**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-QSB**

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

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the quarterly period ended September 30, 2007**

**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.**

| **Nevada**(State                or other jurisdiction ofincorporation                or organization)                                     |   | **20-4711789** (I.R.S.                EmployerIdentification                No.) |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|
|                                                                                                                                      |   |                                                                                  |
| **1115                Broadway, 12****th****Floor****New                York, NY**(Address                of principal executive offices) |   |  **10010** (Zip                Code)                                        |

**(212)      710-2712**

----

**SKINS      INC.**

**(A      DEVELOPMENT STAGE COMPANY)**

**FORM      10-QSB QUARTERLY REPORT**

**TABLE      OF CONTENTS**

|                                     |   |                                                                                                                                                                                                                                                   |   | **Page** |
|-----------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| PART                I - FINANCIAL INFORMATION |   |                                                                                                                                                                                                                                                   |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                1.                        |   | FINANCIAL                STATEMENTS                                                                                                                                                                                                                    |   | 1        |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
|                                          |   | Consolidated                Balance Sheet as of September 30, 2007 (unaudited)                                                                                                                                                                         |   | 2        |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
|                                          |   | Consolidated                Statements of Operations for the Three and Nine Months ended September                30,                2007 and 2006 and the period from Inception (May 18, 2004) to September                30, 2007 (unaudited)       |   | 3        |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
|                                          |   | Consolidated                Statements of Stockholders' Equity the period from Inception (May                18,                2004) to September 30, 2007 (unaudited)                                                                                |   | 4        |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
|                                          |   | Consolidated                Statements of Cash Flows for the Nine Months ended September 30,                2007 and                2006, and the period from Inception (May 18, 2004) to September 30,                2007                (unaudited) |   | 5        |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
|                                          |   | Notes                to Consolidated Financial Statements                                                                                                                                                                                              |   | 6        |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                2.                        |   | MANAGEMENT'S                DISCUSSION AND ANALYSIS OF PLAN OF OPERATION                                                                                                                                                                               |   | 19       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                3.                        |   | CONTROLS                AND PROCEDURES                                                                                                                                                                                                                 |   | 24       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| PART                II - OTHER INFORMATION    |   | 25                                                                                                                                                                                                                                                     |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                1.                        |   | LEGAL                PROCEEDINGS                                                                                                                                                                                                                       |   | 25       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                2.                        |   | UNREGISTERED                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                                                                                                                                             |   | 25       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                3.                        |   | DEFAULTS                UPON SENIOR SECURITIES                                                                                                                                                                                                         |   | 25       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                4.                        |   | SUBMISSION                OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                                                                                                                     |   | 25       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                5.                        |   | OTHER                INFORMATION                                                                                                                                                                                                                       |   | 25       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| ITEM                6.                        |   | EXHIBITS                                                                                                                                                                                                                                               |   | 26       |
|                                          |   |                                                                                                                                                                                                                                                   |   |     |
| SIGNATURES                                    |   | 27                                                                                                                                                                                                                                                     |

----

**PART      I - FINANCIAL INFORMATION**

**ITEM      1. FINANCIAL STATEMENTS**

----

**SKINS      INC. AND SUBSIDIARY**

**(A      Development Stage Company)**

**CONSOLIDATED      BALANCE SHEET**

**(Unaudited)**

|                                                                                                                                                                           |   | **September                  30,****2007** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|
| **ASSETS**                                                                                                                                                                     |   |                                       |       |
| **Current                  assets:**                                                                                                                                           |   |                                       |       |
| Cash                  and cash equivalents                                                                                                                                     |   | $                                          | 925,450    |   |
| Inventory                  (Note 4)                                                                                                                                            |   |                                       | 91,728     |   |
| Prepaid                  expenses                                                                                                                                              |   |                                       | 108,538    |   |
| Total                  current assets                                                                                                                                          |   |                                       | 1,125,716  |   |
|                                                                                                                                                                           |   |                                       |       |   |
| Property                  and equipment, net (Note 5)                                                                                                                          |   |                                       | 40,600     |   |
| Software                  costs, net (Note 6)                                                                                                                                  |   |                                       | 19,833     |   |
| Patent                  costs (Note 8)                                                                                                                                         |   |                                       | 133,234    |   |
| **Total                  assets**                                                                                                                                              |   | $                                          | 1,319,383  |   |
|                                                                                                                                                                           |   |                                       |       |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                      |   |                                       |       |   |
| **Current                  liabilities:**                                                                                                                                      |   |                                       |       |   |
| Accounts                  payable and accrued liabilities (Note 9)                                                                                                             |   | $                                          | 537,890    |   |
| Liquidated                  damages                                                                                                                                            |   |                                       | 27,278     |   |
| Total                  current liabilities                                                                                                                                     |   |                                       | 565,168    |   |
|                                                                                                                                                                           |   |                                       |       |   |
| **Commitment                  and contingencies (Note 10)**                                                                                                                    |   |                                       |       |   |
|                                                                                                                                                                           |   |                                       |       |   |
| **Stockholders'                  equity (Note 12):**                                                                                                                           |   |                                       |       |   |
| Common                  Stock, $.001 par value; 436,363,650 shares authorized;                  40,961,292shares                  issued and outstanding at September 30, 2007 |   |                                       | 40,961     |   |
| Additional                  paid in capital                                                                                                                                    |   |                                       | 10,349,873 |   |
| Deficit                  accumulated in the development stage                                                                                                                  |   |                                       | (9,636,619 | ) |
| Total                  stockholders' equity                                                                                                                                    |   |                                       | 754,215    |   |
| Total                  liabilities and stockholders' equity                                                                                                                    |   | $                                          | 1,319,383  |   |

----

**SKINS      INC. AND SUBSIDIARY**

**(A      Development Stage Company)**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**(Unaudited)**

|                                                                                                          |   | **Three                  Months Ended****September                  30,** |       | **Nine                  Months Ended****September                  30,** |   | **Period                  from Inception (May 18, 2004) to****September                  30,** |   |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|
|                                                                                                          |   | **2007**                                                                  |       | **2006**                                                                 |   | **2007**                                                                                       |   | **2006** |   | **2007** |   |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |
| **Operating                  expenses:**                                                            |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |
|                                                                                                          |   |                                                                 |       |                                                                |   |                                                                                      |   |    |   |    |   |
| Design                  and development                                                                       |   | $                                                                         | 965,878    |                                                                     | $      | 94,457                                                                                         |   | $ | 1,851,009 |   | $ | 164,038 |   | $ | 2,326,615 |   |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative                                                          |   |                                                                      | 1,285,600  |                                                                     |   | 531,551                                                                                        |   |   | 3,421,787 |   |   | 1,426,263 |   |   | 6,420,051 |   |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Total                  operating expenses                                                                     |   |                                                                      | 2,251,478  |                                                                     |   | 626,008                                                                                        |   |   | 5,272,796 |   |   | 1,590,301 |   |   | 8,746,666 |   |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Operating                  loss                                                                               |   |                                                                      | (2,251,478 | )                                                                        |   | (626,008                                                                                       | )      |   | (5,272,796 | ) |   | (1,590,301 | ) |   | (8,746,666 | ) |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Unrealized                  (loss) on derivative instruments                                                  |   |                                                                      | -          |                                                                     |   | (58,800                                                                                        | )      |   | - |   |   | (1,284,563 | ) |   | (1,306,754 | ) |
| Liquidated                  damages                                                                           |   |                                                                      | -          |                                                                     |   | -                                                                                              |   |   | - |   |   | - |   |   | (27,278 | ) |
| Interest                  income                                                                              |   |                                                                      | 15,814     |                                                                     |   | 7,709                                                                                          |   |   | 45,617 |   |   | 21,334 |   |   | 73,487 |   |
| Interest                  expense                                                                             |   |                                                                      | -          |                                                                     |   | -                                                                                              |   |   | - |   |   | (931 | ) |   | (5,266 | ) |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Net                  loss**                                                                                 |   | $                                                                         | (2,235,664 | )                                                                        | $      | (677,099                                                                                       | )      | $ | (5,227,179 | ) | $ | (2,854,461 | ) | $ | (10,012,477 | ) |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Basic                  and diluted loss per share**                                                         |   | $                                                                         | (0.06      | )                                                                        | $      | (0.02                                                                                          | )      | $ | (0.14 | ) | $ | (0.10 | ) |   |   |   |
|                                                                                                          |   |                                                                      |       |                                                                     |   |                                                                                                |   |   |  |   |   |  |   |   |   |   |
| **Weighted                  average number of common shares outstanding, basic and                  diluted** |   |                                                                      | 39,500,824 |                                                                     |   | 33,122,006                                                                                     |   |   | 37,324,237 |   |   | 28,779,270 |   |   |  |   |

----

**SKINS      INC. AND SUBSIDIARY**

**(A      Development Stage Company)**

**CONSOLIDATED      STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)**

|                                                                                                                                                                                         |   | **Common                  Stock ** |                     | **Additional****Paid-in****(deficit                  in)** |   | **Deficit                  Accumulated Total Development** |   | **Total                  Stockholders' Equity/** |               |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------------------------|------------------------------------------------------------|--------|------------------------------------------------------------|--------|--------------------------------------------------|--------------------|
|                                                                                                                                                                                         |   | **Shares **                        |                     | **Amounts**                                                |   | **Capital**                                                |   | **Stage**                                        |               | **(Deficiency)** |   |
| Transfer                  of net liabilities from a predecessor entity - May 18,                  2004                                                                                       |   |                                    |                          |                                                       | $      | -                                                          |   | $                                                | (32,312            | ) | $ | - |   | $ | (32,312 | ) |
| Shares                  issued on June 1, 2004                                                                                                                                               |   |                                    | 954,513                  |                                                       |   | 955                                                        |   |                                             | 9,045              |   |   |  |   |   | 10,000 |   |
| Shares                  issued on July 2, 2004                                                                                                                                               |   |                                    | 954,513                  |                                                       |   | 955                                                        |   |                                             | 9,045              |   |   |  |   |   | 10,000 |   |
| Shares                  issued on August 4, 2004                                                                                                                                             |   |                                    | 1,909,026                |                                                       |   | 1,909                                                      |   |                                             | 18,091             |   |   |  |   |   | 20,000 |   |
| Shares                  issued on August 10, 2004                                                                                                                                            |   |                                    | 1,909,026                |                                                       |   | 1,909                                                      |   |                                             | 18,091             |   |   |  |   |   | 20,000 |   |
| Shares                  issued on December 1, 2004                                                                                                                                           |   |                                    | 8,338,484                |                                                       |   | 8,338                                                      |   |                                             | 79,162             |   |   |  |   |   | 87,500 |   |
| Shares                  issued on December 30, 2004                                                                                                                                          |   |                                    | 144,077                  |                                                       |   | 144                                                        |   |                                             | 1,356              |   |   |  |   |   | 1,500 |   |
| Shares                  issued on December 31, 2004                                                                                                                                          |   |                                    | 3,818,053                |                                                       |   | 3,818                                                      |   |                                             | 36,182             |   |   |  |   |   | 40,000 |   |
| Net                  loss                                                                                                                                                                    |   |                                    | -                        |                                                       |   | -                                                          |   |                                             | -                  |   |   | (152,706 | ) |   | (152,706 | ) |
| Balances                  at December 31, 2004                                                                                                                                               |   |                                    | 18,027,692               |                                                       |   | 18,028                                                     |   |                                             | 138,660            |   |   | (152,706 | ) |   | 3,982 |   |
|                                                                                                                                                                                         |   |                                    |                          |                                                       |   |                                                            |   |                                             |                    |   |   |  |   |   |   |   |
| Shares                  issued for services on October 20, 2005                                                                                                                              |   |                                    | 1,376,308                |                                                       |   | 1,376                                                      |   |                                             | (1,370             | ) |   | - |   |   | 6 |   |
| Net                  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                                                                                                                                               |   |                                    | 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            |   |   | - |   |   | 241,157 |   |
| Skins                  Inc. net assets assumed - March 20, 2006                                                                                                                              |   |                                    | 14,821,434               |                                                       |   | 14,821                                                     |   |                                             | 1,693,886          |   |   |  |   |   | 1,708,707 |   |
| Conversion                  of convertible debenture - Common Stock - March 20, 2006                                                                                                         |   |                                    | 178,572                  |                                                       |   | 179                                                        |   |                                             | 119,821            |   |   |  |   |   | 120,000 |   |
| Shares                  issued for consulting services on April 3, 2006 (Note 5)                                                                                                             |   |                                    | 122,000                  |                                                       |   | 122                                                        |   |                                             | 145,058            |   |   |  |   |   | 145,180 |   |
| Share                  based Compensation, June 30, 2006                                                                                                                                     |   |                                    |                          |                                                       |   |                                                            |   |                                             | 86,156             |   |   |  |   |   | 86,156 |   |
| Share                  based Compensation, September 30, 2006                                                                                                                                |   |                                    |                          |                                                       |   |                                                            |   |                                             | 130,218            |   |   |  |   |   | 130,218 |   |
| Reclassification                  of Derivative Liability as Form SB-2                  became effective on October 10, 2006                                                                 |   |                                    |                          |                                                       |   |                                                            |   |                                             | 1,890,600          |   |   |  |   |   | 1,890,600 |   |
| Warrants                  exercised December 5, 2006                                                                                                                                         |   |                                    | 30,000                   |                                                       |   | 30                                                         |   |                                             | 29,970             |   |   |  |   |   | 30,000 |   |
| Warrants                  exercised December 8, 2006                                                                                                                                         |   |                                    | 120,000                  |                                                       |   | 120                                                        |   |                                             | 119,880            |   |   |  |   |   | 120,000 |   |
| Warrants                  exercised December 11, 2006                                                                                                                                        |   |                                    | 320,000                  |                                                       |   | 320                                                        |   |                                             | 319,680            |   |   |  |   |   | 320,000 |   |
| Warrants                  exercised December 12, 2006                                                                                                                                        |   |                                    | 115,715                  |                                                       |   | 116                                                        |   |                                             | 115,599            |   |   |  |   |   | 115,715 |   |
| Warrants                  exercised December 14, 2006                                                                                                                                        |   |                                    | 119,000                  |                                                       |   | 119                                                        |   |                                             | 118,881            |   |   |  |   |   | 119,000 |   |
| Warrants                  exercised December 15, 2006                                                                                                                                        |   |                                    | 274,000                  |                                                       |   | 274                                                        |   |                                             | 273,726            |   |   |  |   |   | 274,000 |   |
| Warrants                  exercised December 19, 2006                                                                                                                                        |   |                                    | 363,476                  |                                                       |   | 363                                                        |   |                                             | 363,113            |   |   |  |   |   | 363,476 |   |
| Warrants                  exercised December 21, 2006                                                                                                                                        |   |                                    | 238,572                  |                                                       |   | 238                                                        |   |                                             | 238,334            |   |   |  |   |   | 238,572 |   |
| Warrants                  exercised December 22, 2006                                                                                                                                        |   |                                    | 100,000                  |                                                       |   | 100                                                        |   |                                             | 99,900             |   |   |  |   |   | 100,000 |   |
| Share                  based Compensation, December 31, 2006                                                                                                                                 |   |                                    |                          |                                                       |   |                                                            |   |                                             | 356,240            |   |   |  |   |   | 356,240 |   |
| Net                  loss                                                                                                                                                                    |   |                                    |           |                                                       |   |                                             |   |                                             |     |   |   | (4,100,278 | ) |   | (4,100,278 | ) |
| Balances                  at December 31, 2006                                                                                                                                               |   |                                    | 36,206,769               |                                                       |   | 36,206                                                     |   |                                             | 6,103,651          |   |   | (4,409,440 | ) |   | 1,730,417 |   |
|                                                                                                                                                                                         |   |                                    |                          |                                                       |   |                                                            |   |                                             |                    |   |   |  |   |   |  |   |
| Warrants                  exercised January 5, 2007                                                                                                                                          |   |                                    | 100,000                  |                                                       |   | 100                                                        |   |                                             | 99,900             |   |   |  |   |   | 100,000 |   |
| Warrants                  exercised January 6, 2007                                                                                                                                          |   |                                    | 11,904                   |                                                       |   | 12                                                         |   |                                             | 11,882             |   |   |  |   |   | 11,894 |   |
| Warrants                  exercised January 10, 2007                                                                                                                                         |   |                                    | 100,000                  |                                                       |   | 100                                                        |   |                                             | 99,900             |   |   |  |   |   | 100,000 |   |
| Warrants                  exercised January 25, 2007                                                                                                                                         |   |                                    | 200,000                  |                                                       |   | 200                                                        |   |                                             | 199,800            |   |   |  |   |   | 200,000 |   |
| Warrants                  exercised February 7, 2007                                                                                                                                         |   |                                    | 59,524                   |                                                       |   | 60                                                         |   |                                             | 59,464             |   |   |  |   |   | 59,524 |   |
|                                                                                                                                                                                         |   |                                    |                          |                                                       |   |                                                            |   |                                             |                    |   |   |  |   |   |  |   |
| Warrants                  exercised February 26, 2007                                                                                                                                        |   |                                    | 138,095                  |                                                       |   | 138                                                        |   |                                             | 137,906            |   |   | - |   |   | 138,044 |   |
| Repurchase                  of options (Note 11)                                                                                                                                             |   |                                    | -                        |                                                       |   | -                                                          |   |                                             | (30,445            | ) |   | - |   |   | (30,445 | ) |
| Share                  based Compensation for the three months ended March 31,                  2007                                                                                    |   |                                    |                          |                                                       |   |                                                            |   |                                             | 195,381            |   |   |  |   |   | 195,381 |   |
| Shares                  issued on May 21, 2007 (net of issuance costs of $37,987)                                                                                                            |   |                                    | 4,000,000                |                                                       |   | 4,000                                                      |   |                                             | 2,958,013          |   |   |  |   |   | 2,962,013 |   |
| Share                  based Compensation for the three months ended June 30,                  2007                                                                                     |   |                                    |                          |                                                       |   |                                                            |   |                                             | 156,138            |   |   |  |   |   | 156,138 |   |
| Warrants                  exercised July 24, 2007                                                                                                                                            |   |                                    | 60,000                   |                                                       |   | 60                                                         |   |                                             | 59,865             |   |   |  |   |   | 59,925 |   |
| Warrants                  exercised August 7, 2007                                                                                                                                           |   |                                    | 10,000                   |                                                       |   | 10                                                         |   |                                             | 9,965              |   |   |  |   |   | 9,975 |   |
| Warrants                  exercised August 14 2007                                                                                                                                           |   |                                    | 75,000                   |                                                       |   | 75                                                         |   |                                             | 75,000             |   |   |  |   |   | 75,075 |   |
| Share                  based compensation for the three months ended September 30,                  2007                                                                                |   |                                    |                          |                                                       |   |                                                            |   |                                             | 213,453            |   |   |  |   |   | 213,453 |   |
| Net                  loss                                                                                                                                                                    |   |                                    |           |                                                       |   |                                             |   |                                             |     |   |   | (5,227,179 | ) |   | (5,227,179 | ) |
| Balances                  at September 30, 2007 (unaudited)                                                                                                                                  |   |                                    | 40,961,292               |                                                       | $      | 40,961                                                     |   | $                                                | 10,349,873         |   | $ | (9,636,619 | ) | $ | 754,215 |   |

----

**SKINS      INC. AND SUBSIDIARY**

**(A      Development Stage Company)**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                                                                                                     |   | **Nine                      Months Ended September 30,** |       | **Period                      from Inception (May 18, 2004) to****September                      30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                     |   |                        **2007**                     |       | **2006**                                                                                               |   | **2007** |   |
| Cash                      flows used in operating activities:                                                                                                                                            |   |                                           |       |                                                                                              |   |                          |   |
| Net                      loss from operations                                                                                                                                                            |   | $                                                        | (5,227,179 | )                                                                                                      | $      | (2,854,461 | ) | $ | (10,012,477 | ) |
| Adjustments                      to reconcile net loss from operations to net cash used in operating                      activities:                                                                    |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Depreciation                                                                                                                                                                                             |   |                                                     | 5,979      |                                                                                                   |   | 1,624 |   |   | 10,325 |   |
| Amortization                                                                                                                                                                                             |   |                                                     | 14,541     |                                                                                                   |   | 2,846 |   |   | 22,204 |   |
| Issuance                      of common stock for services                                                                                                                                               |   |                                                     | 55,340     |                                                                                                   |   | 36,300 |   |   | 109,796 |   |
| Share                      based Compensation Expense                                                                                                                                                    |   |                                                     | 564,972    |                                                                                                   |   | 343,625 |   |   | 1,378,743 |   |
| Unrealized                      loss on derivative instruments                                                                                                                                           |   |                                                     | -          |                                                                                                   |   | 1,284,563 |   |   | 1,306,754 |   |
| Loss                      on write down of molds (Note 7)                                                                                                                                                |   |                                                     | 114,376    |                                                                                                   |   | - |   |   | 114,376 |   |
| Changes                      in operating assets and liabilities:                                                                                                                                        |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Prepaid                      expenses                                                                                                                                                                    |   |                                                     | 1,380      |                                                                                                   |   | (105,506 | ) |   | (72,057 | ) |
| Inventory                                                                                                                                                                                                |   |                                                     | (91,728    | )                                                                                                      |   | - |   |   | (91,728 | ) |
| Accounts                      payable and accrued expenses                                                                                                                                               |   |                                                     | 260,295    |                                                                                                   |   | (177,682 | ) |   | 522,073 |   |
| Liquidated                      damages                                                                                                                                                                  |   |                                                     | -          |                                                                                                   |   | - |   |   | 27,278 |   |
| Net                      cash used in operating activities                                                                                                                                               |   |                                                     | (4,302,024 | )                                                                                                      |   | (1,468,691 | ) |   | (6,684,713 | ) |
|                                                                                                                                                                                                     |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Cash                      flows used in investing activities:                                                                                                                                            |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Purchases                      of property and equipment                                                                                                                                                 |   |                                                     | (40,324    | )                                                                                                      |   | (5,124 | ) |   | (48,947 | ) |
| Software                      Costs                                                                                                                                                                      |   |                                                     | (29,600    | )                                                                                                      |   | - |   |   | (29,600 | ) |
| Purchase                      of Molds                                                                                                                                                                   |   |                                                     | (114,376   | )                                                                                                      |   | - |   |   | (114,376 | ) |
| Patent                      Costs                                                                                                                                                                        |   |                                                     | (29,157    | )                                                                                                      |   | (45,317 | ) |   | (137,220 | ) |
| Net                      cash used in investing activities                                                                                                                                               |   |                                                     | (213,457   | )                                                                                                      |   | (50,441 | ) |   | (330,143 | ) |
|                                                                                                                                                                                                     |   |                                                     |            |                                                                                                   |   |   |   |   |   |   |
| Cash                      flows provided by financing activities:                                                                                                                                        |   |                                                     |            |                                                                                                   |   |  |   |   |   |   |
| Cash                      assumed in connection with Recapitalization                                                                                                                                    |   |                                                     | -          |                                                                                                   |   | 2,261,462 |   |   | 2,261,462 |   |
| Related                      Party payments                                                                                                                                                              |   |                                                     | -          |                                                                                                   |   | (79,605 | ) |   | (26,924 | ) |
| Proceeds                      from issuance of Common Stock (net of issuance costs)                                                                                                                      |   |                                                     | 3,716,450  |                                                                                                   |   | - |   |   | 5,586,213 |   |
| Repurchase                      of options (Note 11)                                                                                                                                                     |   |                                                     | (30,445    | )                                                                                                      |   | - |   |   | (30,445 | ) |
| Proceeds                      from Note Payable                                                                                                                                                          |   |                                                     | -          |                                                                                                   |   | - |   |   | 150,000 |   |
| Net                      cash provided by financing activities:                                                                                                                                          |   |                                                     | 3,686,005  |                                                                                                   |   | 2,181,857 |   |   | 7,940,306 |   |
|                                                                                                                                                                                                     |   |                                                     |            |                                                                                                   |   |  |   |   |   |   |
| Net                      increase (decrease) in cash and cash equivalents                                                                                                                                |   |                                                     | (829,476   | )                                                                                                      |   | 662,725 |   |   | 925,450 |   |
|                                                                                                                                                                                                     |   |                                                     |            |                                                                                                   |   |  |   |   |   |   |
| Cash                      and cash equivalents at beginning of period                                                                                                                                    |   |                                                     | 1,754,926  |                                                                                                   |   | 36,533 |   |   | - |   |
|                                                                                                                                                                                                     |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Cash                      and cash equivalents at end of period                                                                                                                                          |   | $                                                        | 925,450    |                                                                                                   | $      | 699,258 |   | $ | 925,450 |   |
|                                                                                                                                                                                                     |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Supplemental                      Schedule of Disclosure of Cash Flow Information:                                                                                                                       |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Cash                      Paid this period for:                                                                                                                                                          |   |                                                     |            |                                                                                                   |   |  |   |   |  |   |
| Interest                                                                                                                                                                                                 |   | $                                                        | -          |                                                                                                   | $      | 931 |   | $ | 5,266 |   |
| 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 |   |   | 552,755 |   |
| Conversion                      of convertible debenture, assumed from reverse acquisition,                      to common                      stock                                                    |   |                                                     | -          |                                                                                                   |   | 120,000 |   |   | 120,000 |   |
| Conversion                      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                                                                        |   |                                                     | -          |                                                                                                   |   | - |   |   | 32,312 |   |
| Transfer                      of deficit due to merger of Skin Shoes, LLC into Skin Shoes,                      Inc. on                      October 20, 2005                                            |   |                                                     | -          |                                                                                                   |   | - |   |   | 375,568 |   |
| Issuance                      of Common Stock to consultants on April 3, 2006 for services                      to be                      provided for a two year term                                  |   |                                                     | -          |                                                                                                   |   | - |   |   | 145,180 |   |
| 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 |   |   | 241,157 |   |
| Reclassification                      of derivative liability to equity upon the declaration of the                      SB-2                      registration statement as effective.                  |   |                                                     | -          |                                                                                                   |   | - |   |   | 1,890,600 |   |
| Issuance                      of Common Stock to consultants on April 3, 2006 for services                      to be                      provided for a two year term                                  |   |                                                     | -          |                                                                                                   |   | 127,030 |   |   | 127,030 |   |

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

**NOTE      1: DESCRIPTION OF BUSINESS**

**Overview**

**Development      Stage**

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

**Going      Concern**

**NOTE      2: CONDENSED PRESENTATION**

**NOTE      3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

*Principles      of Consolidation*

*Cash      Equivalents*

*Use      of Estimates*

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

*Income      Taxes*

*Share      Based Compensation*

*Recently      Issued Accounting Pronouncements*

*Net      Loss per Common Share*

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

|                                                           |   | **Three                  Months ended** |                                           | **Nine                  Months ended** |   |
|----------------------------------------------------------------|--------|-----------------------------------------|------------------------------------------------|----------------------------------------|--------|
|                                                           |   | **September                  30,**      |                                           | **September                  30,**     |   |
|                                                           |   | **2007**                                |                                           | **2006**                               |   | **2007** |   | **2006** |   |
|                                                           |   | **(Unaudited)**                         |                                           | **(Unaudited)**                        |   | **(Unaudited)** |   | **(Unaudited)** |   |
| Numerator:                                                     |   |                                    |                                           |                                   |   |   |   |   |   |
| Net                  loss - basic and diluted                  |   | $                                       | (2,235,664                                     | )                                      | $      | (677,099 | ) | $ | (5,227,179 | ) | $ | (2,854,461 | ) |
|                                                           |   |                                    |                                           |                                   |   |  |   |   |   |   |   |  |   |
| Denominator:                                                   |   |                                    |                                           |                                   |   |  |   |   |   |   |   |  |   |
| Weighted                  average shares - basic               |   |                                    | 39,500,824                                     |                                   |   | 33,122,006 |   |   | 37,324,237 |   |   | 28,779,270 |   |
|                                                           |   |                                    |                                           |                                   |   |  |   |   |   |   |   |  |   |
| Effect                  of dilutive stock options and warrants |   |                                    |                       |                                   |   | — |   |   |                        |   |   | — |   |
|                                                           |   |                                    |                                           |                                   |   |  |   |   |   |   |   |  |   |
| Denominator                  for diluted earnings per share    |   |                                    | 39,500,824                                     |                                   |   | 33,122,006 |   |   | 37,324,237 |   |   | 28,779,270 |   |
|                                                           |   |                                    |                                           |                                   |   |  |   |   |   |   |   |   |   |
| Loss                  per share:                               |   |                                    |                                           |                                   |   |   |   |   |   |   |   |   |   |
| Basic                                                          |   | $                                       | (0.06                                          | )                                      | $      | (0.02 | ) | $ | (0.14 | ) | $ | (0.10 | ) |
|                                                           |   |                                    |                                           |                                   |   |  |   |   |   |   |   |  |   |
| Diluted                                                        |   | $                                       | (0.06                                          | )                                      | $      | (0.02 | ) | $ | (0.14 | ) | $ | (0.10 | ) |

**NOTE 4: INVENTORY**

**NOTE 5: PROPERTY        AND EQUIPMENT, NET**

| Sewing                  equipment              |   | $      | 1,882   |   |
|------------------------------------------------|--------|--------|---------|--------|
| Office                  equipment              |   |   | 1,183   |   |
| Computer                  equipment            |   |   | 15,220  |   |
| Store                  displays                |   |   | 32,640  |   |
|                                           |   |   | 50,925  |   |
| Less                  accumulated depreciation |   |   | (10,325 | )      |
|                                           |   | $      | 40,600  |   |

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

**NOTE      6: SOFTWARE COSTS**

| Website                  design costs          |   | $      | 29,600 |   |
|------------------------------------------------|--------|--------|--------|--------|
| Less                  accumulated amortization |   |   | (9,767 | )      |
|                                           |   | $      | 19,833 |   |

**NOTE 7: CAPITALIZED      PRODUCTION MOLDS**

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

**NOTE      8: PATENT COSTS**

| Patent                  costs                  |   | $      | 145,671 |   |
|------------------------------------------------|--------|--------|---------|--------|
| Less                  accumulated amortization |   |   | (12,437 | )      |
|                                           |   | $      | 133,234 |   |

**NOTE 9: ACCOUNTS      PAYABLE AND ACCRUED LIABILITIES**

| Trade                  payables            |   | $      | 407,547 |   |
|--------------------------------------------|--------|--------|---------|--------|
| Professional                  fees         |   |   | 55,278  |   |
| Design                  and development    |   |   | 51,357  |   |
| Other                  accrued liabilities |   |   | 23,708  |   |
|                                       |   | $      | 537,890 |   |

**NOTE      10: COMMITMENTS AND CONTINGENCIES**

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

**NOTE      11: STOCK OPTIONS AND WARRANTS**

|    | · | 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.                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

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

|   | · | The                421,875 options granted to two-consultants that vest over a 36-month                period were granted for services not yet rendered. The Company used                the                provisions of FAS 123(R) and EITF 96-18,*Accounting for Equity Instruments That Are Issued to Other Than Employees                for Acquiring, or in Conjunction with Selling, Goods or                Services*                to                account for the compensation expense associated with these grants.                The                Company measured the compensation associated with these grants based                on                the fair value of the equity instruments issued. There is no measurement                date to calculate the fair value of the options at the date of grant                because the performance commitment had not yet occurred (there are                no                sufficiently large disincentives for non-performance) and the performance                by the two consultants was not complete. The Company calculated the                expense at each reporting period based upon fair value of the options                that                vested during the reporting period using the fair value on the reporting                date. Fair value was calculated using the Black-Scholes model. The                options                were treated as liability awards upon the original grant because                the                Company did not have a sufficient number of authorized shares. The                options                became equity awards on the date they were cancelled and re-granted.                For                the three and nine months ended September 30, 2007, the Company recorded                compensation expense of $82,280 and $246,714,                respectively. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | **September                  30,****2007** |   |
|-------------------------------------------|--------|--------------------------------------------|--------|
| Expected                  volatility      |   |                                       | 101.98 | % |
| Expected                  dividends       |   |                                       | 0      |   |
| Expected                  term (in years) |   |                                       | 3.07   |   |
| Risk-free                  interest rate  |   |                                       | 4.14   | % |

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

*      Accounting for Equity Instruments That Are Issued to Other Than Employees for      Acquiring, or in Conjunction with Selling, Goods or Services*

----

----

**Skins      Inc. and Subsidiary**

**(A      Development Stage Company)**

**Notes      to Consolidated Financial Statements**

**(Unaudited)**

|                                    |   | **April                13, 2007****Option                Grant** |   | **March                14, 2007****Option                Grant** |   | **May                9th, 2006****Consultant                Grant** |   |
|-----------------------------------------|--------|------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
| Expected                volatility      |   |                                                             | 95.84  | %                                                                |   | 94.45                                                               | %      |   | 101.25 | % |
| Expected                dividends       |   |                                                             | None   |                                                             |   | None                                                                |   |   | None |   |
| Expected                term (in years) |   |                                                             | 3.00   |                                                             |   | 3.00                                                                |   |   | 0.75 |   |
| Risk-free                interest rate  |   |                                                             | 4.50   | %                                                                |   | 4.51                                                                | %      |   | 4.50 | % |

|                                    |   | **August                27, 2007****Option                Grant** |   | **July                3, 2007****Option                Grant** |   |
|-----------------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
| Expected                volatility      |   |                                                              | 101.38 | %                                                              |   | 99.55 | % |
| Expected                dividends       |   |                                                              | None   |                                                           |   | None |   |
| Expected                term (in years) |   |                                                              | 5.00   |                                                           |   | 4.00 |   |
| Risk-free                interest rate  |   |                                                              | 4.32   | %                                                              |   | 4.92 | % |

|                                             |   | **Shares ** |      | **Weighted****Average****Exercise****Price** |   | **Weighted                  -****Average****Remaining****Contractual****Term** |   | **Aggregate****Intrinsic****Value** |                                 |
|--------------------------------------------------|--------|------------------|-----------|----------------------------------------------|--------|--------------------------------------------------------------------------------|--------|-------------------------------------|--------------------------------------|
| **Options**                                      |   |             |      |                                         |   |                                                                           |   |                                |                                 |
| Outstanding,                  January 1, 2007    |   |             | 3,139,375 |                                         | $      | 0.91                                                                           |   |                                |                                      |   |   |  |   |
| Granted                                          |   |             | 915,000   |                                         |   | 1.29                                                                           |   |                                |                                      |   |   |  |   |
| Cancelled                                        |   |             | (150,000  | )                                            |   | 1.19                                                                           |   |                                |        |   |   |         |   |
| Outstanding,                  September 30, 2007 |   |             | 3,904,375 |                                         | $      | 0.98                                                                           |   |                                | 3.54                                 |   | $ | — |   |
|                                             |   |             |           |                                         |   |                                                                                |   |                                |                                      |   |   |  |   |
| Exercisable,                  September 30, 2007 |   |             | 1,887,499 |                                         | $      | 1.10                                                                           |   |                                | 3.55                                 |   | $ | — |   |

|                                          |   | ** Shares** |      | ** Weighted-****Average****Grant-Date****Fair                Value** |   |
|-----------------------------------------------|--------|------------------|-----------|---------------------------------------------------------------------------|--------|
| **Non-vested                Shares**          |   |        |      |                                                                 |   |
| Non-vested,                January 1, 2007    |   |             | 1,786,248 |                                                                      | $      | 0.42 |   |
| Granted                                       |   |             | 915,000   |                                                                      |   | 0.89 |   |
| Cancelled                                     |   |             | (112,500  | )                                                                         |   | (0.73 | ) |
| Vested                                        |   |             | (571,872  | )                                                                         |   | 0.44 |   |
| Non-vested,                September 30, 2007 |   |             | 2,016,876 |                                                                      | $      | 0.63 |   |

----

**NOTE      12: STOCKHOLDERS' EQUITY**

**NOTE      13: SUBSEQUENT EVENTS**

*      Accounting for Equity Instruments That Are Issued to Other Than Employees for      Acquiring, or in Conjunction with Selling, Goods or Services*

----

**ITEM      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

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

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

**OVERVIEW**

**Our      Company**

**Product      and Technology**

----

|   | · | The                  same fit and feel for every Skin purchased in the same size, no                  matter the                  style or function of the Skin;                            |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                        |
|   | · | Interchangeable                  uppers, which allow the consumer to constantly switch Skins to                  match and                  correspond with their apparel and activity; and |
|   |   |                                                                                                                                                                                        |
|   | · | Fully                  collapsible Skins, allowing for minimal room to store and pack                  numerous                  pairs.                                                     |

**Patent      and Patent Applications**

**PLANNED      OPERATIONS**

**Product      Development**

**Sourcing**

**Planned      Distribution**

----

**Critical      Accounting Policies**

*Inventory      and Inventory Reserves*

*Share-Based      Compensation*

*      Accounting for Equity Instruments That Are Issued to Other Than Employees for      Acquiring, or in Conjunction with Selling, Goods or Services*

*Deferred      Tax Assets*

**Three      Months Ended September 30, 2007 Compared with Three Months Ended September      30,      2006**

|   | · | Employee                  compensation and benefits of approximately $ 157,000;                                                           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                      |
|   | · | Selling,                  warehouse and shipping expense of $ 115,000;                                                                    |
|   |   |                                                                                                                                      |
|   | · | Professional                  fees of $ 77,000 (including employee recruitment, investor relations,                  legal and auditing); |
|   |   |                                                                                                                                      |
|   | · | Advertising                  and marketing of $188,000;                                                                                   |
|   |   |                                                                                                                                      |
|   | · | Travel                  and entertainment of $ 35,000; and                                                                                |
|   |   |                                                                                                                                      |
|   | · | Share                  based compensation of                  $83,000.                                                                    |

----

**Nine      Months Ended September 30, 2007 Compared with Nine Months Ended September 30,      2006**

|   | · | Employee                    compensation and benefits of approximately $380,000;                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Selling                    ,warehouse and shipping expense of $ 150,000;                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Termination                    expense for a previous employee of $198,000;                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Professional                    fees of $261,000 (including employee recruitment, investor relations,                    legal and auditing);                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Advertising                    and marketing of $452,000;                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Travel                    and entertainment of $197,000; and                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Share                    base compensation of $435,000;                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                   |
|   | · | Partially                    offset by non recurring expense in the prior year of $184,000                    related to                    the acquisition of all of the outstanding capital stock of Skins                    Footwear                    Inc by us. |

----

**Liquidity      and Capital Resources**

| ·   | We                entered into an employment agreement with our CEO on September 28,                2007.                Pursuant to the agreement, we will employ the CEO for a period of                three                years with successive one-year automatic renewals unless either party                provides 180-days' advance notice of intent not to renew. We will                pay our                CEO an annual base salary of $250,000 with a bonus of up to 50% of                the                base salary at the discretion of the Board of Directors or its                Compensation Committee. If our CEO is terminated without cause, resigns                with good reason or is terminated upon a change of control, he will                receive, in addition to his accrued base salary, bonus compensation,                vested deferred compensation, any benefits under any of our plans                in which                he is a participant to the full extent of his rights under such plan,                and                accrued vacation benefits prorated through the termination date,                12 months                of his base salary along with health benefits, to be paid out                proportionally, on our usual paydays, over a 12 month                period.  |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                entered into an employment agreement with our COO on April 13, 2007.                Pursuant to the agreement, we will employ the COO for a period of                three                years with successive one-year automatic renewals unless either party                provides 180-days' advance notice of intent not to renew. We will                pay our                COO an annual base salary of $225,000 with a bonus of up to 50% of                the                base salary at the discretion of the Board of Directors or its                Compensation Committee. If our COO is terminated without cause, resigns                with good reason or is terminated upon a change of control, he will                receive, in addition to his accrued base salary, bonus compensation,                vested deferred compensation, any benefits under any of our plans                in which                he is a participant to the full extent of his rights under such plan,                and                accrued vacation benefits prorated through the termination date,                12 months                of his base salary along with health benefits, to be paid out                proportionally, on our usual paydays, over a 12 month                period.  |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                entered into an employment agreement with our CFO on October 29,                2007.                Pursuant to the agreement, we will employ the CFO for a period of                three                years with successive one-year automatic renewals unless either party                provides 180-days' advance notice of intent not to renew. We will                pay our                CFO an annual base salary of $200,000 with a bonus of up to 40% of                the                base salary at the discretion of the Board of Directors or its                Compensation Committee. In the event the CFO is terminated without                cause                or she resigns with good reason, our CFO will be entitled to severance                pay                from the company. The amount of the severance pay will be an amount                equal                to (i) nine months of her base pay if the termination of her employment                occurs during the first year of employment under the agreement, (ii)                ten                months of her base pay if termination of her employment occurs during                the                second year of employment under the agreement, or (iii) eleven months                of                her base pay if the termination occurs during the third year of employment                under the agreement. The severance pay would be paid in accordance                with                the Company's usual paydays during the applicable severance period. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Off      Balance Sheet Arrangements**

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**Risk      Factors**

**ITEM      3. CONTROLS AND PROCEDURES- need to add language regarding      Controls**

*(a)      Evaluation of disclosure controls and procedures*

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

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**PART      II-OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS**

**ITEM      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF      PROCEEDS**

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

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

|  | 1. | to                elect five members to the Board of Directors to serve for a one-year                term                as Directors; |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | to                approve an amendment of our 2005 Incentive Plan to increase by 1,625,000                shares, to a total of 5,000,000 shares that are available for issuance                under the 2005 Incentive Plan; and |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3. | to                ratify the appointment of Mahoney Cohen & Company, CPA, P.C., as our                independent registered public accounting for the year ending December                31,                2007. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Proposal**                                                                                                         |   | **Votes                For** |       | **Against/Withheld** |   | **Abstentions** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|----------------------|--------|-----------------|--------|
| Proposal                No. 1 -                                                                                 |   |                         |       |                 |   |            |   |
| Election                of Director Nominees                                                                         |   |                         |       |                 |   |            |   |
| Mark                Klein                                                                                       |   |                         | 31,929,855 |                 |   | 724,806         |   |   | — |   |
| Michael                J. Rosenthal                                                                                  |   |                         | 31,939,755 |                 |   | 714,906         |   |   | — |   |
| Stephen                Hochberg                                                                                      |   |                         | 31,909,620 |                 |   | 745,041         |   |   | — |   |
| Steve                Reimer                                                                                          |   |                         | 31,940,855 |                 |   | 713,806         |   |   | — |   |
| Frank                Zambrelli                                                                                       |   |                         | 32,601,855 |                 |   | 52,806          |   |   | — |   |
|                                                                                                                 |   |                         |            |                 |   |                 |   |   |  |   |
| Proposal                No. 2 -                                                                                 |   |                         |            |                 |   |                 |   |   |  |   |
| Amendment                to the 2005 Incentive Plan to Increase Authorized Shares to 5,000,000                Shares |   |                         | 19,797,450 |                 |   | 1,757,299       |   |   | 83,672 |   |
|                                                                                                                 |   |                         |            |                 |   |                 |   |   |  |   |
| Proposal                No. 3 -                                                                                 |   |                         |            |                 |   |                 |   |   |  |   |
| Appointment                of Mahoney Cohen & Company, CPA, P.C                                                  |   |                         | 32,503,073 |                 |   | 112,606         |   |   | 38,982 |   |

**ITEM      5. OTHER INFORMATION**

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**ITEM      6. EXHIBITS**

|   | 31.1   | Certification                  of Principal Executive Officer pursuant to Section 302(a) of the                  Sarbanes-Oxley Act of 2002.                                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                       |
|   | 31.2   | Certification                  of Principal Financial and Accounting Officer pursuant to Section                  302(a)                  of the Sarbanes-Oxley Act of 2002.                               |
|   |   |                                                                                                                                                                                                       |
|   | 32.1   | Certification                  of Principal Executive Officer and Principal Financial and Accounting                  Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.* |

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| * | 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. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**SIGNATURES**

|                               |                                                                                                           |                                 |
|------------------------------------|----------------------------------------------------------------------------------------------------------------|--------------------------------------|
|                               | **SKINS                  INC.**(Registrant)                                                                    |
|                          |                                                                                                      |                            |
| November                  19, 2007 | By:                                                                                                  | /s/ Mark                  Klein |
|                               | Mark                  Klein                                                                                    |
|                               | Chief                  Executive Officer, President and Director(Principal                  Executive Officer) |

|   | By:                                                                                                          | /s/ Deborah                  A. Gargiulo |
|--------|------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|
|   | Deborah                  A. Gargiulo                                                                                   |
|   | Chief                  Financial Officer(Principal                  Financial and Accounting                  Officer) |

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