically renews every year as long as we are in compliance with its terms.
We pay AVT a royalty of 5% of our net sales for the license. On March 26, 2010,
True Gravity Enterprises, Inc. (“TGE”) sold the federally registered trademark
respecting the “Aurios” name to us for nominal consideration. We outsource the
manufacture of our products to several qualified machine shops in the Phoenix
metropolitan area.




Our
annual sales have declined from approximately $255,000 in 2001, on an unaudited
basis, to current levels. The initial downward trend in sales was due to a poor
working relationship with our first distributor. Payment from this first
distributor was slow and we wrote off approximately $75,000 (unaudited) worth of
returned inventory in 2003. We then attempted to sell the product directly and
were not successful. The next distributor we selected was too small to sell a
large quantity of product. By mid-2004, we only had one distributor, located in
Chicago, with whom we continue to work. We have done little to support the
product line since 2004 due to a lack of resources.




Corporate
History




In the
first quarter of 2000, TGE, our former parent company and the former licensor of
our products to us, became aware of the demand for vibration isolation products
in the high-end audio and video market. TGE designed and manufactured vibration
isolation devices for use in high-end applications. These products were sold
through Vistek Inc., a wholly-owned subsidiary of TGE. In response to the
demand, TGE developed a bearing called the Media Isolation Bearing Series 1.0
(the “MIB 1.0”). In August 2001, TGE incorporated us as its wholly-owned
subsidiary to promote the sale of Aurios MIB products. We ceased being a
wholly-owned subsidiary of TGE in June 2007 and TGE ceased being a shareholder
of the Company on December 31, 2007. On February 25, 2010, TGE sold
substantially all of its assets, including the patents the Company uses in its
products, to AVT. As of February 25, 2010, AVT licenses to us the patents we use
in our products.




Since
2001 and the development of the MIB 1.0, we have refined the product design and
manufacturing processes. Our experience has led us to select three bearings as
our products: the Classic MIB, the Isotone MIB, and the Pro Max MIB; a shelf
product, the Series 100 Component Shelf; and a spike mount product, Pivot
Points, as our products. The Classic MIB and the Pro Max MIB bearings may be
augmented with an additional level of isolation that is placed on top of these
bearings.




On May 8,
2009, our registration statement on Form S-1 was declared effective by the US
Securities and Exchange Commission (“SEC”), which registered the resale of up to
193,000 shares of our issued and outstanding common stock, no par value per
share, and 307,000 shares of common stock issuable upon the conversion of
122,800 outstanding shares of our Series A Convertible Preferred Stock
(“Preferred Stock”). We are in the process of having our common stock quoted on
the OTC Bulletin Board under the symbol “AURZ.”




Effective August 31, 2009, we adopted a
2.5-for-1 forward split of
all of our outstanding common stock. All common stock shares and the conversion
rate of the Preferred Stock, warrants and options reflected within this report
have been adjusted to reflect the split. Our corporate offices are locatedat 1741 W. University Drive, Suite 146, Tempe, Arizona 85281 and our
telephone number is (602) 321-1313.




Our
Technology




Most
vibration isolation products on the market today deal with the problem of
vibration by dampening the vibration energy. In dampening the vibration energy,
such energy is converted to heat and this energy conversion dampens the
vibrations and alters the reproduced sound. The effect is a softening of the
sound and is analogous to the effect a filter on a camera would have on the
picture quality of a photograph.




Our
technology conserves energy and does not convert the energy to heat. By
conserving energy, the vibrations are removed and the sound quality is
sharpened, not softened. To the audiophile, the sharpening effect produces a
truer sound than sound reproduced with the sound dampening products on the
market.


2




Business
Strategy




We
believe that we can increase the sales of our products through a three-pronged
strategy. First, we plan to introduce and promote new products to keep the
Aurios name and products prominent in the audiophile market, which includes the
home theater market. Second, we plan to promote sales of our products on-line
with our new web site to capitalize on the popularity of social networks and
on-line sales promotional tools. Finally, we plan to strengthen our distributor
network both domestically and internationally.




We intend
to employ our business strategy at a low cost in an effort to preserve our
capital. Due to the current economic downturn and slow sales, we are selling our
current inventory and plan to order new inventory as sales dictate. We believe
that distributors will continue to order limited quantities of our products;
however, due to the economic downturn, we have suspended our plans to increase
inventory for our distributors until market conditions improve. We have no
written agreements with our manufacturers.




New Product Development.We
intend to promote two or three new products into the audiophile market. By
introducing new products, we aim to maintain our position as a product leader
and innovator in the audiophile market. The new products include a speaker shelf
incorporating Aurios bearings, low-cost isolation mounts and spikes, and a
speaker tune-mass-damper.




Our shelf
product, the Series 100 Component Shelf, incorporates four bearings and is
protected by the patent we licensed from TGE and now license from AVT. The shelf
is placed on the floor and a speaker is placed on the shelf. The shelf provides
the same level of isolation as our bearings product. TGE developed the initial
prototype and, based on our tests, it proved effective at isolating sensitive
components from vibrations. TGE made some cosmetic changes to the shelf to
achieve the aesthetic look and feel required and expected in the high-end
audio-video market. TGE delivered the next prototype of the Series 100 Component
Shelf and we have since commenced sales of our shelf units.




The
speaker tune-mass-damper is designed to be placed on top of a speaker. A
tune-mass-damper prevents unwanted resonance by tuning a structure off its own
natural frequency. Our tune-mass-damper will incorporate the patented technology
we license from AVT. The initial prototypes of the tune-mass-damper have been
developed, however additional development of this product has been delayed after
conversations we have had with several customers who would prefer to have a
lower-cost, yet effective, component isolation spike mount. Nevertheless, while
we have temporarily halted development of a speaker tune-mass-damper, we used
our tune-mass-damper expertise to develop a tune-mass-damper for ceiling mounted
video projectors. The prototypes for our tune-mass-damper for ceiling mounted
vide projectors, based on our tests, have proven effective and we are in
discussions with two significant distributors of projector mounting
hardware.




Spike
mounts are used to support equipment and reduce the effects of vibrations. We
have developed a spike mount that we have named “Pivot Points.” Our spike mount
product is not as effective as our Media Isolation Bearing products, but it can
be sold at a much lower price. Therefore, we expect that the addition of our
Pivot Points product will increase our sales without compromising sales for our
high-performance Media Isolation Bearing products as each product serves a
different market demographic.




We plan
to deliver samples of the Series 100 Component Shelf and the Pivot Points to
Stereophile magazine and other audiophile focused print and online magazines for
their review. These media outlets regularly review products and can help build
interest and demand for a product. The Series 100 Component Shelf is currently
available on our website and we intend for the Pivot Points to be available by
the end of the second quarter of 2010.




TGE
manufactured the prototypes for our two new products as part of its obligation
under our former management fee arrangement. As of February 25, 2010, we entered
into a similar management fee arrangement with AVT that expires on July 31,
2010. We incur no expenses until the final products are finished, then we
purchase components for the manufacture of finished products for resale and as
samples for product reviewers, such as Stereophile magazine and other media
outlets. Consequently, we can develop these new products at minimal cost. We
anticipate spending approximately $3,000 on samples of our two new products. In
addition, we will spend approximately $2,500 on inventory for the new products
so we have product readily available for resale.




On-line Marketing. We have
developed a new web page. To accomplish this task, we selected a website
developer, Gatesix Inc., located in Phoenix, Arizona. The web page employs the
latest flash technology giving the web page a more current look and feel. In
addition, our web page contains an on-line store where our customers can
purchase our products from us directly.


3




Strengthened Distribution. We
intend to identify strong, high-end brick and mortar distributors within the
major metropolitan regions in the United States and provide these distributors
with aggressive pricing to give them incentive to carry a small amount of
inventory. Through integrating our on-line sales and marketing approach with
that of our distributors, our distributors will continue to market our products
without fear that potential customers can simply by-pass them and purchase
directly from us. Recently we engaged a distributor in the Netherlands (Music
Matters, www.music-matters.org). In 2009, we have added Roksan Trading, located
in Taiwan, and ECS Ltd., located in the UK, to our international sales force.
Sales from these distributors have been steady and are expected to grow in 2010
in response to the distributors’ independent advertising. For the year ended
December 31, 2009, 30% and 19% of sales were made to distributors Roksan Trading
Company and ECS, Ltd., respectively. For the year ended December 31, 2008, 48%
and 5% of sales were made to distributors Music Direct and Music Matters,
respectively.Revenues
from sales to Music Direct for fiscal year 2009 and 2008 totaled $6,831 and
$10,878, respectively. Revenues from sales to ECS Ltd. for fiscal year 2009 and
2008 totaled $6,033 and $0, respectively. We can negotiate distributions
agreements telephonically and through the exchange of documents on-line. Thus,
we can manage our relationship with our international distributors without
incurring travel costs.




Market
and Industry Overview




The
market for audio component vibration isolation products is audiophiles. While
audiophiles may be relatively few in number when compared to the general public,
they are typically high income, college educated, professionals who are willing
to pay a premium for even the slightest improvement in sound
quality.




The
market for audiophile accessories is limited by the number of audiophiles. These
customers tend to want the best and most current product available. After a few
years on the market, a new accessory or product ceases to be “new” and then the
product cannot command the same premium. In this type of market, manufacturers
must either transition the product into the broader mass market or continually
introduce new products or variations on previous products to maintain their
reputation as being innovative and on the cutting-edge of
technology.




The
demand for high performance entertainment electronics is fueled by the
consumer’s desire for a more realistic and involving sound experience when
watching television, movies or when listening to music. The higher resolution,
range and dynamic power of contemporary consumer’s audio and video systems
reveal critical sound subtleties that were masked by older technologies. We
believe that consumers are demanding products capable of providing a more
fulfilling audio experience and are searching for products that can deliver
movie theater quality and more authentic sound to their home theaters. This
demand and interest in sound quality has lead to new product development in the
industry aimed at assisting the consumer to secure the desired heightened
entertainment experience. We believe that we can tap the growing home theater
market to increase sales of our products as consumers demand larger, better
quality screens and theater-quality sound for their home theaters.




Isolating
entertainment media sources, such as CD players, turntables, DVD/Laserdisc video
players, speakers, amplifiers and high-resolution televisions, from vibrations
improves the quality of sound reproduction. While sound reproduction is enhanced
through reducing the transmission of vibrations from the environment into the
audio component, a significant benefit also results from removing the vibration
energy created by these audio components that would otherwise reverberate and
distort sound reproduction.




License
Agreement




AVT holds
the patents respecting our products in the United States and Taiwan. We have a
non-exclusive worldwide license from AVT to produce the Pro Max MIB, the Classic
MIB and the Isotone MIB. We pay a royalty of 5% of our net sales to AVT for the
AVT License. This license with AVT automatically renews every year, unless the
agreement is terminated: (i) due to a material breach that is not cured within
60 days of notice of such breach; (ii) by written statement by one of the
parties of such party’s inability or unwillingness to perform pursuant to the
terms and conditions of the license agreement; or (iii) due to a change of
control or ownership or control of one party by or to any third party who is a
competitor of the other party.




Sales
and Marketing




Historical Review




From the
early stages of our product development from the first quarter 2000 through
2002, we sold our product through a single master distributor. This distributor
was responsible for advertising, delivering samples to influential product
reviewers and selling the product downstream. This single distributor would
select regional storefronts through which the product would be re-sold. We
supported this distributor with a web site and a limited number of
samples.


4




The relationship with this
distributor deteriorated as a result of slow payment and non-payment by the
distributor’s customers. Beginning in 2003, we sold our product directly while
we searched for a new distributor. Sales were made to resellers within in the
United States.




In the
second quarter 2003, we selected a new national distributor. Unfortunately, this
distributor was too small and could not purchase a sufficiently large volume of
our product to justify the discounted price we were offering it. Therefore, in
the second quarter 2004, we terminated our relationship with this distributor
and abandoned our approach of using a single master distributor.




Since the
second quarter 2004, we have sold to a variety of resellers and end users. In
every instance, the price charged is a function of the volume purchased.
Consequently, resellers buying in volume will pay a lower price than an end user
purchasing product for his needs only. In the second quarter 2004, we only had
one distributor, located in Chicago, with whom we continue to work. While we
have done little to support the product line since 2004 due to lack of
resources, we have added a few foreign distributors through whom we have
received intermittent, but increasing, sales. The allocation of our sales
between sales in the United States and international sales fluctuates. In fiscal
year 2009, our international sales were 50% of our total sales.




New
Sales and Marketing Strategy




We
commenced a private placement of our common stock in August 2009. As of March
29, 2010, the Company has sold 288,000 shares, for gross proceeds of $72,000,
under the private placement. The proceeds from the private placement of our
common stock will help us reinvigorate our approach to marketing. We plan to
employ a strategy of developing an online sales and marketing approach, such as
the use of search engine optimization and the purchase of banner advertisements,
that will be integrated with that of a strengthened distributor network. We
believe that the introduction of new products will bring new visibility to the
Company.




As with
most markets, the internet has impacted the audiophile market tremendously.
Before the internet, manufacturers typically distributed their products through
brick-and-mortar storefronts that primarily sold high-end, specialty stereo
systems. Stores were encouraged to carry an inventory of products so they could
quickly service their customers. A manufacturer could conceivably sell to
thousands of specialty stores.




Initially,
the internet made it difficult to bring audio products to the market through
storefronts because these stores would not carry inventory. The storefronts
would only carry a sample of the product and then place orders as needed. This
distribution structure evolved because audiophiles could purchase audio
accessories either directly from the manufacturer online or from internet based
companies with little overhead, and therefore, pay a lower price for the
product. Consequently, it was not practical to support a network of storefronts
because the distributors were reluctant to support a product if they feared the
manufacturer could easily go around them with online sales through the company’s
web page.




Consequently,
in the early stages of the internet, storefronts were threatened by the
internet. The storefronts that survived did so by selling expertise. The
internet brought an explosion of smaller manufacturers to the market. The
storefronts became the trusted advisor that an audiophile could turn to for help
in distilling all the information regarding the products offered in the
audiophile market. Furthermore, in-home audio/video systems have become very
complicated and support beyond installation is now often required.




The role
of the storefront as the trusted advisor was enhanced by the popularity of blogs
and other “social networking” websites that have developed as the internet has
evolved from a static source of information to a dynamic, organic medium for the
exchange of information. Over the last several years, we believe that the
internet experienced a paradigm shift. In the internet’s infancy, information
online was created, controlled and pushed from one side of the web to its users.
We believe that the internet has evolved into an entirely different environment
coined “Web 2.0.” In the current Web 2.0 world, websites are dynamic, non-static
and many are built on the contributions of participants. This content developed
by those who do not own the web site is called user-generated
content.




Social
networks, blogs and other user-generated content web sites have provided the
most dynamic new aspects of the Web 2.0 world. According to Dow Jones Newswires
article “Facebook Surpasses MySpace To Become Social-Networking King” dated
August 13, 2008, “[t]he number of social-network users grew 9% in North America
but leapt 25% globally to 580.5 million people.” In the “social network web”
environment, millions of people now network, browse content and build extensive
online contacts.




The
“social network web” is comprised of internet users who want to communicate
quickly with large audiences. As a result, social networking has completely
altered the way online information and media is exchanged. Furthermore, small
budget merchants that embrace blogging and social networking can build extremely
effective advertising campaigns. These marketing campaigns are referred to as
“viral” campaigns.


5




We intend
to capitalize on these changes and have developed a new web page. We have
developed a MySpace page (see www.myspace.com/aurios)and our web page allows
others to post used audio equipment for sale through such Myspace page. Our
Myspace page and our used audio equipment section of our website are both
low-cost methods that we are employing to increase our visibility and to
advertise our products.




We plan
to have our web page host one or more blogs authored and maintained by
individuals who carry influence within the audio/video market. We will receive
the benefit of traffic to our web site and the blogger receives the benefit of
traffic to the blog. Hosting a blog is a low-cost method that we intend to
employ to draw traffic to our web site. To date we have not approached any
individuals to host a blog on our website. We are interviewing search engine
optimization firms, but have not made a selection yet. Our objective in
retaining a search engine optimization firm is that it will help us identify and
attract individuals who carry influence within our industry to author a blog
hosted on our website.




Competition




There are
numerous other companies, including Kinetics Systems, Inc., Bright Star,
Audioquest, Final Labs and Symposium, that are engaged in the business of
manufacturing or selling vibration isolation products. Many of these companies
have substantially greater resources than we do and enjoy established production
facilities and processes, market presence, distribution networks and market
share. It is likely that any or all of these other companies are in the process
of, and have allocated substantially more resources in, developing their own
products that are or would be competitive with our products.




The
isolation products available include rubber feet, conical metal feet,
constrained layer shelving, air isolation platforms, corkboards, and various
roller bearing products. The companies selling these products range from
national manufacturers of air isolation bearings and tables to small
proprietorships.




The
following summarizes certain of the principal competitive products
available:




Townshend
      Audio Seismic Sinks:
              
              Pneumatic
      (passive) platform, which is a constrained layer of a composite of steel
      and Isodamp rubber. It uses air bladders to cut the transmission of
      vertical vibrations.Vibraplane
      Platform:
              
              Manufactured
      by Kinetics Systems, Inc. and sold by Sounds of Silence, which is in
      Nashua, New Hampshire.Bright
      Star:
              
              Wood
      platforms resting on a sand-filled base. The product dampens the energy,
      but does not convert it.Audioquest:
              
              A
      variety of cone and ball shaped feet manufactured by
      Sorbethane.Final
      Labs:
              
              Japanese
      company that manufactures the Daruma roller bearing. It sells in the
      United States market through an importer in Miami.Symposium
      Roller Blocks:
              
              This
      is a very small United States company with a roller-type bearing product.
      Applications are limited by weight carrying capacity of bearing and
      construction.




Patents
and Trademark




AVT owns
the following patents on an invention titled “Mechanical Signal Filter” which
protect the Pro Max MIB and Classic MIB.




Country
                          
                          Patent Number
                          
                          Date Filed
                          
                          Date Issued
                          
                          Expiration DateUSA
                          
                          
                          6,520,283
                          
                          6/29/2001
                          
                          2/18/2003
                          
                          6/29/2021




6




Country
                            
                            Patent Number
                            
                            Date Filed
                            
                            Date Issued
                            
                            Expiration DateTaiwan
                            
                            
                            I235798
                            
                            6/29/2001
                            
                            4/14/2005
                            
                            6/29/2021




Under our
license agreement with AVT, AVT has the right to enforce and defend the patents
from infringement and to bear the associated costs. There can be no assurance
that any of AVT’s future patent applications, if any, will be issued with the
scope of the claim sought, if at all. There also can be no assurance that any
patents AVT may obtain will not be invalidated, circumvented or challenged.
Furthermore, there can be no assurance that others will not develop technologies
that are similar or superior to AVT’s technology or design around any patents
AVT owns. Unauthorized parties may attempt to copy aspects of the Aurios
products or to obtain or use information that we or AVT regard as proprietary.
In addition, the laws of some foreign countries do not protect patent rights as
fully as do the laws of the United States. There can be no assurance that AVT’s
means of protecting the foregoing proprietary rights in the United States or
abroad will be adequate or that others will not independently develop similar or
superior technology.




On March
26, 2010, TGE assigned the federally registered trademark respecting the
“Aurios” name to us in consideration for a payment of $100.




Employees




We have
no employees. We plan to outsource our principal functions until we achieve a
scale that requires us to reconsider this business model. AVT provides
administrative support and personnel to us at $1,500 per month under an
administration services/rental agreement that expires on July 31,
2010.





ITEM
1A. Risk Factors.




You
should carefully consider the following risk factors in evaluating our business
and us. The factors listed below represent certain important factors that we
believe could cause our business results to differ. These factors are not
intended to represent a complete list of the general or specific risks that may
affect us. It should be recognized that other risks may be significant,
presently or in the future, and the risks set forth below may affect us to a
greater extent than indicated. If any of the following risks occur, our
business, financial condition or results of operations could be materially and
adversely affected. You should also consider the other information included in
this Annual Report and subsequent quarterly reports filed with the
SEC.





Risks
Related to the Company




We
have a history of declining operating results.




We have incurred net losses of
$256,710 for the period from August 7, 2001 (inception) to December 31, 2009. We
have an accumulated deficit and have had negative cash flows from our
operations. Since 2004, we have generated limited revenues and we have expended
minimal funds to support our products due to lack of funds. We intend to use the
proceeds from the private placement of our common stock to rejuvenate the
presentation of our products and marketing efforts in order to increase revenues
and profits and to provide working capital. There can be no assurance that we
will be successful in this regard.




Investors
may lose all of their investment.




Investment in us involves a high
degree of risk. Investors may never recoup all or part of their investment or
realize any return on their investment. Accordingly, investors may lose all of
their investment and must be prepared to do so.




Our
auditors have included an explanatory paragraph in their opinion regarding our
ability to continue as a going concern, which could negatively impact our
ability to obtain additional funding and the market price of our
stock.




We have
an accumulated deficit and have had negative cash flows from our operations.
Accordingly, we have received a report from our independent auditors that
includes an explanatory paragraph describing their substantial doubt about our
ability to continue as a going concern. This may negatively impact our ability
to obtain additional funding or funding on terms attractive to us and may
negatively impact the market price of our stock.


7




Our cash
requirements may vary materially from those now planned depending on numerous
factors, including the results of our marketing efforts, our business
development activities, the results of future research and development, and
competition. We believe that the net proceeds from the private placement of our
common stock in the third and fourth quarters of 2009 and first quarter of 2010,
our prior capital raising activities, together with our projected revenue and
cash flow from future operations, will be sufficient to fund our working capital
and other capital requirements for the immediate future. If, however, our
estimates are incorrect and we require additional capital, there can be no
assurance that additional funds will be available on terms attractive to us or
at all. If adequate funds are not available, we may be required to curtail our
marketing and new product development activities and/or otherwise materially
reduce our operations.




Our
ability to fully implement our business plan and increase revenues will depend
on our ability to execute our business plan and may require us to raise
additional capital through the sale of debt or equity securities.




We
believe that we have sufficient working capital to pursue the initial stage of
our business plan as described in this report. We may incur operating deficits
as we implement our business plan. Our ability to fully implement our business
plan and significantly increase our revenues will depend upon our ability to
execute our business plan and may require us to raise additional capital through
the sale of debt or equity securities. If we do not achieve a profitable level
of operations from our operations, we will require additional capital. No
assurance can be given that we will be able to obtain additional capital or, if
available, that such capital will be available at terms acceptable to us, or
that we will be able to generate profits from operations, or if profits are
generated, that they will be sufficient to carry out our business plan, or that
the plan will not be modified.




Our
ability to successfully market our products to the intended range of customers
depends on our ability to retain employees or consultants with strong industry
contacts and knowledge of our products. Individuals with specialized industry
skills may be in short supply given our size and competition for qualified sales
persons is intense. The failure to attract new qualified personnel could
adversely affect our business and growth prospects.




In
formulating our business plan, we have relied on the judgment of our officers
and their experience in and research on the industry. There can be no assurance
that we will be able to obtain sufficient financing or implement the business
plan that we have devised. Further, even with sufficient financing, there can be
no assurance that we will be able to expand on a national or international basis
or operate our business on a profitable basis. Our plans are based upon the
assumptions that present market conditions in the business that we operate will
continue and that the risks described in this report will be dealt with
successfully. There can be no assurance that such plans will be realized or that
any of the assumptions will prove to be correct.




We
may need additional financing and such financing could include equity financing,
which may be dilutive to stockholders, or debt financing, which would likely
restrict our ability to borrow from other sources.




Our cash requirements may vary
materially from those now planned depending on numerous factors, including the
status of our marketing efforts, our business development activities, the
results of future research and development and competition. The net proceeds
from our private placement of our equity securities in the third and fourth
quarters of 2009 and first quarter of 2010, our prior capital raising
activities, together with our projected revenue and cash flow from operations,
if any, may not be sufficient to fund our working and other capital requirements
for the next twelve months in accordance with the business plan set forth in
this report. We therefore would need to raise additional funds to finance our
capital requirements through new financings to achieve the level of operations
we anticipate. Such financings could include equity financing, which may be
dilutive to stockholders, or debt financing, which would likely restrict our
ability to borrow from other sources. In addition, such securities may contain
rights, preferences or privileges senior to those of the rights of our current
shareholders. We do not have any commitments for additional financing. There can
be no assurance that additional funds will be available on terms attractive to
us or at all. If adequate funds are not available, we may be required to curtail
our marketing and new product development activities and/or otherwise materially
reduce our operations. Any inability to raise adequate funds could have a
material adverse effect on our business, results of operation and financial
condition.




We
conducted our own research into the markets for our products and have
uncertainties regarding increasing revenues and market penetration.




We
conducted our own research into the markets for our products. In formulating our
business plan, we have relied on the judgment of our officers and their research
and experience. Our plans are based upon the assumptions that present market
conditions in the business in which we operate will continue and that the risks
described in this report will be dealt with successfully. There can be no
assurance that we will be successful in our efforts to increase our market
penetration or to develop markets in the manner we contemplate.


8




We
will continue to incur the expenses of complying with public company reporting
requirements.




We have an obligation to continue to
comply with the applicable reporting requirements of the Securities Exchange Act
of 1934, as amended, even though compliance with such reporting requirements is
economically burdensome.




We
may experience difficulties in the future in complying with certain requirements
of Section 404 of the Sarbanes-Oxley Act.




Because
we are a public company, we are required to evaluate our internal controls under
Section 404 of the Sarbanes-Oxley Act of 2002 and we will be required to comply
with the requirements of Section 404 of the Sarbanes-Oxley Act. For our Annual
Report for fiscal year 2010, Section 404 of the Sarbanes-Oxley Act will also
require that our independent registered public accounting firm report on
management’s evaluation of our system of internal controls. If we fail to
maintain the adequacy of our internal controls, we could be subject to
regulatory scrutiny, civil or criminal penalties and/or stockholder litigation.
Any inability to provide reliable financial reports could harm our business.
Furthermore, any failure to implement required new or improved controls, or
difficulties encountered in the implementation of adequate controls over our
financial processes and reporting in the future, could harm our operating
results or cause us to fail to meet our reporting obligations.




If we
fail to maintain proper and effective internal controls in future periods, it
could adversely affect our operating results, financial condition and our
ability to run our business effectively and could cause investors to lose
confidence in our financial reporting.




There
are economic and general risks relating to our business.




The
success of our activities is subject to risks inherent in business generally,
including (i) demand for products and services; (ii) general economic
conditions; (iii) changes in taxes and tax laws; and (iv) changes in
governmental regulations and policies.




Our
costs of production may exceed those of our competitors and may adversely impact
our profitability.




Our
actual costs of production may exceed those of competitors and, even if our
costs of production are lower, our competitors may be able to sell the same or
similar products at a lower price than is economical for us.




We
license the intellectual property necessary for our products from AVT and we are
uncertain of AVT’s ability to protect such intellectual property through
patents.




We do not
own the intellectual property necessary for our products. We license such
intellectual property from AVT. Such license is terminable and non-exclusive,
and therefore, AVT could license the intellectual property underlying our
products to our current and future competitors.




We rely
on AVT to protect the intellectual property respecting our products. AVT, and
its predecessor TGE, have used a combination of U.S. and foreign patent and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights to our products. There can,
however, be no assurance that any of AVT’s pending or future patent
applications, whether or not being currently challenged by applicable
governmental patent examiners, will be issued with the scope of the claims
sought, if at all. There also can be no assurance that any patents AVT has or
may obtain will not be invalidated, circumvented or challenged. Furthermore,
there can be no assurance that others will not develop technologies which are
similar or superior to AVT’s technology or design around any patents owned by
it. Unauthorized parties may attempt to copy aspects of the products or to
obtain and use information they regard as proprietary. In addition, the laws of
some foreign countries do not protect proprietary rights as fully as do the laws
of the United States. There can be no assurance that AVT’s means of protecting
its proprietary rights in the United States will be adequate or that others will
not independently develop similar or superior technology.




We
rely on third party distributors and representatives for our marketing
capability.




Our
distribution strategy is to pursue sales through multiple channels with an
emphasis on independent distributors and representatives.  Our inability to
recruit and retain audio equipment distributors and representatives who can
successfully sell our products would adversely affect our sales.  In
addition, our arrangements with our distributors and representatives are
generally short-term.  If we do not competitively price our products,
meet the requirements of our distributors and representatives or end-users,
provide adequate marketing and technical support, or comply with the terms of
our distribution arrangements, our distributors and representatives may fail to
market our products or may terminate their relationships with
us.  These developments would likely have a material adverse effect on
our sales.  Our reliance on the sales of our products by others also
makes it more difficult to predict our revenues, cash flow and operating
results.


9


We
are dependent on key personnel.




We are
highly dependent on the services of Paul Attaway and Timothy Louis. The loss of
the services of either of these individuals would harm our business. Our future
success also depends on our ability to attract, train, retain and motivate other
highly qualified sales, technical and managerial personnel. Competition for such
personnel is intense and we may not be able to attract, train, retain or
motivate such persons in the future.




There
is a limited market for our common stock and you may not be able to
sell your shares of common stock  in the future, even if a market
develops.




There
is a limited market for our common stock.  Our common stock
is included on the Over-the-Counter Bulletin Board (“OTC Bulletin Board”) under
the symbol “AURZ,” and trading commenced on March 30, 2010. There can be no
assurance that an active market will develop for our common stock on the OTC
Bulletin Board.  Additionally, there can be no assurance any broker
will be interested in trading our common stock. Therefore, it may be difficult
for holders of our common stock to sell their shares if they desire or need to
sell them.




Our
stock price is likely to be highly volatile because of several factors,
including a limited public float.




The
market price of our stock is likely to be highly volatile because there will likely be a
relatively thin trading market for our common stock, which may cause trades of
small blocks of stock to have a significant impact on our stock price. Holders
of our common stock may not be able to resell it following periods of volatility
because of the market’s adverse reaction to volatility.




Other
factors that could cause such volatility may include, among other
things:




•
            actual
      or anticipated fluctuations in our operating
  results;




•
            the
      potential absence of securities analysts covering us and distributing
      research and recommendations about
us;




•
            we
      may have a low trading volume for a number of reasons, including that a
      large amount of our stock is closely
held;




•
            overall
      stock market fluctuations;




•
            announcements
      concerning our business or those of our
  competitors;




•
            our
      ability to raise capital when we require it, and to raise such capital on
      favorable terms;




•
            changes
      in financial estimates by securities analysts or our failure to perform as
      anticipated by the analysts;




•
            announcements
      of technological innovations;




•
            conditions
      or trends in the industry;




•
            litigation;




•
            changes
      in market valuations of other similar
companies;




•
            future
      sales of common stock;




•
            departure
      of key personnel or failure to hire key personnel;
  and




•
            general
      market conditions.




Any of
these factors could have a significant and adverse impact on the market price of
our common stock. In addition, the stock market in general has at times
experienced extreme volatility and rapid decline that has often been unrelated
or disproportionate to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common
stock, regardless of our actual operating performance.


10





Coalitions
of a few of our larger stockholders have sufficient voting power to make
corporate governance decisions that could have significant effect on us and the
other stockholders.




As of
March 29, 2010 our largest stockholders, Paul Attaway, Ira J. Gaines and
Christian J. Hoffmann, III hold shares representing approximately 61.66% of the
voting power of our outstanding capital stock, including the conversion of all
of the outstanding shares of Preferred Stock into Common Stock. These
shareholders may, if they act together, exercise significant influence over all
matters requiring shareholder approval, including the election of directors and
the determination of significant corporate actions, as well as control the
management, policies and operation of the Company. This concentration of
ownership could depress the stock price or value of the Company or delay or
prevent a change in control that could be otherwise beneficial to our
shareholders.




Risks
Related to the Industry




Our
market is characterized by new products and rapid technological
change.





Our industry is susceptible to
fast-paced technological advancements and our competitive advantage may be
reduced if we fail to keep up with changes in the technological
processes.  Our products are subject to technological change and
innovation.  Technological developments are occurring rapidly and
while the effects of such developments are uncertain, they may have a material
adverse effect on the demand for our products.  Additionally, we may
not be able to match any technological changes to the needs of our target
customers, which will reduce demand for our products.




If
we are unable to compete in our market, you may lose all or part of your
investment.




There are numerous other companies,
including Kinetics Systems, Inc., Bright Star, Audioquest, Final Labs and
Symposium, that are engaged in the business of manufacturing or selling
vibration isolation products.  Some of these companies may have
greater resources than we do and enjoy well established production facilities
and processes, market presence, distribution networks and market
share.  It is likely that any or all of these other companies are in
the process of, and have allocated substantially more resources than we have, in
developing their own products that are or would be competitive with our high
purity products.  If any of these companies is successful in its
efforts to develop high quality vibration isolation products at lower costs than
it now apparently has, such a company would have substantially greater resources
to market its competing products.  Their ability to produce economies
of scale may put us at a disadvantage.  Increased competition or our
failure to compete successfully is likely to result in price reductions, fewer
customer orders, reduced gross margins, increased marketing costs, failure to
acquire or retain market share, or any combination of these
problems.




Risks
Relating to our Common Stock




Any
future sale of a substantial number of shares of our common stock could depress
the trading price of our common stock, lower our value and make it more
difficult for us to raise capital.




Any sale
of a substantial number of shares of our common stock, or the prospect of such
sales, may have the effect of depressing the trading price of our common stock.
In addition, those sales could lower our value and make it more difficult for us
to raise capital. Further, the timing of the sale of the shares of our common
stock may occur at a time when we would otherwise be able to obtain additional
equity capital on terms more favorable to us.




The
possible issuance of common stock subject to options and warrants may dilute the
interest of stockholders.




The board
of directors adopted the 2007 Stock Option and Restricted Stock Plan (the “2007
Plan”) on July 1, 2007 and the shareholders approved the Plan on
July 8, 2007. The Plan authorizes us to issue up to 625,000 shares of our
common stock upon exercise of options and grant of restricted stock awards. To
date, we have not issued any options or restricted stock awards under the Plan.
To the extent we issue stock options or warrants under the 2007 Plan and such
outstanding stock options and warrants are exercised, dilution to the interests
of our stockholders may occur. Moreover, the terms upon which we will be able to
obtain additional equity capital may be adversely affected since the holders of
the outstanding options can be expected to exercise them at a time when we
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to us than those provided in such outstanding options.




We
have additional securities available for issuance, which, if issued, could
adversely affect the rights of the holders of our common stock.




Our
Articles of Incorporation authorize the issuance of 90,000,000 shares of our
common stock and 10,000,000 shares of preferred stock. The common stock and
preferred stock can be issued by our board of directors, without stockholder
approval. Any future issuances of our common stock would further dilute the
percentage ownership of the Company held by our stockholders.


11




We
have never paid dividends and have no plans to in the future.




We do not intend to pay dividends on
our common stock in the foreseeable future.  As an Arizona
corporation, we are legally permitted to declare and pay dividends only out of
surplus, or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and for the preceding fiscal year.  To
the extent no surplus or net profits of the Company are available for payment of
dividends, we cannot pay dividends on our common stock.  Any dividends
not paid will accrue.  No interest will be paid on any accrued but
unpaid dividends. There can no be no assurance that we will declare any
dividends or have sufficient surplus or generate any or sufficient earnings to
pay cash or stock dividends on our common stock.  We will pay
dividends on our common stock, when and if declared by the board of directors
and when and if funds are legally available therefore.  If dividends
are declared, all accrued but unpaid dividends on the Preferred Stock must be
paid in full before any additional dividends may be declared and paid on the
Common Stock.  Dividends shall accrue if they are not paid when
due.




Indemnification
of officers and directors.




The Articles of Incorporation and
Bylaws of the Company contain broad indemnification and liability limiting
provisions regarding its officers, directors and employees, including the
limitation of liability for certain violations of fiduciary
duties.  Our shareholders therefore will have only limited recourse
against the individuals.





ITEM
1B.  Unresolved Staff Comments.




None.





ITEM
2.  Description of Property.




Our
executive office consists of approximately 200 square feet and is located at
1741 W. University Drive, Suite 146, Tempe, Arizona 85281. This office space is
provided to us by AVT as needed and the $1,500 monthly administrative fee we pay
to it includes a charge for our rent. We believe that our current facilities are
adequate to meet our operational needs for the upcoming year.




ITEM
3.  Legal Proceedings.




We are
not involved in any pending litigation, legal proceedings or
claims.




ITEM
4.  [Reserved]





PART
II




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





Market
Information




Our
common stock is included for trading on the OTC Bulletin Board and trading
commenced on March 30, 2010.  Therefore, there have been no
quotations for our common stock in fiscal year 2009 and 2008.




Holders
of Common Stock and Preferred Stock




We had
approximately 37 shareholders of record of our common stock as of March 29,
2010.




Dividend
Policy




To date,
we have not declared or paid cash dividends on our shares of common stock. 
The holders of the shares of common stock will be entitled to non-cumulative
dividends on the shares of common stock, when and as declared by our board of
directors, in its discretion. We intend to retain all future earnings, if any,
for our business and do not anticipate paying cash dividends in the foreseeable
future.




Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business conditions and such other
factors as our board of directors may deem relevant.


12




Securities
Authorized for Issuance under Equity Compensation Plans




The
following table sets forth certain information regarding the Company’s equity
compensation plans as of December 31, 2009.




Plan category
                                
                                Number of
                                  securities to
                                  be issued
                                  upon exercise
                                  of
                                  outstanding
                                  options,
                                  warrants
                                  and rights
                                
                                
                                Weighted-average
                                  exercise price of
                                  outstanding
                                  options, warrants
                                  and rights
                                
                                
                                Number of
                                  securities
                                  remaining available
                                  for future issuance
                                  under equity
                                  compensation plans
                                  (excluding securities
                                  reflected in column (a))Equity compensation plans approved by stockholders
                                
                                
                                625,000
                                
                                
                                $
                                -0-
                                
                                
                                
                                625,000Equity
      compensation plans not approved by stockholders
                                
                                
                                -0-
                                
                                
                                
                                -0-
                                
                                
                                
                                -0-Total
                                
                                
                                625,000
                                
                                
                                $
                                -0-
                                
                                
                                
                                625,000





Recent
Issuances of Unregistered Securities




On August 31, 2009, we commenced a
private placement of shares of our common stock to “accredited investors,” as
such term is defined in Regulation D promulgated under the Securities Act of
1933, as amended (“Securities Act”), at a price of $0.25 per
share.  As of March 29, 2010, the Company has sold 288,000 shares, for
gross proceeds of $72,000, under the private placement. Our officers and
directors sold the common stock and we did not pay any commissions to them in
connection with such sales. The shares were issued in reliance on the exemptions
from registration set forth in Section 4(2) of the Securities
Act.





ITEM
6.  Selected Financial Data.





Not
applicable.





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





Forward-Looking
Statements




This Report on Form 10-K contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words
“believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,”
“could,” “will,” “plan,” “future,” “continue” and other expressions that are
predictions of or indicate future events and trends and that do not relate to
historical matters identify forward-looking statements. These forward-looking
statements are based largely on our expectations or forecasts of future events,
can be affected by inaccurate assumptions, and are subject to various business
risks and known and unknown uncertainties, a number of which are beyond our
control. Therefore, actual results could differ materially from the
forward-looking statements contained in this document, and readers are cautioned
not to place undue reliance on such forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. A wide variety of
factors could cause or contribute to such differences and could adversely impact
revenues, profitability, cash flows and capital needs. There can be no assurance
that the forward-looking statements contained in this document will, in fact,
transpire or prove to be accurate.


13


Factors that could cause or contribute
to our actual results to differ materially from those discussed herein or for
our stock price to be adversely affected include, but are not limited to: (i)
our history of declining operating results; (ii) our auditors have expressed a
going concern opinion; (iii) our ability to raise additional working capital
that we may require and, if available, that such working capital will be on
terms acceptable to us; (iv) our ability to implement our business plan; (v)
uncertainties regarding our ability to increase revenues and penetrate our
market; (vi) economic and general risks relating to business; (vii) our ability
to manage our costs of production; (viii) our ability to protect our
intellectual property through patents and other intellectual property
protection; (ix) our dependence on key personnel; (x) increased competition or
our failure to compete successfully; (xi) our ability to keep pace with
technological advancements in our industry; (xii) our ability to comply with
Section 404 of the Sarbanes-Oxley Act of 2002, as required; (xiii) our
nonpayment of dividends and lack of plans to pay dividends in the future; (xiv)
future sale of a substantial number of shares of our common stock that could
depress the trading price of our common stock, if it trades, lower our value and
make it more difficult for us to raise capital; (xv) our additional securities
available for issuance, which, if issued, could adversely affect the rights of
the holders of our common stock; (xvi) our ability to have our common stock
trade in a public market; (xvii) the price of our stock, if it trades, is likely
to be highly volatile because of several factors, including a relatively limited
public float; and (xviii) indemnification of our officers and
directors.




General




The following discussion should be read
in conjunction with our Financial Statements and notes thereto. The following
discussion contains forward-looking statements, including, but not limited to,
statements concerning our plans, anticipated expenditures, the need for
additional capital and other events and circumstances described in terms of our
expectations and intentions. You are urged to review the information set forth
under the captions for factors that may cause actual events or results to differ
materially from those discussed below.




Overview




We were
formed in August 2001 by our former parent, TGE. Our corporate offices are
located at 1741 W. University Drive, Suite 146,Tempe, Arizona
85281 and our telephone number is (602) 321-1313.




We produce, market and distribute
vibration isolation products to the high-end audio and video markets in the
United States and in certain foreign countries. Our products are the Classic
MIB, the PRO MIB, the Isotone, the Series 100 Component Shelf, a shelf product,
and Pivot Points, a spike mount product.




Our
vibration isolation products produce superior sound quality by sharpening, not
softening, the sound. AVT holds the patents respecting our products in the
United States and Taiwan.  AVT has granted us a non-exclusive world-wide
license to sell the products under the patents (“AVT License”). The AVT License
automatically renews every year as long as we are in compliance with its terms.
We pay AVT a royalty of 5% of our net sales for the license. We outsource the
manufacture of our products to several qualified machine shops in the Phoenix
metropolitan area.  On March 26, 2010, TGE assigned its federally
registered trademark respecting the “Aurios” name to us in consideration of
$100.





For the Years Ended December
31, 2009 and 2008




Results
From Operations




Revenues




Since our inception, our activities
have focused on product and market development with a nominal level of
operations. Revenues for the years ended December 31, 2009 and 2008 were $32,029
and $22,663, respectively. Revenues increased as a result of improved sales from
our international distributors.




Most of our sales are made through
audio equipment distributors, with the balance being direct retail
sales.  For the year ended December 31, 2009, the Company had 30%,
21%, 19%, and 13% of sales to Roksan Trading Co., Music Direct, ECS Ltd., and
Galen Carol Audio, respectively. For the year ended December 31, 2008, 48% and
10% of sales were made through distributors, Music Direct and Absolute Hi End,
respectively. No other customer accounted for more than 10% of sales in either
period.




Cost
of Sales




The cost of sales on units sold for the
year ended December 31, 2009 totaled $18,937 (59.1% of revenues) compared to
$9,825 (43.4% of revenues) for the year ended December 31, 2008. The cost of
sales for the year ended December 31, 2009 was slightly higher on a percentage
basis than for the same period in 2008 due to the increased cost of the product
from our third party manufacturers.  We outsource the manufacture of
our products to several qualified machine shops in the Phoenix metropolitan
area.


14





Gross
Margin





Gross margin for the year ended
December 31, 2009 was $13,092 (40.9% of revenues) compared to $12,838 (56.6% of
revenues) for the year ended December 31, 2008.   The decrease in
gross margin is attributed to higher material costs.  We ordered
material in smaller quantities and, as a result, we incurred higher material
costs.




General
and Administrative Expenses




We incurred nearly all of our selling
and operating expenses, as well as research and development expenses, through a
contractual relationship with TGE, which performs these services under an
administrative services agreement with us.  These expenses were
$18,000 in the year ended December 31, 2009 and 2008. In the year ended December
31, 2009, we had additional expenses consisting of legal expenses of $60,997 and
accounting expenses of $47,736, most of which were related to preparing us to
become publicly held and to comply with our reporting obligations under the
Securities Exchange Act of 1934, as amended.   In the year ended
December 31, 2008, we had legal expenses of $30,315 and accounting expenses of
$38,685, most of which were related to preparing us to become publicly
held.





Interest
Expense.
Interest expense was $4,103 and $3,940 for the years ended December 31, 2009 and
2008, respectively.




Income
Tax Provision




The Company had a potential tax
provision benefit of approximately $51,000 and $33,000 for the years ended
December 31, 2009 and 2008, respectively, arising from losses generated during
the aforementioned periods. The Company has fully reserved against these
benefits due to the uncertainty of their realization.




Net
Loss




For the reasons listed above, for the
years ended December 31, 2009 and 2008, we recorded net loss of $131,625 and
$83,427, respectively, an increase of our net loss by $48,198.




Basic
and Diluted Loss per Share




The basic and diluted loss per share
were <$0.06> and <$0.04> for the years ended December 31, 2009 and
2008, respectively, for the reasons previously noted.




Liquidity
and Capital Resources




Our auditors have rendered a going
concern opinion. Because our revenues and cash flow have not increased enough to
provide sufficient working capital, we needed to raise capital through the sale
of our equity securities.  We provided for our cash requirements in
fiscal year 2009 with the capital we raised in 2007 through the sale of
Preferred Stock in a private placement, yielding $115,000 in gross
proceeds.  In August 2009, we commenced a private placement of a
minimum of 80,000 shares and a maximum of 400,000 shares of our Common Stock to
accredited investors at a price of $0.25 per share.  Through March 29,
2010, we have sold 288,000 shares, for gross proceeds of $72,000, under the
private placement.




We plan to use the proceeds from this
private placement to pay a portion of our outstanding payables, expand our
promotion and marketing activities, including for product introduction, and
provide working capital.  If the proceeds from our private placement
and cash flow from our operations are not sufficient to meet our working capital
needs, we will need to raise additional capital through the sale of our debt
securities.  We have no commitments to obtain debt financing and there
can be no assurance that we will be able to obtain the necessary funds or obtain
them on terms favorable to us.  Any future financing may be on terms
that substantially dilute the ownership interests of present shareholders. If we
are unable to raise sufficient additional capital as necessary, we may have to
suspend or contract operations or cease operations entirely.




We do not anticipate that we will have
any large capital requirements over the next twelve months. In addition, we have
relationships with third parties who will manufacture small quantities of our
products quickly and charge us the same prices as we would be charged for larger
orders, particularly in the current economic environment. Accordingly, we
believe we can continue to place smaller orders with a number of such
manufacturers at favorable prices and will not have to allocate our working
capital to increasing our inventory.  We work with five
manufacturers.


15





As of December 31, 2009, we had a
working capital deficit of ($33,111) and long-term debt of $44,121.




Capital
Commitments




We had no material commitments for
capital expenditures.




Off-Balance
Sheet Arrangements




There were no off-balance sheet
arrangements as of December 31, 2009 and December 31, 2008.




Critical
Accounting Policies and Estimates




Our financial statements are prepared
in accordance with U.S. Generally Accepted Accounting Principles. Preparation of
the statements in accordance with these principles requires that we make
estimates, using available data and our judgment, for such things as valuing
assets, accruing liabilities and estimating expenses.




Our significant accounting policies are
summarized in note 1 to our consolidated financial statements included in Item 8
“Financial Statements” of this report.  While the selection and
application of any accounting policy may involve some level of subjective
judgments and estimates, we believe the recoverability of inventory accounting
policies are the most critical to our financial statements, potentially involve
the most subjective judgments in their selection and application, and are
the most susceptible to uncertainties and changing conditions.




Recoverability of
Inventory.  We assume that our inventory can be sold for at
least its carrying cost.





ITEM 7A.  Quantitative and
Qualitative Disclosures About Market Risk.





Not applicable





ITEM 8.  Financial
Statements and Supplementary Data.





The
financial statements of the Company are included as an exhibit to this Form 10-K
commencing on page F-1.




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





None.




ITEM 9A(T).  Controls and
Procedures.





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures




Under the
supervision and with the participation of our President, Chief Executive Officer
and Chief Financial Officer, Paul Attaway, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934.  Based on his evaluation as of December 31,
2009, the end of the period covered by this Annual Report on Form 10-K, he
concluded that our disclosure controls and procedures were effective at a
reasonable assurance level to ensure that the information required to be
disclosed in reports filed or submitted under the Securities Exchange Act of
1934, including this Annual Report, were recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and was
accumulated and communicated to management, including our principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.


16





Management’s Report on Internal Control Over Financial
Reporting




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





·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of our
      assets;





·
            Provide
      reasonable assurance that the transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally
      accepted accounting principles, and that our receipts and expenditures are
      being made only in accordance with authorizations of our management and
      directors; and





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.





All
internal control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.




In
connection with the filing of our Annual Report on Form 10-K, our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009.  In making this assessment,
our management used the criteria set forth by Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated
Framework.  Based on our assessment using those criteria,
management believes that, as of December 31, 2009, our internal control
over financial reporting is effective based on those criteria.





This
Annual Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this Annual Report.




Changes
in Internal Control Over Financial Reporting




There have been no changes in our
internal controls over financial reporting during the year ended December 31,
2009 that have materially affected, or are reasonably likely to materially
affect, such controls.




ITEM
9B.  Other Information.





None.





PART
III




ITEM
10.  Directors, Executive Officers and Corporate
Governance.




The
following table sets forth the names, positions and ages of our directors and
executive officers. Our directors were elected by the unanimous written consent
of our stockholders in lieu of a meeting. Our directors are typically elected at
each annual meeting and serve for one year or until their successors are elected
and qualify. Officers are elected by our board of directors and their terms of
office are at the discretion of our board.


17





Name
                    
                    Age
                    
                    Position
      with CompanyPaul Attaway
                    
                    46
                    
                    President,
      Chief Financial Officer and Director since 2001Timothy Louis
                    
                    45
                    
                    Secretary,
      Treasurer and Director since
2004




Paul Attawayhas served as an
officer and director of the Company since its incorporation in August 2001. In
1997, Mr. Attaway founded True Gravity Enterprises, Inc., a privately held
corporation that designed and manufactured vibration control solutions for the
semiconductor and life science industries and he has been its principal
shareholder and executive officer since then.  TGE sold substantially
all of its assets to AVT in February 2010.  He practiced law for two
years from 1988 to 1990 in Phoenix, Arizona with Streich Lang Weeks &
Cardon. From 1990 to 1995, he worked for a family business, MM Systems
Corporation, which manufactures and sells building materials worldwide. From
1995 to 1997, Mr. Attaway left the family business and started Tekton Inc.,
a privately held corporation that designs and manufactures seismic isolation
systems for network server racks. Mr. Attaway sold Tekton, Inc. in 2004.
Mr. Attaway holds a B.S.B.A. with a major in finance from Georgetown
University and a J.D. from the University of Georgia School of Law.
Mr. Attaway divides his time between TGE and the Company as the two
businesses require in a manner sufficient to discharge his fiduciary duties to
both entities. The Company believes that Mr. Attaway is qualified to serve as a
director because he is its founder and has managed it since its
inception.




Timothy Louishas served as
an officer and director of the Company since July 2004. Since 1995,
Mr. Louis has been the principal of Desert Capital Investments, L.L.C., a
venture capital investment firm. Its venture investments include Frye-Louis
Capital Management, Mobility Electronics, The Schirf Brewing Company, TGE, The
rSmart Group, BH USA and PIVOT Cycles, Inc. He has served as a board member of
companies such as Johnson Polymer, Inc (an affiliate company of S.C. Johnson
Wax) and non-profit companies such as A.T. Still University, Desert Voices Oral
Learning Center and The Phoenix Art Museum. Since 2001 he has served as the Vice
President - Finance at The rSmart Group, a provider of enterprise open source
applications in the global education software and services market. From 1990 to
2002 he was an owner/director of Frye-Louis Capital Management, Inc., a high net
worth family asset management firm based in Chicago. The firm was sold to Credit
Suisse Private Bank in 2002. Mr. Louis has a B.S. in Communication
Disorders and a M.A. in Audiology and Hearing Impairment from Northwestern
University, and a M.B.A. in Financial Management and Markets from Arizona State
University. The Company believes that Mr. Louis’s broad business
experience gives him the qualifications and skills to serve as a
director.





Board
of Directors and Committee Meetings





Our Board
of Directors held four meetings during the fiscal year ended December 31,
2009.  In addition, our Board of Directors acted by unanimous written
consent during fiscal year ended December 31, 2009.  Both of our
directors attended at least 75% of the meetings of the Board of Directors and
the committees on which he served in the fiscal year ended December 31,
2009.  Our directors are expected, absent exceptional circumstances,
to attend all Board meetings and meetings of any committees on which they
serve.




Committees
of the Board of Directors





We do not
have Audit, Compensation or  Nominating and Governance
Committees.  Our full Board of Directors discharges the duties that
such committees would normally have.  We do not have such committees
because of our stage of development and because our Board of Directors consists
of only two members. Also due to the small size of our Board, we do not have a
Chairman of the Board of Directors.




Our full
Board is comprised of two Directors, one of whom is independent, as defined by
the rules and regulations of the Securities and Exchange Commission. The members
of our Board of Directors are Paul Attaway and Timothy Louis.  The
Board of Directors determined that Mr. Louis qualifies as an “audit committee
financial expert,” as defined under the rules and regulations of the Securities
and Exchange Commission, and is independent as noted above.




Under the
Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the
Company’s independent accountants must be approved in advance by the Board to
assure that such services do not impair the accountants’ independence from the
Company.  Our full board of directors performs the equivalent
functions of an audit committee, therefore, no policies or procedures other than
those required by SEC rules on auditor independence, have been
implemented.


18


Report
of the Board of Directors Serving the Equivalent Functions of an Audit
Committee




Review
and Discussion with Management




Our Board
has reviewed and discussed with management our audited financial statements for
the fiscal year ended December 31, 2009, the process designed to achieve
compliance with Section 404 of the Sarbanes-Oxley Act of 2002, our
assessment of internal control over financial reporting and the report by our
independent registered public accounting firm thereon.




Review
and Discussions with Independent Registered Public Accounting Firm




Our Board
has discussed with Semple, Marchal & Cooper, LLP, our independent
registered public accounting firm for fiscal year 2009, the matters the Board,
serving the equivalent functions of an audit committee, is required to discuss
pursuant to Statement on Auditing Standards No. 114 (Communications with
Audit Committees), which includes, among other items, matters related to the
conduct of the audit of our financial statements.




Our Board
also has received the written disclosures and the letter from Semple,
Marchal & Cooper, LLP required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) and has discussed
with Semple, Marchal & Cooper, LLP any relationships that may impact
its independence, and satisfied itself as to the independent registered public
accounting firm’s independence.




Conclusion




Based on
the review and discussions referred to above, the Board, serving the equivalent
functions of the audit committee, approved our audited financial statements for
the fiscal year ended December 31, 2009 be included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2009 for filing with
the Securities and Exchange Commission.





Director
Independence




Paul
Attaway and Timothy Louis are the sole directors of the Company.  Mr.
Attaway is not considered “independent” in accordance with rule 5605(a)(2) of
the NASDAQ Marketplace Rules. The Board of Directors has determined that Mr.
Louis is independent in accordance with the Nasdaq and SEC rules.  We
are currently traded on the OTC Bulletin Board, which does not require that a
majority of the board be independent.  If we ever become an issuer
whose securities are listed on a national securities exchange or on an automated
inter-dealer quotation system of a national securities association, which has
independent director requirements, we intend to comply with all applicable
requirements relating to director independence.





Board
of Directors’ Role in the Oversight of Risk Management




We face a
variety of risks, including credit, liquidity and operational
risks.  In fulfilling its risk oversight role, our Board of Directors
focuses on the adequacy of our risk management process and overall risk
management system.  Our Board of Directors believes that an effective
risk management system will (i) adequately identify the material risks that
we face in a timely manner; (ii) implement appropriate risk management
strategies that are responsive to our risk profile and specific material risk
exposures; (iii) integrate consideration of risk and risk management into
our business decision-making; and (iv) include policies and procedures that
adequately transmit necessary information regarding material risks to senior
executives and, as appropriate, to the Board or relevant committee.




Our Board
of Directors oversees risk management for us.  Accordingly, the Board
schedules time for periodic review of risk management, in addition to its other
duties.  In this role, the Board receives reports from management,
certified public accountants, outside legal counsel, and to the extent
necessary, from other advisors, and strives to generate serious and thoughtful
attention to our risk management process and system, the nature of the material
risks we face, and the adequacy of our policies and procedures designed to
respond to and mitigate these risks.




Board
Leadership Structure




Our Board
of Directors does not have a Chairman of the Board due to its small size.
Because we do not have a Chairman of the Board, our Board of Directors does not
have a policy on whether or not the roles of Chief Executive Officer and
Chairman of the Board of Directors should be separate and, if they are to be
separate, whether the Chairman of the Board should be selected from the
non-employee directors or be an employee.  Our Board of Directors
believes that it should be free to make a choice from time to time in any manner
that is in the best interests of us and our shareholders.  If our
Board determines that a Chairman of the Board is needed, the Board will appoint
a Chairman of the Board whose appointment is in the best interest of the Company
and its shareholders. Our Board has determined that our Board leadership
structure is appropriate given the size of our Board and the nature of our
business.


19


Stockholder
Communications with the Board of Directors




Stockholders
may communicate with the Board of Directors by writing to us as
follows:  Aurios Inc., attention:  Corporate Secretary, 1741
W. University Drive, Suite 146, Tempe, AZ 85281.  Stockholders who
would like their submission directed to a particular member of the Board of
Directors may so specify and the communication will be forwarded as
appropriate.




Process
and Policy for Director Nominations




Our full Board will consider candidates
for Board membership suggested by Board members, management and our
stockholders.  In evaluating the suitability of potential nominees for
membership on the Board, the Board members  will consider the Board's
current composition, including expertise, diversity, and balance of inside,
outside and independent directors.  The Board considers the general
qualifications of the potential nominees, including integrity and honesty;
recognized leadership in business or professional activity; a background and
experience that will complement the talents of the other board members; the
willingness and capability to take the time to actively participate in board and
committee meetings and related activities; the extent to which the candidate
possesses pertinent technological, political, business, financial or
social/cultural expertise and experience; the absence of realistic possibilities
of conflict of interest or legal prohibition; the ability to work well with the
other directors; and the extent of the candidate's familiarity with issues
affecting our business.




While the
Board considers diversity and variety of experiences and viewpoints to be
important factors, it does not believe that a director nominee should be chosen
solely or mainly because of race, color, gender, national origin or sexual
identity or orientation. Thus, although diversity may be a consideration in the
Board's process, it does not have a formal policy regarding the consideration of
diversity in identifying director nominees.




Stockholder Recommendations for
Director Nominations.Our Board of Directors does not have a formal
policy with respect to consideration of any director candidate recommendation by
stockholders.  While the Board of Directors may consider candidates
recommended by stockholders, it has no requirement to do so.  To date,
no stockholder has recommended a candidate for nomination to the
Board.  Given that we have not received director nominations from
stockholders in the past and that we do not canvass stockholders for such
nominations, we believe it is appropriate not to have a formal policy in that
regard.  We do not pay a fee to any third party to identify or
evaluate or assist in indentifying or evaluating potential
nominees.





Stockholder
recommendations for director nominations may be submitted to the Company at the
following address:  Aurios Inc., attention:  Corporate
Secretary, 1741 W. University Drive, Suite 146, Tempe, AZ 85281.  Such
recommendations will be forwarded to the Board for consideration, provided that
they are accompanied by sufficient information to permit the Board to evaluate
the qualifications and experience of the nominees, and provided that they are in
time for the Board to do an adequate evaluation of the candidate before the
annual meeting of stockholders.  The submission must be accomplished
by a written consent of the individual to stand for election if nominated by the
Board of Directors and to serve if elected and to cooperate with a background
check.




Stockholder Nominations of
Directors.The bylaws of the Company provide that in order for
a stockholder to nominate a director at an annual meeting, the stockholder must
give timely, written notice to the Secretary of the Company and such notice must
be received at the principal executive offices of the Company not less than 120
days before the date of its release of the proxy statement to stockholders in
connection with its previous year’s annual meeting of stockholders. Such
stockholder’s notice shall include, with respect to each person whom the
stockholder proposes to nominate for election as a director, all information
relating to such person, including such person’s written consent to being named
in the proxy statement as a nominee, serving as a director, that is required
under the Securities Exchange Act of 1934, as amended, and cooperating with a
background investigation.  In addition, the stockholder must include
in such notice his name and address, as they appear on the Company’s records, of
the stockholder proposing the nomination of such person, and the name and
address of the beneficial owner, if any, on whose behalf the nomination is made,
the class and number of shares of capital stock of the Company that are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any, on whose behalf the nomination is made, and any material interest
or relationship that such stockholder of record and/or the beneficial owner, if
any, on whose behalf the nomination is made may respectively have in such
business or with such nominee. At the request of the Board of Directors, any
person nominated for election as a director shall furnish to the Secretary of
the Company the information required to be set forth in a stockholder’s notice
of nomination which pertains to the nominee.


20




To be timely in the case of a special
meeting or if the date of the annual meeting is changed by more than thirty (30)
days from such anniversary date, a stockholder’s notice must be received at the
principal executive offices of the Corporation no later than the close of
business on the tenth day following the earlier of the day on which notice of
the meeting date was mailed or public disclosure of the meeting date was
made.




Code
of Ethics and Conduct




Our Board of Directors has adopted a
Code of Ethics and Conductthat is applicable to all of our employees, officers and directors. Our
Code of Ethics and Conductis intended to ensure that our employees act in accordance with the
highest ethical standards.  A copy of our Code of Ethics and Conductmay be obtained by sending a written request to us at 1741 W. University
Drive, Suite 146, Tempe, AZ 85281, Attn: Paul Attaway and the Code of Ethics and Conduct is
filed as an exhibit to this Annual Report on Form 10-K.




Section
16(a) Beneficial Ownership Reporting




Section
16(a) of the Securities Act of 1934, as amended, requires our executive officers
and directors, and persons who own more than ten percent (10%) of our common
stock, to file with the Securities and Exchange Commission reports of ownership
of, and transactions in, our securities and to provide us with copies of those
filings. To our knowledge, based solely on our review of the copies of such
forms received by us, or written representations from certain reporting persons,
we believe that during the year ended December 31, 2009, all filing requirements
applicable to our officers, directors and greater than ten percent beneficial
owners were complied with during fiscal year 2009.




ITEM
11. EXECUTIVE COMPENSATION.




The table
below sets forth all cash compensation paid or proposed to be paid by us to the
chief executive officer and the most highly compensated executive officers, and
key employees for services rendered in all capacities to us during fiscal years
2009 and 2008.




Summary
Compensation Table




Name and
                                                                                        Principal Position
                                                                                        (a)
                                                                                      
                                                                                      Year
                                                                                        (b)
                                                                                      
                                                                                      Salary
                                                                                        ($) (c)
                                                                                      
                                                                                      Bonus
                                                                                        ($) (d)
                                                                                      
                                                                                      Stock
                                                                                        Awards
                                                                                        ($) (e)
                                                                                      
                                                                                      Option
                                                                                        Awards
                                                                                        ($) (f)
                                                                                      
                                                                                      Non-Equity
                                                                                        Incentive
                                                                                        Plan
                                                                                        Compensation
                                                                                        ($) (g)
                                                                                      
                                                                                      Nonqualified
                                                                                        Deferred
                                                                                        Compensation
                                                                                        Earnings
                                                                                        ($) (h)
                                                                                      
                                                                                      All Other
                                                                                        Compensation
                                                                                        ($) (i)
                                                                                      
                                                                                      Total
                                                                                        ($) (j)Paul
      Attaway,
                                                                                      
                                                                                      2009
                                                                                      
                                                                                      No
      compensation paid or options issuedPresident
      and Chief Financial Officer
                                                                                      
                                                                                      2008Timothy
      Louis,
                                                                                      
                                                                                      2009
                                                                                      
                                                                                      No
      compensation paid or options issuedSecretary
      and Treasurer
                                                                                      
                                                                                      2008




Mr. Attaway
and Mr. Louis received no compensation in 2009 and 2008. Mr. Attaway
will receive a salary at the annual rate of $20,000 after our revenues exceed an
annual rate of $75,000.




Compensation
Policy. Our executive compensation plan is based on attracting and
retaining qualified professionals who possess the skills and leadership
necessary to enable us to achieve earnings and profitability growth to satisfy
our stockholders. We must, therefore, create incentives for these executives to
achieve both company and individual performance objectives through the use of
performance-based compensation programs.




No one
component is considered by itself, but all forms of the compensation package are
considered in total. Wherever possible, objective measurements will be utilized
to quantify performance, but many subjective factors still come into play when
determining performance.




Compensation
Components. We expect that the main elements of our compensation package
will consist of base salary, stock options and bonus.


21




Base
Salary. The base salary for each executive officer will be reviewed and
compared to the prior year, with considerations given for increase. During 2009
and 2008 the executive officers received no compensation. As we grow and if
financial conditions improve, we plan to establish base salaries for all
executive officers and to review them periodically for possible adjustments. At
the appropriate point, we will base salary adjustments on both the individuals
and our performance and will include both objective and subjective criteria
specific to each executive’s role and responsibility with us.




Stock
Options.No stock
options were issued to our officers during fiscal years 2009 and
2008.




Bonuses.
To date, we have not granted bonuses. When considered, our bonuses will be
related to meeting certain performance criteria that are directly related to
areas within the executive’s responsibilities with us, such as production of
product and sales of product to customers. If we grow, we will create a more
defined bonus program to attract and retain our employees at all
levels.




Other.At
this time, we have no profit sharing plan in place for employees. However, this
is another area of consideration to add such a plan to provide yet another level
of compensation to our compensation plan.




Stock
Options. The board of directors adopted the 2007 Stock Option and
Restricted Stock Plan (the “Plan”) on July 1, 2007 and the shareholders
approved the Plan on July 8, 2007. The Plan authorizes us to issue up to
625,000 shares of our common stock upon exercise of options and grant of
restricted stock awards. We have not issued any options under the
Plan.




Employment
Contracts; Termination of Employment and Change-in-Control
Arrangements. We
have no employment agreements with either Paul Attaway or Timothy
Louis.




Outstanding
Equity Awards at Fiscal Year-End




Option
      Awards
                      
                      
                      
                      
                      
                      Stock
    AwardsName
                        (a)
                      
                      Number of
                        Securities
                        Underlying
                        Unexercised
                        Options
                        (#) (b)
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Number of
                        Securities
                        Underlying
                        Unexercised
                        Unearned
                        Options (#)
                        (c)
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Number of
                        Securities
                        Underlying
                        Unexercised
                        Unearned
                        Options (#)
                        (d)
                      
                      
                      Option
                        Exercise
                        Price
                        ($) (e)
                      
                      
                      Option
                        Expiration
                        Date
                        (f)
                      
                      
                      Number
                        of
                        Shares
                        or Units
                        of
                        Stock
                        That
                        Have
                        Not
                        Vested
                        (#) (g)
                      
                      
                      Market
                        Value of
                        Shares or
                        Units of
                        Stock
                        That
                        Have
                        Not
                        Vested
                        ($) (h)
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Number of
                        Unearned
                        Shares,
                        Units or
                        Other
                        Rights That
                        Have Not
                        Vested
                        (#) (i)
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Market
                        or
                        Payout
                        Value
                        of
                        Unearned
                        Shares,
                        Units
                        or Other
                        Rights
                        That
                        Have
                        Not
                        Vested
                        ($) (j)Paul
      Attaway
                      
                      No
      outstanding equity awards.Timothy
      Louis
                      
                      No
      outstanding equity awards.




The table
above indicates that no options were granted under the Plan to directors and
officers in fiscal 2009.


22




Stock
Option Plan




The board
of directors adopted the Plan on July 1, 2007 and the shareholders approved
the Plan on July 8, 2007. The Plan authorizes us to issue up to 625,000
shares of our common stock upon exercise of options and grant of restricted
stock awards. We have not issued any options under the Plan.




The Plan
authorizes us to grant (i) to the key employees incentive stock options to
purchase shares of common stock and non-qualified stock options to purchase
shares of common stock and restricted stock awards, and (ii) to
non-employee directors and consultants non-qualified stock options and
restricted stock. Our Board of Directors will administer the Plans by making
recommendations to the board or determinations regarding the persons to whom
options or restricted stock should be granted and the amount, terms, conditions
and restrictions of the awards.




The Plan
allows for the grant of incentive stock options, non-qualified stock options and
restricted stock awards. Incentive stock options granted under the Plan must
have an exercise price at least equal to 100% of the fair market value of the
common stock as of the date of grant. Incentive stock options granted to any
person who owns, immediately after the grant, stock possessing more than 10% of
the combined voting power of all classes of our stock, or of any parent or
subsidiary corporation, must have an exercise price at least equal to 110% of
the fair market value of the common stock on the date of grant. Non-statutory
stock options may have exercise prices as determined by our Compensation
Committee.




The
Compensation Committee is also authorized to grant restricted stock awards under
the Plan. A restricted stock award is a grant of shares of the common stock that
is subject to restrictions on transferability, risk of forfeiture and other
restrictions and that may be forfeited in the event of certain terminations of
employment or service prior to the end of a restricted period specified by the
Compensation Committee.




Compensation
of Directors




Directors
who are neither our employees nor of our affiliates receive no cash compensation
for serving on our Board of Directors. We have one independent director. We
reimburse directors for any travel or other out-of-pocket expenses related to
their service on the Board of Directors. When we add outside Board members we
expect that they will receive compensation of options or shares of common stock
of the Company for each year for their service on the Board of Directors and for
serving without directors and officers’ liability insurance in
place.




Director
Compensation




Name (a)
                
                Fees
                  Earned
                  Or Paid
                  in Cash
                  ($) (b)
                
                
                Stock
                  Awards
                  ($) (c)
                
                
                Option
                  Awards
                  ($) (d)
                
                
                Non-Equity
                  Incentive Plan
                  Compensation
                  ($) (e)
                
                
                Nonqualified
                  Deferred
                  Compensation
                  Earnings
                  ($) (f)
                
                
                All Other
                  Compensation
                  ($) (g)
                
                
                Total
                  ($) (h)Paul
      Attaway,
                  President,
      Chief Financial Officer and Director
                
                
                
                
                
                
                
                
                
                No
      compensation paid or awards made in 2009 and 2008.Timothy
      Louis,Secretary,
      Treasurer and Director
                
                
                
                
                
                
                
                
                
                No
      compensation paid or awards made in 2009 and 2008.




ITEM
12.  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.




The
following table sets forth, as of March 29, 2010, the number and percentage of
outstanding shares of common stock beneficially owned by (a) each person
known by us to beneficially own more than five percent of such stock,
(b) each director of the Company, (c) each named officer of the
Company, and (d) all our directors and executive officers as a
group.


23





Name and Address of Beneficial Owner(1)
                      
                      Amount and
                        Nature of
                        Beneficial
                        Ownership(2)
                      
                      
                      Percent
                        of
                        Class(4)Paul
      Attaway(3)
                      
                      
                      1,188,000
                      
                      
                      
                      32.30Timothy
      Louis
                      
                      
                      100,000
                      
                      
                      
                      2.72Ira
      J. Gaines
                      
                      
                      540,000
                      
                      
                      
                      14.68Christian
      J. Hoffmann, III(5)
                      
                      
                      540,000
                      
                      
                      
                      14.68All
      officers and directors as a group (two persons)
                      
                      
                      1,288,000
                      
                      
                      
                      35.02





(1)
            The
      address of these persons is c/o 1741 W. University Drive, Suite 146,
      Tempe, Arizona 85281.


(2)
            The
      foregoing beneficial owners hold investment and voting power in their
      shares.


(3)
            Paul
      Attaway owns 66% of the capital stock of TGE, which is a former
      shareholder of the Company and the Company’s former parent
      company.


(4)
            Assuming
      3,678,000 shares of common stock outstanding.  All 460,000
      shares of Preferred Stock have been converted into 1,150,000 shares of
      Common Stock.


(5)
            Mr. Hoffmann
      is a partner of Quarles & Brady LLP, the legal counsel of the
      Company.





Changes
in Control





We are
unaware of any contract, or other arrangement or provision of our Articles of
Incorporation or Bylaws, the operation of which may at a subsequent date result
in a change of control of the Company.




ITEM
13.  Certain Relationships and Related Transactions, and Director
Independence.




Paul
Attaway is an officer, director and principal shareholder of the Company and the
principal shareholder, director and an officer of our founder and former parent
company, TGE. On June 11, 2007, Mr. Attaway purchased 1,137,500 shares
of common stock of the company for $455, which is $0.0004 per share. On
December 31, 2007, Mr. Attaway purchased all 2,500 shares of common
stock of the Company held by TGE for $250, which is $0.10 per
share.




On
June 11, 2007, Timothy Louis, an officer and director the Company,
purchased 100,000 shares of common stock of the Company for $40, which is
$0.0004 per share. Also on June 11, 2007, Christian J. Hoffmann, III, a
partner of Quarles & Brady LLP, legal counsel of the Company, purchased
500,000 shares of common stock for $0.0004 per share for a total of $200. On
July 11, 2007, Ira J. Gaines, a principal shareholder of the Company,
purchased 500,000 shares of common stock for $0.02 per share for a total of
$10,000.




The
Company and TGE, its affiliate and former parent, entered into a license
agreement on July 2, 2007, which is renewable on an automatic basis for
additional consecutive three-year terms on certain conditions. Aurios pays a
royalty of five percent (5%) of its gross sales to TGE under the terms of
the license. Also under this license agreement, TGE licensed Aurios the right to
produce, distribute and sell the Classic MIB and PRO MIB products and to use the
Aurios trademark in connection with such products. Because Paul Attaway controls
both TGE and Aurios as the principal shareholder of each company, the license
agreement was not the result of arm’s length negotiations between the two
companies. While Mr. Attaway believes the terms to be fair to each company,
there can be no assurance in this regard. In the event of a dispute between
Aurios and TGE in connection with the license agreement, Mr. Attaway will
recuse himself from the dispute and let the other director(s) of both companies
deal with the dispute. This agreement was terminated on February 25, 2010 as a
result of the sale of substantially all of TGE’s assets to AVT.




The
Company had a balance due to a related party, TGE, in the amount of $1,792 and
$454 at December 31, 2009 and December 31, 2008, respectively. These are
considered short term in nature and non-interest bearing.




The
Company had a note payable to a related party, TGE, in the amount of $44,121 as
of December 31, 2009 and December 31, 2008, bearing interest at a rate of
8.25%. All outstanding principal and interest is due and payable on
December 15, 2011. As of December 31, 2009 and December 31, 2008,
there was accrued interest in the amount of $11,683 and $7,580,
respectively.


24




The
Company and TGE, its affiliate and former parent, entered into an administrative
services/rental agreement with TGE on January 1, 2009. Under such agreement, TGE
performs certain administrative duties for Aurios and provides it office space
as required at $1,500 per month. Aurios has no employees and contracts with TGE
for all services. Paul Attaway controls TGE as its principal shareholder, and an
officer and director.  This agreement was terminated on February 25,
2010 as a result of the sale of substantially all of TGE’s assets to
AVT.




During
2009 and 2008, the Company paid $60,997 and $29,291, respectively, in fees to
Quarles & Brady LLP, in which Mr. Hoffmann, a principal shareholder of the
Company, is a partner. The principal shareholder also performed or supervised a
majority of the legal services performed for the Company.




On March
26, 2010, TGE, the Company’s affiliate and former parent, assigned the Company
its federally registered trademark “Aurios” in consideration for a payment of
$100.




On March
25, 2010, Paul Attaway, an officer and director of the Company, purchased 48,000
shares of common stock for $0.25 per share for a total of $12,000 in the
Company's private placement of common stock.




On March
26, 2010 and March 29, 2010, Ira J. Gaines and Christian J. Hoffmann, III,
respectively, both of whom are principal shareholders of the Company, each
purchased 40,000 shares of common stock for $0.25 per share for a total of
$10,000 in the Company's private placement of common stock.





Director
Independence




Paul
Attaway and Timothy Louis are the sole directors of the Company.  Mr.
Attaway is not considered “independent” in accordance with rule 5605(a)(2) of
the NASDAQ Marketplace Rules. We are currently traded on the OTC Bulletin Board,
which does not require that a majority of the board be
independent.  If we ever become an issuer whose securities are listed
on a national securities exchange or on an automated inter-dealer quotation
system of a national securities association, which has independent director
requirements, we intend to comply with all applicable requirements relating to
director independence.




ITEM
14.  Principal Accounting Fees and Services.




The
following table is a summary of the fees billed to us by Semple,
Marchal & Cooper, LLP for professional services for the fiscal years
ended December 31, 2009 and December 31, 2008:




Fee Category:
                      
                      Fiscal
                        2009 Fees
                      
                      
                      Fiscal
                        2008 FeesAudit
      Fees
                      
                      $
                      40,224
                      
                      
                      $
                      44,199Audit-Related
      Fees
                      
                      
                      0
                      
                      
                      
                      0Tax
      Fees
                      
                      
                      520
                      
                      
                      
                      0All
      Other Fees
                      
                      
                      0
                      
                      
                      
                      0Total
      Fees
                      
                      $
                      40,744
                      
                      
                      $
                      44,199




Audit
Fees. Such
amount consists of fees billed for professional services rendered in connection
with the audit of our annual financial statements and review of the interim
financial statements included in our quarterly reports.  It also
includes services that are normally provided by our independent registered
public accounting firms in connection with statutory and regulatory filings or
engagements.




Audit-Related
Fees. Consists of fees
billed for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported under “Audit Fees.” These services include accounting consultations in
connection with acquisitions, attest services that are not required by statute
or regulation, and consultations concerning financial accounting and reporting
standards.




Tax
Fees.Tax
fees consist of fees billed for professional services related to tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and international tax compliance, tax audit defense,
customs and duties, mergers and acquisitions, and international tax
planning.




All Other
Fees. Consists of fees for
products and services other than the services reported above. In fiscal 2009 and
2008, there were no fees related to this category.




25




We do not
have a separate audit committee. Our full board of directors performs the
functions of an audit committee, therefore, no policies or procedures other than
those required by SEC rules on auditor independence, have been
implemented.  All of the above services and fees were reviewed and
approved by the entire board of directors either before or after the respective
services were rendered.





The audit
report of Semple, Marchal & Cooper, LLP on the financial statements of
the Company for the year ended December 31, 2009 did not contain an adverse
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles, except that the report
contained an explanatory paragraph regarding the Company as a going concern. The
audit report for the year ended December 31, 2008 did not contain an
adverse opinion or disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principles, except that the report
contained an explanatory paragraph regarding the Company as a going
concern.




During
our fiscal years ended December 31, 2009 and 2008, there were no
disagreements with Semple, Marchal & Cooper, LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to Semple,
Marchal & Cooper, LLP’s satisfaction would have caused it to make
reference to the subject matter of such disagreements in connection with its
reports on the financial statements for such periods.




During
our fiscal years ended December 31, 2009 and 2008, there were no reportable
events (as described in Item 304(a)(1)(v) of
Regulation S-K).




PART
IV




ITEM
15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.


Exhibit
                                                                              Number
                                                                            
                                                                            Description
                                                                            
                                                                            Incorporated by Reference to:
                                                                            
                                                                            Filed
                                                                              Herewith3.1
                                                                            
                                                                            Articles of Incorporation of the Company, dated
      August 9, 2001.
                                                                            
                                                                            Exhibit 3.1 of the Company’s Form S-1, filed May
      8, 2009, No. 333-150881 (the “S-1”).3.2
                                                                            
                                                                            Amendment to the Articles of Incorporation of the
      Company, dated September 28, 2007.
                                                                            
                                                                            Exhibit 3.2 of the S-1.3.3
                                                                            
                                                                            Amendment to the Articles of Incorporation of the
      Company, dated October 10, 2007.
                                                                            
                                                                            Exhibit 3.3 of the S-1.3.4
                                                                            
                                                                            By-laws of the Company.
                                                                            
                                                                            Exhibit 3.4 of the S-1.3.5
                                                                            
                                                                            Amended and Restated By-laws of the
      Company.
                                                                            
                                                                            
                                                                            
                                                                            X4.1
                                                                            
                                                                            Form of Common Stock
      Certificate.
                                                                            
                                                                            Exhibit 4.1 of the S-1.4.2
                                                                            
                                                                            Form of Series A Convertible Preferred Stock
      Certificate.
                                                                            
                                                                            Exhibit 4.2 of the S-1.5.1
                                                                            
                                                                            Opinion of Quarles & Brady LLP as to the
      legality of securities being registered (includes
      consent).
                                                                            
                                                                            Exhibit 5.1 of the S-1.10.1
                                                                            
                                                                            2007 Stock Option and Restricted Stock
      Plan.
                                                                            
                                                                            Exhibit 10.1 of the S-1.10.2
                                                                            
                                                                            Form of Stock Option Agreement (ISO and
      Non-Qualified) 2007 Stock Option Plan.
                                                                            
                                                                            Exhibit 10.2 of the S-1.10.3
                                                                            
                                                                            License Agreement with True Gravity Enterprises,
      Inc., dated July 2, 2007.
                                                                            
                                                                            Exhibit 10.3 of the S-1.10.4
                                                                            
                                                                            Management and Rental Agreement between True
      Gravity Enterprises, Inc. and the Company dated January 1,
      2007.
                                                                            
                                                                            Exhibit 10.4 of the S-1.10.5
                                                                            
                                                                            Promissory Note between the Company and True
      Gravity Enterprises, Inc., dated January 1, 2007, in theprincipal amount of
    $44,121.35.
                                                                            
                                                                            Exhibit 10.5 of the S-1.10.6
                                                                            
                                                                            Stock Purchase Agreement between True Gravity
      Enterprises, Inc. and Paul Attaway, dated December 31,
      2007.
                                                                            
                                                                            Exhibit 10.6 of the S-1.10.7
                                                                            
                                                                            Form of Subscription Agreement related to 2007
      private placement of preferred shares.
                                                                            
                                                                            Exhibit 10.7 of the S-1.




26





10.8
                                                                    
                                                                    Management and Rental Agreement between True
      Gravity Enterprises, Inc. and the Company dated January 1,
      2009.
                                                                    
                                                                    Exhibit 10.8 of the S-1.10.9
                                                                    
                                                                    License Agreement with Advanced Vibration
      Technologies Inc.
                                                                    
                                                                    
                                                                    
                                                                    X10.10
                                                                    
                                                                    Management and Rental Agreement between Advanced
      Vibration Technologies Inc. and the Company dated February 25,
      2010
                                                                    
                                                                    
                                                                    
                                                                    X14.1
                                                                    
                                                                    Code of Ethics and Conduct.
                                                                    
                                                                    
                                                                    
                                                                    X23.1
                                                                    
                                                                    Consent of Semple, Marchal & Cooper
      LLP.
                                                                    
                                                                    
                                                                    
                                                                    X23.2
                                                                    
                                                                    Consent of Quarles & Brady LLP (Included in
      5.1 above).
                                                                    
                                                                    Exhibit 5.1 of the S-1.31.1
                                                                    
                                                                    Certification of Paul Attaway, Chief Executive
      Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.
                                                                    
                                                                    
                                                                    
                                                                    X31.2
                                                                    
                                                                    Certification of Paul Attaway, Chief Financial
      Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.
                                                                    
                                                                    
                                                                    
                                                                    X32.1
                                                                    
                                                                    Certification of 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.
                                                                    
                                                                    
                                                                    
                                                                    X99.1
                                                                    
                                                                    Audited Financial Statements of Aurios Inc. as of
      and for the years ended December 31, 2009 and 2008.
                                                                    
                                                                    
                                                                    
                                                                    X


27


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized, this 31st day of
March, 2010.





Aurios
      Inc.Date:
                      March
      31, 2010By:
                      /s/ Paul AttawayPaul
      AttawayTitle:
                      President,
      Chief Executive Officer, ChiefFinancial
      Officer and
Director




Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by following persons on behalf of the Registrant
and in the capacities and on the dates indicated.




Signature
      and Title
                          
                          Date/s/ Paul Attaway
                          
                          March
      31, 2010Paul
      Attaway, President, Chief Executive
                            Officer,
      Chief Financial Officer, Principal
                            Accounting
      Officer and Director/s/ Timothy LouisTimothy
      Louis, Secretary, Treasurer and
                            Director
                          
                          March
      31,
2010




28