**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**




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


**For
      the fiscal year ended** **December
      31, 2006**





o**TRANSITION
      REPORT UNDER SECTION
      13 OR 15(d) OF THE EXCHANGE ACT**


**For
      the transition period from _____________________ to
      ______________**





**Commission
      File Number: 000-51119**





**SKINS
      INC.**


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





**Nevada**
              (State
                or other jurisdiction of incorporation
              or
                organization)
            
            **20-4711789**
              (I.R.S.
                Employer Identification
              No.)**45
                West 21st Street, 2nd Floor**
              **New
                York, NY**
              (Address
                of principal executive offices)
            
            **10010**
              (Zip
                Code)





**(212)
      561-5111**


(Registrant's
      telephone number, including area code)





Securities
      registered under section 12(b) of the Exchange Act: (none)





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, $.001 value
      per share





Check
      whether the issuer is not required to file reports pursuant to section 13 or
      15(d) of the Exchange Act o





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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





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





Issuer’s
      revenues for its most recent fiscal year: $0





As
      of
      April 13, 2007 there were 36,771,745 shares of the registrant’s common stock
      issued and outstanding, and the aggregate market value of such common stock
      held
      by non-affiliates was approximately $31,800,000, based on the average of the
      bid
      ($1.23) and ask ($1.25) prices of such stock on that date. For purposes of
      this
      calculation only, all directors, officers, and each holder of a 10% or greater
      beneficial interest in the Company have been deemed affiliates.





Documents
      Incorporated By Reference: None





Transitional
      Small Business Disclosure Format (Check one): Yes oNo x











SKINS
      INC.


FORM
      10-KSB ANNUAL REPORT


TABLE
      OF
      CONTENTS


PagePART
                IITEM
                1.
            
            DESCRIPTION
                OF BUSINESS
            2ITEM
                2.
            
            DESCRIPTION
                OF PROPERTY
            15ITEM
                3.
            
            LEGAL
                PROCEEDINGS
            16ITEM
                4.
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            16PART
                IIITEM
                5.
            
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            16ITEM
                6.
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            18ITEM
                7.
            
            FINANCIAL
                STATEMENTS
            F-1ITEM
                8.
            
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            23ITEM 8A.
            
            CONTROLS
                AND PROCEDURES
            23ITEM 8B.
            
            OTHER
                INFORMATIONPART
                IIIITEM
                9.
            
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSON AND CORPORATE GOVERNANCE;
                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
            23ITEM
                10.
            
            EXECUTIVE
                COMPENSATION
            25ITEM
                11.
            
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            27ITEM
                12.
            
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
            27ITEM
                13.
            
            EXHIBITS
            28ITEM
                14.
            
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            3030SIGNATURES
            
            
            32





Certification
                Pursuant to Rule 13a-14(a) or 15d-14(a)Certification
                Pursuant to Section 1350













**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




In
      addition to historical information, this report contains statements relating
      to
      our future business and/or results, including, without limitation, the
      statements under the captions “Risk Factors,” “Management's Discussion and
      Analysis or Plan of Operation” and “Description of Business.” These statements
      include certain projections and business trends that are “forward-looking.”
Forward-looking statements can include statements containing a projection of
      revenues, income (including income loss) , earnings (including earnings loss)
      per share, capital expenditures, dividends, capital structure, or other
      financial items; a statement of the plans and objectives of management for
      future operations, including plans or objectives relating to the products or
      services of the issuer; a statement of future economic performance, including
      any such statement contained in a discussion and analysis of financial condition
      by the management or in the results of operations included pursuant to the
      rules
      and regulations of the SEC; any report issued by an outside reviewer retained
      by
      an issuer, to the extent that the report assesses a forward-looking statement
      made by the issuer; or a statement containing a projection or estimate of such
      other items as may be specified by rule or regulation of the SEC. You can
      identify these statements by the use of words like “may,” “will,” “could,”
“should,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,”
“forecast,” “potential,” “intend,” “continue” and variations of these words or
      comparable words. Forward-looking statements do not guarantee future performance
      and involve risks and uncertainties. Actual results will differ, and may differ
      materially, from projected results as a result of certain risks and
      uncertainties. These risks and uncertainties include, without limitation, those
      described under “Risk Factors” and those detailed from time to time in our
      filings with the SEC, and include, among others, the following:




·
            Our
                limited operating history;·
            Our
                lack of profits from operations;




·
            Our
                recent restatement of our financial statements;·
            Our
                ability to raise additional funds on acceptable terms or at
                all;




·
            Our
                ability to successfully design, manufacture and commercialize our
                proposed
                product;·
            Our
                reliance on one unproven and undeveloped product
                type;




·
            Rapidly
                changing consumer demands for footwear products;·
            Our
                unestablished brand;




·
            The
                degree and nature of our competition;·
            Our
                ability to employ and retain qualified
                employees;




·
            The
                limited trading market for our common stock; and·
            The
                other factors referenced in this report, including, without limitation,
                under the sections entitled “Risk Factors,” “Management's Discussion and
                Analysis or Plan of Operation,” and “Description of
                Business.”




The
      assumptions used for purposes of the forward-looking statements specified in
      the
      following information represent estimates of future events and are subject
      to
      uncertainty as to possible changes in economic, legislative, industry, and
      other
      circumstances. As a result, the identification and interpretation of data and
      other information and their use in developing and selecting assumptions from
      and
      among reasonable alternatives require the exercise of judgment. To the extent
      that the assumed events do not occur, the outcome may vary substantially from
      anticipated or projected results, and, accordingly, no opinion is expressed
      on
      the achievability of those forward-looking statements. We cannot guarantee
      that
      any of the assumptions relating to the forward-looking statements specified
      in
      the following information are accurate, and we assume no obligation to update
      any such forward-looking statements.







**PART
      I**





**ITEM
      1: DESCRIPTION OF BUSINESS**




**Overview**





We
      have
      designed and continue to develop a patented two-part, footwear structure
      consisting of an outer collapsible “Skin” and an inner orthopedic support
      section called the “Bone.” The design is intended to allow consumers to purchase
      one inner section, the Bone, and numerous outer Skins, resulting in multiple
      style variations from the same pair of shoes, with the same feel and fit despite
      which Skin is being worn. We intend to initially design, manufacture and market
      high quality men's and women's footwear and are finalizing the first Skins
      collection with an anticipated early Fall 2007 commercial launch.





Our
      management hopes that its product concept will act as the link between the
      traditional footwear industry and the apparel industry - allowing consumers
      to
      view Skins like a shirt, changing them frequently, matching skins to an outfit
      or supporting their favorite sports team with a Skin fitted with the team's
      logo.





Since
      consumers typically prefer to try on shoes before a purchase, footwear sales
      traditionally occur in locations that have footwear-selling expertise. We
      believe we should be able to market our products via traditional footwear
      channels but also via non-traditional channels including the Internet and retail
      locations without a footwear department. Once a consumer owns a Bone, any Skin
      purchased in the same size will fit and a consumer will not need to be concerned
      as to the fit or feel of the product at that point, allowing the purchase of
      a
      Skin to be done through non-traditional footwear channels.





**Corporate
      Information**





We
      were
      incorporated in the State of Nevada on January 23, 2004. We were originally
      organized as “Logicom Inc.” to develop, market and support a voice interface
      software platform that would make the information and services of enterprises,
      telecommunications networks and the Internet accessible from telephone. Our
      chief software designer resigned on July 4, 2005, after which our active
      operations ceased. On
      March
      20, 2006, we closed a share exchange transaction pursuant to which we (i) became
      the 100% parent of Skins Footwear Inc., a Delaware corporation (“Skins
      Footwear”), (ii) assumed the operations of Skins Footwear, (iii) subsequently
      changed our name from Logicom Inc. to Skins Inc.




Skins
      Footwear was originally organized on May 18, 2004 as a New Jersey limited
      liability company under the name Skins Shoes, LLC. On October 11, 2005, Skins
      Shoes, LLC created a Delaware corporation under the name Skins Shoes, Inc.
      as a
      wholly owned subsidiary and merged with and into Skins Shoes, Inc. on October
      20,  2005,
      resulting in Skins Shoes, Inc. becoming the surviving Delaware corporation
      and
      the limited liability company ceasing to exist. The merger on October 20, 2005
      was a conversion of a non-taxable entity to a taxable corporation, The deficit
      accumulated in the development stage on October 20, 2005 was treated as a return
      of capital to the members of Skins Shoes, LLC, which was then contributed to
      Skin Shoes, Inc., and as a result the accumulated deficit was reclassified
      to
      additional paid in capital at October 20, 2005 in the consolidated statements
      of
      stockholders' equity.




Our
      corporate offices are located at 45 West 21st Street, 2nd Floor, New York,
      New
      York 10010.





**The
      Skins Product Concept**





We
      believe that there are few, if any, methods for a consumer to change the look
      of
      their shoe other than buying multiple pairs, in multiple colors, or multiple
      styles. With the average price of high quality shoes ranging anywhere from
      $150
      and up, the purchase of new shoes can be a costly proposition for
      consumers.





Other
      markets have already launched products that exploit the concept of cost and
      style in terms of interchangeability. Within the watch market, companies offer
      cost effective, fashionable watches that have interchangeable straps and faces.
      Within the sunglasses market, some companies have many fashion-focused models
      with interchangeable lenses. Even in the cellular phone market, cellular phone
      manufacturers offer interchangeable covers that are purely a fashion
      statement.





***The
      Bi-Sectional System***





We
      have
      designed and continue to develop a line of footwear products based on our
      patented modular shoe system built with two sections: the Bone and the Skin.
      The
      Skins products are designed to be easy to use, comfortable, and employ quality
      craftsmanship. The inner section - or the Bone - is made from a mold utilizing
      advanced light-weight and resilient synthetic material. The Bone is designed
      to
      be a consistent source of comfort and support, without regard to changing styles
      and fashions. The outer section - or the Skin - is expected to represent our
      core product. It is expected that Skins will be created with various
      combinations of toe shapes, materials, fabrics, leather and outsole treads.
      We
      expect to launch numerous styles per season for each targeted consumer
      group.





2


***Design
      and Development***





Our
      principal goal in product design is to generate new and exciting interchangeable
      footwear with classic contemporary and progressive styles. All of our footwear
      is designed with an active lifestyle in mind. We design most of our styles
      to be
      fashionable and marketable to the 18 to 35 year-old consumer, with most lines
      appealing to the broad cross-section of the population. Any success of the
      Skins
      product may be related to:





·
            The
                unique interchangeable Skin
                concept,





·
            A
                constant fit and feel of the bone,





·
            Collapsibility
                of the Skin, allowing ease of
                travel,





·
            Ease
                of purchase over the internet,





·
            Catalog
                and other non-traditional methods of
                distribution,





·
            Our
                ability to recognize trends in the footwear market,
                and





·
            A
                product design that anticipates and accommodates consumers' ever-evolving
                preferences.





Our
      technology is designed to allow consumers to continually change Skins to fit
      their respective fashion and functional needs. We will attempt to identify,
      interpret and translate current and emerging lifestyle trends in the design
      of
      our footwear. We expect to obtain lifestyle trend information through various
      methods intended to monitor changes in the culture and society,
      including:


·
              Review
                    and analysis of modern music, television, cinema, clothing and
                    other
                    trend-setting media,


·
            Travel
                to domestic and international fashion markets to identify and confirm
                current trends,


·
              Consultation
                    with retail customers for information on current retail selling
                    trends,




·
            Participation
                in major footwear tradeshows to stay abreast of popular brands, fashions
                and styles, and


·
              Subscription
                    to various fashion and color information
                    services.


We
      expect
      that our footwear design process will typically begin approximately nine months
      prior to the start of a season. Our products will be designed and developed
      by
      our in-house staff and freelance design agencies. To promote innovation and
      brand relevance, we expect to utilize dedicated design teams that focus on
      each
      of the men's, women's, and children's categories and report to our chief design
      executive, once we are able to locate and hire a person for this position.
      We
      anticipate that the design process will be collaborative whereby design staff
      will meet with retail and merchandising and sales and production personnel
      to
      refine the design to our perceived demand of the markets. After the designers
      arrive at a consensus regarding the fashion themes for the coming season, the
      designers then translate these themes into products. These variations will
      include variations in product color, material, structure and decoration, which
      are arrived at after close consultation with those involved in design and
      production.





After
      a
      design is complete, we will create prototype blueprints and specifications
      and
      forward them to our third-party manufacturers, which will then forward the
      design prototypes back to our design team. We plan to allow our major retail
      customers, if any, to review upcoming design concepts prior to release. We
      believe that input from these retailers could assist us in predicting consumer
      reaction to our latest designs and afford us an opportunity to foster
      collaborative relationships with our customers. Our design teams will be able
      to
      modify and refine a design based on customer input.





**Business
      Strategy**





Footwear
      manufacturers may expect a limited number of purchases from consumers since
      footwear is commonly viewed by consumers as functional attire. The Skins product
      concept is designed to change the consumer view of footwear from a functional
      requirement to a fashionable accessory. The consequence is that we may be able
      to market, sell and distribute in a similar manner as an apparel entity. In
      essence, we expect that the non-traditional concept of our footwear will be
      ground breaking and disruptive to lifestyle and the footwear and fashion
      industry specifically.





3


We
      will
      concentrate on our core design and development of the Skin and Bone product,
      while outsourcing the production requirements to third parties. We plan an
      initial strategy of developing our own brand. In the future, we intend to
      license to existing brands to maximize our market exposure and product
      distribution, in addition to working with the orthopedic market in supplying
      Bones without foot-beds to orthopedic insole manufacturers to allow for
      orthopedic fitted Bones for individuals with orthopedic needs. We expect to
      act
      as a wholesaler, marketing our products to specialty, department and Internet
      retail locations via marketing and branding efforts.





We
      intend
      to begin with both men and women's high-end footwear. We plan to introduce
      our
      product in the high-end market to mavens, trendsetters and early adopters,
      in an
      attempt to build brand equity and focus on exclusive specialty shops that sell
      high-fashion quality apparel and footwear. We plan on conducting promotional
      activities such as celebrity product placement and Skins Inc. sponsored events,
      in addition to fashion and business press editorial coverage to increase the
      brand visibility and credibility. We will be working with a fashion, footwear
      and accessory specific public relations firm to assist and produce these events
      and undertakings. After establishing our brand, we plan to broaden our
      distribution with more mainstream middle-market retailers, and then begin to
      enter the children's market and license our technology to other
      manufacturers.




**Marketing
      Strategy**





We
      expect
      that our marketing strategy will consist of the following elements:





***Product
      Diversity***





We
      expect
      that product diversity will be a key marketing strategy. Initially, we plan
      to
      invest only the required time and money for the design and development of our
      initial line of products. Following the initial stages of our market
      penetration, if any, we plan to expand our product line and increase the number
      of retail channels through which our products are sold. We believe that the
      strategy of continuously diversifying our products will occur as we build and
      develop our retail distribution channels.





***Branding***





We
      believe that a well-recognized brand is an important element for success in
      the
      footwear and apparel industry. We will attempt to position our footwear as
      a
      lifestyle brand that encompasses innovation and design while maintaining quality
      and a holistic fit. Our senior management will be directly involved in shaping
      our image and the conception, development and implementation of its advertising
      and marketing activities. We intend to aggressively promote our brand through
      a
      comprehensive marketing campaign. We hope that this campaign, which will be
      image-oriented and product specific, will eventually result in a high level
      of
      recognition of the Skins brand across a variety of footwear and apparel
      categories.





We
      engaged the services of Robert Burke Associates, Banfi Zambrelli, Sportie LA
      Media, Factory PR, Tronic Studio and Studio Dror to provide our management
      with
      strategic advisory services to assist in the positioning of the Skins brand
      and
      to review and analyze the product lines.





***Advertising***





We
      anticipate that our advertisements will generally seek to build and increase
      brand awareness by linking the Skins brand to contemporary lifestyles and
      attitudes, rather than exclusively marketing a particular Skins footwear
      product. We will market the Skins name to represent flexibility, managing the
      brand and product design towards evolving footwear and apparel fashions and
      consumer lifestyle preferences.





We
      intend
      to employ a multi-phased advertising strategy that we hope will expand with
      our
      advertising requirements and investment capabilities. Initially, we plan to
      utilize cost sensitive and effective means to reach our targeted customer base.
      We expect to use this marketing phase within our first phase of growth and
      expansion strategy, initially targeting the fashion centers within the US and
      later within Europe, and Asia/Australia.




Once,
      and
      if, we reach certain predetermined levels of sales, we plan to invest monetary
      and human capital to expand our advertising campaigns into a traditional
      portfolio marketing campaign that is based on management of our marketing and
      advertising portfolio.





4


***Promotional
      Activities***





We
      plan
      on implementing product placement with well known celebrities and hosting events
      to help enhance the Skins image in the coming years and to focus marketing
      efforts for our products among specific consumer groups. We anticipate that
      high
      profile and diverse appeal of celebrities may be able to assist the Skins brand
      to reach new markets.





On
      July
      19, 2006 we appointed Factory PR as our public relations firm. Factory PR will
      develop all consumer and press focused communication platforms, as well as
      other
      brand building initiatives.





Entertainment
      Promotions: Our promotional strategies are expected to include retail
      collaborations, in-store specials, product tie-ins and giveaways, and other
      special events.





**Sourcing,
      Production and Development**





***Outsourcing***





We
      entered into a sourcing and buying agent agreement with Atsco Footwear, LLC
      pursuant to which Atsco Footwear was to be responsible for sourcing,
      commercialization and product line review. According to the agreement, Atsco
      Footwear would be the exclusive sourcing and development agent for us and would
      assist us in developing a fit-and-wear tested marketable product. Atsco was
      to
      be responsible for the factory development and output as well as delivery,
      scheduling, supplier deadlines and other related matters. We were to pay
      commissions to Atsco Footwear for its services under the agreement primarily
      based on merchandise sourced by Atsco Footwear and shipped to us. This agreement
      with Atsco Footwear was terminated as of February 2007. Consequently we continue
      to work with Atsco on a month-to-month basis as our non-exclusive sourcing
      agent
      in the Far East.





***Development***





On
      October 1, 2006, we entered into a product development, engineering and
      consulting agreement with TLD Asia Pacific, LLC where TLD is responsible for
      all
      order placements, production planning, quality control of finished products,
      monitoring and enforcing timeliness in all development sampling, facilitating
      prototypes, pullovers, and sample requests, and assisting in negotiating FOB
      costs, and delivery of fit test samples in the Far East.





***Production***





On
      December 6, 2006 we finalized an agreement with Italian manufacturer Boemos
      S.P.A. Boemos craftsmen will be responsible for the production of a majority
      of
      the Skins collection that will be distributed and sold in the US for the Fall
      2007 collection. The balance of the collection is being produced in China as
      well as our packaging and displays.





***Inventory
      Risks***





Due
      to
      the nature of our planned “high level” of style and fashion, inventory risks
      will be higher, since fashions can change quickly and past styles can be rapidly
      considered obsolete. We will attempt to reduce the risk of overstocking
      by:


·
              assessing
                    demand for our products by soliciting input from our customers
                    and
                    monitoring retail sell-through
                    processes,
 ·
                analyzing
                      historical and current sales and market data to develop internal
                      product
                      quantity forecasts, and
 ·
                  seeking
                        to share inventory risks with retail channels as much as
                        possible.


**Growth
      and Expansion Strategy**





We
      plan
      to expand our operations in three primary segments:





***Region
      by Region***





We
      will
      launch our operations in the U.S. and attempt to maintain those operations
      throughout the planned growth period. We expect to expand into developed
      countries in Western Europe and throughout the world. This expansion process
      may
      be expedited via licensing agreements with multinational apparel
      brands.





***Demographics***





We
      believe that the Skins core product concept is suitable for all ages. We believe
      that the key advantages of the product concept will initially attract the most
      fashion-savvy age group - the 18 to 35 year olds. When and if the product
      concept becomes more widely known, we plan to expand our demographic focus
      of
      the product concept to the 5 to 55 year old market segments.





5


***Distribution***





Initially,
      we will market our products to specialty high end retail stores and chains
      in
      the U.S. Our sales strategy includes setting sales meetings with the retail
      stores in which we hope to have our product carried. We will exhibit and
      participate in international industry tradeshows and events and establish close
      connections with the retailers we intend on doing business with, including
      them
      at times in pre-selection and viewing of upcoming collections for the purpose
      of
      their review and comment. When and if our brand becomes more widely known and
      the product concept is more widely accepted, we will seek to establish licensing
      agreements with branded apparel companies. The third phase of distribution
      may
      include self-managed Skins concept stores in the heart of major metropolitan
      shopping areas acting primarily as a marketing tool.





***Pricing
      Strategy***





Initially
      we will target our Skins footwear products to the purchasers of higher end
      lifestyle oriented and casual footwear and are aiming to the higher end of
      the
      market.





**Competition**





We
      will
      face intense direct and indirect competition.




·
            Direct
                Competition: We will primarily offer lifestyle, athletic and dress-casual
                shoes. Consequently, all footwear companies that can be defined within
                those categories will be competition for
                us.





·
            Indirect
                Competition: In addition, due to the unique Skins product concept
                that
                involves interchangeability, we should be able to utilize the distribution
                patterns of the apparel market, including Internet and catalog sales,
                and
                via specialty retail distribution without the requirement of a footwear
                department. This opportunity widens our competition to include apparel
                companies that do or potentially will offer footwear products with
                their
                respective brand. These companies are defined as indirect competition,
                since we will target these companies as potential retail distribution
                points and for possible licensing
                agreements.





The
      apparel and footwear industries are extremely competitive and highly fragmented.
      This is most likely due to low barriers to entry. All that is required to enter
      the industries are clothing designs that appeal to department store and/or
      specialty store buyers. If a designer receives orders, he or she can contract
      the production of the item to a low-cost, independent manufacturer, usually
      outside the United States. In many areas, the barriers to entry are
      insignificant. These industries are characterized by simple technologies, low
      fixed assets per employee and ease of expansion through the use of
      contractors.





Although
      entering into the apparel and footwear industry may be relatively simple, being
      successful in the industry is much more difficult. The strength of large
      retailers is a major challenge to many designers, including us. As retailers
      shrink their inventories and place orders closer to the time that merchandise
      will be needed, designers and manufacturers are forced to assume more inventory
      risk.





**Employees**





As
      a
      development stage company, and even as we begin selling our product, we plan
      to
      rely on outside consultants and resources in an attempt to control our costs
      and
      expenses. Accordingly, as of December 31, 2006, we employed five full-time
      employees. None of our employees are covered by a collective bargaining
      agreement.





**Patent
      and Patent Applications**




We
      have
      applied for a U.S. patent relating to our Modular Shoe System. We also filed
      international (PCT) Patent App. No. PCT/US04/33446 for our Modular Shoe System
      on October 7, 2004, for which we have filed national and regional entry
      applications in Canada, Australia, China (PRC), Japan, New Zealand, South Korea,
      the European Patent Office, the Russian Federation and Israel. On November
      20,
      2006 the U.S. patent and trademark office allowed and approved our patent
      application for a modular shoe system in the US. The allowance went into effect
      immediately. On February 6, 2007 we were issued patent number 7,171,768 for the
      Modular Shoe System. Two additional U.S. patent applications related to the
      issued patent are pending.





6


**RISK
      FACTORS**




Any
      investment in our common stock involves a high degree of risk. Skins Inc. is
      the
      100% parent of Skins Footwear Inc. and Skins Inc.'s sole business operation
      consists of the operations of Skins Footwear Inc. The discussion below refers
      to
      the registrant, Skins Inc., and its wholly-owned subsidiary, Skins Footwear
      Inc,
      which are referred to in the discussion below as Skins, the Company, we, us,
      and
      our. Investors should carefully consider the risks described below and all
      of
      the information contained in this report before deciding whether to make an
      equity investment in our company. Our business, financial condition or results
      of operations could be materially adversely affected by these risks if any
      of
      them actually occur. The trading price of our common stock could decline due
      to
      any of these risks, and an investor may lose all or part of his or her
      investment. Some of these factors have affected our financial condition and
      operating results in the past or are currently affecting us. This report also
      contains forward-looking statements that involve risks and uncertainties. Our
      actual results could differ materially from those anticipated in these
      forward-looking statements as a result of certain factors, including the risks
      faced by our company described below and elsewhere in this report.




**RISKS
      RELATED TO OUR BUSINESS**





**We
      are a development stage company with a limited operating history on which to
      evaluate our business.**




Our
      business prospects are difficult to predict because of our limited operating
      history, early stage of development, unproven business strategy and unproven
      product. We are a development stage company that has yet to generate any revenue
      since our inception. Since our inception in May 2004, it has been our business
      plan to design, develop, manufacture and distribute our sole product
      type--footwear with an interchangeable outer skin. Our Skins shoe product has
      yet to be introduced to the market and there is no guarantee that our product
      will be able to generate any significant revenues. To the extent that we are
      able to implement our business plan, our business will be subject to all of
      the
      problems that typically affect a business with a limited operating history,
      such
      as unanticipated expenses, capital shortfalls, delays in design and
      manufacturing and possible cost overruns.





**We
      have a history of losses and we anticipate that our expenses will dramatically
      increase as we execute our business plan. Thus, we will likely experience
      continued losses in the near future and may not ever achieve or maintain
      profitability.**





We
      have
      yet to initiate sales or demonstrate that it can generate sufficient sales
      to
      become profitable. We incurred significant net losses since its inception in
      May
      2004, including a net loss of $4,100,278 and $532,314 for the years ended
      December 31, 2006 and 2005, respectively. As of December 31, 2006, we had an
      accumulated deficit of approximately $4,785,298. We expect to continue to incur
      operating losses in the future. Further, we expect operating expenses to
      increase as we seek to finalize our designs, build relationships with
      manufacturers and a distribution channel for product introductions, continue
      design and development projects, and increase administrative activities to
      support our planned growth. The extent of our future operating losses and the
      timing of our profitability are highly uncertain, and we may never generate
      sufficient revenues to achieve or sustain profitability.





**We
      will need to raise additional funds in the future to continue our operations
      and
      these funds may not be available on acceptable terms or at
      all.**





We
      anticipate raising additional funds through public or private financing,
      strategic relationships or other arrangements in the near future to support
      our
      business operations, however we currently do not have commitments from
      third parties for additional capital. We cannot be certain that any such
      financing will be available on acceptable terms, or at all, and our failure
      to
      raise capital when needed could limit our ability to continue and expand our
      business. We intend to overcome the circumstances that impact our ability to
      remain a going concern through a combination of the commencement of revenues,
      with interim cash flow deficiencies being addressed through additional equity
      and debt financing. Our ability to obtain additional funding in year 2007 and
      thereafter will determine our ability to continue as a going concern. There
      can
      be no assurances that these plans for additional financing will be successful.
      Failure to secure additional financing in a timely manner and on favorable
      terms
      if and when needed in the future could have a material adverse effect on our
      financial performance, results of operations and stock price and require us
      to
      implement cost reduction initiatives and curtail operations. Furthermore,
      additional equity financing may be dilutive to the holders of our common stock,
      and debt financing, if available, may involve restrictive covenants, and
      strategic relationships, if necessary to raise additional funds, may require
      that we relinquish valuable rights.





**Our
      independent registered public accountants indicate that they have substantial
      doubts that we can continue as a going concern, which may negatively affect
      our
      ability to raise additional funds and otherwise operate our business. If we
      fail
      to raise sufficient capital, we will not be able to implement our business
      plan,
      we may have to liquidate our business, and you may lose your
      investment.**




7


Mahoney
      Cohen & Company, CPA, P.C., our independent registered public accountants,
      has added an explanatory paragraph to their audit opinion issued in connection
      with the financial statements for the year ended December 31, 2006 indicating
      that it has substantial doubt about our ability to continue as a going concern
      given our recurring losses from operations and deficiencies in working capital
      and equity. This opinion could materially limit our ability to raise additional
      funds by issuing new debt or equity securities or otherwise. If we fail to
      raise
      sufficient capital, we will not be able to implement our business plan, we
      may
      have to liquidate our business and you may lose your investment. You should
      consider our independent registered public accountants' comments when
      determining if an investment in us is suitable.





**We
      face risks related to our recent accounting restatements.**





In
      August
      and September 2006, we determined that we had accounting inaccuracies in
      previously reported financial statements and decided to restate our financial
      statements for the year ended December 31, 2005 and the three months and six
      months ended March 31, 2006 and June 30, 2006, respectively. The restatements
      related to our determination that we misapplied accounting principles generally
      accepted in the United States of America in relation to (i) options granted
      on
      October 24, 2005 that were cancelled and replaced on March 16, 2006, (ii)
      derivative instruments that existed at December 31, 2005, March 31, 2006 and
      June 30, 2006, and (iii) 122,000 fully vested common stock shares granted to
      two
      of the Company's shareholders on April 3, 2006 for consulting services to be
      provided over a two year term. Such restatement of our financial statements
      could lead to litigation claims and/or regulatory proceedings against us. The
      defense of any such claims or proceedings may cause the diversion of
      management's attention and resources, and we may be required to pay damages
      if
      any such claims or proceedings are not resolved in our favor. Any litigation
      or
      regulatory proceeding, even if resolved in our favor, could cause us to incur
      significant legal and other expenses. We also may have difficulty raising equity
      capital or obtaining other financing, such as lines of credit or otherwise.
      We
      may not be able to effectuate our current operating strategy, including our
      ability effect the initial launch of our product and obtain additional financing
      in the future. The occurrence of any of the foregoing could harm our business
      and reputation and cause the price of our securities to decline.





**Our
      business is based on a single unproven and undeveloped product, and we may
      not
      be able to generate significant revenue if our product
      fails.**





We
      are a
      development stage company with no current line of products. Our business and
      ability to generate revenue will depend on our ability to successfully develop
      and commercialize our only product type--the Skins and Bone shoe--which is
      currently in development and testing stages. We have conducted various wear,
      fit
      and abrasion testing on our product, but there is no guarantee that the product
      will ever be fully and successfully developed. We may experience unforeseen
      difficulties during our testing and development of our product, which may
      require us to expend a significant amount of resources in an attempt to address
      any faults that are discovered. Such faults may be related to comfort,
      durability, appearance and any other characteristics that would affect the
      commercial viability of the product.





Further,
      even if we are able to develop and release our product, there can be no
      assurance that it will be well-received by the market or that it will generate
      any substantial revenue. Accordingly, our failure to generate revenue from
      our
      sole product type will have a significant negative impact on our business and
      results of operation, and shareholders in our company may lose all or part
      of
      their investment.




**Our
      management has a limited amount of senior management experience in manufacturing
      footwear and apparel industry and limited design experience in the
      industry.**





Our
      company is new to the footwear industry and our management has limited
      experience conducting business with overseas manufactures. The lack of
      experience in footwear management and the non-traditional design of our footwear
      may make it difficult to compete against companies that have more senior
      management and are manufacturing conventional footwear designs.. We expect
      to
      add additional key personnel in the near future. Our failure to attract and
      fully integrate our new employees into our operations or successfully manage
      such employees could have a material adverse effect on our business, financial
      condition and results of operations.





**Our
      future success depends on our ability to respond to changing consumer demands,
      to identify and to interpret fashion trends and successfully to market new
      products.**





The
      footwear industry is subject to rapidly changing consumer demands and fashion
      trends, particularly in the “high fashion” market that we intend to market our
      product. Accordingly, we must identify and interpret fashion trends and respond
      in a timely manner. Demand for and market acceptance of new products are
      uncertain and achieving market acceptance for new products generally requires
      substantial product development and marketing efforts and expenditures. If
      we do
      not meet changing consumer demands or are unable to continually develop styles
      that appeal to current consumer demands, our results of operations will be
      negatively impacted. In addition, we will have to make decisions about product
      designs and marketing expenditures several months in advance of the time when
      consumer acceptance can be determined, which makes it more difficult to appeal
      to current demands. If we fail to anticipate, identify or react appropriately
      to
      changes in styles and trends or are not successful in marketing our products,
      we
      could experience excess inventories, higher than normal markdowns or an
      inability to sell our products once and if the products are
      available.





8


**Our
      business and the success of our products could be harmed if we are unable to
      establish and maintain a brand image.**





We
      believe that establishing the Skins brand is critical to achieving acceptance
      of
      our footwear products and to establishing key strategic relationships. As a
      new
      company with a new brand, we believe that we have little to no brand recognition
      with the public. We may experience difficulty in establishing a brand name
      that
      is well-known and regarded, and any brand image that we may be able to create
      may be quickly impaired. The importance of brand recognition will increase
      when
      and if our competitors create products that are similar to our products. Even
      if
      we are able to establish a brand image and react appropriately to changes in
      consumer preferences, consumers may consider our brand image to be outdated
      or
      associate our brand with styles of footwear that are no longer popular. In
      the
      past, footwear companies have experienced fluctuations in revenues and sales
      due, at least in part, to changes in the companies' brand image. Our results
      of
      operations may be similarly affected in the future should our products even
      be
      successfully launched.





**We
      may fail in introducing and promoting our new products to the footwear market,
      which will have an adverse effect on our ability to generate
      revenues.**




Demand
      for and market acceptance of new products such as the Skin and Bones product
      type is inherently uncertain. We expect that our revenue, if and when generated,
      will come from the sale of our products, and our ability to sell our products
      will depend on various factors, including the eventual strength, if any, of our
      brand name, competitive conditions and our access to necessary capital. If
      we
      fail to introduce and promote our products, we may not be able to generate
      any
      significant revenues. In addition, as part of our growth strategy, we intend
      to
      expand our product offerings to introduce products in multiple categories.
      This
      strategy may however prove unsuccessful and our association with failed products
      could impair our brand image. Introducing and achieving market acceptance for
      these products will require, among other things:


·
              the
                    establishment of our brand;
 ·
                the
                      development and application of advanced performance technologies
                      to our
                      planned product
                      introductions;
 ·
                  the
                        establishment of key relationships with designers of and
                        customers for our
                        apparel products; and
 ·
                    substantial
                          marketing and product development efforts and expenditures
                          to create and
                          sustain consumer demand.
 **When
              and if our products are introduced and commercially available, we expect
              to rely
              on licensees for sales outside the U.S., and our dependence on licensees
              may
              adversely impact our business and results of
              operations.**





We
      expect
      that our sales outside the U.S., if any, will be conducted through licensees.
      Any dependence on licensees will subject us to a number of risks,
      including:


·
              Our
                    brand image will be dependent, in part, on the marketing efforts
                    of our
                    licensees and on the quality of the products that licensees distribute.
                    If
                    licensees or their sponsors or endorsers do not maintain our
                    brand image
                    or our licensees fail to adhere to our quality control standards,
                    our
                    brand image could suffer.
  ·
                We
                      expect that our licensees will likely have the exclusive right
                      to
                      distribute products in a particular country or region. Licensees
                      may
                      engage in the trans-shipment, or gray marketing, of goods to
                      countries
                      where they are not licensed to sell
                      products.
 ·
                  Licensees
                        may use manufacturers who fail to meet our human rights or
                        product quality
                        standards, which could harm our brand image and
                        reputation.
 ·
                    Licensees
                          may fail to timely and accurately report sales and licensing
                          income to
                          us.
 ·
                      Our
                            reserve for unpaid licensee revenue may be
                            insufficient.
 Revenue
                we may receive from international licensees will subject us to the
                risks of
                doing business abroad, including, political risks, foreign currency
                risks, funds
                transfer restrictions and exposure to different legal standards,
                particularly
                with respect to intellectual
                property.




9


**Our
      business could be harmed if we fail to maintain proper inventory levels once
      product is available.**





We
      may
      have difficulty in determining and maintaining the proper inventory levels
      for
      our Skins shoe product and styles, and if our inventory levels are too high
      or
      low, our results of operations will suffer. We plan to market our Skins shoe
      product as a “high level” style and fashion product, and, as a result, we will
      be subject to a higher risk of having an overstocked inventory because such
      styles and fashions change quickly and past styles can be rapidly considered
      obsolete. We expect to place orders with manufacturers for most of our products
      prior to the time we receive customer orders. Our inventory levels that are
      in
      excess of any customer demand, if any, that may develop for our products, once
      available, may result in an inventory of unfashionable product styles, inventory
      write-downs, and the sale of excess inventory at discounted prices could
      significantly impair our brand image as it is built and have a material adverse
      effect on our operating results and financial condition. Conversely, if we
      underestimate any consumer demand for our products that may develop or if our
      manufacturers, which are located in China and Italy, fail to supply the quality
      products that we require at the time we need them, we may experience inventory
      shortages. Inventory shortages might delay shipments to customers, negatively
      impact retailer and distributor relationships, and diminish any brand loyalty
      that we may be able to foster.





**We
      expect to rely on independent contract manufacturers and, as a result, will
      be
      exposed to potential disruptions in product supply.**





Our
      footwear products will likely be manufactured by independent contract
      manufacturers. We will not have long-term contracts with manufacturers and
      will
      compete with other footwear companies for production facilities. We could
      experience difficulties with these manufacturers, including reductions in the
      availability of production capacity, failure to meet our quality control
      standards, failure to meet production deadlines or increased manufacturing
      costs. This could result in future customers, if any, canceling orders, refusing
      to accept deliveries or demanding reductions in purchase prices, any of which
      could have a negative impact on our cash flow and harm our
      business.




**We
      are likely to depend upon a relatively small group of customers for a large
      portion of our sales.**





Our
      customers are not likely to have a contractual obligation to purchase our
      products once they are available and we cannot be certain that we will be able
      to retain major customers. We are likely to rely at all stages of our business
      on certain significant customers. Furthermore, the retail industry regularly
      experiences consolidation, contractions and closings. If there are further
      consolidations, contractions or closings in the future, we may lose future
      customers or be unable to collect accounts receivable of major customers in
      excess of amounts that we may insure. If we lose a major customer in the future,
      experience a significant decrease in sales to a major customer or are unable
      to
      collect the accounts receivable of a major customer in excess of amounts
      insured, our business could be harmed.





**Any
      international sales and manufacturing operations we are able to develop will
      be
      subject to the risks of doing business abroad, which could affect our ability
      to
      sell or manufacture our products in international markets, obtain products
      from
      foreign suppliers or control the costs of our products.**





Substantially
      all of any net sales we may be able to develop are likely to be derived from
      sales of footwear manufactured in foreign countries, which will most likely
      be
      China & Italy. We also expect to sell our footwear products in foreign
      countries and plan to establish international sales efforts over time as part
      of
      our growth strategy. Foreign manufacturing and sales will be subject to a number
      of risks, including:


·
              work
                    stoppages;
 ·
                natural
                      disasters and outbreaks pandemic diseases (such as the Avian
                      Flu);
 ·
                  political
                        and social unrest, including U.S. military presence in
                        Iraq;
 ·
                    changing
                          domestic and foreign economic
                          conditions;
 ·
                      currency
                            exchange rate fluctuations;
 ·
                        electrical
                              shortages;
 ·
                          transportation
                                delays or damage to products in
                                transit;
 10
  ·
                            the
                                  imposition of tariffs and trade duties both international
                                  and
                                  domestically;
 ·
                              import
                                    and export controls and other non-tariff
                                    barriers;
 ·
                                exposure
                                      to different legal standards (particularly
                                      with respect to intellectual
                                      property);
 ·
                                  compliance
                                        with foreign laws; and
 ·
                                    changes
                                          in domestic and foreign governmental
                                          policies.
 The
                              effects of these factors could restrict our ability
                              to manufacture or sell our
                              shoe products in a particular country and have a negative
                              impact on our
                              operating
                              results.





**Our
      business could be harmed if our future contract manufacturers, suppliers or
      licensees violate labor or other laws.**





Once
      we
      are able to retain them, our independent contract manufacturers, suppliers
      and
      licensees may not operate in compliance with applicable United States and
      foreign laws and regulations, including labor practices. If one of any of our
      possible future independent contract manufacturers, suppliers or licensees
      violates labor or other laws or diverges from those labor practices generally
      accepted as ethical in the United States, we could result in adverse publicity
      for us, damage our reputation in the United States or render our conduct of
      business in a particular foreign country undesirable or impractical, any of
      which could harm our business.





**We
      expect that once our products are introduced and when, and if, we are able
      to
      generate revenue on our products, our quarterly revenues and operating results
      will fluctuate as a result of a variety of factors, including seasonal
      fluctuations in demand for footwear, delivery date delays and potential
      fluctuations in our annualized tax rate, which may result in volatility of
      our
      stock price.**





Once
      and
      if established, our quarterly revenues and operating results can be expected
      to
      fluctuate due to a number of factors, many of which are beyond our control.
      For
      example, sales of footwear products have historically been seasonal in nature
      with the strongest sales generally occurring in the second and third quarters.
      Delays in scheduling or pickup of purchased products by domestic customers
      could
      negatively impact our net sales and results of operations for any given quarter.
      In addition, a number of companies in the footwear industry specifically, and
      others in the fashion and apparel industry in general, have experienced periods
      of growth in revenues and earnings and thereafter periods of declining sales
      and
      losses, based on the market reception of their collection of products for a
      particular season. Also, our annualized tax rate will be based on projections
      of
      our domestic and international operating results for the year, which we will
      review and revise as necessary at the end of each quarter, and we will be highly
      sensitive to fluctuations in projected international earnings. Any quarterly
      fluctuations in our annualized tax rate that may occur could have a material
      impact on our quarterly operating results. As a result of these specific and
      other general factors, our operating results will likely vary from quarter
      to
      quarter and the results for any particular quarter may not be necessarily
      indicative of results for the full year.





**We
      will face intense competition, including competition from companies with
      significantly greater resources than ours, and if we are unable to compete
      effectively with these companies, our business could be
      harmed.**





We
      will
      face intense competition in the footwear industry from other established
      companies. We have no product sales, introductions, manufacturing or brand
      equity. All of our competitors have significantly greater financial,
      technological, engineering, manufacturing, marketing and distribution resources
      than we do. Their greater capabilities in these areas will enable them to better
      withstand periodic downturns in the footwear industry, compete more effectively
      on the basis of price and production and more quickly develop new products.
      In
      addition, new companies may enter the markets in which we expect to compete,
      further increasing competition in the footwear industry.





We
      believe that our ability to compete successfully will depend on a number of
      factors, including the style and quality of our products once marketed and
      the
      strength of our brand, once established, as well as many factors beyond our
      control. We may not be able to compete successfully in the future, and increased
      competition may result in price reductions, reduced profit margins, loss of
      market share and an inability to generate cash flows that are sufficient to
      maintain or expand our development and marketing of new products.





**We
      depend on key personnel to manage our business effectively in a rapidly changing
      market, and if we are unable to retain existing personnel, our business could
      be
      harmed.**





Our
      future success depends upon the continued services of Mark Klein, President
      and
      Chief Executive Officer. The loss of the services of Mr. Klein or any other
      key
      employee could harm us. Our future success also depends on our ability to
      identify, attract and retain additional qualified personnel. Competition for
      employees in our industry is intense and we may not be successful in attracting
      and retaining such personnel.





11


**The
      disruption, expense and potential liability associated with unanticipated future
      litigation against us could have a material adverse effect on our business,
      results of operations and financial condition.**





We
      expect
      to be subject to various legal proceedings and threatened legal proceedings
      from
      time to time as part of our ordinary business. We are not currently a party
      to
      any legal proceedings. However, any unanticipated litigation in the future,
      regardless of merits, could significantly divert management's attention
      from our operations and result in substantial legal fees to it. Further, there
      can be no assurance that any actions that have been or will be brought against
      us will be resolved in our favor or, if significant monetary judgments are
      rendered against us, that we will have the ability to pay such judgments. Such
      disruptions, legal fees and any losses resulting from these claims could have
      a
      material adverse effect on our business, results of operations and financial
      condition.




**Our
      ability to compete will be jeopardized if we are unable to protect our
      intellectual property rights or if we are sued for intellectual property
      infringement.**





We
      hope
      to use trademarks on most or all of our products and believe that having
      distinctive marks that are readily identifiable will be an important factor
      in
      creating a market for our goods, in identifying our and in distinguishing our
      products from the products of others.





We
      have
      applied for a U.S. patent relating to our Modular Shoe System. We also filed
      international (PCT) Patent App. No. PCT/US04/33446 for our Modular Shoe System
      on October 7, 2004, for which we have filed national and regional entry
      applications in Canada, Australia, China (PRC), Japan, New Zealand, South Korea,
      the European Patent Office, the Russian Federation and Israel. On November
      20,
      2006 the U.S. patent and trademark office allowed and approved our patent
      application for a modular shoe system in the US. The allowance went into effect
      immediately. On February 6, 2007 we were issued patent number 7,171,768 for
      the
      Modular Shoe System. Two additional U.S. patent applications related to the
      issued patent are pending.





We
      believe that our ability to achieve success will depend primarily upon our
      ability to be effective in design, research and development, production and
      marketing rather than upon our patent position,. However, we expect to establish
      a policy of filing applications for United States and foreign patents on designs
      and technologies that we deem valuable. If we fail to protect or maintain our
      trademarks, we may lose or damage our intellectual property rights and impair
      our ability to generate revenue in the future.





**We
      may incur significant litigation expenses protecting our intellectual property
      or defending our use of intellectual property, which may have a material adverse
      effect on our cash flow and results of operations.**





If
      our
      efforts to protect our intellectual property rights are inadequate to prevent
      imitation of our products by others or to prevent others from seeking to block
      sales of our products as a violation of the intellectual property rights of
      others, we could incur substantial significant legal expenses in resolving
      such
      disputes.





**Our
      competitors may develop similar, non-infringing products that adversely affect
      our ability to generate revenues.**





Our
      competitors may be able to produce a footwear product that is similar to our
      product without infringing on our intellectual property rights. Since we have
      yet to establish any significant brand recognition for our product , we could
      lose a substantial amount of business due to competitors developing products
      similar to our Skin and Bones footwear product. As a result, our future growth
      and ability to generate revenues from the sale of our product could suffer
      a
      material adverse effect.




**Our
      business may be negatively impacted as a result of changes in the economy and
      consumer spending.**





Our
      business will depend on the general economic environment and levels of consumer
      spending that affect not only the ultimate consumer, but also retailers, our
      likely primary direct customers. Purchases of footwear tend to decline in
      periods of recession or uncertainty regarding future economic prospects, when
      consumer spending, particularly on discretionary items, declines. During periods
      of recession or economic uncertainty, we may not be able to maintain or increase
      our sales to customers, maintain sales levels, establish international
      operations on a profitable basis or create earnings from operations as a
      percentage of net sales. As a result, our operating results may be adversely
      and
      materially affected by downward trends in the economy or the occurrence of
      events that adversely affect the economy in general. Our operating results
      and
      margins will be adversely impacted if we do not grow as
      anticipated.





12


**We
      may be unable to scale our operations successfully.**




Our
      plan
      is to grow our business rapidly. Our growth, if it occurs as planned, will
      place
      significant demands on our management, as well as our financial, administrative
      and other resources. We have only just hired a Vice President of Sales and
      Finance and our success will be heavily dependent on our ability to integrate
      these employees and to locate and hire a Vice President Design and Development.
      There is no guarantee that we will be able to locate and retain qualified
      personnel for such positions, which would likely hinder our ability to manage
      operations. Furthermore, we cannot guarantee that any of the systems, procedures
      and controls we put in place will be adequate to support the commercialization
      of our products or other operations. Our operating results will depend
      substantially on the ability of our officers and key employees to manage
      changing business conditions and to implement and improve our financial,
      administrative and other resources. If we are unable to respond to and manage
      changing business conditions, or the scale of our products, services and
      operations, then the quality of our services, our ability to retain key
      personnel and our business could be harmed.





**RISKS
      RELATED TO OUR CAPITAL STRUCTURE**




**There
      is no assurance of an established public trading market, which would adversely
      affect the ability of our investors to sell their securities in the public
      market.**




Although
      our common stock is listed on the OTC Bulletin Board, a regular trading market
      for the securities does not yet exist and may not exist or be sustained in
      the
      future. The NASD has enacted changes that limit quotations on the OTC Bulletin
      Board to securities of issuers that are current in their reports filed with
      the
      Securities and Exchange Commission. The effect on the OTC Bulletin Board of
      these rule changes and other proposed changes cannot be determined at this
      time.
      The OTC Bulletin Board is an inter-dealer, over-the-counter market that provides
      significantly less liquidity than the NASD's automated quotation system, or
      the
      NASDAQ Stock Market. Quotes for stocks included on the OTC Bulletin Board are
      not listed in the financial sections of newspapers as are those for the NASDAQ
      Stock Market. Therefore, prices for securities traded solely on the OTC Bulletin
      Board may be difficult to obtain and holders of common stock may be unable
      to
      resell their securities at or near their original offering price or at any
      price. Market prices for our common stock will be influenced by a number of
      factors, including:


·
              the
                    issuance of new equity securities pursuant to the share exchange
                    transaction, or a future
                    offering;
 ·
                changes
                      in interest rates;
 ·
                  competitive
                        developments, including announcements by competitors of new
                        products or
                        services or significant contracts, acquisitions, strategic
                        partnerships,
                        joint ventures or capital
                        commitments;
 ·
                    variations
                          in quarterly operating
                          results;
 ·
                      change
                            in financial estimates by securities
                            analysts;
 ·
                        the
                              depth and liquidity of the market for our common
                              stock;
 ·
                          investor
                                perceptions of our company and the footwear industry
                                generally;
                                and
 ·
                            general
                                  economic and other national
                                  conditions.
 **Shares
                      eligible for future sale may adversely affect the market price
                      of our common
                      stock, as the future sale of a substantial amount of outstanding
                      stock in the
                      public marketplace could reduce the price of our common
                      stock.****




Shares
      eligible for future sale may have an adverse effect on the market price of
      our
      common stock by creating an excessive supply. Following the Share Exchange
      Transaction, pursuant to the terms of the private placement that we closed,
      we
      registered 6,122,000 shares of common stock that are now freely tradeable.
      In
      addition, the former stockholders of Skins Footwear Inc. who received shares
      of
      our common stock in the Share Exchange Transaction on the closing of the
      transaction in March 2006 are now eligible to sell all or some of their shares
      of common stock by means of ordinary brokerage transactions in the open market
      pursuant to Rule 144, promulgated under the Securities Act, or Rule 144, subject
      to certain limitations. In general, pursuant to Rule 144, a stockholder (or
      stockholders whose shares are aggregated) who has satisfied a one-year holding
      period may, under certain circumstances, sell within any three-month period
      a
      number of securities which does not exceed the greater of 1% of the then
      outstanding shares of common stock or the average weekly trading volume of
      the
      class during the four calendar weeks prior to such sale. There was a total
      of
      19,404,000 shares of common stock issued to the Skins Footwear shareholders.
      As
      of December 31, 2006, 1% of our issued and outstanding shares of common stock
      was approximately 362,068 shares. Rule 144 also permits, under certain
      circumstances, the sale of securities, without any limitations, by a
      non-affiliate that has satisfied a two-year holding period. Any substantial
      sale
      of common stock pursuant to any resale prospectus or Rule 144 may have an
      adverse effect on the market price of our common stock by creating an excessive
      supply.




13


**Following
      the Share Exchange Transaction, the former principal stockholders of Skins
      Footwear Inc. have significant influence over our company.**




Mark
      Klein, Michael J. Rosenthal, Stephen Hochberg, Geoffrey Dubey and Joshua
      Hermelin, each of whom were principal stockholders of Skins Footwear prior
      to
      the Share Exchange Transactions, beneficially own, in the aggregate, a majority
      of our outstanding voting stock following the Share Exchange Transaction. Mr.
      Klein became our President and Chief Executive Officer and Messrs. Rosenthal
      and
      Hochberg became directors of our company upon the closing of the Share Exchange
      Transaction. The former principal stockholders of Skins Footwear Inc. possess
      significant influence over our company, giving them the ability, among other
      things, to elect a majority of the Board of Directors and to approve significant
      corporate transactions. Such stock ownership and control may also have the
      effect of delaying or preventing a future change in control, impeding a merger,
      consolidation, takeover or other business combination or discourage a potential
      acquirer from making a tender offer or otherwise attempting to obtain control
      of
      our company.





**We
      may not be able to achieve the benefits we expect to result from the Share
      Exchange Transaction.**




On
      March
      20, 2006, the Share Exchange Transaction closed, Skins Footwear Inc. became
      our
      wholly-owned subsidiary and our sole business operations became that of Skins
      Footwear Inc. Also, the management and directors of Skins Footwear Inc. became
      the management and directors of our company.




The
      Share
      Exchange Transaction was conducted for various reasons, but there is no
      guarantee that we will ever obtain the anticipated benefits, as
      follows:


·
              the
                    increased market liquidity expected to result from exchanging
                    stock in a
                    private company for publicly traded
                    securities;
 ·
                the
                      ability to use registered securities to make acquisition of
                      assets or
                      businesses;
 ·
                  increased
                        visibility in the financial
                        community;
 ·
                    enhanced
                          access to the capital
                          markets;
 ·
                      improved
                            transparency of operations;
                            and
 ·
                        perceived
                              credibility and enhanced corporate image of being a
                              publicly traded
                              company.
 There
                  can
                  be no assurance that any of the anticipated benefits of the Share
                  Exchange
                  Transaction will be realized in respect to our new business operations.
                  In
                  addition, the attention and effort devoted to achieving the benefits
                  of the
                  Share Exchange Transaction and attending to the obligations of
                  being a public
                  company, such as reporting requirements and securities regulations,
                  could
                  significantly divert our management's attention from other important
                  issues,
                  which could materially and adversely affect our operating results
                  or stock price
                  in the future.





**If
      we fail to maintain effective internal controls over financial reporting, the
      price of our common stock may be adversely affected.**





Our
      internal control over financial reporting may have weaknesses and conditions
      that need to be addressed, the disclosure of which may have an adverse impact
      on
      the price of our common stock. We are required to establish and maintain
      appropriate internal controls over financial reporting. Failure to establish
      and
      maintain an effective internal controls over financial reporting could result
      in
      accounting errors such as those which led to the restatement of our financial
      statements in the year ended December 31, 2005, the three months ended March
      31,
      2006 and the six months ended June 30, 2006, which could adversely impact our
      public disclosures regarding our business, financial condition or results of
      operations. We may in the future identify similar errors in prior period
      financial information, requiring further restatement of our financial
      statements. In addition, management’s assessment of internal controls over
      financial reporting may identify weaknesses and conditions that need to be
      addressed in our internal controls over financial reporting or other matters
      that may raise concerns for investors. Any actual or perceived weaknesses and
      conditions may have an adverse impact on the price of our common
      stock.





14


**Compliance
      with changing regulation of corporate governance and public disclosure will
      result in additional expenses.**




Changing
      laws, regulations and standards relating to corporate governance and public
      disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC
      regulations, have created uncertainty for public companies and significantly
      increased the costs and risks associated with accessing the public markets
      and
      public reporting. Our management team will need to invest significant management
      time and financial resources to comply with both existing and evolving standards
      for public companies, which will lead to increased general and administrative
      expenses and a diversion of management time and attention from revenue
      generating activities to compliance activities.





**Standards
      for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are uncertain,
      and if we fail to comply in a timely manner, our business could be harmed and
      our stock price could decline.**




Rules
      adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
      require annual assessment of our internal control over financial reporting,
      and
      attestation of this assessment by our company's independent registered public
      accountants. The SEC extended the compliance dates for non-accelerated filers,
      as defined by the SEC. Accordingly, we believe that this requirement will first
      apply to our annual report for fiscal 2007. The standards that must be met
      for management to assess the internal control over financial reporting as
      effective are new and complex, and require significant documentation, testing
      and possible remediation to meet the detailed standards. We may encounter
      problems or delays in completing activities necessary to make an assessment
      of
      our internal control over financial reporting. In addition, the attestation
      process by our independent registered public accountants is new and we may
      encounter problems or delays in completing the implementation of any requested
      improvements and receiving an attestation of our assessment by our independent
      registered public accountants. If we cannot assess our internal control over
      financial reporting as effective, or our independent registered public
      accountants are unable to provide an unqualified attestation report on such
      assessment, investor confidence and share value may be negatively
      impacted.




**Our
      common stock is considered a “penny stock,” and is subject to additional sale
      and trading regulations that may make it more difficult to
      sell.**




Our
      common stock is considered to be a “penny stock” since it does not qualify for
      one of the exemptions from the definition of “penny stock” under Section 3a51-1
      of the Securities Exchange Act for 1934, as amended, or the Exchange Act. Our
      common stock is a “penny stock” because it meets one or more of the following
      conditions (i) the stock trades at a price less than $5.00 per share; (ii)
      it is
      NOT traded on a “recognized” national exchange; (iii) it is NOT quoted on the
      Nasdaq Stock Market, or even if so, has a price less than $5.00 per share;
      or
      (iv) is issued by a company that has been in business less than three years
      with
      net tangible assets less than $5 million.




The
      principal result or effect of being designated a “penny stock” is that
      securities broker-dealers participating in sales of our common stock will be
      subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9
      promulgated under the Exchange Act. For example, Rule 15g-2 requires
      broker-dealers dealing in penny stocks to provide potential investors with
      a
      document disclosing the risks of penny stocks and to obtain a manually signed
      and dated written receipt of the document at least two business days before
      effecting any transaction in a penny stock for the investor's account. Moreover,
      Rule 15g-9 requires broker-dealers in penny stocks to approve the account of
      any
      investor for transactions in such stocks before selling any penny stock to
      that
      investor. This procedure requires the broker-dealer to (i) obtain from the
      investor information concerning his or her financial situation, investment
      experience and investment objectives; (ii) reasonably determine, based on that
      information, that transactions in penny stocks are suitable for the investor
      and
      that the investor has sufficient knowledge and experience as to be reasonably
      capable of evaluating the risks of penny stock transactions; (iii) provide
      the
      investor with a written statement setting forth the basis on which the
      broker-dealer made the determination in (ii) above; and (iv) receive a signed
      and dated copy of such statement from the investor, confirming that it
      accurately reflects the investor's financial situation, investment experience
      and investment objectives. Compliance with these requirements may make it more
      difficult and time consuming for holders of our common stock to resell their
      shares to third parties or to otherwise dispose of them in the market or
      otherwise.





**We
      do not foresee paying cash dividends in the foreseeable
      future.**




To
      date,
      we have not declared or paid any cash dividends on our shares of common stock
      and currently intend to retain any future earnings for funding growth. We do
      not
      anticipate paying any dividends in the foreseeable future. As a result, you
      should not rely on an investment in our securities if you require dividend
      income. Capital appreciation, if any, of our shares may be your sole source
      of
      gain for the foreseeable future. Moreover, you may not be able to resell your
      shares in our company at or above the price you paid for them.





**ITEM
      2. DESCRIPTION OF PROPERTY.**





We
      do not
      own any real property. Pursuant to an oral agreement, we currently lease
      approximately 700 square feet of office space in New York City for $3,500 per
      month. The office acts as our executive headquarters and principal offices.
      The
      initial term of our oral lease is six months.





15


**ITEM
      3. LEGAL PROCEEDINGS.**





We
      are
      not a party to any material litigation.





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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of our 2006 year.





**ITEM
      5.** **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**





Our
      common stock is listed on the Over-the-Counter Bulleting Board under the trading
      symbol “SKNN.” Prior to April 18, 2006, our shares were listed under the symbol
“LGIM.” No trading market for our common stock developed until March 20, 2006,
      the closing of the Share Exchange Transaction. The following table sets forth
      the high and low bid prices for our common stock for the periods noted, as
      reported by the National Daily Quotation Service and the Over-The-Counter
      Bulletin Board. Quotations reflect inter-dealer prices, without retail mark-up,
      markdown or commission and may not represent actual transactions.





**2006****High**
            
            **Low**Fourth
                Quarter
            
            $
            3.05
            
            $
            1.10Third
                Quarter
            
            $
            1.31
            
            $
            0.89Second
                Quarter
            
            $
            1.26
            
            $
            0.90First
                Quarter
            
            $
            1.25
            
            $
            0.55





As
      of
      April 1, 2007, we have approximately 34 registered shareholders. The closing
      sales price of our common stock on April 13, 2007 was $1.25, as reported on
      the
      Over-the-Counter Bulletin Board.





The
      price
      of our common stock will likely fluctuate in the future. The stock market in
      general has experienced extreme stock price fluctuations in the past few years.
      In some cases, these fluctuations have been unrelated to the operating
      performance of the affected companies. Many companies have experienced dramatic
      volatility in the market prices of their common stock. We believe that a number
      of factors, both within and outside our control, could cause the price of our
      common stock to fluctuate, perhaps substantially. Factors such as the following
      could have a significant adverse impact on the market price of our common
      stock:





·
            Our
                limited operating history;·
            Our
                lack of profits from operations;




·
            Our
                recent restatement of our financial statements;·
            Our
                ability to raise additional funds on acceptable terms or at
                all;




·
            Our
                ability to successfully design, manufacture and commercialize our
                proposed
                product;·
            Our
                reliance on one unproven and undeveloped product
                type;




·
            Rapidly
                changing consumer demands for footwear products;·
            Our
                unestablished brand;




·
            The
                degree and nature of our competition;·
            Our
                ability to employ and retain qualified employees;
                and




·
            The
                limited trading market for our common
                stock.




16


Additionally,
      our common stock is currently considered to be a “penny stock” because it does
      not qualify for one of the exemptions from the definition of “penny stock” under
      Section 3a51-1 of the Securities Exchange Act for 1934, as amended (the
“Exchange Act”). Our common stock may be a “penny stock” if it meets one or more
      of the following conditions (i) the stock trades at a price less than $5.00
      per
      share; (ii) it is NOT traded on a “recognized” national exchange; (iii) it is
      NOT quoted on the Nasdaq Stock Market, or even if so, has a price less than
      $5.00 per share; or (iv) is issued by a company that has been in business less
      than three years with net tangible assets less than $5 million.




The
      principal result or effect of being designated a “penny stock” is that
      securities broker-dealers participating in sales of our common stock will be
      subject to the “penny stock” regulations set forth in Rules 15g-2 through 15g-9
      promulgated under the Exchange Act. For example, Rule 15g-2 requires
      broker-dealers dealing in penny stocks to provide potential investors with
      a
      document disclosing the risks of penny stocks and to obtain a manually signed
      and dated written receipt of the document at least two business days before
      effecting any transaction in a penny stock for the investor’s account. Moreover,
      Rule 15g-9 requires broker-dealers in penny stocks to approve the account of
      any
      investor for transactions in such stocks before selling any penny stock to
      that
      investor. This procedure requires the broker-dealer to (i) obtain from the
      investor information concerning his or her financial situation, investment
      experience and investment objectives; (ii) reasonably determine, based on that
      information, that transactions in penny stocks are suitable for the investor
      and
      that the investor has sufficient knowledge and experience as to be reasonably
      capable of evaluating the risks of penny stock transactions; (iii) provide
      the
      investor with a written statement setting forth the basis on which the
      broker-dealer made the determination in (ii) above; and (iv) receive a signed
      and dated copy of such statement from the investor, confirming that it
      accurately reflects the investor’s financial situation, investment experience
      and investment objectives. Compliance with these requirements may make it more
      difficult and time consuming for holders of our common stock to resell their
      shares to third parties or to otherwise dispose of them in the market or
      otherwise.





**Dividend
      Policy**




We
      have
      not declared or paid any cash dividends on our common stock, and we currently
      intend to retain future earnings, if any, to finance the development of our
      business, and we do not expect to pay any cash dividends in the foreseeable
      future. The decision whether to pay cash dividends on our common stock will
      be
      made by our board of directors, in their discretion, and will depend on our
      financial condition, operating results, capital requirements and other factors
      that the board of directors considers significant. We currently intend to retain
      our earnings for funding development and growth and, therefore, do not expect
      to
      pay any dividends in the foreseeable future.





**Equity
      Compensation Plan**





#
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
            
            #
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))Equity
                compensation plans approved by security holders
            
            
            3,139,375
            
            $
            0.91
            
            
            235,625Equity
                compensation plans not approved by securities holders
            
            
            -
            
            
            -
            
            
            -Total
            
            
            3,139,375
            
            $
            0.91
            
            
            235,625





Administration
      of the Skin Shoes, Inc. 2005 Incentive Plan (the “2005 Incentive Plan”) is
      carried out by a committee of the Board of Directors to which the Board of
      Directors has delegated all or a portion of responsibility for the
      implementation, interpretation or administration of the 2005 Incentive Plan
      (the
      Committee). Our employees, officers directors, consultants are eligible to
      participate in the 2005 Incentive Plan. The Committee of the 2005 Incentive
      Plan
      selects the participants who are granted stock options or stock awards and,
      consistent with the terms of the 2005 Incentive Plan, will establish the terms
      of each stock option or stock award. The maximum period in which a stock option
      may be exercised will be fixed by the Committee. Under the 2005 Incentive Plan,
      the maximum number of shares of common stock that may be subject to stock
      options or stock awards is 3,375,000. As of December 31, 2006, we had
      outstanding an aggregate of 3,375,000 options
      to our directors, officers, consultants, and employees with 235,625 shares
      of common stock available for future issuance. For more information, please
      see
      the discussion under “Item 10. Executive Compensation.”





17


**ITEM
      6.****MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





*The
      following discussion of our financial condition and plan of operation should
      be
      read in conjunction with our financial statements and the related notes, and
      the
      other financial information included in this report. This Management's
      Discussion and Analysis or Plan of Operation describes the matters we consider
      to be important to understanding our history, technology, current position,
      financial condition and future plans. Our fiscal year begins on January 1 and
      ends on December 31.*





*The
      following discussion includes forward looking statements and uncertainties,
      including plans, objectives, goals, strategies, financial projections as well
      as
      known and unknown uncertainties. The actual results of our future performance
      may differ materially from the results anticipated in these forward-looking
      statements. Although we believe that the expectations reflected in the
      forward-looking statements are reasonable, we can not guarantee future results,
      levels of activity, performance or achievement.*





**OVERVIEW**





**Our
      Company**





We
      are a
      development stage company. We have not yet realized any revenues from our
      planned operations. We intend to initially design, manufacture and market high
      quality men's and women's footwear. Our primary activities have been conducting
      research and development, performing business, strategic and financial planning,
      and raising capital.





We
      have
      designed and continue to develop an innovative footwear product - a two-part
      footwear structure consisting of an outer collapsible “Skin” and an inner
      orthopedic support section called the “Bone.” This structure enables consumers
      to purchase one inner section and multiple outer skins - resulting in multiple
      style variations from the same pair of inner section, with the same feel and
      fit
      despite the type of Skin being worn. The Skins product concept is patent
      pending.





We
      anticipate marketing our products via traditional footwear channels,
      non-traditional apparel channels, the Internet and other retail locations that
      traditionally do not have a footwear department. Due to the interchangeability
      of a Skin and a Bone, a consumer will know how the product will fit and feel
      once they own a Bone, allowing the customer to purchase a Skin from various
      venues without having to try on the product.




Our
      objective is to create a new attire concept that allows and encourages consumers
      to more frequently change their footwear - positioning the Skins concept between
      footwear and apparel. Our footwear will initially be designed with an active,
      youthful lifestyle in mind. We will initially design most of our styles to
      be
      fashionable and marketable to the 18- to 35-year old consumer, with
      consideration in the future to lines that will appeal to the broad cross-section
      of the population.




As
      of
      December 31, 2006, we had no established source of revenues and had accumulated
      losses of $4,607,018 since inception. Our ability to continue as a going concern
      is dependent upon achieving production, sales, profitability and our ability
      to
      obtain the necessary financing to meet our obligations and pay our liabilities
      arising from normal business operations when they come due. The outcome of
      these
      matters cannot be predicted with any certainty at this time and raise
      substantial doubt that we will be able to continue as a going concern. The
      financial statements contained in this 10-KSB form do not include any
      adjustments to the amounts and classification of assets and liabilities that
      may
      be necessary should we be unable to continue as a going concern. We anticipate
      that additional funding may be generated from the sale of common shares and/or
      debt with an equity feature and from asset based financing or
      factoring.





**Product
      and Technology**





Management
      believes that the Skins concept has advantages that eliminate a large part
      of
      traditional footwear manufacturing - including the stretching, shaping and
      stiffening normally found in footwear construction. The engineering of the
      Bone
      and Skin allows for a pressure fit attachment, removing the need for any type
      of
      fasteners, like hooks, Velcro, zippers or buttons. The Bone is an exact fit
      to
      its corresponding Skin in the same size, meaning that despite the type of Skin
      the consumer purchases, no matter the shape or style, the Skin will fit as
      long
      as it is the same size as the Bone.





The
      Skin
      by itself is a shapeless, thin material upper made from traditional materials
      found in shoemaking that has been stitched and glued to a “hollowed-out”
outsole. The outsole is part of the actual Skin and changes accordingly with
      each new Skin design. The Skin cannot be worn on its own. Without the Bone,
      the
      Skin is fully collapsible, and offers no shape or support. As a result,
      traveling with multiple skins will require much less space than packing multiple
      pairs of shoes.





The
      Bone
      represents the inner structure and support of the product. It is made up of
      an
      orthopedic midsole, a shock absorbent heel, a supporting heel counter and a
      protective toe box. The Bone was designed to be as minimalist and timeless
      as
      possible. It is designed to provide the consumer with fit and comfort, and
      such
      fit and comfort may be felt no matter which Skin is being worn. The Bone is
      designed such that it can only be worn once it is inside the Skin and not on
      its
      own.





18


These
      two
      components of Skin and Bones, when combined, create a full shoe. Management
      believes that the key characteristics of the Skin and Bones are as
      follows:




·
            The
                same fit and feel for every Skin purchased in the same size, no matter
                the
                style or function of the Skin;




·
            Interchangeable
                uppers, which allow the consumer to constantly switch Skins to match
                and
                correspond with their apparel and activity;
                and




·
            Fully
                collapsible Skins, allowing for minimal room to store and pack numerous
                pairs.





**Patent
      and Patent Applications**





We
      have
      applied for a U.S. patent relating to our Modular Shoe System. We also filed
      international (PCT) Patent App. No. PCT/US04/33446 for our Modular Shoe System
      on October 7, 2004, for which we have filed national and regional entry
      applications in Canada, Australia, China (PRC), Japan, New Zealand, South Korea,
      the European Patent Office, the Russian Federation and Israel. On November
      20,
      2006 the U.S. patent and trademark office allowed and approved our patent
      application for a modular shoe system in the US. The allowance went into effect
      immediately. On February 6, 2007 we were issued patent number 7,171,768 for
      the
      Modular Shoe System. Two additional U.S. patent applications related to the
      issued patent are pending.





**CORPORATE
      HISTORY**





We
      were
      incorporated in the state of Nevada on January 23, 2004. We had planned to
      develop, market and support a voice interface software platform for the Chinese
      languages to serve as a standard set of software that would allow other software
      programmers and engineers to develop voice interface applications for the
      Chinese languages based on the software platform. Our chief software engineer
      resigned in July 2005 and we determined that we were not likely to be successful
      in the software industry unless we were able to find a replacement. We began
      both to search for a replacement and to assess other business opportunities.
      We
      became aware of a business opportunity presented by an unrelated private
      company, Skins Footwear Inc., and we began to consider and discuss the
      possibility of a business combination between our company and the shareholders
      of Skins Footwear Inc.





On
      November 2, 2005, we entered into a Share Exchange Agreement with all of the
      stockholders of Skins Footwear Inc., a Delaware corporation, pursuant to which
      we agreed to acquire all of the issued and outstanding share capital of Skins
      Footwear in exchange for shares of our common stock. The exchange of the shares
      pursuant to the Share Exchange Agreement is herein referred to as the Share
      Exchange Transaction. The Share Exchange Agreement was amended on February
      1,
      2006. On March 20, 2006, the Share Exchange Transaction was completed, Skins
      Footwear became our wholly-owned subsidiary and our sole business operations
      became that of Skins Footwear.





In
      April
      2006, we changed our corporate name from “Logicom Inc.” to “Skins Inc.” and we
      changed the name of our operating subsidiary from Skins Shoes, Inc. to Skins
      Footwear Inc. Skins Footwear Inc. was originally organized in May 2004 as a
      New
      Jersey limited liability company under the name Skin Shoes, LLC and, in 2005,
      merged with Skins Footwear Inc., a Delaware corporation, whereby the corporation
      was the surviving entity. The merger on October 20, 2005 was a conversion of
      a
      non-taxable entity to a taxable corporation, The deficit accumulated in the
      development stage on October 20, 2005 was treated as a return of capital to
      the
      members of Skin Shoes, LLC and as a result the accumulated deficit was
      reclassified to additional paid in capital in the consolidated statements of
      stockholders' equity.





**RECENT
      EVENTS**





***Principal
      Terms of the March 2006 Share Exchange***





Pursuant
      to the terms of the Share Exchange Agreement, we:





·
            provided
                a loan to Skins Footwear in the sum of $150,000 evidenced by a promissory
                note with an annual interest rate of 5% and secured by a general
                security
                agreement pledging all of the assets of Skins Footwear as security
                for the
                loan;




19




·
            repurchased
                and canceled 7,418,182 shares of our common stock owned by a major
                shareholder, Wayne Weaver, for the sum of
                $100,000;




·
            effected
                a 1 for 8.727273 forward stock split on December 16, 2005 that resulted
                in
                our shareholders, after adjustment for the repurchase of Mr. Weaver's
                shares, holding an aggregate of 12,000,006 common shares prior to
                the
                closing of the Share Exchange
                Transaction;




·
            issued
                to the stockholders of Skins Footwear, at the closing of the Share
                Exchange Transaction, 19,404,000 common shares of our common stock
                in
                exchange for all of the issued and outstanding shares of Skins Footwear
                (of these 19,404,000 common shares, 1,404,000 shares are held in
                escrow by
                us and are subject to partial and full return to us contingent upon
                the
                number of share purchase warrants exercised by investors within a
                period
                of 30 months following the closing of private placements and the
                Share
                Exchange Transaction on March 20,
                2006);




·
            assumed,
                at the closing of the Share Exchange Transaction, Skins Footwear's
                2005
                Incentive Plan and stock option agreements entered into between Skins
                Footwear and certain persons who have received stock options from
                Skins
                Footwear pursuant to its 2005 Incentive
                Plan;




·
            appointed
                Mark Klein, the President of Skins Footwear, to the office of President
                and Chief Executive Officer of oru company and accepted the resignation
                of
                Gary Musil, our former President, from that office, effective at
                the
                closing of the Share Exchange Transaction;
                and




·
            increased
                the number of directors of our director to five and elected as our
                directors at the completion of the Share Exchange Transaction all
                four of
                the current directors of Skins Footwear (i.e., Mark Klein, Michael
                J.
                Rosenthal, Stephen Hochberg and Steve
                Reimer).




The
      Share
      Exchange Transaction was completed on March 20, 2006. Immediately after the
      closing of the Share Exchange Transaction, and taking into account the 1 for
      8.727273 forward stock split, the repurchase of Mr. Weaver's shares and the
      private placements (as described below), we had 34,404,006 outstanding shares
      of
      common stock, options to purchase 2,109,375 shares of common stock and warrants
      to purchase 3,000,000 shares of common stock. At the close of the Share Exchange
      Transaction, the former shareholders of Skins Footwear owned approximately
      56%
      of the issued and outstanding shares of our company, our previous shareholders
      owned approximately 9% of the outstanding shares and the investors in the
      private placements owned approximately 35% of the outstanding shares. The
      forward stock split and the repurchase of Mr. Weaver's shares were effected
      to
      reach the foregoing ownership percentages.





***The
      March 2006 Private Placements***





We,
      pursuant to the Share Exchange Agreement, effected two private placement
      transactions in which we sold a total of 3,000,000 units and raised an aggregate
      of $2,520,000. In the first private placement, which occurred on November 2,
      2005, we sold one convertible debenture in the amount of $150,000 to one
      offshore investor. The convertible debenture was convertible into 178,572 units
      at a conversion price of $0.84 per unit, with each unit consisting of one share
      of common stock of our company and one share purchase warrant. Pursuant to
      the
      terms of the convertible debenture, the conversion of the debenture into units
      occurred automatically upon the completion of our Share Exchange Transaction
      on
      March 20, 2006. The share purchase warrants are exercisable for a period of
      thirty months from the date of issue at an exercise price of $1.00 per share.
      We
      used the funds received for the convertible note to provide a loan to Skins
      Footwear in the sum of $150,000 evidenced by a promissory note with an annual
      interest rate of 5% and secured by a general security agreement pledging all
      of
      the assets of Skins Footwear as security for the loan.





In
      the
      second private placement, which occurred immediately prior to the closing of
      the
      Share Exchange Transaction on March 20, 2006, we closed a private placement
      of
      units to purchase our common stock and warrants pursuant to a subscription
      agreement. Each unit consisted of one share of our common stock and one share
      purchase warrant convertible at an exercise price of $1.00 per share at any
      time
      upon election of the holder during the 30 month period following the date of
      issue. A total of 2,821,428 units were sold in the second private placement
      for
      an aggregate of $2,370,000. We agreed to register, and did register, all of
      the
      securities issued pursuant to the first and second private
      placements.





**PLANNED
      OPERATIONS**





**Product
      Development**





We
      will
      concentrate on our core design and development of the Skin and Bone product,
      while outsourcing the production requirements to third parties. Production
      requirements are currently being handled by Atsco Footwear, LLC, Boemos SPA,
      and
      TLD.





20


A
      fully
      developed men's and women's line is expected to be delivered to retailers for
      sale for early Fall 2007. The focus is on creating a high-end line of Skins
      priced at a manufacturer's suggested retail price of $150-$300 for women and
      $170-$300 for men. This first collection will have approximately 25-30 styles
      including both genders.




Our
      Skins
      are being designed by our in-house designer and other outsourced design firms.
      They collaboratively put together the collection for men's and women's Skins,
      the packaging and retail displays, and help in refining the creative identity
      of
      the brand.





**Planned
      Distribution**





We
      plan
      to act as a wholesaler and market our products to specialty, department and
      Internet retail locations via our marketing and branding efforts.





We
      will
      consider the children's market and more mainstream middle-market retailers
      once
      our brand is more established. We may also consider licensing our technology
      in
      the future.





Our
      current plan is to launch a limited nationwide distribution by early Fall 2007.
      We plan to be in approximately 60 to 70 stores by the end December
      2007.





We
      believe that the initial purchase order amount we can expect per retailer will
      be 72 pairs per gender at an average wholesale price of $75 per pair of Skins.
      We further plan on selling fill-in orders as the season progresses.





**Year
      Ended December 31, 2006 Compared with Year Ended December 31,
      2005**





Net
      revenues during the twelve months ended December, 2006 and 2005 were
      nil.





Our
      design and development expenses increased $242,923 to $336,815 for the year
      ended December 31, 2006, as compared to $93,892 for the same period in 2005.
      The
      primary reason for the increase was the increase in compensation for our
      in-house designer, and outsourcing of design work to design firms.





Our
      selling, general and administrative expenses increased $2,066,152 to
      $2,478,561for the year ended December 31, 2006, as compared to $412,409 for
      the
      same period in 2005. The increase was primarily due to the legal, accounting,
      stock based compensation, and other expenses that we incurred in connection
      with
      the share exchange transaction that was completed on March 20, 2006,
      commencement of compensation to its chief executive officer and chairman of
      the
      board, hiring of new key personnel and consultants, increase our advertising
      and
      promotion expense, increase our travel expense, opening a new office location
      in
      Manhattan and compensation expense related to our stock option
      grants.





The
      unrealized loss on derivative instruments of $1,284,563 for the year ended
      December 31, 2006 represents mainly the fair value charge in our derivative
      liability that resulted from the liquidated damages provision we have within
      a
      subscription agreement with certain of our stockholders who hold warrants to
      purchase common stock in accordance with the Share Exchange
      Agreement.





Our
      net
      losses for the year ended December 31, 2006 were $4,100,278, or $0.14 per share,
      as compared to a net loss of $532,314, or $0.03 per share for the same period
      in
      2005. The increase in net loss is attributable primarily to an increase in
      unrealized loss on derivative instruments and an increase in our selling,
      general and administration expenses.





**Liquidity
      and Capital Resources**





At
      December 31, 2006, we had $1,754,926 in cash and cash equivalents. Generally,
      we
      have primarily financed operations to date through the proceeds of the private
      placement of equity securities and the proceeds of warrants exercised in the
      fourth quarter of fiscal year 2006. We received net proceeds of $2,261,462
      from
      the private placements that were conducted in connection with the share exchange
      transaction during the fiscal quarter ended March 31, 2006 and $1,680,763 from
      the exercise of the warrants.,





Net
      cash
      used in operating activities for the year ended December 31, 2006 was
      $2,086,524. We earned no revenues since our inception in May 2004. Operating
      expenditures consisted of design and development, advertising and promotion,
      legal and accounting fees and salaries.





21


At
      December 31, 2006, we had 3,139,375 stock options and 1,319,237 stock purchase
      warrants outstanding. The outstanding stock options have a weighted average
      exercise price of $0.91per share. The outstanding warrants have a weighted
      average exercise price of $1.00 per share. Accordingly, at December 31, 2006,
      the outstanding options and warrants represented a total of 4,458,612 shares
      issuable for a maximum of $4,162,737 if these options and warrants were
      exercised in full. The exercise of these options and warrants is completely
      at
      the discretion of the holders. There is no assurance that any of these options
      or any additional warrants will be exercised.





We
      expect
      to continue to incur expenditures of our cash on hand for compensation to our
      employees. We currently pay Mark Klein, our Chief Executive Officer and
      President, an annual base salary of $175,000, with a bonus of up to 50% of
      his
      base salary. In April 2007, we hired Antonio Pavan as our Chief Operating
      Officer and Executive Vice President, whom we will pay $225,000 per year in
      base
      salary with an annual bonus up to 50% of his base salary. We have paid Jake
      Kamuonka, who is expected to leave the company in May 2007, $150,000 per year
      in
      base salary, and we will pay approximately $115,000 for his severance. We also
      pay Michael Rosenthal $90,000 annually as Chairman of the Board of Directors
      of
      our company.





As
      of
      December 31, 2006, we anticipate that we will need financing to enable us to
      meet our anticipated expenditures for the next year. We anticipate raising
      additional funds through public or private financing, strategic relationships
      or
      other arrangements in the future to support our business operations, however
      we
      currently do not have commitments from third parties for additional capital.
      We
      cannot be certain that any such financing will be available on acceptable terms,
      or at all, and our failure to raise capital when needed could limit our ability
      to continue as a going concern. We plan to overcome the circumstances that
      impact our ability to remain a going concern through a combination of beginning
      to generate revenues and decreasing costs, as necessary, with interim cash
      flow
      deficiencies being addressed through additional equity financing. Our ability
      to
      obtain additional funding in year 2007 and thereafter will determine our ability
      to continue as a going concern. There can be no assurances that these plans
      for
      additional financing will be successful. Failure to secure additional financing
      in a timely manner and on favorable terms if and when needed in the future
      could
      have a material adverse effect on our financial performance, results of
      operations and stock price and require us to implement cost reduction
      initiatives and curtail operations. Furthermore, additional equity financing
      may
      be dilutive to the holders of our common stock, and debt financing, if
      available, may involve restrictive covenants, and may require the Company to
      relinquish valuable rights.





**Off
      Balance Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements.





**Critical
      Accounting Policies**





The
      Company is currently in the development stage, as we have yet to either produce,
      or sell the product lines we are developing. As a result critical accounting
      policies common to comparable operating companies do not, as yet apply to us.
      As
      a development stage company, we are focused entirely on the combination of
      raising capital and using those funds to develop an on-going business.
      Accordingly our critical accounting issues result from (1) equity-related
      transactions, including the issuance of stock options and stock purchase
      warrants and (2) income taxes, and the valuation of income tax benefits that
      may, or may not have future realization as the result of our cumulative
      operating losses.





**Change
      in Auditors**





On
      March
      20, 2006, we dismissed Amisano Hanson, Chartered Accountants as our independent
      registered public accounting firm following the change in control of our company
      on the closing of the Share Exchange Transaction. While Amisano Hanson was
      engaged by us, there were no disagreements with Amisano Hanson on any matter
      of
      accounting principles or practices, financial statement disclosure, or auditing
      scope or procedure with respect to our company, which disagreements if not
      resolved to the satisfaction of Amisano Hanson would have caused it to make
      reference to the subject matter of the disagreements in connection with its
      report on our financial statements for the fiscal year ended March 31,
      2005. We
      engaged Mahoney Cohen & Company, P.C. as our independent registered public
      accounting firm as of March 20, 2006 upon the close of the share exchange.





22


**ITEM
      7. FINANCIAL STATEMENTS**





**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS OF**





**SKINS
      INC. AND SUBSIDIARY**





**(A
      DEVELOPMENT STAGE COMPANY)**








**Page**Report****of
                Independent Registered Public Accounting Firm
            
            F-2Financial
                Statements:Consolidated
                Balance Sheets
            
            F-3Consolidated
                Statements of Operations
            
            F-4Consolidated
                Statements of Stockholders’ Equity (Deficiency)
            
            F-5Consolidated
                Statements of Cash Flows
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-7-F-17






F-1




**Report
      of Independent Registered Public Accounting Firm**







Board
      of
      Directors and Stockholders


Skins
      Inc. and Subsidiary





We
      have
      audited the accompanying consolidated balance sheets of Skins Inc. and
      Subsidiary (a development stage company) as of December 31, 2006 and 2005,
      and
      the related consolidated statements of operations, stockholders' equity
      (deficiency) and cash flows for the years then ended. These consolidated
      financial statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audits included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company's internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Skins Inc. and Subsidiary
      at
      December 31, 2006 and 2005, and the results of their operations and their cash
      flows for the year ended December 31, 2006 and 2005, in conformity with
      accounting principles generally accepted in the United States of
      America.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      Skins, Inc. and Subsidiary will continue as a going concern. As more fully
      described in Note 1, at December 31, 2006, the Company has no established source
      of revenues and has accumulated losses of $4,785,298 since inception. These
      conditions raise substantial doubt about the Company's ability to continue
      as a
      going concern. Management's plans in regard to these matters are also described
      in Note 1. The consolidated financial statements do not include any adjustments
      to reflect the possible future effects on the recoverability and classification
      of assets or the amounts and classification of liabilities that may result
      from
      the outcome of this uncertainty.







/s/
      Mahoney Cohen & Company, CPA, P.C.




New
      York,
      New York


April
      11,
      2007





F-2




**SKINS
        INC. AND SUBSIDIARY**
 **(A
      Development Stage Company)**




**CONSOLIDATED
      BALANCE SHEETS**


**December
                  31,**
                **2006**
              
              
              **December
                  31,**
                **2005****ASSETS**Current
                  assetsCash
                  and cash equivalents
              
              $
              1,754,926
              
              $
              36,533Prepaid
                  expenses
              
              
              165,258
              
              
              -Total
                  current assets
              
              
              1,920,184
              
              
              36,533Property
                  and equipment, net (Note 3)
              
              
              6,255
              
              
              3,553Patent
                  costs, net (Note 4)
              
              
              108,851
              
              
              61,224Total
                  Assets
              
              $
              2,035,290
              
              $
              101,310LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              
              277,595
              
              
              263,188Liquidated
                  damages payable
              
              
              27,278
              
              
              -Note
                  Payable (Note 7)
              
              
              -
              
              
              150,000Related
                  party payable
              
              
              -
              
              
              80,351Derivative
                  liability
              
              
              -
              
              
              22,191Share
                  based compensation liability
              
              
              -
              
              
              113,906Total
                  current liabilities
              
              
              304,873
              
              
              629,636Commitments
                  and Contingencies (Note 6)Stockholders'
                  Equity (Deficiency)Common
                  Stock, $.001 par value; 436,373,650 shares authorized; 36,206,769
                  and
                  19,404,000 shares issued and outstanding at December 31, 2006 and
                  2005, respectively (Note 1)
              
              
              36,206
              
              
              19,404Additional
                  paid in (deficit in) capital
              
              
              6,103,651
              
              
              (238,568
              )Deficit
                  accumulated in the development stage
              
              
              (4,409,440
              )
              
              (309,162
              )Total
                  stockholders' equity (deficiency)
              
              
              1,730,417
              
              
              (528,326
              )Total
                  Liabilities & Stockholders' Equity (Deficiency)
              
              $
              2,035,290
              
              $
              101,310





The
      accompanying notes are an integral part of the financial
      statements.




F-3


**SKINS
      INC. AND SUBSIDIARY**


**(A
      Development Stage Company)**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**Year
                      Ended**December 31,2006
              
              
              **Year
                      Ended**December 31,2005
              
              
              **Period
                      from Inception (May 18, 2004) to**December
                    31,2006Operating
                  expenses:Design
                  and development
              
              $
              336,815
              
              $
              93,892
              
              $
              475,606Selling,
                  general and administrative
              
              
              2,478,561
              
              
              412,409
              
              
              2,998,264Total
                  operating expenses
              
              
              2,815,376
              
              
              506,301
              
              
              3,473,870Operating
                  Loss
              
              
              (2,815,376
              )
              
              (506,301
              )
              
              (3,473,870
              )Unrealized
                  (loss) on derivative instruments
              
              
              (1,284,563
              )
              
              (22,191
              )
              
              (1,306,754
              )Liquidated
                  damages
              
              
              (27,278
              )
              
              -
              
              
              (27,278
              )Interest
                  Income
              
              
              27,870
              
              
              -
              
              
              27,870Interest
                  Expense
              
              
              (931
              )
              
              (3,822
              )
              
              (5,266
              )Net
                  loss
              
              $
              (4,100,278
              )
              $
              (532,314
              )
              $
              (4,785,298
              )Basic
                  and diluted loss per share
              
              $
              (0.14
              )
              $
              (0.03
              )Weighted
                  average number of common shares outstanding, basic and
                  diluted
              
              
              29,948,876
              
              
              16,975,816








The
      accompanying notes are an integral part of the financial
      statements.





F-4


**SKINS
        INC. AND SUBSIDIARY**
 **(A
      Development Stage Company)**




**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)**





**Common
                Stock**
            
            
            **Additional**
              **Paid-in
                (deficit in)**
            
            
            **Deficit**
              **Accumulated**
              **Total
                Development**
            
            
            
            **Total**
              **Stockholders'
                Equity/****Shares**
            
            
            **Amounts**
            
            
            **Capital**
            
            
            **Stage**
            
            
            
            **(Deficiency)**Transfer
                of net liabilities from a predecessor entity - May 18,
                2004
            
            
            
            $
            -
            
            $
            (32,312
            )
            $
            -
            
            
            $
            (32,312
            )Shares
                issued on June 1, 2004
            
            954,513
            
            
            955
            
            
            9,045
            
            
            
            
            
            
            10,000Shares
                issued on July 2, 2004
            
            954,513
            
            
            955
            
            
            9,045
            
            
            
            
            
            
            10,000Shares
                issued on August 4, 2004
            
            1,909,026
            
            
            1,909
            
            
            18,091
            
            
            
            
            
            
            20,000Shares
                issued on August 10, 2004
            
            1,909,026
            
            
            1,909
            
            
            18,091
            
            
            
            
            
            
            20,000Shares
                issued on December 1, 2004
            
            8,338,484
            
            
            8,338
            
            
            79,162
            
            
            
            
            
            
            87,500Shares
                issued on December 30, 2004
            
            144,077
            
            
            144
            
            
            1,356
            
            
            
            
            
            
            1,500Shares
                issued on December 31, 2004
            
            3,818,053
            
            
            3,818
            
            
            36,182
            
            
            
            
            
            
            40,000Net
                Loss
            
            
            
            
            -
            
            
            -
            
            
            (152,706
            )
            
            
            (152,706
            )Balances
                at December 31, 2004
            
            18,027,692
            
            
            18,028
            
            
            138,660
            
            
            (152,706
            )
            
            
            3,982-Shares
                issued for services on October 20, 2005
            
            1,376,308
            
            
            1,376
            
            
            (1,370
            )
            
            -
            
            
            
            6Net
                Loss January 1, 2005 to October 20, 2005
            
            
            
            
            
            
            
            
            
            
            (223,152
            )
            
            
            (223,152
            )Recapitalization
                of deficit upon merger of Skins Shoes, LLC into Skin Shoes, Inc.
                on
                October 20, 2005 (Note 1)
            
            
            
            
            
            
            
            (375,858
            )
            
            375,858
            
            
            
            -Net
                Loss Oct 21, 2005 to Dec 31, 2005
            
            
            
            
            -
            
            
            -
            
            
            (309,162
            )
            
            
            (309,162
            )Balances
                at December 31, 2005 (as restated, see Note 11)
            
            19,404,000
            
            
            19,404
            
            
            (238,568
            )
            
            (309,162
            )
            
            
            (528,326
            )Reclassification
                of Share based liability Awards to equity Awards upon the re-Adoption
                of
                the 2005 Incentive Stock Plan on March 16, 2006
            
            -
            
            
            -
            
            
            241,157
            
            
            -
            
            
            
            241,157Skins
                Inc. net assets assumed - March 20, 2006
            
            14,821,434
            
            
            14,821
            
            
            1,693,886
            
            
            
            
            
            
            1,708,707Conversion
                of convertible debenture - Common Stock - March 20, 2006
            
            178,572
            
            
            179
            
            
            119,821
            
            
            
            
            
            
            120,000Shares
                issued for consulting services on April 3, 2006 (Note 5)
            
            122,000
            
            
            122
            
            
            145,058
            
            
            
            
            
            
            145,180Share
                based Compensation, June 30, 2006
            
            
            
            
            
            
            
            86,156
            
            
            
            
            
            
            86,156Share
                based Compensation, September 30, 2006
            
            
            
            
            
            
            
            130,218
            
            
            
            
            
            
            130,218Reclassification
                of Derivative Liability as Form SB-2 became effective on October
                10,
                2006
            
            
            
            
            
            
            
            1,890,600
            
            
            
            
            
            
            1,890,600Warrants
                Exercised December 5, 2006
            
            30,000
            
            
            30
            
            
            29,970
            
            
            
            
            
            
            30,000Warrants
                Exercised December 8, 2006
            
            120,000
            
            
            120
            
            
            119,880
            
            
            
            
            
            
            120,000Warrants
                Exercised December 11, 2006
            
            320,000
            
            
            320
            
            
            319,680
            
            
            
            
            
            
            320,000Warrants
                Exercised December 12, 2006
            
            115,715
            
            
            116
            
            
            115,599
            
            
            
            
            
            
            115,715Warrants
                Exercised December 14, 2006
            
            119,000
            
            
            119
            
            
            118,881
            
            
            
            
            
            
            119,000Warrants
                Exercised December 15, 2006
            
            274,000
            
            
            274
            
            
            273,726
            
            
            
            
            
            
            274,000Warrants
                Exercised December 19, 2006
            
            363,476
            
            
            363
            
            
            363,113
            
            
            
            
            
            
            363,476Warrants
                Exercised December 21, 2006
            
            238,572
            
            
            238
            
            
            238,334
            
            
            
            
            
            
            238,572Warrants
                Exercised December 22, 2006
            
            100,000
            
            
            100
            
            
            99,900
            
            
            
            
            
            
            100,000Share
                based Compensation, December 31, 2006
            
            
            
            
            
            
            
            356,240
            
            
            
            
            
            
            356,240Net
                Loss
            
            
            
            
            
            
            
            
            
            
            (4,100,278
            )
            
            
            (4,100,278
            )Balances
                at December 31, 2006
            
            36,206,769
            
            $
            36,206
            
            $
            6,103,651
            
            $
            (4,409,440
            )
            
            $
            1,730,417





The
      accompanying notes are an integral part of the financial
      statements.








F-5


**SKINS
      INC. AND SUBSIDIARY**


**(A
      Development Stage Company)**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**Year
                Ended**
              **December
                31,**
                **2006**
            
            **Year
                Ended**
              **December
                31,**
                **2005**
            
            **Period
                from**
              **Inception**
              **(May
                18, 2004)**
              **to**
              **December
                31,**
                **2006**Cash
                flows used in operating activities:Net
                loss
            
            $
            (4,100,278
            )
            $
            (532,314
            )
            $
            (4,785,298
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            2,423
            
            
            1,484
            
            
            4,346Amortization
            
            
            4,205
            
            
            2,483
            
            
            7,663Issuance
                of common stock for services
            
            
            54,450
            
            
            6
            
            
            54,456Share
                based compensation expense
            
            
            699,865
            
            
            113,906
            
            
            813,771Unrealized
                loss on derivative instruments
            
            
            1,284,563
            
            
            22,191
            
            
            1,306,754Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            
            (73,437
            )
            
            -
            
            
            (73,437
            )Accounts
                payable and accrued expenses
            
            
            14,407
            
            
            215,223
            
            
            261,778Liquidated
                damages payable
            
            
            27,278
            
            
            -
            
            
            27,278Net
                cash used in operating activities
            
            
            (2,086,524
            )
            
            (177,021
            )
            
            (2,382,689
            )Cash
                flows used in investing activities:Purchases
                of property and equipment
            
            
            (5,125
            )
            
            -
            
            
            (8,623
            )Patent
                Costs
            
            
            (51,832
            )
            
            (31,887
            )
            
            (108,063
            )Net
                cash used in investing activities
            
            
            (56,957
            )
            
            (31,887
            )
            
            (116,686
            )Cash
                flows provided by financing activities:Cash
                assumed in connection with Recapitalization
            
            
            2,261,462
            
            
            -
            
            
            2,261,462Related
                party proceeds (payments)
            
            
            (80,351
            )
            
            74,459
            
            
            (26,924
            )Proceeds
                from issuance of Common Stock
            
            
            1,680,763
            
            
            -
            
            
            1,869,763Proceeds
                from note payable
            
            
            -
            
            
            150,000
            
            
            150,000Net
                cash provided by financing activities:
            
            
            3,861,874
            
            
            224,459
            
            
            4,254,301Net
                increase in cash and cash equivalents
            
            
            1,718,393
            
            
            15,551
            
            
            1,754,926Cash
                and cash equivalents at beginning of period
            
            
            36,533
            
            
            20,982
            
            
            -Cash
                and cash equivalents at end of period
            
            $
            1,754,926
            
            $
            36,533
            
            $
            1,754,926Supplemental
                Schedule of Non-Cash Investing and Financing Activities:
                (continued)Net
                liabilities assumed from recapitalization onMarch
                20, 2006, net of cash of $2,261,462
            
            $
            552,755
            
            $
            -
            
            $
            552,755Conversion
                of convertible debenture, assumed fromreverse
                acquisition, to common stock
            
            $
            120,000
            
            $
            -
            
            $
            120,000Conversion
                of convertible debenture, assumed fromreverse
                acquisition, to warrant liability
            
            $
            30,000
            
            $
            -
            
            $
            30,000





Transfer
                of deficit due to merger ofSkin
                Shoes, LLC into Skin Shoes, Inc. on October 20, 2005
            
            $
            -
            
            $
            375,568
            
            $
            375,568Issuance
                of Common Stock to Consultants on April 3, 2006 forServices
                to be provided for a two year term
            
            $
            145,180
            
            $
            -
            
            $
            45,180Reclassification
                of derivative liability to equity upon the declaration of the Form
                SB-2
                registration statement as effective
            
            $
            1,890,600
            
            $
            -
            
            $
            1,890,600




The
      accompanying notes are an integral part of the financial
      statements.





F-6


**NOTE 1: DESCRIPTION
      OF BUSINESS**





**Basis
      of presentation, organization and other matters**





On
      March
      20, 2006 Logicom Inc. (“Logicom”), acquired all of the outstanding capital stock
      of Skins Footwear Inc. (formerly known as Skin Shoes, Inc.) (“Skins Footwear”).
      Skins Footwear thereupon became a wholly owned subsidiary of Logicom. The
      business of Skins Footwear is the only business of Logicom.




Logicom
      was incorporated in the State of Nevada on January 23, 2004. Logicom was in
      the
      development stage since its formation and it had not realized any revenues
      from
      its planned operations. Logicom originally intended to develop, market and
      support a voice interface software platform that would make the information
      and
      services of enterprises, telecommunications networks and the Internet accessible
      from telephone. Logicom's chief software designer resigned on July 4, 2005.
      Logicom entered into a share exchange agreement with all of the shareholders
      of
      Skins Footwear, a privately held development stage footwear company, on November
      2, 2005.




Skins
      Footwear was originally organized on May 18, 2004 as a New Jersey limited
      liability company under the name Skin Shoes, LLC. On October 11, 2005, Skins
      Shoes, LLC created a Delaware corporation under the name Skin Shoes, Inc. as
      a
      wholly owned subsidiary and merged with and into Skin Shoes, Inc. on October
      20,  2005,
      resulting in Skin Shoes, Inc. becoming the surviving Delaware corporation and
      the limited liability company ceasing to exist. The merger on October 20, 2005
      was a conversion of a non-taxable entity to a taxable corporation, The deficit
      accumulated in the development stage on October 20, 2005 was treated as a return
      of capital to the members of Skin Shoes, LLC, which was then contributed to
      Skin
      Shoes, Inc., and as a result the accumulated deficit was reclassified to
      additional paid in capital at October 20, 2005 in the consolidated statements
      of
      stockholders' equity.




On
      April
      10, 2006, Logicom changed its corporate name to Skins Inc. (the “Company”) and
      Skins Shoes, Inc. changed its corporate name to Skins Footwear Inc. (“Skins
      Footwear”).




The
      acquisition of Skins Footwear by the Company on March 20, 2006 was accounted
      for
      as a recapitalization by the Company. The recapitalization was the merger of
      a
      private operating company (Skins Footwear) into a non-operating public shell
      corporation (the Company) with nominal net assets and as such is treated as
      a
      capital transaction, rather than a business combination. As a result no Goodwill
      is recorded. The transaction is the equivalent to the issuance of stock by
      the
      private company for the net monetary assets of the shell corporation. The pre
      acquisition financial statements of Skins Footwear are treated as the historical
      financial statements of the consolidated companies. The financial statements
      presented reflect the change in capitalization for all periods presented,
      therefore the capital structure of the consolidated enterprise, being the
      capital structure of the legal parent, is different from that appearing in
      the
      financial statements of Skins Shoes, LLC and Skins Shoes, Inc. in earlier
      periods due to the recapitalization.





**Development
      Stage Company**




The
      Company is in the development stage. Since its formation the Company has not
      realized any revenues from its planned operations. The Company intends to
      design, manufacture and market high quality men's and women's footwear. The
      Company's primary activities since incorporation have been conducting research
      and development, performing business, strategic and financial planning, and
      raising capital. The deficit accumulated in the development stage presented
      on
      the consolidated balance sheet on December 31, 2006 will not agree with the
      total loss from May 18, 2004 (inception date) to December 31, 2006 due to the
      treatment of the merger of the non-taxable entity to a taxable corporation
      on
      October 20, 2005 described in paragraph three of Note 1, basis of presentation,
      organization and other matters.




**Going
      Concern**




The
      financial statements have been prepared using accounting principles generally
      accepted in the United States of America applicable for a going concern which
      assumes that the Company will realize its assets and discharge its liabilities
      in the ordinary course of business. As of December 31, 2006, the Company has
      no
      established source of revenues and has accumulated losses of $4,785,298 since
      its commencement. Its ability to continue as a going concern is dependent upon
      achieving production or sale of goods, the ability of the Company to obtain
      the
      necessary financing to meet its obligations and pay its liabilities arising
      from
      normal business operations when they come due and upon profitable operations.
      The outcome of these matters cannot be predicted with any certainty at this
      time
      and raise substantial doubt that the Company will be able to continue as a
      going
      concern. These financial statements do not include any adjustments to the
      amounts and classification of assets and liabilities that may be necessary
      should the Company be unable to continue as a going concern.




F-7


The
      Company intends to overcome the circumstances that impact its ability to remain
      a going concern through a combination of the commencement of revenues, with
      interim cash flow deficiencies being addressed through additional equity and
      debt financing. The Company's ability to obtain additional funding will
      determine its ability to continue as a going concern. There can be no assurances
      that these plans for additional financing will be successful. Failure to secure
      additional financing in a timely manner and on favorable terms if and when
      needed in the future could have a material adverse effect on the Company's
      financial performance, results of operations and stock price and require the
      Company to implement cost reduction initiatives and curtail operations.
      Furthermore, additional equity financing may be dilutive to the holders of
      the
      Company's common stock, and debt financing, if available, may involve
      restrictive covenants, and may require the Company to relinquish valuable
      rights.




**NOTE 2: SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




*Principles
      of Consolidation*




The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, Skins Footwear. All significant inter-company
      transactions and balances have been eliminated in consolidation.




*Concentration
      of Credit Risk*




The
      Company maintains cash balances at various financial institutions. At various
      times throughout the years, the Company's cash balances exceeded FDIC insurance
      limits.




*Cash
      Equivalents*




The
      Company considers all highly liquid investments with an original maturity of
      three months or less at the date of purchase to be cash
      equivalents.







*Property
      and Equipment*




Equipment is stated at cost, less accumulated depreciation, which is calculated
      using the straight-line method over the estimated useful lives of the respective
      assets, ranging between three and five years.




*Patent
      Costs*




Costs
      associated with the development and filing of patent applications are
      capitalized and amortized over the useful life of 20 years, using the
      straight-line method.




*Design
      and Development*




Costs to develop the Company's products are expensed as incurred in accordance
      with Statement of Financial Accounting Standards (“SFAS”) No. 2, *“Accounting
      for Research and Development Costs.”* These
      costs include research, related overhead expenses, including salaries and other
      personnel related expenses, travel costs, supplies and depreciation of
      equipment.




*Use
      of Estimates*




The preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and the disclosure of contingent assets and liabilities at the
      date
      of the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.




*Estimated
      Fair Value of Financial Instruments*




The Company's financial instruments include cash, accounts payable and
      liquidated damages payable. Management believes the estimated fair value of
      cash, accounts payable and liquidated damages payable at December 31, 2006
      approximate their carrying value as reflected in the balance sheets due to
      the
      short-term nature of these instruments




F-8


*Income
      Taxes*




Deferred
      tax assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases and operating
      loss and tax credit carryforwards. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in the
      years in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the enactment date.
      At
      December 31, 2006 and 2005, the Company had a full valuation allowance against
      its deferred tax assets.




*Stock
      Options*




The
      Company has elected to adopt the intrinsic-value method of accounting for
      liability awards and the fair value (calculated) method for equity awards issued
      to employees under SFAS No. 123 (R), “Share Based Payment” that were granted
      prior to the Company becoming a public company. The Company uses the fair value
      method for all liability and equity awards after it became a public
      company.




*Derivative
      Instruments*




In
      accordance with the Emerging Issues Task Force (EITF) 00-19, Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in a
      Company's Own Stock, the Company records a liability for the derivative
      instrument that results due to the number of potential common stock shares
      plus
      outstanding shares that exceed the number of authorized common stock shares.
      At
      each balance sheet date, the liability for these potential excess shares is
      adjusted to fair value with the change being recorded as a gain or loss on
      the
      statement of operations. At December 31, 2005, the Company had 1,000 common
      authorized shares and had 515,725 of outstanding shares plus potential shares
      from the exercise of options that had vested. The 514,725 excess potential
      shares were attributed to the option grants that had vested. The Company
      calculated the fair value of these potential shares using the Black-Scholes
      model and recorded a derivative liability of $22,191 at December 31, 2005.
      The
      liability booked was net of the derivative recorded for the options granted
      to
      non-employees where services were provided (Note 9) because the options used
      in
      that calculation are also part of the derivative calculation for the shares
      and
      potential shares over the authorized share amount. On March 16, 2006 the
      Company increased its authorization of common stock and cured this liability.
      At
      March 16, 2006, the Company reversed out the liability through a charge to
      unrealized gains on derivative instruments.





In
      accordance with EITF 00-19, the Company recorded a liability for the derivative
      instruments that result from the liquidated damages provision it had with
      stockholders who also held warrants to purchase common stock in accordance
      with
      the Share Exchange Agreement. At each balance sheet date after the
      March 20, 2006 Share Exchange Close, a liability was calculated for
      3,000,000 warrants subject to the liquidated damages provision. On March 20,
      2006, 2,821,428 of the 3,000,000 warrants were granted upon the close of the
      private placement which occurred immediately prior to the close of the share
      exchange transaction (Note 8). The Company assumed a derivative liability of
      $553,846 which was reflected in the net assets assumed on the Company's
      Statement of Shareholder Equity (Deficit). The change in the value of the
      derivative liability from March 20, 2006 to October 10, 2006 was recorded in
      the
      Statement of Operations. The remaining 178,572 warrants were granted in
      conjunction with the conversion of the convertible debenture. The Company
      calculated a fair value of $30,000 for the 178,572 warrants issued upon
      conversion of the convertible debenture in accordance with EITF 00-27 and
      treated these warrants as a liability in accordance with EITF 00-19. The change
      in fair value of the derivative liability from the conversion date, March 20,
      2006, to October 10, 2006 was recorded in the Statement of Operations. The
      provision required the Company to have its Registration Statement declared
      effective (to register the common stock and common stock equivalents issued
      in
      relation to the Share Exchange Agreement (Note 8)) by the middle of August
      2006.
      If the Registration Statement was not declared effective before the
      effectiveness date, the Company was required to pay liquidated damages to each
      Share Exchange Common Stock holder equal to 0.025% for each day after the
      effectiveness date until the Registration Statement is declared effective by
      the
      United States Securities and Exchange Commission. At December 31, 2006 The
      Company accrued approximately $27,000 for the potential liquidated damages
      payable.





On
      October 10, 2006 the registration statement was declared effective by the United
      States Securities and Exchange Commission. As a result the Company reclassified
      its derivative liability at October 10, 2006 to additional paid in capital
      in
      accordance with paragraph 10 of EITF 00-19.




F-9


*Net
      Loss per Common Share*




Basic
      net
      loss per share is computed by dividing net loss by the weighted average number
      of common shares outstanding during the period. For both the years ended
      December 31, 2006 and 2005, the Company had 1,404,000 common shares held in
      escrow, respectively. The escrow amounts for all periods prior to the March
      20,
      2006 transaction are shown retroactively based on the recapitalization of the
      Company (Note 1). The shares held in escrow are excluded from the weighted
      average common share calculation at each date because all the necessary
      conditions for the release of the escrow shares have not been satisfied (Note
      7).




Diluted
      net loss per share is computed by dividing the net loss by the weighted average
      number of common and common equivalent shares outstanding during the period.




Years
                  ended
                December
                  31,2006
            
            
            2005Numerator:Net
                loss - basic and diluted
            
            $
            (4,100,278
            )
            $
            (532,314
            )Denominator:Weighted
                average shares - basic
            
            
            29,948,876
            
            
            16,975,816Effect
                of dilutive stock options and warrants
            
            
            --
            
            
            --Denominator
                for diluted earnings per share
            
            
            29,948,876
            
            
            16,975,816Loss
                per shareBasic
            
            $
            (0.14
            )
            $
            (0.03
            )Diluted
            
            $
            (0.14
            )
            $
            (0.03
            )




At
      December 31, 2006 and 2005 the Company’s stock options outstanding totaled
      3,139,375 and 2,109,375, respectively. In addition, at December 31, 2006 and
      2005 the Company’s warrants outstanding were 1,319,237 and 0, respectively.
      Inclusion of the Company’s options and warrants in diluted loss per share for
      the years ended December 31, 2006 and 2005 have an anti-dilutive effect because
      the Company incurred a loss from continuing operations.





*Recent
      Accounting Pronouncements*





In
      June
      2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income
      Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 is effective for the 2007 year. The Company is
      assessing the impact of FIN 48 but does not anticipate that it will have a
      material effect on its financial statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 clarifies the principal that fair value should be based on the
      assumptions market participants would use when pricing an asset or liability
      and
      establishes a fair value hierarchy that prioritizes the information used to
      develop those assumptions. Under the standard, fair value measurements would
      be
      separately disclosed by level within the fair value hierarchy. SFAS 157 if
      effective for the Company on January 1, 2008. The Company is in the process
      of
      evaluating SFAS 157 but does not believe it will have a significant effect
      on
      its financial position or results of operation.





In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities Including an Amendment of FASB Statement No.
      115 (“SFAS 159”). SFAS159 permits an entity to choose to measure many financial
      instruments and certain other items at fair value. Most of the provisions of
      SFAS 159 are elective, however, the amendment to SFAS 115, “Accounting for
      Certain Investments in Debt and Equity Securities”, applies to all entities with
      available for sale or trading securities. SFAS 159 is elective as of the
      beginning of an entity’s first fiscal year that begins after November 15, 2007.
      SFAS 159 was recently issued and the Company is currently assessing the
      financial impact the statement will have on our financial
      statements.




F-10


**NOTE 3: PROPERTY
      AND EQUIPMENT**







Property and equipment consist of the following:




**December
                31,**
              **2006**
            
            **December
                31,**
              **2005**Sewing
                equipment
            
            $
            1,882
            
            $
            1,882Office
                equipment
            
            
            1,183
            
            
            1,183Computer
                equipment
            
            
            7,536
            
            
            2,41110,601
            
            
            5,476Less
                accumulated depreciation
            
            
            4,346
            
            
            1,923$
            6,255
            
            $
            3,553




Depreciation
      expense related to property and equipment was $2,423 and $1,484 for the years
      ended December 31, 2006 and 2005, respectively.




**NOTE
      4: PATENT COSTS**




The
      Company has applied for several patents in the U.S. and Internationally. On
      November 20, 2006, the United States (US) Patent and Trademark office allowed
      and approved the Company’s Patent Application for a Modular Shoe System in the
      U.S. The Company periodically evaluates the recoverability of unamortized
      patents and will write off the unamortized value if it is determined they no
      longer have value.




**December
                31,**
              **2006**
            
            **December
                31,**
              **2005**Patent
                costs
            
            $
            116,514
            
            $
            64,682Less
                accumulated amortization
            
            
            7,663
            
            
            3,458$
            108,851
            
            $
            61,224





Amortization
      expense related to patents was $ 4,205 and $2,483 for the years ended December
      31, 2006 and December 31, 2005, respectively. The estimated aggregate
      amortization expense for the next five years is estimated to be approximately
      $6,000 for each year.




**NOTE 5: RELATED
      PARTY TRANSACTIONS**




As
      of
      December 31, 2006, there were no related party payables..





For
      the
      years ended December 31, 2006 and 2005, consulting expenses incurred to Mage
      LLC
      was $90,000 and $65,000 respectively. A director of the company is a principal
      of Mage, LLC. As of December 31, 2006 and 2005, there were accrued expenses
      totaling $0 and $55,000, respectively relating to consulting services provided
      by Mage, LLC.





As
      of
      December 31, 2006 the Company granted 843,750 options exercisable at $.80 cents
      a share that vest over three years to two members of the Board of Directors
      of
      the Company, with approximately 328,125 options vested.





On
      October 20, 2005, The Company issued 1,376,308 common stock shares (adjusted
      per
      recapitalization, see Note 1) to Mage Capital Partners, LLC for services
      provided that totaled $6.00, which were valued based on fair value of the common
      stock shares issued for $0.80 per share.




On
      April
      3, 2006 the Company granted 122,000 fully vested shares of the Company's common
      stock to two shareholders for consulting services to be provided over a two
      year term beginning April 3, 2006. The Company valued the transaction based
      on
      the fair value of its common stock on the date of grant and will amortize the
      expense ratably over the two year term. Prepaid consulting expense of $90,740
      was recognized and presented as a prepaid asset at December 31,
      2006.




F-11


**NOTE
      6: COMMITMENTS AND CONTINGENCIES**




We
      had
      entered into a sourcing and buying agent agreement with Atsco Footwear, LLC
      pursuant to which Atsco Footwear will be responsible for sourcing,
      commercialization and product line review. According to the agreement, Atsco
      Footwear will be the exclusive sourcing and development agent for us and will
      assist us in developing a fit-and-wear tested marketable product. Atsco is
      responsible for the factory development and output as well as delivery,
      scheduling, supplier deadlines and other related matters. We will pay
      commissions to Atsco Footwear for its services under the agreement primarily
      based on merchandise sourced by Atsco Footwear and shipped to us. We decided
      not
      to exercise the option to extend the outsourcing agreement, and consequently
      we
      work with Atsco on a month-by-month basis as our non-exclusive sourcing agent
      in
      the Far East. Stephen Hochberg, who is a director of our company, is also a
      director Atsco Footwear.




The
      Company has entered into a design services agreement dated March 2, 2006, with
      an effective date of December 1, 2005, with Studio Dror, Inc. for a period
      of
      four months from the effective date. According to the agreement the Company
      agreed to pay Studio Dror a $5,000 monthly retainer, totaling $20,000 over
      the
      four month period, plus a fee of $1,000 for each and every deliverable the
      Company elected to use. Additionally, the Company agreed to pay a royalty of
      $0.50 cents on each and every licensed product that was sold in excess of 10,000
      units, payable on a quarterly basis and continue to be paid after expiration
      or
      termination of the agreement. The Company has not realized any revenues to
      date
      therefore no royalty expenses or fees have been incurred. The agreement expired
      on March 31, 2006. The Company is using Studio Dror, Inc. on an as needed basis
      since the expiration of the agreement.





The
      Company entered into an engineering and consulting agreement dated October
      1,
      2006, with an effective date of December 10, 2006, with TLD Asian Pacific Ltd
      for a period of six months from the effective date. According to the agreement
      the Company agreed to pay TLD $9,600 monthly totaling $57,600 over the six
      month
      period.





On
      November 7, 2006 the Company entered into a factoring agreement with FCC, LLC
      (First Capital) through October 31, 2008. The agreement provides for the Company
      to sell its credit-approved accounts receivable to First Capital without
      recourse as to bad debts but with recourse as to all future customer claims.
      First Capital will provide cash advances to the Company in an amount equal
      to
      85% of the value of the assigned accounts receivable, as defined. In addition
      the First Capital will make cash advances to the Company against the value
      of
      the Company’s future finished goods inventory , up to a maximum of $500,000. The
      unpaid advances will bear interest at the greater of 6% or 1% above the prime
      rate. Upon commencement of factoring, the Company’s obligation to First Capital
      will be secured by all of its tangible and intangible assets. The Company has
      the right to terminate the agreement prior to its expiration term, for a maximum
      fee payable of $24,000.





The
      Company has entered into an investor relations consulting agreement with ICR,
      with an effective date of December 15, 2006 for a period of one year from the
      effective date. According to the agreement the Company agreed to pay ICR $96,000
      over the one year period.





The
      Company aligned with SLAM (Sportie LA Media) in March 2007 to benefit from
      SLAM’s nontraditional advertising, marketing, promoting and consulting to
      selected brands. The agreement between the Company and SLAM has an effective
      date of March 1, 2007 and states that the Company will pay SLAM a fee of
      $197,800 in twelve equal monthly installments of $16,483, on the first day
      of
      each month during the term.





On
      April
      1, 2007, the Company engaged the services of Robert Burke Associates, an advisor
      to the fashion and retail sectors, to provide our management with strategic
      advisory services to assist in the positioning of the Skins brand, review and
      analysis of the product lines, and identify potential licensing opportunities
      and partners. The Company agreed to pay Robert Burke Associates $15,000 per
      month for six months, beginning April 1, 2007, after which the agreement will
      continue on a month-to-month basis.





On
      the
      closing the Share Exchange Agreement, the Company entered into an employment
      with the Company’s President and Chief Executive Officer. The duration of the
      employment agreement is three years unless terminated earlier pursuant to the
      terms and conditions of the agreement. The agreement provides for a base salary
      of $150,000 per year and an annual incentive bonus of up to 50% of the base
      salary based on annual volume and net profit of our company. For the year ended
      December 31, 2006, the Company paid its President a bonus of $25,000. Pursuant
      to the terms of the employment agreement, the Company’s President will not
      disclose to any third party any confidential information or trade secrets of
      the
      company during and after the term of the employment agreement. In addition,
      the
      Company’s President agreed not to solicit away any customers or employees of our
      company during the term of the employment agreement and one year after the
      termination of his employment. The Company’s President also agreed not to
      compete, either directly or indirectly, with the business of our company in
      the
      United States for a period of one year from the termination of his employment
      with us. The Company also paid approximately $20,000 to cover moving and
      relocation expenses for its President and his Family. As of January 1, 2007,
      the
      Company raised the Company’s President base salary to $175,000 per
      year.




F-12


**NOTE
      7: SHARE EXCHANGE AGREEMENT**




On
      March
      20, 2006, the Company completed the transactions contemplated by the Share
      Exchange Agreement dated November 2, 2005 and amended February 1, 2006 with
      all
      of the stockholders of Skins Footwear whereby the Company :





·
            Repurchased
                all of the common shares of the Company owned by a shareholder for
                the sum
                of $100,000 (the shareholder owned 7,418,182 common shares of the
                Company
                );




·
            Issued
                to the stockholders of Skins Footwear, at the closing of the share
                exchange transaction, 19,404,000 common shares of the Company in
                exchange
                for all of the issued and outstanding shares of Skin Shoes Inc.,
                (of these
                19,404,000 common shares, 1,404,000 shares are held in escrow by
                the
                Company and are subject to partial and full return to the Company
                contingent upon the number of share purchase warrants exercised by
                investors in the Company within a period of 30 months following the
                closing of private placements and the share exchange transaction
                on March
                20, 2006);




·
            Assumed,
                at the closing of the share exchange transaction, Skins Footwear's
                Incentive Plan and certain stock option agreements entered into between
                Skins Footwear and certain persons who have already received stock
                options
                from the Skins Footwear pursuant to its 2005 Incentive
                Plan;




·
            Entered
                into an employment agreement with the new President of the Company
                for a
                term of 3 years and a base salary of $150,000. An incentive bonus
                plan
                will also be implemented. The Company will also pay up to $20,000
                to cover
                moving and relocation expenses of the President and his
                family.




On
      March
      20, 2006, immediately prior to the closing of the share exchange transaction,
      the Company closed a private placement of units to purchase its common stock
      and
      warrants pursuant to a subscription agreement. Each unit consisted of one share
      of common stock of the Company and one share purchase warrant convertible at
      an
      exercise price of $1.00 per share at any time upon election of the holder during
      the 30 month period following the date of issue. A total of 2,821,428 units
      were
      sold in the private placement for an aggregate of $2,370,000. The proceeds
      from
      this private placement offering were included in the net asset assumed by the
      Company.





On
      November 2, 2005, the Company sold one convertible debenture in connection
      to
      the share exchange agreement in the amount of $150,000 to one offshore investor.
      The convertible debenture was convertible into 178,572 units at a conversion
      price of $0.84 per unit, with each unit consisting of one share of common stock
      of our company and one share purchase warrant. Pursuant to the terms of the
      convertible debenture, the conversion of the debenture into units occurred
      automatically upon the completion of our share exchange transaction on March
      20,
      2006. Upon conversion the fair value of the common stock and warrants were
      accounted for in the December 31, 2006 financial statements based on the
      relative value on the day of issuance in accordance with EITF 00-27. The
      share purchase warrants are exercisable for a period of thirty months from
      the
      date of issue at an exercise price of $1.00 per share.





On
      December 31, 2006 the Company had 36,206,769 outstanding shares of common stock,
      options to purchase 2,709,375 shares of common stock, and warrants to purchase
      1,319,237 shares of common stock.




**NOTE
      8: STOCK OPTIONS**




In
      October 2005, Skins Footwear's Board of Directors approved the 2005 Incentive
      Plan (the “2005 Plan”). The 2005 Plan provides that the following types of
      awards may be granted under the 2005 Plan: stock appreciation rights (“SARs”);
      incentive stock options (“ISOs”); non-qualified stock options (“NQSOs”);
      restricted stock awards; unrestricted stock awards; and performance share awards
      which entitle recipients to acquire shares upon the attainment of specified
      performance goals, stock units and other stock-based awards, short-term cash
      incentive awards or any other award. Under the 2005 Plan, awards may be granted
      with respect to a maximum of 3,375,000 shares of Skins Footwear's common
      stock, subject to adjustment in connection with certain events such as a stock
      split, merger or other recapitalization of the Company.




On
      October 24, 2005 Skins Footwear granted the following individuals options under
      the 2005 Plan:




F-13





·
            Two
                board members were granted 421,875 options each at an exercise price
                of
                $0.80 that vest ratably over a 36-month
                period.




·
            Two
                consultants were granted 421,875 options each at an exercise price
                of
                $0.80 a share that vests ratably over a 36-month
                period.




·
            One
                consultant was granted 421,875 options at an exercise price of $0.80
                that
                vested immediately for finder fee
                services.





As
      part
      of the Share Exchange Agreement, the Company assumed Skins Footwear 's 2005
      Incentive Plan.




The
      awards granted to the two board members were treated as liability awards upon
      the grant on October 24, 2005. The treatment of the awards as liability was
      due
      to insufficient number of authorized shares at the time of issuance. The Company
      used the intrinsic value method to determine compensation on these liability
      awards. For the twelve months ended December 31, 2006, the Company recorded
      compensation expense related to these grants of $1,876.




March
      16, 2006 Replacement Option Grants




On
      March
      16, 2006 as a result of the granting of options in excess of the authorized
      shares allowed, Skins Footwear canceled and re-adopted its 2005 Incentive Stock
      Plan. In connection thereof Skins Footwear increased its authorized shares
      to
      4,000,000. Additionally, all options granted under the original plan were
      canceled and re-granted in accordance with the terms of the re-adopted 2005
      Incentive Stock Option Plan.




The
      replacement options to the two board members were treated as replacement equity
      awards. On the date of replacement the Company calculated the fair value
      (calculated method) of the replacement options using a Black-Scholes option
      valuation model that uses the assumptions noted in the following table. At
      the
      time of the replacement of the options the Company was non-public and calculated
      its expected volatility based on the calculated method using the Dow Jones
      US
      Footwear Index. The Company elected to use the calculated method because it
      did
      not have a trading history for its stock and it was a development stage company.
      The Company chose the Dow Jones US Footwear Index because it represents an
      industry index closest to which the Company operates. The Company estimates
      option exercise and employee termination within the valuation model; separate
      groups of employees that have similar historical exercise behavior are
      considered separately for valuation purposes. The expected term of options
      granted is derived from the output of the option valuation model and represents
      the period of time that options granted are expected to be outstanding. The
      risk-free rate for periods within the contractual life of the option is based
      on
      the U.S. Treasury yield curve in effect at the time of grant.




Expected
                volatility
            
            
            17.30
            %Expected
                dividends
            
            
            0Expected
                Term (Years)
            
            
            3Risk
                free interest rate
            
            
            4.70
            %




The
      total
      incremental compensation expense from the cancellation and replacement of the
      awards was $196,763, which is expected to be recognized over a period of 32
      months from March 16, 2006. The total compensation expense related to the
      non-vested replacement options at December 31, 2006 was $135,274. For the twelve
      months ended December 31, 2006 the Company recorded compensation expense of $61,488 ,
      related
      to the replacement option grants to the board members.




· The
      421,875 options granted to two-consultants that vest over a 36-month period
      were
      granted for services not yet occurred. The Company used the provisions of FAS
      123(R) and EITF 96-18, *Accounting for Equity Instruments That Are Issued to Other Than Employees for
      Acquiring, or in Conjunction with Selling, Goods or Services* to
      account for the compensation expense associated with these grants. The Company
      measured the compensation associated with these grants based on the fair value
      of the equity instruments issued. There is no measurement date to calculate
      the
      fair value of the options at the date of grant because the performance
      commitment had not yet occurred (there are no sufficiently large disincentives
      for non-performance) and the performance by the two consultants was not
      complete. The Company calculated the expense at each reporting period based
      upon
      fair value of the options that vested during the reporting period using the
      fair
      value on the reporting date. Fair value was calculated using the Black-Scholes
      model. The options were treated as liability awards upon the original grant
      because the Company did not have a sufficient number of authorized shares.
      The
      options became equity awards on the date they were cancelled and re-granted.
      For
      the year ended December 31, 2006, the Company recorded compensation expense
      of $304,889 .





F-14


· The
      remaining 421,875 options were granted to a non-employee for services that
      had
      already been provided. The Company used the provisions of EITF-00-19 to account
      for these options. At the grant date and at December 31, 2005, the Company
      treated the option grant as liability award because it did not have enough
      authorized shares to settle the contract in equity. Therefore, these options
      were recorded at fair value as a liability at December 31, 2005. The fair value
      of the options was calculated using the Black-Scholes model at December 31,
      2005. On March 16, 2006 the Company increased its authorization of Common Stock
      therefore alleviating the potential liability. The Company recorded the fair
      value of the options using a Black-Scholes model as of March 16, 2006 and
      reclassified the total remaining liability from these awards to additional
      paid
      in capital. For the period January 1 to March 16, 2006, the Company
      recorded compensation expense of $98,381.





· The
      fair value of the options granted to consultants and the replacement option
      grant transactions were calculated using the Black-Scholes option valuation
      model with the following assumptions at the applicable dates noted:





March
                16,
              2006
            
            December
                31,
              2006Expected
                volatility
            
            
            17.30
            %
            
            100.94
            %Expected
                dividends
            
            
            None
            
            
            NoneExpected
                term (in years)
            
            
            4.6
            
            
            3.6Risk-free
                interest rate
            
            
            4.70
            %
            
            4.53
            %




2006
      Option Grants.




On
      May
      15, 2006 the Company granted 150,000 options to the Vice President of Sales.
      The
      options vest quarterly beginning three months after the grant at 12,500 per
      quarter and have an exercise price of $1.10. The options expire on May 15,
      2011.





On
      June
      19, 2006 the Company granted 150,000 options to the Vice President of Finance
      and Operations. The options vest quarterly beginning three months after the
      grant at 12,500 per quarter and have an exercise price of $1.19. The options
      expire on June 19, 2011.





The
      fair
      value of each option award is estimated on the date of grant using a
      Black-Scholes option valuation model that uses the assumptions noted in the
      following table. Expected volatilities are based on the Company's closing price
      on its Common Stock from March 20, 2006, which is the date the Company became
      a
      public company. The Company reviewed each individual grant to determine the
      applicable forfeiture rate. The expected term of options granted is derived
      from
      the output of the option valuation model and represents the period of time
      that
      options granted are expected to be outstanding. The risk-free rate for periods
      within the contractual life of the option is based on the U.S. Treasury yield
      curve in effect at the time of grant.




May
                15, 2006 Grant
            
            June
                19, 2006 GrantExpected
                Volatility
            
            
            59.07
            %
            
            68.80
            %Expected
                dividends
            
            
            0
            
            
            0Expected
                Term (Years)
            
            
            3
            
            
            3Risk
                Free Interest Rate
            
            
            5.00
            %
            
            5.11
            %




The
      total
      compensation expense from these awards was $197,235, which is expected to be
      recognized over a period of 36 months. The total compensation expense related
      to
      the non-vested options on these awards at December 31, 2006 is $158,519. For
      the
      year ended December 31, 2006, the Company recorded compensation expense of
      $38,716 related to the May 15, 2006 and June 19, 2006 option
      grants.





On
      May 9,
      2006 the Company granted 300,000 options to a consultant at an exercise price
      of
      $1.06. The options vest quarterly beginning three months from the date of the
      agreement and expire on May 9, 2008. The Company used the provisions of FAS
      123(R) and EITF 96-18 to account for the compensation expense associated with
      this grant. The Company will measure the compensation associated with this
      grant
      based on the fair value of the equity instrument. There is no measurement date
      to calculate the fair value of this grant at the date of grant because the
      performance commitment had not yet occurred and the performance by the
      consultant was not complete. The Company will calculate the expense at each
      reporting period based on the fair value of the options that will vest during
      the reporting period. Fair value will be calculated using a Black-Scholes model.
      For the twelve-months ended December 31, 2006, the Company recorded compensation
      expense of $59,730.





F-15


On
      October 12, 2006 the Company granted 375,000 options to a consultant. 175,000
      options vest immediately with the remaining 175,000 vesting annually over a
      three-year period with the first vesting occurring one year after the year
      of
      grant. In addition, the Company granted three other consultants a total of
      80,000 options that vest annually over a three-year period with the first
      vesting occurring one year after the year of grant. The 455,000 options were
      granted for services not yet occurred. The Company used the provisions of FAS
      123(R) and EITF 96-18, *Accounting for Equity Instruments That Are Issued to Other Than Employees for
      Acquiring, or in Conjunction with Selling, Goods or Services* to
      account for the compensation expense associated with these grants. The Company
      measured the compensation associated with these grants based on the fair value
      of the equity instruments issued. There is no measurement date to calculate
      the
      fair value of the options at the date of grant because the performance
      commitment had not yet occurred (there are no sufficiently large disincentives
      for non-performance) and the performance by the consultants were not complete.
      The Company calculated the expense at each reporting period based upon fair
      value of the options that vested during the reporting period using the fair
      value on the reporting date. Fair value was calculated using the Black-Scholes
      model. For the year ended December 31, 2006, the Company recorded compensation
      expense of $134,785 for these option grants.





The
      fair
      value of the options granted to consultants on October 12, 2006 were calculated
      using the Black-Scholes option valuation model with the following
      assumptions:





October
                12,
              2006
              GrantExpected
                Volatility
            
            
            79.66Expected
                dividends
            
            
            0Expected
                Term (Years)
            
            
            5Risk
                Free Interest Rate
            
            
            4.74




A
      summary
      of option activity under the 2005 Plan as of December 31, 2006, and changes
      during the year ended is presented below:




**Shares**
            
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            
            **Weighted
                -**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
            
            
            **Aggregate**
              **Intrinsic**
              **Value****Options**Outstanding,
                January 1, 2006
            
            
            2,109,375
            
            $
            0.80Granted,
                May 9
            
            
            300,000
            
            
            1.06Granted,
                May 15
            
            
            150,000
            
            
            1.10Granted,
                June 19
            
            
            150,000
            
            
            1.19Granted,
                October 12
            
            
            430,000
            
            
            1.15Outstanding,
                December 31, 2006
            
            
            3,139,375
            
            $
            0.91
            
            
            3.79
            
            $
            --Exercisable,
                December 31, 2006
            
            
            1,353,127
            
            $
            0.87
            
            
            3.63
            
            $
            --




A
      summary
      of the status of the Company's non-vested shares as of December 31, 2006, and
      changes during the year ended December 31, 2006, is presented
      below:




**Shares**
            
            **Weighted-**
              **Average**
              **Grant-Date**
              **Fair
                Value****Non-vested
              Shares**Non-vested,
                January 1, 2006
            
            
            1,593,750
            
            $
            0.23Granted
            
            
            1,030,000
            
            
            0.70Vested
            
            
            (837,500
            )
            
            0.39Non-vested,
                December 31, 2006
            
            
            1,786,248
            
            $
            0.42




The
      weighted average fair value for 2,109,375 options that were initially liability
      awards that became equity awards on March 16, 2006 is $0.23 per option
      based on a Black-Scholes Model calculated on March 16, 2006. The Company
      has a policy of using authorized shares not previously issued to satisfy stock
      option exercises.





F-16


**NOTE
      9. INCOME TAXES**





The
      components of the Company’s deferred tax assets as of December 31, 2006 are as
      follows:





**2006**
            
            **2005**Start
                up costs
            
            $
            898,000
            
            $
            25,000Less:
                valuation allowance
            
            $
            (898,000
            )
            $
            (25,000
            )Net
                deferred tax asset
            
            $
            --
            
            $
            --





In
      assessing the realization of deferred tax assets, management considers whether
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. As a result of uncertainty of achieving sufficient taxable
      income in the future, the Company has recorded a full valuation allowance
      against its deferred tax asset of $898,000 as of December 31, 2006 (an increase
      of approximately $873,000 for the year ended December 31,
      2006).




A
      reconciliation of the benefit from income taxes based on the Federal statutory
      rate to the Company’s effective rate for the years ended December 31, 2006 and
      2005 is as follows:





**2006**
              **%**
            
            **2005**
              **%**Federal
                income tax benefit at statutory rate
            
            
            (34.0
            )
            
            (34.0
            )State
                income tax benefit, net of federal income tax
            
            
            (6.0
            )Non
                deductible losses attributable to Skins Inc., a pass-through
                entity
            
            
            -
            
            
            20.5Non
                deductible losses principally arising from unrealized losses on derivative
                instruments
            
            
            18.7
            
            
            9.5Change
                in valuation allowance
            
            
            21.3
            
            
            4.0Total
                benefit from taxes
            
            
            -
            
            
            -




**NOTE
        10. SUBSEQUENT EVENT**
  The
        Company’s Vice President of Finance and Operations offered his resignation to
        the Company, which was accepted by the Company, and the Company agreed to
        pay
        severance to the employee of $115,000, less applicable deductions and
        withholdings. The employee agreed to assist the Company with the preparation
        and
        filing of its annual report for 2006 and its quarterly report for the three
        months ended March 31, 2007, after which the employee’s resignation would be
        effective.




F-17


**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





None.





**ITEM
      8A. CONTROLS AND PROCEDURES**




*(a)
      Evaluation of disclosure controls and procedures*




As
      of
      December 31, 2006, our management, which consists of our Chief Executive
      Officer, or “CEO,” who is the Principal Executive Officer and Principal
      Financial and Accounting Officer of our company, performed an evaluation of
      the
      effectiveness and the operation of our disclosure controls and procedures as
      defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of
      1934, as amended, or the “Exchange Act.” Based on that evaluation, our CEO
      concluded that our disclosure controls and procedures, after the closing of
      the
      Share Exchange on March 20, 2006, were ineffective due to a lack of experience
      with disclosure controls and procedures and a lack of a formal structure to
      record, process, summarize and report information with the Securities and
      Exchange Commission (the “SEC”) within the time periods specified in the SEC
      rules and regulations.




We
      have
      taken following remedial steps to address the specific problems
      identified:  we have engaged an accounting firm (other than the
      Company's auditors) to consult with on accounting issues. In addition, after
      the
      departure of our Vice President of Finance and Operations, we intend to hire
      a
      full time and qualified Chief Financial Officer in 2007 to become our principal
      financial and accounting officer. We believe that the remedial steps that the
      Company takes will address the conditions identified by our CEO as significant
      deficiencies in our disclosure controls and procedures. We will continue to
      monitor the effectiveness of these new internal policies. Our CEO believes
      that
      there are no material inaccuracies, or omissions of material facts necessary
      to
      make the statements not misleading in light of the circumstances in which they
      were made, in this Form 10-KSB.




*(b)
      Changes in internal control over financial reporting*




Based
      on
      the evaluation of our management as required by paragraph (d) of Rule 13a-15
      or
      15d-15 of the Exchange Act, we believe that there were no changes in our
      internal control over financial reporting that occurred during our last fiscal
      quarter that have materially affected, or are reasonably likely to materially
      affect, our internal control over financial reporting.





**ITEM
      8B. OTHER INFORMATION**





None.





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSON AND CORPORATE
      GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT**




The
      following table sets forth the name and position of each of our directors and
      executive officers as of April 17, 2007.





**Year
                First Appointed****Name**
            
            **Age**
            
            **Position**
            
            **Officer
                or Director of Skins**Mark
                Klein
            
            32
            
            President,
                Chief Executive Officer, Director
            
            2005Michael
                J. Rosenthal
            
            63
            
            Director
                and Chairman of the Board
            
            2005Antonio
                Pavan
            
            45
            
            Chief
                Operating Officer and Executive Vice President
            
            2007Stephen
                Hochberg
            
            59
            
            Director
            
            2005Steve
                Reimer
            
            63
            
            Director
            
            2005Frank
                Zambrelli
            
            40
            
            Director
            
            2007




23


**Mark
      Klein.** Mr.
      Klein began working on the business concept behind the predecessor of Skins
      Footwear Inc. in 2002 and was appointed President and Chief Executive Officer
      of
      Skins Footwear Inc. on May 18, 2004. From 2001 to 2002, Mr. Klein served as
      the
      Sales Director on ICQ Mobile, the mobile instant messaging division of AOL
      Time
      Warner, where he set sales and marketing strategies for ICQ's Value Added
      Service (VAS) wireless operations and handled technical and marketing
      deployments and workshops with operators. From 1999 to 2000, he acted as a
      senior marketing and sales executive for both Comverse Network Systems and
      Oraios.com, where he directed, created and implemented sales and marketing
      initiatives. Mr. Klein launched his executive career from 1997 through 1999
      as
      the Sales Director of Convertbond.com, where he managed the business development
      and sales strategy for the online financial portal.




**Michael
      J. Rosenthal.** Mr.
      Rosenthal was appointed Chairman of the Board of Directors of Skins Footwear
      Inc. in October 2005. As of February 2006 Mr. Rosenthal was appointed Chairman
      and CEO of Bill Blass NY. Since 1986, Mr. Rosenthal has served as Chairman
      and
      President of M.J. Rosenthal and Associates, Inc., an investment and consulting
      company. From 1984 to 1986, Mr. Rosenthal was a partner and managing director
      of
      Wesray Capital Corporation, an equity investment firm. From 1976 to 1984 ,
      Mr.
      Rosenthal served as a partner and a Managing Director of the Mergers and
      Acquisitions Department of Donaldson, Lufkin & Jenrette, Inc. an investment
      banking firm. During 2002 and 2003, Mr. Rosenthal served as Chief Restructuring
      Officer for Foster Wheeler Ltd. Mr. Rosenthal also serves as a director of
      MAXXAM, Inc., The Pacific Lumber Company, Nobel Learning Communities, Inc.
      and
      as a director and Treasurer of the Horticultural Society of New York. Over
      the
      last several years, Mr. Rosenthal has also served as Chairman, a director and/or
      Chief Executive Officer of a number of companies including American Vision
      Centers, Inc.; Northwestern Steel & Wire Company; Star Corrugated Box Co.,
      Inc. Vector Distributors, Inc; Western Auto Supply Company; and Wilson Sporting
      Goods Company. Mr. Rosenthal was an honors graduate from the New York University
      Law School and Columbia University Graduate School of Business.





**Antonio
      Pavan** .
      Mr.
      Pavan was appointed as our Chief Operating Officer and Executive Vice President
      on April 13, 2007. Before his appointment as an executive of the Company, from
      November 2005 to April 2007, Mr. Pavan worked as an independent consultant
      advising clients on strategic and business development with respect to apparel
      and furniture design. From October 2004 to November 2005 Mr. Pavan acted as
      Executive Vice President of GEOX USA, a subsidiary to one of the fastest growing
      companies in Europe, GEOX SpA., where he established and controlled all
      operations and had full responsibility and oversight of sales, human relations,
      legal, fiscal, finance and marketing. From 1998 until October 2004, he acted
      has
      Executive Vice President of Alessi USA a subsidiary of Alessi SpA., a worldwide
      leader of luxury home and kitchen accessories, where he had full accountability
      for all USA operations including financial, legal and administrative.





**Stephen
      Hochberg.** Mr.
      Hochberg was appointed to the Board of Directors of Skins Footwear Inc. in
      August 2005. Since 1999, Mr. Hochberg has served as Chief Executive Officer
      of
      Mage, LLC, an international business and management-consulting firm that has
      helped more than 600 companies achieve their organizational and strategic goals.
      Mage specializes in creating value through leadership coaching, team building,
      strategic planning, organizational development and financial counsel. Mage
      is
      committed to the continuous improvement of its clients' capabilities, offering
      a
      full menu of tailored management, organizational and financial advisory
      services.




**Steve
      Reimer.** Mr.
      Reimer joined Skins Inc. as a Director in October 2005. From 1986 to 2001,
      he
      served as Senior Vice President of Kohl's Department Store. From 2001 to the
      present, he has served as a consultant to B.T.M. Consulting. Mr. Reimer is
      also
      currently a board member of the Two Ten Footwear Foundation, a non-profit
      organization that provides educational and social services to individuals
      working in the footwear industry.





**Frank
      Zambrelli.** Mr.
      Zambrelli was appointed to the Board of Directors of Skins Inc. in January
      2007.
      Mr. Zambrelli is
      a
      founder of Banfi Zambrelli, a leading fashion footwear design firm. As a Skins
      strategic business partner, Banfi Zambrelli has helped lead the direction of
      the
      Skins brand and will coordinate production design and oversee production and
      manufacturing of Skins footwear in Italy. Before founding Banfi Zambrelli in
      2003 along with Silvano Banfi, Mr. Zambrelli has worked with a renowned group
      of
      clients including, Chanel, Cole- Haan and Coach. Currently, Mr. Zambrelli leads
      the creative direction for Calvin Klein footwear and serves as President of
      Judith Leiber as well as sitting on the Board of the prominent, New York based
      Fashion Institute of Technology.




24


**Advisory
      Board**





We
      have
      an advisory board that renders advisory services to us with respect to
      technical, financial and marketing matters, in addition to matters related
      to
      recruitment of personnel. The advisory board meets with our Board of Directors
      approximately six to eight times per year. Members of our advisory board
      are:





*Bill
      Priakos.* **** Mr.
      Priakos has served on our advisory board since October 2005. He has served
      as
      Vice President of Merchandising for the Dallas Cowboys Football Team for the
      past nine years.





*Mark
      Itzkowitz.* **** Mr.
      Itzkowitz has been President of Atsco Footwear LLC since July 2001 to the
      present day. Mr. Itzkowitz's expertise in sourcing, development and design
      of
      footwear product has been extensive in the footwear community over the last
      35
      years.





**Family
      Relationships**




There
      are
      no family relationships among the individuals that comprise our Board of
      Directors and Executive Officers.





**The
      Board of Directors and Committees**





Our
      Board
      of Directors maintains a separate audit committee and a separate compensation
      committee .





**AUDIT
      COMMITTEE FINANCIAL EXPERT**





The
      Audit
      Committee of the Board of Directors is comprised of Mr. Rosenthal, who serves
      as
      chairman, and Mr. Hochberg, who serves as a director. The Board of Directors
      has
      determined that all of the Audit Committee members are independent, as that
      term
      is defined under the enhanced independence standards for audit committee members
      in the Securities and Exchange Act of 1934. The Board of Directors has also
      determined that Michael Rosenthal is an Audit Committee Financial Expert as
      that
      term is defined in rules issued pursuant to the Sarbanes-Oxley Act of 2002.





**SECTION
      16(A) BENEFICIAL OWNERSHIP COMPLIANCE**





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
      officers, directors and persons who own more than 10% of a registered class
      of
      our equity securities to file with the Securities and Exchange Commission
      initial statements of beneficial ownership, reports of changes in ownership
      and
      annual reports concerning their ownership of common stock and other of our
      equity securities, on Forms 3, 4 and 5 respectively. Executive officers,
      directors and greater than 10% shareholders are required by Commission
      regulations to furnish us with copies of all Section 16(a) reports they file.
      To
      our knowledge, based solely on our review of the copies of such forms received
      by us, or written representations from certain reporting persons that no
      additional forms were required for those persons, we believe that during fiscal
      2006 all persons subject to these reporting requirements, except for a missing
      filing of a Form 3 for Frank Zambrelli, filed the required reports on a timely
      basis except.





**CODE
      OF ETHICS**





The
      Company has not adopted a Code of Ethics policy. The Company is in the process
      of establishing such policy.





**ITEM
      10. EXECUTIVE COMPENSATION**





**Summary
      Compensation Table**





The
      following table sets forth information concerning the compensation for the
      year
      ended December 31, 2006 of our chief executive officer and other executive
      officers whose annual salary and bonus exceeded $100,000 in such years,
      collectively referred to as the Named Executive Officers.




**Annual
                Compensation****Name
                and Position**
            
            **Year**
            
            **Salary($)**
            
            **Bonus
                ($)**Mark
                Klein(1)
            
            
            2006
            
            $
            150,000
            
            
            25,000President
                and Chief Executive Officer
            
            
            2005
            
            
            11,108
            
            
            --




25





(1)
            Mr.
                Klein was the President of Skin Shoes LLC, which was formed in 2004,
                and
                became the President and Chief Executive Officer of Skins Footwear
                Inc. in
                2005. Mr. Klein was appointed President and Chief Executive Officer
                of
                Skins Inc. upon the closing of the Share Exchange Transaction on
                March 20,
                2006.




**Employment
      Agreements**





On
      the
      closing the Share Exchange Agreement, we entered into an employment agreement
      with Mark Klein to serve as our President and Chief Executive Officer. The
      duration of the employment agreement is three years unless terminated earlier
      pursuant to the terms and conditions of the agreement. The agreement provides
      for a base salary of $150,000 per year and an annual incentive bonus of up
      to
      50% of the base salary based on annual volume and net profit of our company.
      Pursuant to the terms of the employment agreement, Mr. Klein will not disclose
      to any third party any confidential information or trade secrets of our company
      during and after the term of the employment agreement. In addition, Mr. Klein
      agreed not to solicit away any customers or employees of our company during
      the
      term of the employment agreement and one year after the termination of his
      employment. Mr. Klein also agreed not to compete, either directly or indirectly,
      with the business of our company in the United States for a period of one year
      from the termination of his employment with us. As of January 1, 2007 the
      Company raised Mr. Klein’s base salary to $175,000 per year.





We
      entered into an employment agreement with Mr. Pavan to serve as our Chief
      Operating Officer and Executive Vice President. Pursuant to the terms of the
      Agreement, we will employ Mr. Pavan for three years with successive one year
      automatic renewals unless either party provides 180 days advance notice of
      intent not to renew and we will pay Mr. Pavan an annual base salary of $225,000
      with a cash bonus of up to 50% of the base salary at the discretion of the
      Board
      of Directors. Mr. Pavan is also eligible to receive up to $4,000 as a one time
      benefit in connection with the fees incurred in connection with the Agreement,
      paid vacation, and other benefits made available by us to its executives,
      including a company-owned or leased automobile. Furthermore, we will grant
      Mr.
      Pavan 500,000 stock options pursuant to the company’s 2005 Incentive Plan, to
      encourage him to provide long-term services to the company and to encourage
      greater productivity and efficiency. The 500,000 stock options will vest over
      a
      three year period in equal 1/6 portions semi-annually and exercisable per share
      at an amount that is equal to the closing trading price of the Company’s common
      stock as of April 13, 2007. Upon a change of control of the Company, all options
      outstanding that have not previously vested or terminated will be immediately
      and fully vested and exercisable upon the date of the change of control.





**Skins
      2005 Incentive Plan**





In
      connection with the Share Exchange Transaction, we assumed the Skins 2005
      Incentive Plan as the stock option plan of Skins Inc. The 2005 Incentive Plan
      provides for the granting of stock options, stock appreciation rights,
      restricted shares, and other stock-based awards for employees, directors and
      consultants. Immediately after the closing of the Share Exchange Transaction,
      we
      assumed share purchase options granted under the 2005 Incentive Plan to purchase
      an aggregate of 2,109,375 shares at an exercise price of $0.80 per
      share.





**Grants
      of Plan-Based Awards in 2006**





There
      were no option grants to Named Executive Officers in 2006.





**Outstanding
      Equity Awards at 2006 Fiscal Year-End**




There
      were no option exercises or options outstanding in respect to Named Executive
      Officers in 2006.




**Option
      Exercises and Stock Vested in Fiscal 2006**




There
      were no option exercises or stock vested in respect to Named Executive Officers
      in 2006.





**Director
      Compensation**


Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Option
              Awards
                ($)
            
            Total
              ($)Michael
                J. Rosenthal
            
            
            100,000
            
            
            None
            
            
            100,000Stephen
                Hochberg
            
            
            10,000
            
            
            30,745
            
            
            40,745Steve
                Reimer
            
            
            10,000
            
            
            30,745
            
            
            40,745








26


We
      have
      an established policy to provide compensation to members of our Board of
      Directors for their services in that capacity. Directors are compensated $10,000
      per year and are eligible for option grants for their services. Stephen Hochberg
      and Steven Reimer were each granted options to purchase 421,875 shares of our
      common stock in 2005. The options vest one-thirty sixth per month. In addition,
      the Chairman of our Board, Michael J. Rosenthal, receives $90,000 per year
      as
      compensation for his services. Directors are reimbursed for reasonable
      out-of-pocket expenses incurred in connection with attendance at Board meetings.
      Messrs. Prikos and Itzkowitz, who sit on our advisory board, receive $2,500
      per
      quarter and were granted options to purchase 421,875 share of our common
      stock.








**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**


Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission. In computing the number of shares beneficially owned by
      a
      person and the percentage of ownership of that person, shares of common stock
      subject to options held by that person that are currently exercisable or become
      exercisable within 60 days of December 31, 2006 are deemed outstanding even
      if
      they have not actually been exercised. Those shares, however, are not deemed
      outstanding for the purpose of computing the percentage ownership of any other
      person. We had 36,206,769 outstanding shares of common stock, warrants to
      purchase 1,319,237 shares of common stock and options to purchase 3,139,375
      shares of common stock as of December 31, 2006.





The
      following table sets forth certain information with respect to beneficial
      ownership of our common stock immediately after the closing of the share
      exchange transaction, by (i) each director, (ii) each executive officer, (iii)
      shareholders of 5% or more, and (iv) all directors and executive officers as
      a
      group. Unless otherwise indicated in the table, the persons and entities named
      in the table have sole voting and sole investment power with respect to the
      shares set forth opposite the stockholder's name, subject to community property
      laws, where applicable. Unless otherwise indicated in the table, the address
      of
      each stockholder listed in the table is c/o Skins Inc., 45 West 21st Street,
      2nd
      Floor, New York, NY 10010




Title
                of Class
            
            Name
                and Address of Beneficial Owner
            
            Number
                of Shares
              Beneficially
                Owned
            
            Percent
                of Class***Directors
                and Executive Officers:***Common
                Stock
            
            
            Mark
                Klein
              President,
                Chief Executive Officer and Director
            
            
            9,758,223
            (1)
            
            27.0
            %Common
                Stock
            
            
            Stephen
                Hochberg
              Director
            
            
            514,708
            (2)
            
            1.4Common
                Stock
            
            
            Steve
                Reimer
              Director
            
            
            126,628
            (3)
            
            *Common
                Stock
            
            
            Michael
                J. Rosenthal
              Director
                and Chairman
            
            
            970,200
            (4)
            
            2.7Common
                Stock
            
            
            Frank
                Zambrelli
              Director
            
            
            --
            
            
            --Common
                Stock
            
            
            Antonio
                Pavan
              Chief
                Operating Officer and Executive Vice President
            
            
            50,000
            (5)
            
            8Common
                Stock
            
            
            Executive
                Officers and Directors as a group (6 persons)
            
            
            11,419,756
            (6)
            
            31.3
            %***5%
                or more Stockholders***Common
                Stock
            
            
            Geoffrey
                Dubey(7)
            
            
            3,118,743
            
            
            8.6Common
                Stock
            
            
            Joshua
                Hermelin(7)
            
            
            3,454,603
            
            
            9.5


______________


*
      Less
      than 1%.




27




(1)
            Includes
                70,200 shares of common stock that are held in escrow and subject
                to
                partial and full return to Skins Inc. contingent upon the number
                of share
                purchase warrants exercised by investors in Skins Inc. within a period
                of
                30 months following the closing of private placements and the Share
                Exchange Transaction.




(2)
            Includes
                388,080 shares held by Mage Capital Partners LLC. Mr. Hochberg is
                President and control person of Mage Capital Partners LLC and may
                be
                deemed to have voting and investment power over the shares held by
                Mage
                Capital Partners LLC. Mr. Hochberg disclaims beneficial ownership
                of the
                shares held by Mage Capital Partners LLC except to the extent of
                his
                pecuniary interest therein. The shares held by Mage Capital Partners
                LLC
                include 28,080 shares of common stock that are held in escrow and
                subject
                to partial and full return to Skins Inc. contingent upon the number
                of
                share purchase warrants exercised by investors in Skins Inc. within
                a
                period of 30 months following the closing of private placements and
                the
                Share Exchange Transaction. Also includes 126,628 shares underlying
                options currently exercisable or exercisable within 60 days of December
                31, 2006.




(3)
            Consists
                of shares underlying options currently exercisable or exercisable
                within
                60 days of December 31, 2006.




(4)
            Includes
                70,200 shares of common stock that are held in escrow and subject
                to
                partial and full return to Skins Inc. contingent upon the number
                of share
                purchase warrants exercised by investors in Skins Inc. within a period
                of
                30 months following the closing of private placements and the Share
                Exchange Transaction.




(5)
            Includes
                236,979 shares underlying options currently exercisable or exercisable
                within 60 days of September 15,
                2006.




(6)
            Consists
                of shares held by Mr. Pavan’s wife.


(7)
            Messrs.
                Dubey and Hermelin are consultants to the Company and utilize the
                Company's address for Company matters. Mr. Dubey’s and Mr. Hermelin’s
                shares includes 222,043 and 244,752 shares of common stock, respectively,
                that are held in escrow and subject to partial and full return to
                Skins
                Inc. contingent upon the number of share purchase warrants exercised
                by
                investors in Skins Inc. within a period of 30 months following the
                closing
                of private placements and the Share Exchange
                Transaction.




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**




**Skins
      Footwear Inc.**




Skins
      Footwear Inc. is our wholly-owned subsidiary. We have interlocking executive
      and
      director positions with Skins Footwear Inc.




**March
      2006 Share Exchange Transaction**




In
      March 2006, we completed the Share Exchange Transaction with Skins Footwear
      Inc.
      At the closing, Skins Footwear Inc. became a wholly-owned subsidiary of Skins
      Inc. and all outstanding securities of Skins Footwear Inc. were exchanged for
      securities of Skins Inc. The following sets forth information with respect
      to
      our affiliates holdings prior to the Share Exchange Transaction.




·
            Mark
                Klein, our President, Chief Executive Officer and a Director, received
                beneficial ownership of 9,758,221 shares of our common stock pursuant
                to
                the Share Exchange Transaction. This amount includes 70,200 shares
                of
                common stock that are held in escrow and subject to partial and full
                return to Skins Inc. contingent upon the number of share purchase
                warrants
                exercised by investors in Skins Inc. within a period of 30 months
                following the closing of private placements and the Share Exchange
                Transaction.




28




·
            Stephen
                Hochberg, a member of our Board of Directors, received beneficial
                ownership of 388,080 shares of our common stock pursuant to the Share
                Exchange Transaction. This amount includes 28,080 shares of common
                stock
                that are held in escrow and subject to partial and full return to
                Skins
                Inc. contingent upon the number of share purchase warrants exercised
                by
                investors in Skins Inc. within a period of 30 months following the
                closing
                of private placements and the Share Exchange
                Transaction.




·
            Michael
                Rosenthal, Chairman of our Board of Directors, received beneficial
                ownership of 970,200 shares of our common stock pursuant to the Share
                Exchange Transaction. This amount includes 70,200 shares of common
                stock
                that are held in escrow and subject to partial and full return to
                Skins
                Inc. contingent upon the number of share purchase warrants exercised
                by
                investors in Skins Inc. within a period of 30 months following the
                closing
                of private placements and the Share Exchange
                Transaction





·
            Geoffrey
                Dubey and Joshua Hermelin received 3,068,743 shares and 3,382,603
                shares,
                respectively, of our common stock pursuant to the Share Exchange
                Transaction. Messrs. Dubey and Hermelin each beneficially own more
                than 5%
                of our securities.




**Atsco
      Footwear LLC and Mage LLC**





We
      had
      entered into a sourcing and buying agent agreement with Atsco Footwear, LLC
      pursuant to which Atsco Footwear will be responsible for sourcing,
      commercialization and product line review. According to the agreement, Atsco
      Footwear will be the exclusive sourcing and development agent for us and will
      assist us in developing a fit-and-wear tested marketable product. Atsco is
      responsible for the factory development and output as well as delivery,
      scheduling, supplier deadlines and other related matters. We will pay
      commissions to Atsco Footwear for its services under the agreement primarily
      based on merchandise sourced by Atsco Footwear and shipped to us. We decided
      not
      to exercise the option to extend the outsourcing agreement, and consequently
      we
      work with Atsco on a month-by-month basis as our non-exclusive sourcing agent
      in
      the Far East. Stephen Hochberg, who is a director of our company, is also a
      director Atsco Footwear.





We
      had an
      oral consulting arrangement with Mage LLC pursuant to which Mage LLC receives
      approximately $5,000 per month for consulting services providing business
      advisory and financial services. Mage's services to us included strategic
      planning, development of business plan, and evaluation of funding including
      negotiation and structure, as well as, interim financial management and
      accounting services. This arrangement expired in June 2006 when we hired our
      VP
      of Finance and Operations and was later renewed on a month to month basis in
      January 2007. In 2005, Mage Capital Partners, LLC received equity securities
      in
      Skins Footwear Inc. in exchange for services provided by Mage LLC. These equity
      securities were exchanged for 388,080 shares of our common stock upon the
      closing of the Share Exchange Transaction on March 20, 2006. Mr. Hochberg,
      a
      member of our Board of Directors, is Chief Executive Officer of Mage LLC and
      Mage Capital Partners, LLC.





**Consulting
      Agreements**





On
      April
      3, 2006, we entered into consulting agreements with two shareholders, Geoffrey
      Dubey and Joshua Hermelin, pursuant to which we agreed to issue 50,000 and
      72,000 shares of our common shares to Geoffrey Dubey and Joshua Hermelin
      respectively for an aggregate of 122,000 shares in exchange for consulting
      services to be provided by the two shareholders over a two year term. The total
      consulting services were valued at $145,180 based upon the closing price of
      our
      common stock of $1.19 per share on the date of the agreement. The consulting
      services include advising and counseling us with respect to technical, financial
      and marketing issues, recruitment of qualified personnel and specific technical
      issues, growth and business plans, and strategic planning. Messrs. Dubey and
      Hermelin beneficially own approximately 8.9% and 9.8%, respectively, of our
      outstanding securities. We believe that our arrangements with Messrs. Dubey
      and
      Hermelin are at fair market value and are on terms comparable to those that
      would have been reached in arm's-length negotiations had the parties been
      unaffiliated at the time of the negotiations.




29


**ITEM
      13. EXHIBITS**








2.1
            Share
                Exchange Agreement, dated as of November 2, 2005, by and among Skin
                Shoes,
                Inc., Logicom Inc. and all of the stockholders of Skin Shoes, Inc
                (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K
                filed with the Securities and Exchange Commission on November 7,
                2005).2.1(a)
            Amendment
                No. 1 to the Share Exchange Agreement dated February 1, 2006 by and
                among
                Skin Shoes, Inc., Logicom Inc. and all of the stockholders of Skin
                Shoes,
                Inc (incorporated by reference to Exhibit 2.1(a) of the Registrant’s Form
                8-K filed with the Securities and Exchange Commission on March 24,
                2006).4.1
            Form
                of Stock Purchase Warrant (incorporated by reference to Exhibit 4.1
                of the
                Registrant’s Form 8-K filed with the Securities and Exchange Commission on
                March 24, 2006).10.1
            Form
                of Subscription Agreement (incorporated by reference to Exhibit 10.1
                of
                the Registrant’s Form 8-K filed with the Securities and Exchange
                Commission on March 24, 2006)..10.2
            Skin
                Shoes, Inc. 2005 Incentive Plan (incorporated by reference to Exhibit
                10.2
                of the Registrant’s Form 8-K filed with the Securities and Exchange
                Commission on March 24, 2006).10.2(a)
            Form
                of Skin Shoes, Inc. Incentive Plan Option Agreement (incorporated
                by
                reference to Exhibit 10.2(a) of the Registrant’s Form 8-K filed with the
                Securities and Exchange Commission on March 24, 2006).10.3
            Employment
                Agreement by Mark Klein and the Logicom, Inc. dated March 20, 2006
                (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K
                filed with the Securities and Exchange Commission on March 24,
                2006).10.4
            Exclusive
                Buying Agency and Sourcing Agreement dated December 7, 2005 by and
                between
                the Registrant and Atsco Footwear LLC and addendum dated February
                27, 2006
                (incorporated by reference to Exhibit 10.4 of the Registrant’s
                registration statement on Form SB-2 file with the Securities and
                Exchange
                Commission on June 30, 2006).21.1
            List
                of Subsidiaries of Registrant (incorporated by reference to Exhibit
                21.1
                of the Registrant’s registration statement on Form SB-2 file with the
                Securities and Exchange Commission on June 30, 2006).31.1
            Certification
                of Chief Executive Officer pursuant to Section 302(a) of the
                Sarbanes-Oxley Act of 2002.32.1*
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.*


____________


*
            This
                exhibit shall not be deemed “filed” for purposes of Section 18 of the
                Securities Exchange Act of 1934 or otherwise subject to the liabilities
                of
                that section, nor shall it be deemed incorporated by reference in
                any
                filing under the Securities Act of 1933 or the Securities Exchange
                Act of
                1934, whether made before or after the date hereof and irrespective
                of any
                general incorporation language in any
                filings.





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





During
      the two fiscal years ended December 31, 2006, we retained Mahoney Cohen
& Company, CPA, P.C. to provide services as follows:








**Fees
                for the Year Ended December 31, 2006**
            
            **Fees
                for the Year Ended December 31, 2005****Service**Audit
                fees(1)
            
            $
            93,000
            
            $
            25,000Audit-related
                fees(2)
            
            
            53,412
            
            
            -Tax
                fees(3)
            
            
            -
            
            
            -All
                other fees(4)
            
            
            -
            
            
            -Total
                audit and non-audit fees
            
            $
            146,412
            
            $
            25,000




(1) The
      aggregate fees billed for fiscal 2006 professional services rendered by the
      principal accountant for the audit of the Company’s annual financial statements
      and review of financial statements included in the Company’s forms 10-QSB, or
      services that are normally provided by the accountant in connection with
      statutory and regulatory filings or engagements for this fiscal respectively
      year was $146,412.





(2) Fees
      billed by the principal accountant relating to filing of the Company's
      Registration Statements.





(3) There
      were
      no tax return preparation fees for fiscal 2006 and fiscal 2005 paid to our
      principal accountants.





(4)
      No
      fees were billed for each of fiscal 2006 and fiscal 2005 for products and
      services provided by the principal accountant.





30





**Pre-Approval
      Policy**





The
      Company’s audit committee pre-approves all services provided by Mahoney
      Cohen & Company, CPA, P.C .
      Prior
      to the engagement of Mahoney
      Cohen & Company, CPA, P.C. for any
      non-audit or non-audit related services, the Board of Directors must conclude
      that such services are compatible with the independence of Mahoney
      Cohen & Company, CPA, P.C. as our
      auditors.





31





**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant has duly
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.





**SKINS
                INC.**
              (Registrant)April
                17, 2007
            By:
            /s/ Mark
                KleinMark
                KleinChief
                Executive Officer, President and Director
              (Principal
                Executive Officer and Principal Financial and Accounting
                Officer)





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





SIGNATURE
            
            TITLE
            
            DATE/s/
                Mark Klein
            
            Chief
                Executive Officer, President and Director
            
            April
                17, 2007Mark
                Klein
            
            (Principal
                Executive Officer and Principal Financial and Accounting
                Officer)/s/
                Michael J. Rosenthal
            
            
            
            April
                17, 2007Michael
                J. Rosenthal
            
            Chairman
                of the Board/s/
                  Stephen Hochberg
            
            
            
            April
                17, 2007Stephen
                Hochberg
            
            Director/s/
                Steve Reimer
            
            
            
            April
                17, 2007Steve
                Reimer
            
            Director/s/ Frank
                Zambrelli
            
            
            
            April
                17, 2007Frank
                Zambrelli
            
            Director











32