UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-Q




(Mark
One)




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




For the
quarterly period ended June 30,
2010




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




For the
transition period from 
to




Commission
File Number:  000-53643




Aurios
Inc.


(Exact
name of registrant as specified in its charter)




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





1741 W. University Drive, Suite
      146
              Tempe,
      AZ 85281(Address
      of principal executive offices)(602)
      426-1211(Registrant’s
      telephone number, including area code)________________________________________________________________(Former
      name, former address and former fiscal year, if changed since last
      report)




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




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




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




Large
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer  ̈  (Do
      not check if a smaller reporting company)
                Smaller
      reporting company ý




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




 ̈      Yes           ý No




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




Class
                
                Outstanding
      at August 11, 2010Common
      Stock, no par value
                
                3,678,000









FORM
      10-Q
                                                                  AURIOS
      INC.
                                                                  JUNE
      30, 2010
                                                                  TABLE
      OF CONTENTSPART I – FINANCIAL
    INFORMATION
                                                                PageItem
      1.
                                                                Financial
      Statements.Condensed
      Balance Sheets—As of June 30, 2010 (Unaudited) and December 31,
      2009
                                                                1Condensed
      Statements of Operations (Unaudited)—for the three and six months ended
      June 30, 2010 and 2009
                                                                2Condensed
      Statements of Changes in Stockholders’ Equity (Deficit) for the year ended
      December 31, 2009 and the six months ended June 30, 2010
      (Unaudited)
                                                                3Condensed
      Statements of Cash Flows (Unaudited) for the six months ended June 30,
      2010 and 2009
                                                                4Notes
      to Condensed Financial Statements
                                                                5Item
      2.
                                                                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                                                10Item
      3.
                                                                Quantitative
      and Qualitative Disclosures About Market Risk.
                                                                14Item
      4.
                                                                Controls
      and Procedures.
                                                                14PART II – OTHER
  INFORMATIONItem
      1.
                                                                Legal
      Proceedings.
                                                                15Item
      1A.
                                                                Risk
      Factors.
                                                                15Item
      2.
                                                                Unregistered
      Sales of Equity Securities and Use of Proceeds.
                                                                15Item
      3.
                                                                Defaults
      Upon Senior Securities.
                                                                15Item
      4.
                                                                (Removed
      and Reserved).
                                                                15Item
      5.
                                                                Other
      Information.
                                                                15Item
      6.
                                                                Exhibits.
                                                                15SignaturesExhibitsCertifications









AURIOS
INC.


CONDENSED
BALANCE SHEETS




(Unaudited)June
      30,
                                        
                                        
                                        December
      31,2010
                                        
                                        
                                        2009ASSETSCurrent
      Assets:Cash
                                        
                                        $
                                        18,890
                                        
                                        
                                        $
                                        6,676Accounts
      receivable, net
                                        
                                        
                                        3,735
                                        
                                        
                                        
                                        2,932Inventory
                                        
                                        
                                        4,530
                                        
                                        
                                        
                                        19,469Total
      Assets
                                        
                                        $
                                        27,155
                                        
                                        
                                        $
                                        29,077LIABILITIES
      AND STOCKHOLDERS' EQUITY / (DEFICIT)Current
      Liabilities:Accounts
      payable
                                        
                                        $
                                        65,221
                                        
                                        
                                        $
                                        62,396Due
      to related party
                                        
                                        
                                        731
                                        
                                        
                                        
                                        1,792Total
      Current Liabilities
                                        
                                        
                                        65,952
                                        
                                        
                                        
                                        64,188Long-Term
      LiabilitiesAccrued
      interest
                                        
                                        
                                        13,653
                                        
                                        
                                        
                                        11,683Note
      payable - related party
                                        
                                        
                                        44,121
                                        
                                        
                                        
                                        44,121Total
      Liabilities
                                        
                                        
                                        123,726
                                        
                                        
                                        
                                        119,992Stockholders'
      Equity / (Deficit):Convertible
      preferred stock - no par value; 10,000,000 sharesaurthorized,
      0 and  460,000 shares issued and outstandingat
      June 30, 2010  and December 31, 2009,
    respectively
                                        
                                        
                                        -
                                        
                                        
                                        
                                        115,000Common
      stock - no par value; 90,000,000 shares authorized,3,678,000
      and 2,400,000 shares issued and outstandingat
      June 30, 2010 and December 31, 2009, respectively
                                        
                                        
                                        197,795
                                        
                                        
                                        
                                        50,795Accumulated
      deficit
                                        
                                        
                                        (294,366
                                        )
                                        
                                        
                                        (256,710
                                        )Total
      Stockholders' Equity/(Deficit)
                                        
                                        
                                        (96,571
                                        )
                                        
                                        
                                        (90,915
                                        )Total
      Liabilities and Stockholders' Equity / (Deficit)
                                        
                                        $
                                        27,155
                                        
                                        
                                        $
                                        29,077


The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements




1




AURIOS
INC.


CONDENSED
STATEMENTS OF OPERATIONS


(Unaudited)





Three
      Months Ended
                                        
                                        
                                        Six
      Months EndedJune
      30,
                                        
                                        
                                        June
      30,2010
                                        
                                        
                                        2009
                                        
                                        
                                        2010
                                        
                                        
                                        2009Sales
                                        
                                        $
                                        4,503
                                        
                                        
                                        $
                                        12,539
                                        
                                        
                                        $
                                        9,623
                                        
                                        
                                        $
                                        17,606Cost
      of Sales
                                        
                                        
                                        2,730
                                        
                                        
                                        
                                        7,188
                                        
                                        
                                        
                                        5,686
                                        
                                        
                                        
                                        10,161Gross
      Profit
                                        
                                        
                                        1,773
                                        
                                        
                                        
                                        5,351
                                        
                                        
                                        
                                        3,937
                                        
                                        
                                        
                                        7,445General
      and Administrative Expenses
                                        
                                        
                                        15,276
                                        
                                        
                                        
                                        49,172
                                        
                                        
                                        
                                        39,623
                                        
                                        
                                        
                                        77,871Loss
      from Operations
                                        
                                        
                                        (13,503
                                        )
                                        
                                        
                                        (43,821
                                        )
                                        
                                        
                                        (35,686
                                        )
                                        
                                        
                                        (70,426
                                        )Interest
      Expense
                                        
                                        
                                        985
                                        
                                        
                                        
                                        1,148
                                        
                                        
                                        
                                        1,970
                                        
                                        
                                        
                                        2,133985
                                        
                                        
                                        
                                        1,148
                                        
                                        
                                        
                                        1,970
                                        
                                        
                                        
                                        2,133Net
      Loss (Unaudited)
                                        
                                        $
                                        (14,488
                                        )
                                        
                                        $
                                        (44,969
                                        )
                                        
                                        $
                                        (37,656
                                        )
                                        
                                        $
                                        (72,559
                                        )Loss
      per share - basic and diluted
                                        
                                        $
                                        (0.00
                                        )
                                        
                                        $
                                        (0.02
                                        )
                                        
                                        $
                                        (0.01
                                        )
                                        
                                        $
                                        (0.03
                                        )Weighted
      average shares outstanding
                                        
                                        
                                        3,678,000
                                        
                                        
                                        
                                        2,240,000
                                        
                                        
                                        
                                        3,197,867
                                        
                                        
                                        
                                        2,240,000


The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements




2


AURIOS
INC.


CONDENSED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)


For
the year ended December 31, 2009, and the six months ended June 30,
2010


(Unaudited)





TotalStockholders'Common
      Stock
                          
                          
                          Preferred
      Stock
                          
                          
                          Accumulated
                          
                          
                          EquityShares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          Deficit
                          
                          
                          (Deficit)Balance
      at December 31, 2008
                          
                          
                          2,240,000
                          
                          
                          $
                          10,795
                          
                          
                          
                          460,000
                          
                          
                          $
                          115,000
                          
                          
                          $
                          (125,085
                          )
                          
                          $
                          710Proceeds
      from issuance of common stock
                          
                          
                          160,000
                          
                          
                          
                          40,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          40,000Net
      loss for the year endedDecember
      31, 2009
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (131,625
                          )
                          
                          
                          (131,625
                          )Balance
      at December 31, 2009
                          
                          
                          2,400,000
                          
                          
                          
                          50,795
                          
                          
                          
                          460,000
                          
                          
                          
                          115,000
                          
                          
                          
                          (256,710
                          )
                          
                          
                          (90,915
                          )Preferred
      stock conversion to common stock
                          
                          
                          1,150,000
                          
                          
                          
                          115,000
                          
                          
                          
                          (460,000
                          )
                          
                          
                          (115,000
                          )
                          
                          
                          -
                          
                          
                          
                          -Common
      stock issued
                          
                          
                          128,000
                          
                          
                          
                          32,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          32,000Net
      loss for the six months endedJune
      30, 2010 (Unaudited)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (37,656
                          )
                          
                          
                          (37,656
                          )Balance
      at June 30, 2010 (Unaudited)
                          
                          
                          3,678,000
                          
                          
                          $
                          197,795
                          
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          (294,366
                          )
                          
                          $
                          (96,571
                          )


The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements




3




AURIOS
INC.


CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)




Six
      Months EndedJune
      30,2010
                              
                              
                              2009Cash
      flows from operating activities:Net
      Loss
                              
                              $
                              (37,656
                              )
                              
                              $
                              (72,559
                              )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Changes
      in Assets and Liabilities:Accounts
      receivable
                              
                              
                              (803
                              )
                              
                              
                              3,114Inventory
                              
                              
                              14,939
                              
                              
                              
                              2,609Accounts
      payable
                              
                              
                              2,825
                              
                              
                              
                              35,543Accrued
      interest-related party
                              
                              
                              1,970
                              
                              
                              
                              2,133Due
      to related party
                              
                              
                              (1,061
                              )
                              
                              
                              522Net
      cash used by operating activities
                              
                              
                              (19,786
                              )
                              
                              
                              (28,638
                              )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                              
                              
                              32,000
                              
                              
                              
                              -Net
      cash provided by financing activities
                              
                              
                              32,000
                              
                              
                              
                              -Net
      change in cash and cash equivalents
                              
                              
                              12,214
                              
                              
                              
                              (28,638
                              )Cash
      and cash equivalents at beginning of period
                              
                              
                              6,676
                              
                              
                              
                              43,321Cash
      and cash equivalents at end of period
                              
                              $
                              18,890
                              
                              
                              $
                              14,683Supplemental
      Information:Interest
      paid
                              
                              $
                              -
                              
                              
                              $
                              -Income
      taxes paid
                              
                              $
                              -
                              
                              
                              $
                              -


The
Accompanying Notes are an Integral


Part of
the Condensed Financial Statements




4




AURIOS
INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS







Note
1
 Summary
of Significant Accounting Policies, Nature of Operations and Use of
Estimates





Presentation
of Interim Information




The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
for smaller reporting companies. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements and should be read in
conjunction with our December 31, 2009 Annual Report filed on Form 10K. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted, as permitted by the
SEC, although we believe the disclosures made are adequate to make the
information presented not misleading. Further, the condensed financial
statements reflect, in the opinion of management, all normal recurring
adjustments necessary to fairly present our financial position at June 30, 2010
and the results of our operations and cash flows for the periods presented. The
December 31, 2009 condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of America. The
results of operations for the six months ended June 30, 2010 are not necessarily
indicative of the results to be expected for the full year.




Nature
of Corporation




Aurios
Inc. (the “Company” or “we”) is a corporation which was formed under the laws of
the State of Arizona on August 7, 2001.  Its principal business
activity is the marketing of vibration and motion control technology to the
audio/video markets.  The Company’s sales occur throughout the United
States.  The Company is a former wholly-owned subsidiary of True
Gravity Enterprises Inc. (“TGE”). On December 31, 2007, the principal
shareholder, who is also a director and officer of the Company, purchased all of
the stock owned by TGE. Through June 30, 2007, TGE paid all Company expenses
including payroll and vendors.  It charged the Company $1,500 per
month as a rent and management fee.  Beginning June 30, 2007, the
Company began paying its vendors, but continued to contract with TGE for rent
and for certain services performed by TGE.   On February 25,
2010, TGE sold substantially all of its assets to Advanced Vibration
Technologies Inc., an Arizona corporation (“AVT”). Pursuant to a Management and
Rental Agreement between AVT and the Company, the Company pays AVT $1,500 per
month for rent and certain management services. The aforementioned agreement
expires July 31, 2010.




Use
of Estimates




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





Revenue
Recognition




The
Company derives its revenues primarily from the sale of vibration and motion
control devices through sales from the Company’s website and its distributors.
Revenues are recognized at the time the sale is completed and shipped. Once
shipped, title to the products, as well as the risks and rewards of ownership,
passes to the customers.




Advertising
Costs




Advertising
costs are expensed as incurred. Advertising expense for the six months ended
June 30, 2010 and 2009 were $0 and $3,700, respectively.





Cash
and Cash Equivalents





For
financial accounting purposes, cash and cash equivalents are considered to be
highly liquid investments purchased with an initial maturity of three (3) months
or less.




5




AURIOS
INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS (Continued)




Note
1


Summary
of Significant Accounting Policies, Nature of Operations and Use of Estimates
(Continued)





Accounts
Receivable




The
Company provides for potentially uncollectible accounts receivable by use of the
allowance method.  The allowance is provided based upon a review of
the individual accounts outstanding and the Company’s prior history of
uncollectible accounts receivable.  As of June 30, 2010 and December
31, 2009 there was no provision for uncollectible trade accounts
receivable.  The Company does not accrue interest charges on
delinquent accounts receivable.  The accounts are generally
unsecured.





Inventory




Inventories
are stated at the lower of cost (first-in, first-out method) or market value. We
regularly assess inventory quantities on hand and record provisions for excess
and obsolete inventory based primarily on our estimated forecast of product
demand. Inventory consists primarily of finished vibration control
assemblies.





Income
Taxes




The
Company adopted the provisions of ASC 740-10 (formerly FASB interpretation No.
48), Accounting for Uncertainty in Income Taxes, on January 1, 2007, with no
material impact on the accompanying financial statements.





The
Company files income tax returns in the U.S. federal jurisdiction and the State
of Arizona. The Company has been subject to federal, state and local income tax
examinations by tax authorities for approximately the past three years, or in
some instances longer periods.





Deferred
income taxes are provided on an asset and liability method, whereby deferred tax
assets and liabilities are recognized for deductible temporary differences and
operating loss carryforwards. Deferred tax liabilities are recognized for
taxable temporary differences. Deferred tax assets are reduced by a valuation
allowance when it is more likely than not that the carryforwards will not be
utilized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.





New
Accounting Pronouncements





There
have been no recent accounting pronouncements issued which are expected to have
a material effect on the Company’s financial statements.





Earnings
Per Share




Current
Accounting Standards provides for the calculation of Basic and Diluted earnings
per share. Basic earnings per share includes no dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share reflect
the potential dilution of securities that could share in the earnings of an
entity.




As of
June 30, 2009, there were 460,000 shares of Series A Convertible Preferred Stock
convertible into 1,150,000 common shares. These shares were not included in the
determination of diluted earnings per share as their effect was anti-dilutive.
Holders of shares of Series A Convertible Preferred Stock are entitled to
receive dividends as declared from time to time by the board of directors. Since
their issuance, no dividends have been declared on the Series A Convertible
Preferred Stock. On March 9, 2010, the 460,000 shares of Series A Convertible
Preferred Stock were converted into 1,150,000 common shares.  There
were no potentially dilutive securities outstanding as of June 30,
2010.




On August
31, 2009, the Company approved a 2.5 for 1 stock split of its outstanding common
stock, which resulted in 2,240,000 shares of Common Stock outstanding, which has
been reflected retroactively for all periods presented.




6




AURIOS
INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS (Continued)







Note
2


Related
Party Transactions




The
Company had a balance due to a related party, TGE, in the amount of $0 and
$1,500 at June 30, 2010 and December 31, 2009, respectively, for management
fees. These are considered short term in nature and non-interest
bearing.




The
Company had a note payable to a related party, TGE, in the amount of $44,121 as
of June 30, 2010 and December 31, 2009, bearing interest at a rate of
8.25%. All outstanding principal and interest is due and payable on
December 15, 2011. As of June 30, 2010 and December 31, 2009, there
was accrued interest in the amount of $13,653 and $11,683,
respectively.




In July
2007, the Company entered into a non-exclusive License Agreement with a related
party, TGE, giving the Company rights in various patents, pending applications
for patents and trademarks in various countries of the world, including the
United States. The Company pays the related party five percent (5.0%) of
worldwide net sales of the licensed products. In October 2007, the License
Agreement was amended to provide that the royalty would begin to accrue on
January 1, 2008. This agreement was terminated on February 25, 2010 as a
result of the sale of substantially all of TGE’s assets to AVT.  As of
June 30, 2010 and December 31, 2009, the accrued royalty the Company owed
to TGE was $731 and $292, respectively. The Company now pays royalties to AVT
under a new agreement with AVT.




TGE
shares common management with the Company and both the Company and TGE have the
same majority owner.




During
the six months ended June 30, 2010 and 2009, the Company paid $5,321 and
$22,913, respectively, for legal services to a firm in which Christian J.
Hoffmann III, a principal stockholder of Aurios, is a partner. He also performed
or supervised the legal services rendered by his law firm. In addition, the
Company owes such firm $25,996 as of June 30, 2010 for legal
services.




On
February 25, 2010, TGE sold substantially all of its assets to Advanced
Vibration Technologies Inc., an Arizona corporation.





The
Company and TGE, its affiliate and former parent, entered into an administrative
services/rental agreement on January 1, 2009. Under such agreement, TGE
performed certain administrative duties for Aurios and provided it office space
as required at $1,500 per month. Aurios has no employees and had contracted with
TGE for all services. Paul Attaway controls TGE as its principal shareholder and
an officer and director.  This agreement was terminated on February
25, 2010 as a result of the sale of substantially all of TGE’s assets to
AVT.  As of February 25, 2010, AVT provides administrative support and
personnel to the Company at $1,500 per month under a Management and Rental
Agreement that expires on July 31, 2010. During the six months ended June 30,
2010, the Company paid a fee of$9,000to TGE to compensate it
for administrative expenses and the use of TGE’s facilities.On March 26, 2010,
TGE, the Company’s affiliate and former parent, assigned the Company its
federally registered trademark “Aurios” in consideration for a payment of
$100.




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





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




7




AURIOS
INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS (Continued)







Note
3


Concentration
of Credit Risk





The
Company maintains cash accounts at a financial institution. Deposits not to
exceed $250,000 are insured by the Federal Deposit Insurance Corporation. At
June 30, 2010 and December 31, 2009, the Company had no uninsured cash and
cash equivalents.





For the
six months ended June 30, 2010 and 2009, the Company had 88% of its sales to two
customers. As of June 30, 2010 and December 31, 2009 receivables from these
customers were $3,735 and $2,931, respectively.








Note
4
 Stockholders
Equity





On March
9, 2010, 460,000 shares of Series A Convertible Preferred Stock were converted
into 1,150,000 common shares.





Common
Stock:




On
September 27, 2007, the Company amended its Articles of Incorporation to
authorize the Company to issue up to 90,000,000 shares of no par value Common
Stock.




On August
31, 2009, the Company approved a 2.5 for 1 stock split, which resulted in
2,240,000 shares of Common Stock outstanding, which has been reflected
retroactively for all periods presented.





Additionally,
on August 31, 2009, the Company commenced a private placement of a minimum of
80,000 shares and a maximum of 400,000 shares of its Common Stock to accredited
investors at a price of $0.25 per share. As of June 30, 2010,  the
private placement was closed and the Company had sold 288,000 shares, for gross
proceeds of $72,000.




Stock
Options:




The
Company, under its 2007 Stock Option Plan, is authorized to grant options for up
to 250,000 shares of common stock, no par value. Options may be granted as
incentive stock options or nonqualified stock options. Incentive stock options
shall not be granted at less than one hundred percent (100%) of the fair
market value of the common stock on the date of the grant, and have exercise
terms of up to ten years with vesting periods determined at the discretion of
the Company’s board of directors. As of June 30, 2010 no stock options have been
granted.




8




AURIOS
INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS (Continued)





Note
5


Income
Taxes





The
provisions for income tax expense consist of the following:




June
      30,Deferred:
                                
                                2010
                                
                                
                                2009Income
      tax benefit at statutory rates
                                
                                $
                                14,700
                                
                                
                                $
                                28,000Valuation
      allowance of net operating loss
                                
                                
                                (14,700
                                )
                                
                                
                                (28,000
                                )$
                                -
                                
                                
                                $
                                -




The
Company’s deferred tax asset consists of the following:





June
      30,2010
                            
                            
                            2009Deferred
      tax asset:Net
      operating loss carryforward
                            
                            $
                            102,400
                            
                            
                            
                            64,800Less:
      Valuation allowance
                            
                            
                            (102,400
                            )
                            
                            
                            (64,800
                            )Net
      deferred tax asset
                            
                            $
                            -
                            
                            
                            $
                            -





During
the year ended December 31, 2006 and through June 30, 2007, the net
operating loss carryforward was consolidated by TGE pursuant to a tax sharing
agreement. No intercompany receivable was recorded due to the uncertainty of the
utilization of the net operating loss carryforward by TGE.




The loss
carryforwards, unless utilized, will expire from 2027 through 2030.








Note
6
 Going
Concern





The
Company has incurred an accumulated deficit and has had negative cash flows from
its operations. Realization of the Company’s assets is dependent upon the
Company’s ability to meet its future financing requirements and the success of
future operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.




No
assurances can be given that the Company will be able to raise additional
capital, when needed or at all, or that such capital, if available, will be on
terms acceptable to the Company.  In the event the Company is unable
to raise additional funds, it could be required to either substantially reduce
or terminate its operations.




Currently
the Company has no extensive expansion plans that would require significant
infusions of capital into the operations of Aurios Inc.





9




Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.





Forward-Looking
Statements





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




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




As used
in this Report, the terms “we,” “us,” “our,” and “Aurios” mean Aurios Inc.
unless otherwise indicated.





General





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





Overview





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




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


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


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


·
            reduces costs through its new
      symmetrical design.




10


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




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




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




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





For the Three Months EndedJune
30,2010 and
2009




Results
From Operations




Revenues




Since our
inception, our activities have focused on product and market development with a
nominal level of operations. Revenues for the three months ended June 30, 2010
and June 30, 2009 were $4,503 and $12,539, respectively. Sales for the periods
remained relatively flat and are the result of the current poor economic
conditions.




Most of
our sales are made through audio equipment distributors, with the balance being
direct retail sales. For the three months ended June 30, 2010, 83% and
13% of sales were made through distributors, Music Direct and RAM Technology,
respectively. For the three months ended June 30, 2009, 76% and 21% of
sales were made to distributors Roksan Trading Company and ECS, Ltd.,
respectively.  No other customer accounted for more than 10% of sales
in either period.




Cost
of Sales




The cost
of sales on units sold for the three months ended June 30, 2010 totaled $2,730
(60.6% of revenues) compared to $7,188 (57.3% of revenues)  for the
three months ended June 30, 2009. The cost of sales for the three months ended
June 30, 2010 was slightly higher as a percentage of revenues in 2010 due to
slightly increased cost of materials.




Gross
Margin




Gross
margin for the three months ended June 30, 2010 declined to $1,773 (39.4% of
revenues) compared to $5,351 (42.7% of revenues) for the three months ended June
30, 2009 due to the higher cost of sales and primarily due to the lower levels
of revenues.




Operating
Expenses




All
selling and operating expenses, as well as research and development expenses,
are incurred through a contractual relationship with TGE, which performs these
services under an administrative services agreement with us. These expenses were
$4,500 in the three months ended June 30, 2010 and 2009. In the three months
ended June 30, 2010, we had additional expenses consisting of legal expenses of
$634 and accounting expenses of $9,957 related to being publicly held. In the
three months ended June 30, 2009, we had additional expenses consisting of
legal expenses of $22,428 and accounting expenses of $21,245, related to being
publicly held.




11




Interest Expense.Interest expense was $985 and $1,148 for the three months ended June 30,
2010 and 2009, respectively.




Income
Tax Provision




The
Company had a potential tax provision benefit of approximately $5,700 and
$17,200 for the three months ended June 30, 2010 and 2009, respectively, arising
from losses generated during the aforementioned periods. The Company has fully
reserved against these benefits due to the uncertainty of their
realization.




Net
Loss




For the
reasons listed above, for the three months ended June 30, 2010 and 2009, we
recorded net loss of $14,488 and $44,969, respectively, a decrease of our net
loss of $30,481.




Basic
and Diluted Loss per Share




The basic
and diluted loss per share were <$0.00> and <$0.02> for the three
months ended June 30, 2010 and 2009, respectively, for the reasons previously
noted.





For the Six Months Ended
June 30, 2010 and 2009




Results
From Operations




Revenues




Since our
inception, our activities have focused on product and market development with a
nominal level of operations. Revenues for the six months ended June 30, 2010 and
June 30, 2009 were $9,623 and $17,606, respectively. Sales for the periods
remained relatively flat and are the result of the current poor economic
conditions.




Most of
our sales are made through audio equipment distributors, with the balance being
direct retail sales. For the six months ended June 30, 2010, 51% and 37% of
sales were made through distributors, Music Direct and Bernard Knoop,
respectively. For the six months ended June 30, 2009, 54% and 34% of
sales were made to distributors Roksan Trading Company and ECS, Ltd.,
respectively.  No other customer accounted for more than 10% of sales
in either period.




Cost
of Sales




The cost
of sales on units sold for the six months ended June 30, 2010 totaled $5,686
(59.1% of revenues) compared to $10,161 (57.7% of revenues)  for the
six months ended June 30, 2009. The cost of sales for the six months ended June
30, 2010 was slightly higher than for the same period in 2009 due to increased
cost of materials.




Gross
Margin




Gross
margin for the six months ended June 30, 2010 was $3,937 (40.9% of revenues)
compared to $7,445 (42.3% of revenues) for the six months ended June 30, 2009
due to the higher cost of sales and lower level of revenues.




Operating
Expenses




All
selling and operating expenses, as well as research and development expenses,
are incurred through a contractual relationship with TGE, which performs these
services under an administrative services agreement with us. These expenses were
$9,000 in the six months ended June 30, 2010 and 2009. In the six months ended
June 30, 2010, we had additional expenses consisting of legal expenses of $5,321
and accounting expenses of $24,706 related to being publicly held. In the six
months ended June 30, 2009, we had additional expenses consisting of legal
expenses of $22,913 and accounting expenses of $33,511, some of which were
related to preparing us to become publicly held.




Interest Expense.Interest expense was $1,970 and $2,133 for the six months ended June 30,
2010 and 2009, respectively.




12




Income
Tax Provision




The
Company had a potential tax provision benefit of approximately $14,700 and
$28,000 for the six months ended June 30, 2010 and 2009, respectively, arising
from losses generated during the aforementioned periods. The Company has fully
reserved against these benefits due to the uncertainty of their
realization.




Net
Loss




For the
reasons listed above, for the six months ended June 30, 2010 and 2009, we
recorded net loss of $37,656 and $72,559, respectively, a decrease of our net
loss of $34,903.




Basic
and Diluted Loss per Share




The basic
and diluted loss per share were <$0.01> and <$0.03> for the six
months ended June 30, 2010 and 2009, respectively, for the reasons previously
noted.




Liquidity
and Capital Resources




Our
auditors have rendered a going concern opinion. We provided for our cash
requirements in the first half of 2010 with the capital we raised through the
sale of Common Stock yielding $72,000 in the fourth quarter of 2009 and first
quarter of 2010. We believe that we will have sufficient capital to operate for
the next twelve months through the use of our cash reserves, deferral of payment
of certain accounts payable and by generating operating income through increased
sales. We can make no assurances that we will be successful in this regard. If
our revenues do not increase and our cash flow is not positive or not sufficient
to meet our working capital needs, we will need to seek to raise capital through
the sale of our equity or debt securities. We have no commitments for obtaining
such financing and there can be no assurance that we could obtain the necessary
funds or obtain them on terms favorable to us. Any future financing may be on
terms that substantially dilute the ownership interests of present shareholders.
If we are unable to raise sufficient additional capital as necessary, we may
have to suspend or contract operations or cease operations
entirely.




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




As of
June 30, 2010, we had a working capital deficit of ($38,797) and long-term debt
of $44,121.




Capital
Commitments




We had no
material commitments for capital expenditures.




Off-Balance
Sheet Arrangements




There
were no off-balance sheet arrangements as of June 30, 2010 and June 30,
2009.




Critical
Accounting Policies and Estimates




Our
financial statements are prepared in accordance with U.S. Generally Accepted
Accounting Principles. Preparation of the statements in accordance with these
principles requires that we make estimates, using available data and our
judgment, for such things as valuing assets, accruing liabilities and estimating
expenses. The following is a discussion of what we feel is the most critical
estimate that we must make when preparing our financial statements.




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




Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure




There are
no such disagreements or changes.




New
Accounting Pronouncements





There
have been no recent accounting pronouncements issued which are expected to have
a material effect on the Company’s financial statements.




13




Item
      3.
            Quantitative
      and Qualitative Disclosures About Market
Risk





A smaller reporting company is not
required to provide the information required by this Item.





Item
      4.
            Controls
      and Procedures





Evaluation
of Disclosure Controls and Procedures





We
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of June 30, 2010.  This evaluation was carried out
under the supervision and with the participation of our President, Chief
Executive Officer and Chief Financial Officer, Paul Attaway.  Based
upon that evaluation, he has concluded that, as of June 30, 2010, our disclosure
controls and procedures are effective.





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure.





Limitations
on the Effectiveness of Internal Controls





Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will prevent all fraud and material
error.  Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level.  Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs.  Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been
detected.  These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake.  Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the internal control.  The design
of any system of controls also is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions.  Over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate.





Changes
in Internal Control Over Financial Reporting





There
have been no changes in our internal controls over financial reporting during
the quarter ended June 30, 2010 that have materially affected or are reasonably
likely to materially affect such controls.




14


PART
II – OTHER INFORMATION





Item
      1.
            Legal
      Proceedings.





We are
not a party to any pending legal proceeding.  We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of five percent or more of our voting securities are adverse
to us or have a material interest adverse to us.





Item
      1A.
            Risk
      Factors.





A smaller reporting company is not
required to provide the information required by this Item.





Item
      2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds.





None.





Item
      3.
            Defaults
      upon Senior Securities.





None.





Item
      4.
            (Removed
      and Reserved).





Item
      5.
            Other
      Information.





None.





Item
      6.
            Exhibits.








Exhibit
                    Number
                  Description
      of Exhibit31.1
                  Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                  Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
                  Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002




15




SIGNATURES





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




Aurios
      Inc.Date:
                  August
      16, 2010By:
                  /s/ Paul
      AttawayPaul
      AttawayTitle:
                  President,
      Chief Executive Officer, Chief Financial Officer and Director




16