**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB/A**


**Amendment
      No. 1**




**x** **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**




**For
      the quarterly period ended June 30, 2006**





**OR**





**o** **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**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)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past 90 days. Yes x No o




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




There
      were 34,526,006 shares outstanding of registrant’s common stock, par value $.001
      per share, as of August 8, 2006.




Transitional
      Small Business Disclosure Format (check one):    
Yes o No x















**SKINS
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**FORM
      10-QSB QUARTERLY REPORT**





**TABLE
      OF CONTENTS**





**Page**PART
                I - FINANCIAL INFORMATION
            1ITEM
                1.
            FINANCIAL
                STATEMENTS
            1Consolidated
                Balance Sheet as of June 30, 2006 (unaudited)
            1Consolidated
                Statements of Operations for the Three and Six Months ended June
                30, 2006
                and 2005 and period from Inception (May 18, 2004) to June 30, 2006
                (unaudited)
            2Consolidated
                Statement Stockholders' Equity (Deficiency) for the period from Inception
                (May 18, 2004) to June 30, 2006 (unaudited)
            3Consolidated
                Statements of Cash Flows for the Six Months ended June 30, 2006 and
                2005,
                and period from Inception (May 18, 2004) to June 30, 2006
                (unaudited)
            4Notes
                to the Consolidated Financial Statements
            5ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATION
            14PART
                II - OTHER INFORMATION
            21ITEM
                6.
            EXHIBITS
            21SIGNATURES
            
            22













**EXPLANATORY
      NOTE**




This
      Amendment No. 1 (this “Amendment”) on Form 10-QSB/A, which amends and restates
      items identified below with respect to the Form 10-QSB, filed by Skins Inc.
      (“we” or “the Company”) with the Securities and Exchange Commission (the “SEC”)
      on August 18, 2006 (collectively, the “Original Filing”) is being filed to
      reflect the restatement of certain of our financial statements as described
      below and elsewhere in this Amendment.




On
      September 27, 2006, our management concluded that the Company’s previously filed
      financial statements as of and for three and six months ended June 30, 2006,
      should no longer be relied upon as a result of the Company’s determination that
      it misapplied accounting principles generally accepted in the United States
      of
      America in relation to (i) common stock purchased and retired and warrants
      granted in conjunction with the close of two private placements outlined in
      the
      share exchange agreement and (ii) 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. This conclusion was based upon
      conversations between the Company and its independent auditors (Mahoney Cohen
      & Company, CPA, P.C.). During this process, management and the Board of
      Directors of the Company were alerted to the facts and circumstances regarding
      the errors in accounting. Authorized officers of the Company discussed this
      matter with the Company's independent public accounting firm who agreed that
      the
      Company's previously issued financial statements described above could not
      be
      relied upon and needed to be restated. See “Note 9 - Subsequent Events” in the
      Notes to Financial Statements for further details.




This
      Form
      10-QSB/A only amends and restates certain information in Item 1 (Financial
      Statements), Item 2 (Management’s Discussion And Analysis Of Financial Condition
      And Results Of Operation), and Item 6 (Exhibits). Except for the foregoing
      amended and restated information, this Amendment continues to describe
      conditions as of the date of the Original Filing, and the disclosures contained
      herein have not been updated to reflect events, results or developments that
      have occurred after the Original Filing, or to modify or update those
      disclosures affected by subsequent events. Among other things, forward-looking
      statements made in the Original Filing have not been revised to reflect events,
      results or developments that have occurred or facts that have become known
      to us
      after the date of the Original Filing, and such forward-looking statements
      should be read in their historical context. This Amendment should be read in
      conjunction with the Company’s filings made with the SEC subsequent to the
      Original Filing, including any amendments to those filings.


















**SKINS
      INC. AND SUBSIDIARY**


**(A
      Development Stage Company)**





**CONSOLIDATED
      BALANCE SHEET**


**(Unaudited)**




**June
                30,**
              **2006**
              (unaudited)
              (as
                restated)
              (See
                Note 10)**ASSETS**Current
                assetsCash
              and cash equivalents
            
            $
            1,357,715Prepaid
              expenses
            
            
            193,046Total
                current assets
            
            
            1,550,761Property
              and equipment, net (Note 3)
            
            
            4,119Patent
              costs (Note 4)
            
            
            72,439Total
                Assets
            
            $
            1,627,319**LIABILITIES
                AND STOCKHOLDERS' DEFICIENCY**Current
                liabilitiesAccounts
              payable and accrued liabilities
            
            $
            198,670Related
              party payable
            
            
            1,337Derivative
              liability
            
            
            1,831,800Total
                current liabilities
            
            
            2,031,807Commitments
                and Contingencies (Note 7)Stockholders'
                DeficiencyCommon
              Stock, $.001 par value; 436,373,650 shares authorized; 34,526,006 shares
              issued and outstanding at June 30, 2006 (Note 1)
            
            
            34,526Additional
              paid in (deficit in) capital
            
            
            2,047,510Deficit
              accumulated in the development stage
            
            
            (2,486,524
            )Total
                stockholders' deficiency
            
            
            (404,488
            )Total
                Liabilities & Stockholders' Deficiency
            
            $
            1,627,319





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




1




**SKINS
      INC. AND SUBSIDIARY**


**(A
      Development Stage Company)**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**





**Three
                Months Ended**
              **June
                30,**
            
            ****Six
                Months Ended****
              **June
                30,**
            
            ****Period
                from****
                **Inception
                  (May**
                **18,
                  2004)**
                **to**
                **June
                  30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**(as
                restated)
              (See
                Note 10)Operating
                expenses:Design
                and development
            
            $
            35,293
            
            $
            —
            
            $
            69,582
            
            $
            40,172
            
            $
            208,373Selling,
                general and administrative
            
            
            451,015
            
            
            36,512
            
            
            894,711
            
            
            75,845
            
            
            1,414,414Total
                operating expenses
            
            
            486,308
            
            
            36,512
            
            
            964,293
            
            
            116,017
            
            
            1,622,787Operating
                Loss
            
            
            (486,308
            )
            
            (964,293
            )
            
            (964,293
            )
            
            (116,017
            )
            
            (1,622,787
            )Unrealized
                (loss) on derivative instruments
            
            
            (1,245,000
            )
            
            —
            
            
            (1,225,763
            )
            
            —
            
            
            (1,247,954
            )Interest
                Income
            
            
            12,357
            
            
            —
            
            
            13,625
            
            
            —
            
            
            13,625Interest
                Expense
            
            
            —
            
            
            (667
            )
            
            (931
            )
            
            (1,334
            )
            
            (5,266
            )Net
                loss
            
            $
            (1,718,951
            )
            $
            (37,179
            )
            $
            (2,177,362
            )
            $
            (117,351
            )
            $
            (2,862,382
            )Basic
                and diluted loss per share
            
            
            (0.05
            )
            
            (0.00
            )
            
            (0.08
            )
            
            (0.01
            )Weighted
                average number of
              common
                shares outstanding, basic and diluted
            
            
            33,119,294
            
            
            16,723,277
            
            
            26,559,648
            
            
            16,723,277





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




2


**SKIN
      SHOES, INC. AND SUBSIDIARY**


**(A
      Development Stage Company)**





**CONSOLIDATED
      STATEMENT OF**


**STOCKHOLDERS'
      EQUITY (DEFICIENCY)**




**Deficit****Accumulated****Additional**
            
            **Total**
            
            **Total****Common
                Stock**
            
            **Paid-in
                (deficit in)**
            
            **Development**
            
            **Stockholders'****Shares**
            
            **Amounts**
            
            **Capital**
            
            **Stage**
            
            **Equity/(Deficit)**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
            )
            
            3,982Shares
                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
            
            
            -
            
            
            241,157SkinsInc. net assets assumed
            
            
            14,821,434
            
            
            14,821
            
            
            1,693,886
            
            
            
            
            
            1,708,707Conversion
                of convertible debenture - Common Stock
            
            
            178,572
            
            
            179
            
            
            119,821
            
            
            
            
            
            120,000Shares
                issued for consulting services on April 3, 2006 (Note 5)
            
            
            122,000
            
            
            122
            
            
            145,058
            
            
            
            
            
            145,180Shares
                based Compensation, June 30, 2006
            
            
            
            
            
            
            
            
            86,156
            
            
            
            
            
            86,156Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            (2,177,362
            )
            
            (2,177,362
            )Balances
                at June 30, 2006 (unaudited) (as restated, see Note 10)
            
            
            34,526,006
            
            $
            34,526
            
            $
            2,047,510
            
            $
            (2,486,524
            )
            $
            (404,488
            )




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




3




**SKINS
      INC. AND SUBSIDIARY**


**(A
      Development Stage Company)**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





****Six
                Months Ended****
              **June
                30,**
            
            ******Period
                from******
                **Inception**
                  **(May
                    18, 2004)**
                  **to**
                  **June
                    30,****2006**
            
            **2005**
            
            **2006**Cash
                flows used in operating activities:
            
            (unaudited)(as
                restated)
              (See
                Note 10)
            
            
            (unaudited)
            
            
            (unaudited)Net
                loss from operations
            $
            (2,177,362
            )
            $
            (117,351
            )
            $
            (2,862,382
            )Adjustments
                to reconcile net loss from operations to net cash used in operating
                activities:Depreciation
            
            861
            
            
            410
            
            
            2,784Amortization
            
            1,741
            
            
            1,185
            
            
            5,199Issuance
                of common stock for services
            
            18,150
            
            
            -
            
            
            18,156Share
                based Compensation Expense
            
            213,407
            
            
            -
            
            
            327,313Unrealized
                loss on derivative instruments
            
            1,225,763
            
            
            -
            
            
            1,247,954Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            (64,925
            )
            
            60,598
            
            
            (64,925
            )Accounts
                payable and accrued expenses
            
            (64,518
            )
            
            -
            
            
            182,853Net
                cash used in operating activities
            
            (846,883
            )
            
            (55,158
            )
            
            (1,143,048
            )Cash
                flows used in investing activities:Purchases
                of property and equipment
            
            (1,427
            )
            
            -
            
            
            (4,925
            )Patent
                Costs
            
            (12,956
            )
            
            (2,072
            )
            
            (69,187
            )Net
                cash used in investing activities
            
            (14,383
            )
            
            (2,072
            )
            
            (74,112
            )Cash
                flows provided by financing activities:Cash
                assumed in connection with Recapitalization
            
            2,261,462
            
            
            -
            
            
            2,261,462Related
                Party payments
            
            (79,014
            )
            
            35,753
            
            
            (25,587
            )Proceeds
                from issuance of Common Stock
            
            -
            
            
            -
            
            
            189,000Proceeds
                from note payable
            
            -
            
            
            -
            
            
            150,000Increase
                in cash overdraft
            
            -
            
            
            495
            
            
            -Net
                cash provided by financing activities:
            
            2,182,448
            
            
            36,248
            
            
            2,574,875Net
                increase/(decrease) in cash and cash equivalents
            
            1,321,182
            
            
            (20,982
            )
            
            1,357,715Cash
                and cash equivalents at beginning of period
            
            36,533
            
            
            20,982
            
            
            -Cash
                and cash equivalents at end of period
            $
            1,357,715
            
            $
            -
            
            $
            1,357,715




Supplemental
                Schedule of Non-Cash Investing and Financing Activities:Net
              liabilities assumed from reverse acquisition on March 20, 2006, net
              of
              cash of $2,261,462
            
            552,755
            
            
            -
            
            
            552,755Conversion
              of convertible debenture, assumed from reverse acquisition, to common
              stock
            
            120,000
            
            
            -
            
            
            120,000Conversion
              of convertible debenture, assumed from reverse acquisition, to warrant
              liability
            
            30,000
            
            
            -
            
            
            30,000


On
              May 18, 2004 the Company received Net Liabilities From a predecessor
              entity totaling
            
            -
            
            
            -
            
            
            32,312Transfer
              of deficit due to merger of Skin Shoes, LLC into Skin Shoes, Inc. on
              October 20, 2005
            
            -
            
            
            -
            
            
            375,568Issuance
              of Common Stock to Consultants on April 3, 2006 forServices
              to be provided for a two year term
            
            127,030
            
            
            -
            
            
            127,030








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





4




**Skins
      Inc. and Subsidiary**


**Notes
      to Financial Statements**





**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 may make the information and
      services of enterprises, telecommunications networks and the Internet accessible
      from telephone. Logicom’s chief software designer resigned 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 to the extent of additional paid in capital that
      existed 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.





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and pursuant to the rules and regulations
      of
      the Securities and Exchange Commission ("SEC"). Certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with accounting principles generally accepted in the United States of America
      have been omitted. In the opinion of management, all material adjustments,
      consisting of normal recurring adjustments, considered necessary for a fair
      presentation have been included in the accompanying unaudited condensed
      financial statements.





The
      results of operations for the interim periods are not necessarily indicative
      of
      the results that maybe expected for the full year ending December 31, 2006.





**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 June 30, 2006 will not agree to the total
      loss
      from May 18, 2004 (inception date) to June 30, 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.




5





**Skins
      Inc. and Subsidiary**


**Notes
      to Financial Statements**





**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 June 30, 2006, the Company has no
      established source of revenues and has accumulated losses of approximately
      $2,862,382 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.




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 strategic relationships, if necessary to raise
      additional funds, may require that the Company 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 intercompany
      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.




6





**Skins
      Inc. and Subsidiary**


**Notes
      to Financial Statements**





*Estimated
      Fair Value of Financial Instruments*





The Company’s financial instruments include cash, accounts payable and related
      party loans payable. Management believes the estimated fair value of cash and
      accounts payable at June 30, 2006 approximate their carrying value as reflected
      in the balance sheets due to the short-term nature of these instruments. Fair
      value of related party loans cannot be determined due to lack of similar
      instruments available to the Company.





*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 June 30, 2006, 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 has 515,725 of outstanding shares plus potential shares
      from the exercise of options that have vested granted. The 514,625 excess
      potential shares were attributed to the option grants that have 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 has with
      stockholders who also hold 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 is 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 was recorded in the Statement of
      Operations for the six months ended June 30, 2006. 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
      warrant 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 June 30, 2006 was recorded in the Statement of Operations
      for
      the six months ended June 30, 2006.





The
      Company calculated the fair value of the warrants using a Black-Scholes model
      and recorded a liability of $1,831,800 at June 30, 2006. The provision requires
      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)) to be effective by the middle of August 2006.
      If
      the Registration Statement is not declared effective before the effectiveness
      date, the Company will be 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.





7
 
  **Skins
          Inc. and Subsidiary**
 **Notes
          to Financial Statements**


The
      fair
      value of the derivative liability at June 30, 2006 was calculated using the
      Black-Scholes valuation model with the following assumptions:




****June
                30,****
              **2006**Expected
                volatility
            
            73.26%Expected
                dividends
            
            NoneExpected
                term (in years)
            
            2.7Risk-free
                interest rate
            
            5.21%





*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 the three-month periods
      ended June 30, 2006 and 2005, the Company had 1,404,000 and 1,304,416 common
      shares held in escrow, respectively. The escrow amounts for all periods prior
      the to 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 8).





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.
      Because the Company had a loss from operations for the three and six month
      periods ended June 30, 2006, respectively, inclusion of the Company’s 2,709,375
      outstanding options and 3,000,000 warrants at June 30, 2006 have an
      anti-dilutive effect on loss per share.





Three
                Months ended
            
            Six
                Months endedJune
                30,
            
            June
                30,2006
            
            2005
            
            2006
            
            2005(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
              (as
                restated)
              (See
                Note 10)
            
            (Unaudited)Numerator:Net
                loss - basic and diluted
            
            $
            (1,718,951
            )
            $
            (37,179
            )
            $
            (2,177,362
            )
            $
            (117,351
            )Denominator:Weighted
                average shares - basic
            
            
            33,119,294
            
            
            16,723,277
            
            
            26,559,648
            
            
            16,723,277Effect
                of dilutive stock options and warrants
            
            
            —
            
            
            —
            
            
            —
            
            
            —Denominator
                for diluted earnings per share
            
            
            33,119,294
            
            
            16,723,277
            
            
            26,559,648
            
            
            16,723,277Loss
                per shareBasic
            
            $
            (0.05
            )
            $
            (0.00
            )
            $
            (0.08
            )
            $
            (0.01
            )Diluted
            
            $
            (0.05
            )
            $
            (0.00
            )
            $
            (0.08
            )
            $
            (0.01
            )





**NOTE 3: PROPERTY
      AND EQUIPMENT**





Property and equipment consist of the following:





**June
                30,**
              **2006**(unaudited)Sewing
                equipment
            
            $
            1,882Office
                equipment
            
            
            1,183Computer
                equipment
            
            
            3,8386,903Less
                accumulated depreciation
            
            
            (2,784
            )$
            4,119





Depreciation
      expense related to property and equipment was $861and $742 for the six months
      ended June 30, 2006 and 2005, respectively.




8




**Skins
      Inc. and Subsidiary**


**Notes
      to Financial Statements**





**NOTE
      4: PATENT COSTS**





The
      Company has applied for several patents. The Company has not been granted any
      patents. 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.








**June
                30,**
              **2006**(unaudited)Patent
                costs
            
            $
            77,638Less
                accumulated amortization
            
            
            (5,199
            )$
            72,439





Amortization
      expense related to patents was $1,741 and $1,185 for the six months ended June
      30, 2006 and June 30, 2005, respectively. The estimated aggregate amortization
      expense for the next five years ending December 31 is estimated to be
      approximately $4,000 for each year.





**NOTE 5: RELATED
      PARTY PAYABLES**





As
      of
      June 30, 2006, there is a loan payable to a stockholder of the Company totaling
      $1,337 and accrued interest on this loan of $3,121. The proceeds from this
      loan
      was used to pay various operating expenses. Interest has been accrued at a
      rate
      of 5%. Interest expense for the six months ended June 30, 2006 on this loan
      was
      $147.





As
      of
      June 30, 2006 there are accrued expenses totaling $15,000 relating to consulting
      services provided by Mage, LLC, a stockholder in the Company. For the six months
      ended June 30, 2006 and 2005, consulting expenses incurred to Mage, LLC were
      $25,368 and $0, respectively. A director of the Company is a principal of Mage,
      LLC.





As
      of
      June 30, 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 187,500 options vested.




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 $127,030
      was recognized and presented as a prepaid asset at June 30, 2006.




**NOTE
      6: COMMITMENTS AND CONTINGENCIES**





The
      Company has entered into a buying agency and sourcing agreement dated December
      7, 2005 and amended February 27, 2006 with Atsco Footwear, LLC in which Atsco
      will be responsible for sourcing, commercialization, and line review. The term
      of the agreement is for one year, beginning March 1, 2006, with an option to
      extend the agreement for an additional year under the same terms and conditions.
      It is agreed the Company will pay Atsco an 8% commission fee on all merchandise
      shipped to the Company under any order placed for the Company by Atsco or
      subsequently placed directly with a factory as a reorder unless the agreement
      is
      terminated. According to the agreement, the Company, beginning March 1, 2006,
      started paying commissions of $6,000 per month, to be adjusted to actual at
      the
      end of the first year of business on March 1, 2007.





The
      Company also 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.




9




**Skins
      Inc. and Subsidiary**


**Notes
      to Financial Statements**





**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 June 30, 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
      June
      30, 2006 the Company had 34,526,006 outstanding shares of common stock, options to purchase 2,709,375 shares of
      common stock, and warrants to purchase 3,000,000 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:





·
            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 six months ended June 30, 2006, the Company recorded
      compensation expense related to these grants of $1,876.




10





**Skins
      Inc. and Subsidiary**


**Notes
      to Financial Statements**





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 his its stock and it was a development stage
      company. The Company chose the Dow Jones US Footwear Index because its
      represented the 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 June 30, 2006 was $172,167. For the six months
      ended June 30, 2006 the Company recorded compensation expense related the
      replacement option grants to the board members of $24,596.





·  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 sufficient number of authorized shares. The
      options became equity awards on the date they were cancelled and re-granted.
      For
      the six months ended June 30, 2006, the Company recorded compensation expense
      of
      $83,025.





·  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
            
            June
                30,
              2006Expected
                volatility
            
            
            17.30%
            
            73.26%Expected
                dividends
            
            
            None
            
            NoneExpected
                term (in years)
            
            
            4.6
            
            4.7Risk-free
                interest rate
            
            
            4.70%
            
            5.21%





Quarter
      Ended June 30, 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
            
            June
                19, 2006Grant
            
            GrantExpected
                Volatility
            
            
            59.07
            %
            
            68.80
            %Expected
                dividends
            
            
            0
            
            
            0Expected
                Term (Years)
            
            
            3
            
            
            3Risk
                Free Interest Rate
            
            
            5.00
            %
            
            5.11
            %




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 June 30, 2006 is $191,706. For the
      six
      months ended June 30, 2006, the Company recorded compensation expense
      related to the May 15, 2006 and June 19, 2006 option grants of
      $5,529.





In
      addition on May 9, 2006 the Company granted 300,000 options to a consultant
      at
      an exercise price of $1.06. The options vest quarterly quarterly beginning
      six
      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 use the fair value on the reporting date.
      Fair value will be calculated using a Black-Scholes model. There was not
      compensation expense booked on this grant for the three and six-month period
      ended June 30, 2006 because no options had vested.





A
      summary
      of option activity under the Plan as of June 30, 2006, and changes during the
      six months ended is presented below:





**Options**
            
            **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted
                -**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
            
            **Aggregate**
              **Intrinsic**
              **Value**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
            
            
            1.19Outstanding,
                June 30, 2006
            
            
            2,709,375
            
            $
            0.87
            
            
            4.13
            
            $
            —Exercisable,
                June 30, 2006
            
            
            796,875
            
            $
            0.80
            
            
            4.13
            
            $
            —





A
      summary
      of the status of the Company’s non-vested shares as of June 30, 2006, and
      changes during the six months ended June 30, 2006, is presented
      below:





**Non-vested
                Shares**
            
            **Shares**
            
            **Weighted-**
              **Average**
              **Grant-Date**
              **Fair
                Value**Non-vested,
                January 1, 2006
            
            
            1,593,750
            
            $
            0.23Granted
            
            
            600,000
            
            $
            0.65Vested
            
            
            (281,250
            )
            $
            0.23Non-vested,
                June 30, 2006
            
            
            1,912,500
            
            $
            0.36





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.





12


**NOTE
      9: SUBSEQUENT EVENTS**





On
      August
      11, 2006, the Company determined that it misapplied accounting principles
      generally accepted in the United States of America in relation to options
      granted on October 24, 2005 that were canceled and replaced on March 26, 2006
      and that it misapplied accounting principles generally accepted in the United
      Sates of America in relation to derivative instruments that existed at December
      31, 2005 and March 31, 2006. The Company restated its December 31, 2005 and
      March 31, 2006 financial statement as a result of these
      misapplications.





The
      Company has restated its financial statements for the six months ended June
      30,
      2006.




NOTE
        10: RESTATEMENT




On
      September 27, 2006, the Company determined it misapplied accounting principles
      generally accepted in the United States of America in relation to common stock
      purchased and retired and warrants granted in conjunction with the close of
      two
      private placements outlined in the share exchange agreement (Note 7). The
      following outlines the changes relative to this misapplication:





1.
            The
                repurchase and retirement of 7,418,182 shares of the Company’s common
                stock for $100,000 was included in the net assets assumed from Skins
                Inc.
                on March 20, 2006 on its Statement of Stockholders’ Equity (Deficiency)
                for the six months ended June 30, 2006 since the transaction occurred
                prior to the close of the Share Exchange Agreement. The Company originally
                presented this transaction as a post share exchange agreement transaction
                on its Statement of Stockholders’ Equity
                (Deficiency).





2.
            Upon
                conversion of the $150,000 convertible debt on March 20, 2006 the
                Company
                allocated the proceeds to the common stock and warrants granted based
                on
                the ratio of the fair value of each equity instrument on the commitment
                date divided by the total fair value of all equity instruments on
                the
                commitment date in accordance with EITF 00-27, Issue 15. Based on
                this
                calculation the Company allocated $120,000 and $30,000 of the proceeds
                to
                common stock and warrants. The $120,000 allocated to the common stock
                was
                shown on the Company’s Statement of Stockholders’ Equity (Deficiency) for
                the six months ended June 30, 2006. The $30,000 allocated to the
                warrants
                was initially classified as a liability in accordance with EITF 00-19
                due
                to liquidating damages provision associated with such warrants as
                outlined
                in Note 2, Summary of Significant Accounting Policies, Derivative
                Instruments. The Company originally allocated the total proceeds
                to the
                common stock and presented the $150,000 in the Company’s Statement of
                Stockholders’ Equity (Deficiency).





3.
            2,821,428
                warrants were granted on the private placement, which occurred immediately
                prior to the close of the share exchange agreement (Note 8). The
                Company
                has a liquidated damages provision with its stockholders who hold
                these
                warrants that creates a derivative liability in accordance with EITF
                00-19. Therefore, the Company assumed a derivative liability of $553,846
                upon the completion of the share exchange agreement based on the
                2,821,428
                warrants granted in conjunction with the private placement that occurred
                immediately prior to the close of the share exchange agreement. The
                Company originally showed that it incurred the derivative liability
                post
                the share exchange agreement with the offset of the liability shown
                on its
                Statement of Operations for the six months ended June 30,
                2006.





4.
            The
                178,572 warrants that were granted in conjunction with the conversion
                of
                the convertible debenture were originally valued at $30,000 on the
                conversion date and treated as a liability in accordance with EITF
                00-19.
                The change in fair value of the derivative liability for these warrants
                was shown as the difference in the fair value at June 30, 2006 and
                the
                original $30,000 value. The Company originally recorded the total
                offset
                of the liability in its Statement of Operations for the six months
                ended
                June 30, 2006.





On
      September 27, 2006, the Company determined it misapplied accounting principles
      generally accepted in the United States of America in relation to the 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 (Note
      5). The following outlines the changes relative to this
      misapplication:





1.
            The
                Company valued the transaction based on the fair value of its common
                stock
                on the date of the grant and will amortize the expense ratably over
                the
                two year term in accordance with FAS 123(R). The unamortized portion
                was
                treated as a prepaid asset at June 30, 2006 in accordance with EITF
                00-18.
                The Company originally recorded the unamortized portion of the expense
                as
                a contra-equity account in its Statement of Stockholders’ Equity
                (Deficiency).





The
      impact of these adjustments of the Company financial results as originally
      reported is summarized below:





**Six-Months
      Ended June 30, 2006**




**As
                Reported**
            
            **As
                Restated**Total
                current assets
            
            $
            1,423,731
            
            $
            1,550,761Total
                assets
            
            $
            1,500,289
            
            $
            1,627,319Total
                stockholders’ deficiency
            
            $
            (531,519
            )
            $
            (404,488
            )Net
                loss
            
            $
            (2,761,208
            )
            $
            (2,177,362
            )Net
                loss per common share
            
            $
            (0.10
            )
            $
            (0.08
            )







13




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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 Skins
      considers to be important to understanding Skins’ 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.*





**HISTORY
      AND OVERVIEW**





Skins
      Inc., the registrant, was 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 to the extent of additional paid
      in
      capital at October 20, 2005 in the consolidated statements of stockholders’
equity.





**PRINCIPAL
      TERMS OF THE SHARE EXCHANGE**





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





·
            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;




·
            repurchased
                and canceled 7,418,182 shares of common stock of Skins 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
                the shareholders of Skins, 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 Skins 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
                Skins and
                are subject to partial and full return to Skins contingent upon the
                number
                of share purchase warrants exercised by investors in Skins within
                a period
                of 30 months following the closing of private placements and the
                Share
                Exchange Transaction on March 20,
                2006);




14




·
            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 Skins and accepted the resignation
                of Gary
                Musil, Skins’ former President, from that office, effective at the closing
                of the Share Exchange Transaction;
                and




·
            increased
                the number of directors of Skins to five and elected as directors
                of Skins
                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), Skins 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 Skins, the previous
      shareholders of Skins 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
      PRIVATE PLACEMENTS**





Skins,
      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, Skins 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.
      Skins 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, Skins 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 Skins 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 all of the
      securities issued pursuant to the first and second private
      placements.





**DESCRIPTION
      OF THE COMPANY POST SHARE EXCHANGE**





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.




15




As
      of
      June 30, 2006, we had no established source of revenues and had accumulated
      losses of $3,573,258 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 prospectus 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 both in the form of equity financing from the sale
      of
      common shares and 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, 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 from
      the
      inside 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 and a single Bone may be less difficult 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.





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:





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




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




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




**Patent
      Applications**




We
      do not
      currently hold any patents. We have applied for a U.S. patent relating to its
      Modular Shoe System. We also filed international (PCT) Patent App. No.
      PCT/US04/33446 for its 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.





**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 the Atsco Footwear, LLC, our
      exclusive sourcing agent.





A
      fully
      developed men’s and women’s production Bone and Skins is estimated to be
      completed by August 2006. The focus is on creating a high-end line of Skins
      priced at a manufacturer's suggested retail price of approximately $150. This
      first collection will have approximately eight Skins patterns per gender, with
      an average of four to five color and material selections per pattern for a
      total
      amount of 64 to 70 stock keeping units, and will be designed for the Fall/Winter
      season.





Our
      Skins
      are being designed by outsourced design firms we work with. 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. Our
      products will then be sourced and commercialized by Atsco on our behalf, such
      as
      the design and material implementation and development for the Skins, Bones,
      packaging, and displays.




16




**Sourcing**





We
      have
      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. Our agreement
      with Atsco Footwear has a term of one year through February 2007 and may be
      extended at the option of either party for an additional year.





**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 conduct a test distribution by mid-September in approximately
      ten nationwide retail stores. The test distribution will coincide with our
      commercial brand launch that will consist of marketing and promotional
      activities. This is to be followed by a modest rollout into a total of 40 retail
      stores by November for the 2006 holiday season and then 80 retail stores by
      March 2007 for the Spring/Summer 2007 collection. Our long-term anticipation
      is
      to be in approximately 270 stores by August 2007.





We
      believe that the initial purchase order amount we can expect per retailer will
      be 96 pairs per gender at an average wholesale amount of $60 to $65 per pair
      of
      Skins.





**Additional
      Projects**





We
      recently hired Dennis Walker as our Vice President of Sales and Jake Kamuonka
      as
      Vice President of Finance. These individuals will assist in executing our
      product launches.





Product
      distribution, fulfillment and warehousing will be outsourced initially in an
      effort to keep our fixed overhead down.





We
      plan
      to launch a commercial website by the middle of September 2006 and have set
      up a
      temporary web site featuring corporate information.





**Results
      of Operations**




**Three
      Months Ended June 30, 2006 Compared with Three Months Ended June 30,
      2005**





Net
      revenues during the quarters ended June 30, 2006 and 2005 were nil.





Our
      design and development expenses increased to $35,293 for the three months ended
      June 30, 2006. The primary reason for the increase was the increase in
      compensation for our in-house designer.





Our
      selling, general and administrative expenses increased $414,503 to $451,015
      for
      the three months ended June 30, 2006, as compared to $36,512 for the same period
      in 2005. The increase was primarily due to the legal, accounting 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, and opening a new office location in Manhattan and compensation
      related to our stock option grants.





The
      unrealized loss on derivative instruments of $1,245,000 for the three months
      ended June 30, 2006 represents the fair value charge in our derivative liability
      from March 31, 2006. The derivative liability resulted from the liquidated
      damages provision we have with in 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 during the quarter ended June 30, 2006 were $1,718,951, or $0.05 per
      share, as compared to a net loss of $37,179, or $0.00 per share, during the
      quarter ended June 30, 2005. The increase in net loss is attributable primarily
      to the increase in our selling, general and administration.




17




**Six
      Months Ended June 30, 2006 Compared with Six Months Ended June 30,
      2005**





Net
      revenues during the six months ended June 30, 2006 and 2005 were
      nil.





Our
      design and development expenses increased $29,410 to $69,582 for the six months
      ended June 30, 2006, as compared to $40,172 for the same period in 2005. The
      primary reason for the increase was the increase in compensation for our
      in-house designer.





Our
      selling, general and administrative expenses increased $818,866 to $894,711
      for
      the six months ended June 30, 2006, as compared to $75,845 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, opening a new office location in Manhattan
      and compensation expense related to our stock option grants.





The
      unrealized loss on derivative instruments of $1,225,763 for the six months
      ended
      June 30, 2006 represents mainly the fair value charge in our derivative
      liability that resulted from the liquidated damages provision we have with
      in 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 six months ended June 30, 2006 were $2,177,362, or $0.08 per
      share, as compared to a net loss of $117,351, or $0.01 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.





**Liquidity
      and Capital Resources**





At
      June
      30, 2006, we had $1,357,715 in cash and cash equivalents. Generally, we have
      primarily financed operations to date through the proceeds of the private
      placement of equity securities. We received net proceeds of $2,261,243 from
      the
      private placements that were conducted in connection with the share exchange
      transaction during the fiscal quarter ended March 31, 2006.





Net
      cash
      used in operating activities for the six months ended June 30, 2006 was
      $846,883. We have had no revenues since our inception in May 2004. Operating
      expenditures in the current quarter primarily consisted of design and
      development, legal and accounting fees and salaries.





At
      June
      30, 2006, we had 2,709,375 stock options and 3,000,000 share purchase warrants
      outstanding. The outstanding stock options have a weighted average exercise
      price of $0.87 per share. The outstanding warrants have a weighted average
      exercise price of $1.00 per share. Accordingly, as at June 30, 2006, the
      outstanding options and warrants represented a total of 5,709,375 shares
      issuable for a maximum of $5,349,000 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 warrants will be exercised.





As
      of
      June 30, 2006, we anticipate that we will need financing to enable us to meet
      our anticipated expenditures for the next eight months.





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
      and
      expand our business. 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 2006 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.





**Off
      Balance Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements.





**RISK
      FACTORS**





Other
      than as stated below, there have been no material changes from the risk factors
      disclosed in the “Risk Factors” section of our registration statement on Form
      SB-2 as filed with the Securities and Exchange Commission.




18




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





In
      August
      and September 2006, we determined that we had discovered accounting inaccuracies
      in previously reported financial statements and, following consultation with
      our
      auditors, we 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. This conclusion was based upon conversations between us, our
      independent auditors and comments received from the Securities and Exchange
      Commission in connection with the filing and review of a registration statement
      on Form SB-2.





The
      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.





**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 and the three and six months
      ended March 31, 2006 and June 30, 2006, respectively, 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.





**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”. These statements include certain projections and
      business trends that are “forward-looking.” 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;




19




·
            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” and “Management’s Discussion
                and Analysis or Plan of Operation.”




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.






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**PART
      II-OTHER INFORMATION**





**ITEM
      6.**  **EXHIBITS**





(a)
      Exhibits




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.




21





**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)October
                3, 2006
            By:
            /s/ Mark
                KleinMark
                KleinChief
                Executive Officer, President and Director
              (Principal
                Executive Officer and Principal Financial and Accounting
                Officer)






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