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As filed with the Securities and Exchange Commission on November 4 , 2008
Registration No. 333-150881
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AURIOS INC.
(Exact name of registrant as specified in its charter)
Arizona 3651 86-1037558
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1741 W. Uni versity Dri ve, Suite 146
Tempe, AZ 85281
(602) 426-1211
(Address and telephone number of principal executive offices)
1741 W. Uni versity Dri ve, Suite 146
Tempe, AZ 85281
(602) 426-1211
(Address of principal place of business or intended principal place of business)
With copies to:
Aurios Inc. Christian J. Hoffmann, III, Es q.
Attn: Paul Attaway Quarles & Brady LLP
1741 W. Uni versity Dri ve, Suite 146 One Renaissance Square
Tempe, AZ 85281 Two North Central Avenue
Phone: (602) 426-1211 Phoenix, Arizona 85004
Fax: (602) 426-1611 Phone: (602) 229-5200
Fax: (602) 420-5008
(Name, address and telephone number of agent for service)
Approxi mate date of proposed sale to the public: Fro m t ime to time after the Reg istration Statement becomes effect ive as determined by
market conditions and the needs of the selling stockholders.
If any of the securities being registered on this fro m are to be offered on a delayed or continuous basis pursuant to Rule 415 u nder the
Securities Act of 1933, check the following bo x.
If this Form is filed to reg ister additional securities for an offer ing pursuant to Rule 462(b) under the Securit ies Act, please check the following
box and list the Securit ies Act registration statement number of the earlier effective reg istration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following bo x and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securit ies Act, check the following box and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non -accelerated filer, o r a s maller reporting
company. See definit ions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Ru le 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting co mpany
(Do not check if a smaller reporting company)
CALCULATION OF REGIS TRATION FEE
Proposed Proposed
Amount maximum maximum Amount of
Title of each class of to be offering price aggregate registration
securities to be Registered registered(1) per share(2) offering price(2) fee(4)
Co mmon Stock, no par value 200,000 (3)
$0.15 $30,000 $1.18
(1) Pursuant to Rule 416, under the Securit ies Act, there are also being registered hereby such indeterminate number of additiona l shares of
common stock as may beco me issuable pursuant to certain applicable provisions providing for the adjustment of the numbe r of shares
issuable upon conversion of preferred stock.
(2) The selling security holders will init ially sell their shares of our common stock at a price of $0.15 per share. If the share s of our common
stock are eventually quoted on the OTC Bulletin Board or listed for trading or quoted on any other public market, the selling shareholders
will sell their shares at the prevailing market prices or privately negotiated prices. Our co mmon stock is not traded on any public market
or securities exchange. Neither we nor any other party has applied for listing or quotation of our common stock on any public market.
(3) Represents 77,200 shares of common stock outstanding and of 122,800 shares of common stock issuable upon conversion of 122,80 0
shares of Series A Convertible Preferred Stock.
(4) Estimated in accordance with Rule 457(c) solely for the purpose of computing the amount of the registration fee based on a bo na fide
estimate of the maximu m offering price.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration statement shall thereafter beco me effective in accordance with
Section 8(a) of the Securit ies Act of 1933 or until the registration statement shall beco me effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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The information in this prospectus i s not complete and may be changed. We have filed a registration statement with the
Securities and Exchange Commissi on relating to this re sale prospectus. The se securi ties may not be sold until the
registration statement filed with the Securities and Exchange Commissi on i s effective. This prospectus i s not an offer to
sell these securitie s and it is not soliciting an offer to buy the se securitie s in any state where the offer or sa le is not
permitted.
SUBJECT TO COMPLETION, DATED NOV EMBER 4 , 2008
PROSPECTUS
AURIOS INC.
Resale of 200,000 shares of common stock, no par value per share
This is a prospectus for the resale of up to 77,200 shares of our issued and outstanding common stock, n o par value per share, and
122,800 shares of common stock issuable upon the conversion of 122,800 outstanding shares of our Series A Convertible Preferr ed Stock
(“Preferred Stock”) by the selling stockholders listed herein.
We will receive none of the proceeds from the sale of these securities by the selling stockholders and we will bear certain expenses
incident to their reg istration. The selling security holders will in itially sell their shares of our common stock at a price of $0.15 per share. If the
shares of our common stock are quoted on the OTC Bu llet in Board or listed for trad ing or quoted on any other public market, the selling
shareholders will sell their shares at the prevailing market prices or at privately negotiated prices. Neither we nor any o ther party has applied
for listing or fo r quotation of our common stock on the OTC Bulletin Board or on any other public market. Certain of the sell in g shareholders
are our directors, officers and principal shareholders, who will be deemed underwriters in this offering. For a description of the plan of
distribution of these securities, please see “Plan of Distribution” on page 11 of this prospectus.
Our co mmon stock is presently not traded on any market or securities exchange and we have not applied for lis ting or quotation on any
public market.
Investing in our common stock involves very high risks. See “ Risk Factors ” on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this pros pectus. Any representation to the contrary is a crimi nal offense.
You should rely only on the info rmation contained in this prospectus. We have not authorized anyone to provide you with info rmat ion
that is different fro m that contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our
common stock only in jurisdictions where offers and sales are permitted. This document may only be used where it is legal to sell the shares of
common stock. The informat ion contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our co mmon stock.
The date of this pros pectus is November , 2008.
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TABLE OF CONTENTS
AVAILAB LE INFORMATION
We are subject to the informat ional requirements of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend to register a
class of securities under the Exchange Act, and in accordance therewith, file reports, pro xy statements and other information with the Securities
and Exchange Co mmission (the “SEC”). Such reports, pro xy statements and other informat ion filed with the SEC can be inspected and copied
at the public reference facilities maintained by the SEC at 100 F Street, N.E., Roo m 1580, Washington, D.C., 20549. Electronic filings filed on
or after Ju ly 1, 1992 are available v ia the Electronic Data Gathering Analysis and Retrieval System (EDGA R) at the public reference facilit y.
The SEC also maintains a web site that contains reports, proxy and information statements and other materials that are filed thro ugh EDGA R
which can be accessed at http://www.sec.gov.
This prospectus constitutes a part of a reg istration statement on Form S-1 (together with all amendments and exh ibits thereto, the
“Registration Statement”) filed by the Co mpany with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). As
permitted by the rules and regulations of the SEC, th is prospectus o mits certain informat ion contained in the Registration Statement, and
reference is made to the Registration Statement and related exhib its for further informat ion with respect to the Company and the securities
offered hereby. Any statements contained herein concerning the provisions of any document filed as an exh ibit to the Registration Statement or
otherwise filed with the SEC are not necessarily co mplete, and in each instance reference is made to the copy of such documen t so filed. Each
such statement is qualified in its entirety by such reference.
We hereby undertake to provide without charge to each person, including a beneficial owner, to who m a p rospectus is delivered , upon
written or oral request of each person, a copy of any document included herein . Requests should be directed to:
Paul Attaway
President and Chief Financial Officer
Aurios Inc.
1741 W. University Drive, Su ite 146
Tempe, AZ 85281
Telephone: (602) 426-1211
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PROSPECTUS
AVAILA BLE INFORMATION
PROSPECTUS SUMMA RY 1
RISK FA CTORS 4
USE OF PROCEEDS 8
DETERMINATION OF OFFERING PRICE 8
DILUTION 8
SELLING SECURITY HOLDERS 9
PLAN OF DISTRIBUTION 11
DESCRIPTION OF SECURITIES 12
INTEREST OF NAM ED EXPERTS AND COUNSEL 15
DESCRIPTION OF BUSINESS 15
DESCRIPTION OF PROPERTY 20
LEGA L PROCEEDINGS 20
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY A ND RELATED STOCKHOLDER
MATTERS 21
MANAGEM ENT’S DISCUSSION A ND ANA LYSIS OF FINANCIA L CONDITION AND RESULTS OF OPERATION 22
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS A ND CONTROL PERSONS 26
EXECUTIVE COMPENSATION 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIA L OWNERS AND MANA GEM ENT 30
TRANSACTIONS WITH RELATED PERSONS, PROM OTERS AND CERTAIN CONTROL PERSONS 31
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIA BILITIES 32
WHERE TO GET M ORE INFORMATION 33
FINA NCIA L STATEM ENTS F-1
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS II-1
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PART I
INFORMATION REQUIR ED IN PROSPECTUS
PROSPECTUS S UMMARY
This summary highlights some information from this prospectus and it does not contain all the information necessary for your investment
decision. The following summary is qualified in its entirety by reference to the more detailed information and financial statements appearing
elsewhere in and incorporated by reference into this prospectus. The shares offered hereby are speculative and involve a high degree of risk.
Each prospective investor should carefully review the entire prospectus, the financial state ments and all exhibits and documents referred to
therein. See “Risk Factors.”
This prospectus covers the resale of up to an aggregate of 200,000 shares of common stock of Aurios Inc., o f which 122,800 ar e shares of
common stock issuable upon the conversion of outstanding Preferred Stock we sold in a p rivate placement that closed in December 2007. The
selling security holders will sell their shares of common stock at $0.15 per share. If our co mmon stock is eventually quoted on the OTC
Bulletin Board or listed for trading or quotation on any other public market, the selling shareholders will sell their shares at the prevailing
market prices or at privately negotiated prices. The common stock of Aurios is not traded on any market or securities exchang e. Neither Aurios
nor any third party has applied for listing or quotation of the common stock on the OTC Bu llet in Board or quotation on any pu blic market.
Except as otherwise required by the context, references in this prospectus to “we,” “our,” “us,” the “Co mpany” and “Aurios” refer to
Aurios Inc., an Arizona corporation.
History
We were formed in August 2001 by our former parent co mpany, True Gravity Enterprises, Inc. (“TGE”), as its wholly o wned subsidiary.
We ceased being a wholly o wned subsidiary of TGE in June 2007. Our corporate offices are located at 1741 W. University Drive, Suite 146,
Tempe, Arizona 85281 and our telephone number is (602) 426-1211.
Products
We produce, market and distribute vibration isolation products to the high -end audio and video markets in the Un ited States and in certain
foreign countries. Our products are the Classic Media Isolation Bearing (the “Classic MIB”), the Pro Med ia Isolation Bearing (t he “PRO MIB”)
and the Isotone Media Isolation Bearing (the “Isotone”).
Our vib ration isolation products produce superior sound quality by sharpening, not softening, the sound. Our products are pro tected by
patents both in the United States and Taiwan, and a patent is pending in Japan. TGE owns the patents relating to the products and it has granted
us a non-exclusive world-wide license to sell products under the patents and to use the Aurios trademark in connection with the products. The
license has a term of two years and is renewab le for additional t wo-year terms as long as we are in co mp liance with its terms. We pay TGE a
royalty of 5% of our net sales for the license. Our min imu m royalty payment under the license is $2,500 per year. Our preside nt and chief
financial officer, who is also a director and our largest stockholder, is also the president, director and largest stockholde r of TGE. We outsource
the manufacture of our products to several qualified mach ine shops in the Phoenix metropolitan area.
Since 2004, we have generated limited revenues and we have expended min imal funds to support our products due to lack of reso urces.
We have incurred net losses of $100,643 (unaudited) for the period fro m August 7, 2001 (inception) to June 30, 2008. We have an accumulated
deficit and have had negative cash flows fro m our operations. Accordingly, we have received a report fro m our independent aud itors that
includes an exp lanatory paragraph describing their substantial doubt about our ability to continue as a going concern.
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THE OFFERING
Common Stock Up to an aggregate of 77,200 shares of our issued and outstanding common stock and up to 122,800 shares of our
common stock issuable upon the conversion of 122,800 outstanding shares of Preferred Stock may be offered
under this prospectus.
Common Stock Outstandi ng
Co mmon stock
outstanding prior
to this offering 896,000 shares (1)
Co mmon stock
outstanding after
this offering,
assuming
conversion of all
Preferred Stock 1,356,000 shares (2)
Use of Proceeds We will not receive any proceeds from the sale of the shares of common stock by the selling stockholders. See
“Use of Proceeds.”
Plan of Distri bution The shares of common stock offered hereby may be sold fro m t ime to time by the selling stockholders in one or
more transactions in the over-the-counter or any public market on which our co mmon stock trades at prevailing
market prices at the time of the sale or in negotiated transactions.
We are paying all of the expenses in connection with the preparation of this prospectus and the related
Registration Statement, estimated at $36,001. See “Selling Stockholders” and “Plan of Distribution.”
Risk Factors This offering involves a high degree of risk. See “Risk Factors,” as well as other cautionary statements throughout
this prospectus, before investing in shares of our common stock.
(1) Indicates shares of common stock outstanding at October 31, 2008.
(2) Includes 896,000 shares of common stock issued and outstanding at October 31, 2008 plus 460,000 shares of common stock, assuming
conversion of all outstanding shares of Preferred Stock into shares of common stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future expectations, contain projections of results of operation or financial
condition or state other “forward-looking” information. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,”
“could,” “will,” “p lan,” “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 the expectations or
forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known an d unknown
uncertainties, a number of wh ich are beyond the control of management . Therefore, the actual results could differ materially fro m the
forward-looking statements contained in this prospectus.
Important factors that may cause the actual results to differ fro m the forward -looking statements, projections or other expectations
include, for examp le, the following:
• our ability to imp lement our business plan;
• our ability to increase revenues and market penetration;
• impairment of license, patent or other proprietary rights;
• competition fro m larger, mo re established companies with far greater econo mic and human resources than we have;
• our ability to attract and retain customers and quality employees;
• the effect of changing economic conditions; and
• changes in government regulations, tax rates and similar matters.
We do not promise to update forward-looking info rmation to reflect actual results or changes in assumptions or other factors that could
affect statements made in this prospectus.
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RIS K FACTORS
Investment in our common stock involves a number of risks. In addition to the risks and investment considerations discussed e lsewhere in
this prospectus, the following factors should be carefully considered by anyone purchasing the securities offered by th is prospectus.
History of Declining Operating Results
We have incurred net losses of $100,643 (unaudited) for the period fro m August 7, 2001 (inception) to June 30, 2008. We have an
accumulated deficit and have had negative cash flows fro m our operations. Since 2004, we have generated limited revenues and we have
expended minimal funds to support our products due to lack of funds. We intend to use the proceeds from our p rivate placemen t that closed in
December 2007 to rejuvenate the presentation of our products and marketing efforts in order to increase revenues and profits. There can be no
assurance that we will be successful in this regard.
Our auditors have expressed a going concern opinion
We have an accumulated deficit and have had negative cash flows fro m our operations. Accordingly, we have received a report f ro m our
independent auditors that includes an explanatory paragraph describing their substantial doubt about our ability to continu e as a going concern.
This may negatively impact our ability to obtain additional funding or funding on terms attractive to us and may negatively i mp act the market
price of our stock.
Our cash requirements may vary materially fro m those now planned depending on numerous factors, including the results of our
market ing efforts, our business development activities, the results of future research and development and competition. We be lieve that the net
proceeds fro m our prior cap ital raising activ ities, together with our projected revenue and cash flow fro m future operations, will be sufficient to
fund our working capital and other capital requirements for the immediate future. If, however, our estimates are incorrect an d we require
additional capital, there can be no assurance that additional funds will be availab le on terms attractive to us or at all. If adequate funds are not
available, we may be required to curtail our market ing and new product development activities and/or otherwise materially red uce our
operations.
Implementation of Business Plan
We have sufficient working capital to pursue the initial stage of our business plan as described in this prospectus. We may incu r operating
deficits as we implement our business plan. Our ability to fu lly imp lement our business plan and significantly increase our revenues will
depend upon our ability to execute our business plan and may require us to raise additional capital through the sale of debt or equity securities.
If we do not achieve a profitable level of operations fro m our operations, we will require additional capital. No assurance can be given that we
will be able to obtain additional capital or, if available, that such capital will be available at terms acceptable to us, or that we will be ab le to
generate profits fro m operations, or if profits are generated, that they will be sufficient to carry out our business plan, o r that the plan will not
be modified.
Our ability to successfully market our products to the intended range of cus tomers depends on our ability to retain employees or
consultants with strong industry contacts and knowledge of our products. Individuals with specialized industry skills may be in short supply
given our size and co mpetition for qualified sales persons is intense. The failure to attract new qualified personnel could adversely affect our
business and growth prospects.
In formu lating our business plan, we have relied on the judg ment of our officers and their experience in and research on the industry.
There can be no assurance that we will be ab le to obtain sufficient financing or imp lement the business plan we have devised. Furthe r, even
with sufficient financing, there can be no assurance that we will be able to expand on a national or international basis or operate our business on
a profitable basis. Ou r plans are based upon the assumptions that present market conditions in the business that we plan to o perate will continue
and that the risks described in this prospectus will be dealt with successfully. There can be no assurance that such plans will be realized or that
any of the assumptions will prove to be correct.
Uncertainties Regarding Increasing Revenues and Market Penetration
We conducted our own research into the markets for our p roducts. There can be no assurance that we will be successful in our efforts to
increase our market penetration or to develop markets in the manner we contemplate.
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Economic and General Risks Relating to B usiness
The success of our activities is subject to risks inherent in business generally, including (i) demand for products and services; (ii) general
economic conditions; (iii) changes in taxes and tax laws; and (iv) changes in governmental regulations and policies.
Costs of Production and Profitability
Our actual costs of production may exceed those of competitors and, even if our costs of production are lower, our co mpetitor s may be
able to sell the same o r similar products at a lower price than is economical for us.
Patents and Intellectual Property Protection
We do not own the intellectual property necessary for our products. We license such intellectual property fro m TGE. Such lice n se is
terminable and non-exclusive, and therefore, TGE could license the intellectual property underlying our products to our current and future
competitors.
We rely on TGE to protect the intellectual property respecting our products. TGE has used a combination of U.S. and foreign p atent and
trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights to our products. There can,
however, be no assurance that any of TGE’s pending or future patent applications, whether or not being currently challenged by applicable
governmental patent examiners, will be issued with the scope of the claims sought, if at all. There also can be no assurance that any patents
TGE has or may obtain will not be invalidated, circu mvented or challenged. Furt hermo re, there can be no assurance that others will not develop
technologies which are similar or superior to TGE’s technology or design around any patents owned by it. Unauthorized parties may attempt to
copy aspects of the products or to obtain and use informat ion they regard as proprietary. In addition, the laws of some foreign countries do not
protect proprietary rights as fully as do the laws of the United States. There can be no assurance that TGE’s means of protecting its proprietary
rights in the United States will be adequate or that others will not independently develop similar or superior technology.
Dependence on Key Personnel
We are highly dependent on the services of Paul Attaway and Timothy Lewis. The loss of the services of either of these in divid uals
would harm our business. Our future success also depends on our ability to attract, train, retain and motivate other highly q ualified sales,
technical and managerial personnel. Co mpetit ion for such personnel is intense and we may not be able to a ttract, train, retain or motivate such
persons in the future.
There is a no public market for your shares, and i f a market for your shares develops, it will be a limited market and you ma y not be able to
sell them
There currently is no public market for our co mmon stock, including your shares. Even if a market for your shares develops, the market
will be limited and you may not be able to sell your shares. There is no assurance that this or any future registration state ment will be declared
effective by the SEC. We expect the SEC to scrutinize our reg istration statements because of the relatively early stage of development of our
business compared to most public co mpanies. The fact that the SEC has reviewed a registration statement does not ensure that such filing is
more accurate than a filing that was not reviewed by the SEC, and the level of SEC review does not ensure any additional accu racy of such
filing.
We intend to have our common stock included on the Over-the-Counter Bulletin Board (“OTC Bulletin Board”) after our registration
statement relating to this prospectus becomes effective with the SEC. To this end, we plan to identify a broker-dealer to file an application with
the OTC Bulletin Board on our behalf. There can be no assurance that a market ma ker will be willing to file an application on our behalf, and
even if an application is filed, there can be no assurance it will be granted or that an active market will develop for our c ommon stock on the
OTC Bulletin Board. Additionally, there can be no assurance any broker will be interested in trading our stock. Therefore, it may be difficult to
sell your shares of common stock if you desire or need to sell them. You may have no more liquid ity in your shares of common stock even if
we are successful in the future in reg istering with the SEC and having our common stock included on the OTC Bu llet in Board.
Control by Key Shareholders
As of October 31, 2008 our largest stockholders, Paul Attaway, Ira J. Gaines and Christian J. Hoffmann, III hold shares repre senting
approximately 95.5% of the voting power of our outstanding capital stock. These shareholders may, if they act together, exe rcis e significant
influence over all matters requiring shareholder approval, including the elect ion of directors and the determination of significant corporate
actions, as well as control the management, policies and operation of the Company. Th is
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concentration of ownership could depress the stock price or value o f the Co mpany or delay or prevent a change in control that could be
otherwise beneficial to our shareholders.
Risks of the Industry
Technology Advancements . Ou r industry is susceptible to fast-paced technological advancements and our competitive advantage may be
reduced if we fail to keep up with changes in the technological processes. Our products are subject to technological change and innovation.
Technological developments are occurring rapidly and wh ile the effects of such developments are uncertain, they may have a ma terial adverse
effect on the demand for our products. Additionally, we may not be able to mat ch any technological changes to the needs of our target
customers, wh ich will reduce demand for our products.
Competition . There are numerous other companies, including Kinetics Systems, Inc., Bright Star, Audioquest, Final Labs and
Symposiu m, that are engaged in the business of manufacturing or selling vibrat ion isolation products. Some of these companies may have
greater resources than we do and enjoy well established production facilities and processes, market presence, distribution ne tworks and market
share. It is likely that any or all of these other companies are in the process of, and have allocated substantially mo re res ources to, developing
their own products that are or would be co mpetit ive with our high purity products. If any of these companies is successful in its efforts to
develop high quality vibration isolation products at lower costs than we have, such a company would have substantially greate r resources to
market its competing products. The ability of these companies to produce economies o f scale may put us at a disadvantage. Increased
competition or our failu re to compete successfully is likely to result in price reductions, fewer customer orders, reduced gross margins,
increased marketing costs, failure to acquire or retain market share, or any comb ination of these problems.
Risks Relating to this Registration
Any fut ure sale of a substantial number of shares of our common stock could depress the trading price of our common stock, lo wer our
value and make it more difficult for us to raise capital
Any sale of a substantial number of shares of our common stock, or the prospect of such sales, may have the effect of depress ing the
trading price of our co mmon stock. In addition, those sales could lower our value and make it more d ifficu lt for us to raise capital. Further, the
timing of the sale of the shares of our common stock may occur at a time when we would otherwise be able to obtain additional equity capital
on terms more favorable to us. At October 31, 2008, we had 896,000 shares of common stock outstanding plus 460,000 shares of Preferred
Stock, convertible into 460,000 shares of common stock. Of such shares, 77,200 shares of common stock, issued and outstanding , and 122,800
shares will be issued and outstanding upon conversion of all 122, 800 outstanding shares of Preferred Stock into shares of common stock, will
be elig ible for resale in the public market under this prospectus, subject to applicable federal securit ies law restrictions.
The possible issuance of commo n stock subject to options and warrants may dilute the interest of stockholders
The board of directors adopted the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”) on July 1, 2007 and the shareholders
approved the Plan on July 8, 2007. The Plan authorizes us to issue up to 250,000 shares of our common stock upon exercise of options and
grant of restricted stock awards. To date, we have not issued any options or restricted stock awards under the Plan. To the e xtent we issue stock
options or warrants under the 2007 Plan and such outstanding stock options and warrants are exercised, dilution to the interests of our
stockholders may occur. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely a ffected since the
holders of the outstanding options can be expected to exercise them at a t ime when we would, in all likelihood, be able to obtain any needed
capital on terms more favorable to us than those provided in such outstanding options.
We have additional securities available for issuance, w hich, if issued, could adversely affect the rights of the holders of our common stock
Our Art icles of Incorporation authorize the issuance of 90,000,000 shares of our common stock and 10,000,000 shares of prefer red stock.
The common stock and preferred stock can be issued by our board of directors, without stockholder approval. Any future issuances of our
common stock would further dilute the percentage ownership of the Co mpany held by public stockholders.
We have never paid dividends and have no plans to in the future.
We do not intend to pay dividends on our Preferred Stock or co mmon stock in the foreseeable future. As an Arizona corporatio n , we are
legally permitted to declare and pay dividends only out of surplus, or, if there is no surplus, out of net profits for
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the fiscal year in wh ich the dividend is declared and for the preceding fiscal year. To the extent no surplus or net profits of the Co mpany are
available for pay ment of div idends, we cannot pay dividends on the Preferred Stock. Any dividends not paid will accrue. No in terest will be
paid on any accrued but unpaid dividends. There can no be no assurance that we will declare any d ividends or have sufficient surplus or
generate any or sufficient earnings to pay cash or stock dividends on the Preferred Stock. We will pay dividends on the Prefe rred Stock, when
and if declared by the board of directors and when and if funds are legally available therefore. If dividends are declared, all accrued but unpaid
dividends on the Preferred Stock must be paid in full before any additional div idends may be declared and paid on the Co mmon Stock.
Div idends shall accrue if they are not paid when due. See “Description of Securities.”
Our stock price is likely to be highly volatile because of several factors, including a limited public float
The market p rice o f our co mmon stock is likely to be high ly volatile because we will be a new issue and because there likely will be a
thin trading market for our stock, which causes trades of small b locks of stock to have a significant impact on our stock price. You may not be
able to resell shares of our co mmon stock following periods of volatility because of the market’s adverse reaction to volatility.
Other factors that could cause such volatility may include, among other things:
• actual or anticipated fluctuations in our operating results;
• the potential absence of securities analysts covering us and distributing research and recommendations about us;
• we may have a low trad ing volu me for a nu mber of reasons, including that a large amount of our stock is closely held;
• overall stock market fluctuations;
• announcements concerning our business or those of our competitors;
• our ability to raise capital when we require it, and to raise such capital on favorable terms;
• changes in financial estimates by securities analysts or our failure to perform as anticipated by the analysts;
• announcements of technological innovations;
• conditions or trends in the industry;
• lit igation;
• changes in market valuations of other similar co mpanies;
• future sales of common stock;
• departure of key personnel or failure to hire key personnel; and
• general market conditions.
Any of these factors could have a significant and adverse impact on the market price o f our co mmon stock. In addit ion, the st ock market
in general has at times experienced extreme volatility and rap id decline that has often been unrelated or disproportiona te to the operating
performance of part icular co mpanies. These broad market fluctuations may adversely affect the trading price of our co mmon sto ck, regard less
of our actual operating performance.
Indemnification of officers and directors
Our Art icles of Incorporation and Bylaws contain broad indemnification and liability limiting provisions regarding our officers, directors
and employees, including the limitation of liability for certain violat ions of fiduciary duties. Our shareholders therefore w ill hav e only limited
recourse against the individuals.
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US E OF PROCEEDS
We will not receive any proceeds from this offering. All proceeds fro m the sale of the shares by this prospectus will go to the selling
stockholders.
DET ERMINATION OF OFFERING PRICE
The selling security holders will init ially sell their shares of our common stock at a price of $0.15 per share. If the shares of our common
stock are quoted on the OTC Bulletin Board or listed for trading or quoted on any other public market, the selling shareholde rs will sell their
shares at the prevailing market prices or at privately negotiated prices. Neither we nor any other party has applied for listing or for quotation of
our common stock on the OTC Bulletin Board or on any other public market. Certain of the selling shareholders are our directors, officers and
principal shareholders, who will be deemed underwriters in th is offering. The offering price of $0.15 per share is based on t he estimated value
of our co mmon stock only and does not have any relationship to any established criteria of value, such as book value or earnings per share. The
price of the co mmon stock is not based on past earnings, nor is the price of the common stock indicative of the current marke t v alue of our
assets. No valuation or appraisal has been prepared for our business and potential business expansion. There is no public market for our
common stock. Ou r co mmon stock is not presently traded on any market or securities exchange.
DILUTION
Sales of shares of our common stock will not result in any change in the net tangible book value per share before and after t he distribution
of shares by the selling stockholders. There will be no change in the net tangible book value per share attributable to cash payments made by
purchasers of the shares being offered by the selling stockholders. Prospective investors in the shares held by the selling s tockholders should be
aware, however, that the price of the shares being offered by the selling stockholders may not bear any rational relat ionship to our net tangible
book value per share.
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S ELLING S ECURITY HOLDERS
Each of the selling stockholders listed below is, as of the date of this prospectus, the holder of our co mmon stock or the ho lder of our
Preferred Stock, which is convertible into co mmon stock. The number of shares of common stock owned o r to be acquired is set forth opposite
each selling stockholder’s name. The issuance of our common stock to the selling stockholders was a transaction exempt fro m t he registration
requirements of the Securit ies Act and various state securities laws.
Each selling stockholder will determine the nu mber of shares that he or she may actually sell. The selling stockholders are under n o
obligation to sell all or any portion of the shares offered, nor are the selling stockholders obligated to sell such shares i mmediat ely under this
prospectus. Particular selling stockholders may not have a present intention of selling their shares and may offer less than the number o f shares
indicated. Because a selling stockholder may sell all, some or none of his or her shares of common stock, no estimate can be given as to the
number of shares of our common stock that will be held by a selling stockholder upon termination of the offering. Shares of o ur common stock
may be sold fro m time to time by the selling stockholders or by pledges, donees, transferees or other successors in interest.
The following table provides certain information with respect to the common stock owned by the selling stockholders who are e ntitled to
use this prospectus. The information in the table is as of the date of this prospectus. Except as described below, no selling shareholder has had a
material relationship with us within the past three years other than as a result of the ownership of our common stock.
The selling shareholders acquired their shares of common stock in one or mo re of the fo llo wing ways: (i) purchased as founders stock at
$0.001 per share; (ii) purchased at $0.05 per share; and (iii) by converting the Preferred Stock purchased in the private placement completed by
the Co mpany in 2007 into co mmon stock.
Beneficial
Ownership of
Common Stock
After Offering
Person with Common Stock No. % of
Name and Address of Selling Shareholder Dispositive/Voting Power Registered Hereby (1)
Class
Paul Attaway (2) (3)
Paul Attaway 50,600 0 *
Timothy Louis (4) (3)
Timothy Louis 10,600 0 *
Michael and Phyllis Angel ( 6 )
Michael Angel 5,600 0 *
Paul Anthony Axelrod ( 6 )
Paul Anthony Axelrod 5,600 0 *
James J. Cordello ( 6 )
James J. Cordello 5,600 0 *
Loretta S. Cowie ( 6 )
Loretta S. Cowie 5,600 0 *
Double Do wn Investments ( 6 )
Benjamin Benedict 5,600 0 *
Harvey Fried man ( 6 )
Harvey Fried man 5,600 0 *
Leonard and Deborah Gaby ( 6 )
Leonard Gaby 5,600 0 *
Ira J. Gaines ( 5 )
Ira J. Gaines 10,600 0 *
Jonathon Hoffer ( 6 )
Jonathan Hoffer 5,600 0 *
Thomas R. Hudson Jr. ( 6 )
Thomas R. Hudson Jr. 5,600 0 *
Jonathan Tratt Profit Sharing Plan ( 6 )
Jonathan Tratt 5,600 0 *
Lawrence Kazan ( 6 )
Lawrence Kazan 5,600 0 *
Lahr Family Trust ( 6 )
Lanny B. Lahr 5,600 0 *
Alan J. Light ( 6 )
Alan J. Light 5,600 0 *
Barry Light ( 6 )
Barry Light 5,600 0 *
Arturo and Sharon Lopez ( 6 )
Arturo Lopez 5,600 0 *
Winthrop L. McCormack ( 6 )
Winthrop L. McCormack 5,600 0 *
Anthony J. Perullo ( 6 )
Anthony J. Perullo 5,600 0 *
Joel Shapiro ( 6 )
Joel Shapiro 5,600 0 *
Steve and Helen Gubin Family Trust ( 6 )
Steve and Helen Gubin 5,600 0 *
Lawrence Sucharow ( 6 )
Lawrence Sucharow 10,600 0 *
Tappen Investments LLC ( 6 )
Darren M . Tappen 5,600 0 *
Robert Ho ward Taylo r ( 6 )
Robert Ho ward Taylo r 5,600 0 *
Total 200,000
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* indicates less than one percent.
(1) Percentages and share ownership numbers are based on the assumption that all such shares will be sold by the selling stockholder.
Excludes additional shares of common stock wh ich the selling stockholder may acquire fro m time to time subsequent to the date of this
prospectus.
(2) Mr. Attaway is an officer and a director.
(3) Shares purchased as founders stock at $0.001 per share.
(4) Mr. Louis is an officer and a director.
(5) Shares purchased at $0.05 per share.
(6) Shares of Preferred Stock purchased in 2007 private placement, which are convertible into shares of common stock.
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PLAN OF DISTRIB UTION
We are registering the shares of common stock covered by this prospectus for the selling stockholders. As used in this prospe ctus,
“selling stockholders” includes the pledgees, donees, transferees or others who may later hold the selling stockholders ’ interests. We will pay
the costs and fees of registering the shares of common stock, but the selling stockholders will pay any brokerage co mmissions , discounts or
other expenses relating to the sale of the shares.
We will receive none of the proceeds from the sale of these securities by the selling stockholders and we will bear certain expens es
incident to their reg istration. The selling security holders will in itially sell their shares of our common stock at a price of $0.15 per share. If the
shares of our common stock are quoted on the OTC Bu llet in Board or listed for trad ing or quoted on any other public market, t he selling
shareholders will sell their shares at the prevailing market prices or at privately negotiated p rices. Neither we nor any other party has applied
for listing or fo r quotation of our common stock on the OTC Bulletin Board or on any other public market. Certain of the sell in g shareholders
are our directors, officers and principal shareholders, who will be deemed underwriters in this offering.
The selling stockholders may sell the shares in the over-the-counter market or otherwise at market prices prevailing at the time of sale, at
prices related to the prevailing market prices, or at negotiated prices. In addition, the selling stockholders may sell some or all o f their shares
through:
• a block trade in which a bro ker-dealer may resell a portion of the block, as principal, in order to facilitate the transaction;
• purchases by a broker-dealer, as principal, and resale by the broker-dealer for its account; or
• ordinary brokerage transactions and transactions in which a broker solicits purchasers.
When selling the shares, the selling stockholders may enter into hedging transactions. For example, the selling stockholders may:
• enter into transactions involving short sales of the shares by broker-dealers;
• sell shares short themselves and redeliver such shares to close out their short positions;
• enter into option or other types of transactions that require the selling shareholder to deliver shares to a broker-dealer, who will
then resell or transfer the shares under this prospectus; or
• loan or pledge the shares to a broker-dealer, who may sell the loaned shares or, in the event of default, sell the pledged shares.
The selling stockholders may negotiate and pay broker-dealers co mmissions, discounts or concessions for their services. Broker -dealers
engaged by the selling stockholders may allo w other broker-dealers to participate in resales. However, the selling stockholders and any
broker-dealers involved in the sale or resale of the shares may qualify as “underwriters” within the mean ing of Section 2(a)(11) of the
Securities Act. In addit ion, the broker-dealers’ co mmissions, discounts or concession may qualify as underwriters’ co mpensation under the
Securities Act. If the selling stockholders qualify as “underwriters,” they will be subject to the prospectus delivery requirements of
Section 5(b )(2) o f the Securities Act. We have informed the selling stockholders that th e anti-manipulat ive provisions of Regulation M
promu lgated under the Securities Exchange Act of 1934 may apply to their sales in the market.
In addition to selling their shares under this prospectus, the selling stockholders may :
• agree to indemn ify any broker-dealer or agent against certain liabilit ies related to the selling of the shares, including liab ilities
arising under the Securities Act;
• transfer their shares in other ways not involving market makers or established trading markets, including direct ly by gift,
distribution, or other transfer; or
• sell their shares under Rule 144 of the Securities Act rather than under this prospectus, if the transaction meets the requirements of
Rule 144.
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DESCRIPTION OF S ECURITIES
We have issued and outstanding 896,000 shares of our common stock and 460,000 shares of our Preferred Stock as of October 31, 2008.
Common Stock
The Co mpany is authorized to issue up to 90,000,000 shares of common stock, no par value.
Holders of the co mmon stock are entitled to one vote for each share in the election of d irectors and in all other matters to be voted on by
the stockholders. There is cumu lative voting in the elect ion of directors. Holders of co mmon stock are entit led to receive su ch dividends as may
be declared fro m time to time by the Board of Directors out of funds legally available therefore and, in the event of liquidation, dissolution or
winding up of the Co mpany, to share ratably in all assets remain ing after pay ment of liabilities. The holders of co mmon stock have no
pre-emptive or conversion rights. The holders of common stock are not subject to further calls or assessments. There are no redemption or
sinking fund provisions applicable to the common stock. The rights of the holders of the common stock are subjec t to any rights that may be
fixed for holders of preferred stock, when and if any preferred stock is issued. The common stock currently outstanding is, a nd the common
stock offered by the Co mpany hereby will, when issued, be validly issued, fully paid and nonassessable.
Preferred Stock
The Co mpany is authorized to issue 10,000,000 shares of preferred stock, no par value, of which 460,000 shares are Series A P referred.
Any future issues of preferred stock may, without action by the stockholders of the Co mpan y, be issued by the Board of Direct ors fro m time to
time in one or more series for such consideration and with such relative rights, privileges and preferences as the Board may determine.
Accordingly, the Board has the power to fix the div idend rate and to establish the provisions, if any, relating to voting rights, redemption rate,
sinking fund, liquidation, preferences and conversion rights for any series of preferred stock issued in the future.
It is not possible to state the actual effect of any future series of preferred stock upon the rights of holders of the common stock because
the Board has the power to determine the specific rights of the holders of any future series of preferred stock. The Board ’s authority to issue
preferred stock provides a convenient vehicle in connection with possible acquisitions and other corporate purposes, but could have the effect
of making it more d ifficu lt for a third party to acquire a majority of the outstanding voting stock. Accordingly, the issuanc e of the preferred
stock may be used as an “anti-takeover” device without further action on the part of the stockholders of the Company, and may adversely affect
the holders of the common stock.
Series A Convertible Preferred Stock
The Co mpany issued 460,000 shares of Preferred Stock in a p rivate placement the Co mpany co mpleted in December 2007. The holders
of the Preferred Stock have pre-emptive rights, for a period of fifteen days after written notice of a proposed sale, to purchase any equity
securities on the same terms and conditions that the Company proposes to offer to third parties. If the holder fails to exercise his pre -emptive
right, he will lose such right on any future offerings. The pre-emptive rights will exp ire if the Co mpany becomes publicly held or commences
an initial public offering. Accordingly, the pre-empt ive rights will expire upon the effectiveness of this registration statement. The holders of
the Preferred Stock will share proportionately with the holders of any other series of preferred stock which may be issued in the future in any
distribution of assets of the Co mpany upon liquidation and with respect to payment of dividends on any series of preferred st ock outstanding.
The Co mpany has no present plans to issue any additional shares of preferred sto ck other than the Preferred Stock.
Dividend Rights. Holders of the Preferred Stock are elig ible to receive div idends, out of our assets that are legally availab le for the
payment of dividends when and as declared by our Board of Directors. Dividends on the Preferred Stock, when declared, will b e cumu lative.
No cash dividend may be declared and paid or set apart for payment with respect to the common stock until any past quarterly dividend or
cumulat ive accrued dividends on any outstanding series of preferred stock, including the Preferred Stock, has been fully paid o r declared and
set apart for payment and until any sinking fund obligation for redemption of any other series of preferred stock has been fu lly paid or declared
and set apart for payment. The d ividends on the Preferred Stock must be declared prior to declaration of any div idend on the common stock or
on any other series of preferred stock issued after the Preferred Stock. The holders of Preferred Stock will also receive any dividends declared
on the common stock as if they had converted their Preferred Stock into common stock immediately prio r to such event.
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As an Arizona corporation, we are permitted to declare and pay dividends only out of surplus or, if there is no surplus, out of the net
profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. To the extent no surplu s or net profits are availab le
for pay ment of dividends, no dividends may be paid by us on the Preferred Stock. Any dividends not paid will accrue. No inter est will be paid
on any accrued but unpaid dividends. There can be no assurance that we will have su fficient surplus or generate any or sufficient earnings to
pay dividends on the Preferred Stock. The ability to pay dividends will, in addit ion to our ability to generate net income, b e d ictated by the
amount of our annual net inco me fro m year to year. We may not generate net income fro m our operations for a period of t ime, which will affect
the amount of the dividends paid, if any.
If the Preferred Stock is redeemed prior to the end of a fiscal year, the holders of the Preferred Stock will receive any div idend declared
and accrued but unpaid based upon the proportion of the fiscal year the Preferred Stock was outstanding.
Conversion at Option of the Company. If we have an effect ive registration statement with respect to the common stock underlying the
shares of Preferred Stock, the Co mpany can require the holders of the shares of Preferred Stock to convert them into common stock upon ten
days written notice given to the holders and without any further action on the part of the holders.
Voting Rights. The holders of the Preferred Stock are entitled to vote on any matter submitted to the holders of our common stock. The
holders of Preferred Stock will have the same number of votes on such matters as if they had converted their Preferred Stock into common
stock. In addit ion, the holders of the Preferred Stock will have the right to vote on certain matters affecting the rights of holder s of Preferred
Stock. The affirmat ive vote of the holders of a majo rity of the outstanding shares of Preferred Stock, together wit h the holders of any shares of
any other series of preferred stock outstanding, voting as a class, is required in order to authorize any amendment to our Ar ticles of
Incorporation or bylaws wh ich would affect adversely the holders of the preferred stock ou tstanding or to authorize any additio nal class of
stock equal to, senior to, or ranking prior to the outstanding Preferred Stock with respect to dividends or distributions of assets on liquidation.
The affirmat ive vote of the majority of the outstanding sh ares of Preferred Stock, voting separately, is required to amend our Articles of
Incorporation, bylaws or the resolutions establishing the terms of the Preferred Stock so as to affect adversely the rights, powers or preferences
of the Preferred Stock including, without limitation, any action that would (i) increase or decrease the par value of the Preferred Stock;
(ii) effect an exchange, reclassificat ion or cancellation of all or part of the Preferred Stock; (iii) effect an exchange, or create a right of
exchange, of all or any part of the shares of another class into the Preferred Stock; (iv) change shares of Preferred Stock into the same or a
different number of shares of Preferred Stock, either with or without par value, of the same class or another clas s or classes; or (v) cancel or
otherwise affect div idends on the Preferred Stock which have accrued but have not been declared. The creation or issuance of any other series
of existing authorized preferred stock ranking on a parity with the Preferred Stock as to dividends or distribution of assets on liquidation shall
not be deemed to adversely affect the rights of the Preferred Stock, but any increase in the amount of authorized preferred s tock or creation of a
new class of preferred stock ranking superior in rights and privileges to the Preferred Stock shall be considered to adversely affect the rights of
the Preferred Stock. The Preferred Stock will be entit led to vote as a class, together with the holders of any shares of any other series of
preferred stock outstanding, on any additional matters required to be submitted to a vote of our shareholders by Arizona law.
Company’s Option to Redeem . Subject to the terms of this paragraph, we may redeem the Preferred Stock, in whole or in part, on or after
the second anniversary of the date of our issuance of the Preferred Stock plus all accrued but unpaid dividends on the following b asis:
$.30 per share of Preferred Stock if redeemed on or after the second anniversary of the date of issuance;
$.35 per share of Preferred Stock if redeemed on or after the third anniversary of the date of issuance; and
$.40 per share of Preferred Stock if redeemed on or after the fourth anniversary of the date of issuance.
If we offer to redeem all or part of a holder’s shares of Preferred Stock, the holder will have the option, for a period of 30 days, to decide
whether to accept the redemption or to convert all or part of h is shares of Preferred Stock into shares of common stock. If fewer than all shares
of Preferred Stock are to be redeemed, the shares of Preferred Stock to be redeemed shall be determined on a pro rata basis. The Preferred
Stock is not subject to mandatory redemption, sinking fund or similar provisions on our part. Shares of Preferred Stock that are redeemed shall
assume the status of authorized but unissued Preferred Stock. We may only offer to redeem the shares of Preferred Stock if (i ) we have not
succeeded in having a registration statement declared effective by the SEC with respect to the common s tock underlying the shares of Preferred
Stock, or (ii) a liquidity event has occurred, such as a merger, reorganization, acquisition or sale of all or substantially all of our assets to a third
party.
Under Arizona law, the shares of Preferred Stock may not be redeemed when our capital is impaired or such redemption would cause an
impairment of our cap ital, except that we may purchase or redeem out of our capital any of our own shares, such as the Prefer red Stock, which
are entitled upon any distribution of our assets, whether by dividend or in liquidation, to a preference over another class or series of our stock if
such shares of Preferred Stock are retired upon their acquisition and our capital is reduced. In addit ion, in the event that any quarterly d ividend
due on the Preferred Stock is in default, and until all such defaults are cured, we
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may not redeem any shares of Preferred Stock unless all outstanding shares of such series are simultaneously redeemed and may not purchase
or acquire any Preferred Stock except in accordance with a purchase offer made by us on the same terms to all holders of such series. We will
pay any accrued but unpaid dividends with respect to the shares of Preferred Stock at the time we pay the foregoing redemptio n prices for the
shares of Preferred Stock
Registration Rights. We have agreed to file a registration statement to register the shares of common stock issuable upon conversion of
the shares of Preferred Stock to the extent possible under the Securit ies Act and applicable states securities laws. We will maintain the
effectiveness of the registration statement, at our sole cost and expense, for a period of one year after its effect ive date, and will amend or
supplement the registration statement as required by law and as necessary to keep it and the prospectus portion thereof fro m containing any
untrue statements of material fact or o mitting to state a material fact required to be stated therein or necessary to make the statements there in
not mislead ing, in order to facilitate the conversion by the holders of their Preferred Stock into shares of common stock.
Liquidation Preference . In the event of a voluntary or involuntary liquidation or winding up, the holders of Preferred Stock will be
entitled to receive out of our assets available for distribution to shareholders $.25 per share of Preferred Stock, plus all accrued and unpaid
dividends before any distribution is made to the holders of common stock or any other class or series of preferred stock wh ic h we issue
subsequent to the issuance of the Preferred Stock as to distribution of assets. The holders of the Pre ferred Stock will share ratably with the
holders of any other series of preferred stock in any distribution of our other assets. No payment on account of such liquida tion or a dissolution
or winding up of our affairs shall be made to the holders of any class or series of stock ranking on a parity with the Preferred Stock in respect of
the distribution of assets, unless there shall likewise be paid at the same t ime to the holders of the Preferred Stock like p roportio nate distributive
amounts, ratably, in proportion to the full d istributive amounts to which they and the holders of such parity stock are respectively entitled with
respect to such preferential d istribution. After pay ment of the full amount of the liquidating distribution to which they are entit led, the holders
of Preferred Stock will not be entitled to any further participation in any distribution of assets by us. These liquidation rights shall not be
operative in the event of (i) any consolidation or merger of us with or into any other corporatio n, (ii) any dissolution, liquidatio n, winding up or
reorganizat ion of us immed iately fo llowed by reincorporation of a successor corporation or creation of a successor partnership, or (iii) a sale or
other disposition of all or substantially all of our assets to another corporation or a partnership if, in each case, effect ive provision is made in
the certificate of incorporation of the resulting or surviv ing corporation or the articles of partnership of the resulting pa rtnership or otherwise,
for the protection of the rights of the holders of the Preferred Stock.
Board of Directors
The board of directors of the Co mpany consists of two members. The term of office of each director exp ires at each annual mee ting of
stockholders or until his successor is elected.
Transfer Agent
The Co mpany has effected transfers of its common stock and Preferred Stock. The Co mpany will appoint First American Stock Tra nsfer,
Inc., 706 E. Bell Road, Suite 202, Phoenix, A rizona 85022, as its transfer agent effective upon the date of this Prospectus.
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INTER ES T OF NAMED EXPERTS AND COUNS EL
The financial statements for the fiscal years ended December 31, 2007 and 2006 included in this prospectus have been audited by Semp le,
Marchal & Cooper, LLP, an independent registered public accounting firm, which report expresses an unqualified opinion a nd includes an
explanatory paragraph relating to the Co mpany’s ability to continue as a going concern and are included in reliance upon such report and upon
the authority of such firm as experts in accounting and auditing.
The legality of the securities offered hereby have been passed upon for the Co mpany by Quarles & Brady LLP, Two North Cen tral
Avenue, Phoenix, Arizona 85004. Christian J. Hoffmann, III, a partner of such firm, is one of the Co mpany ’s principal stockholders.
DESCRIPTION OF B US INESS
Introduction
In the first quarter of 2000, True Grav ity Enterprises, Inc. (“TGE”), our former parent company and the licensor of our products to us,
became aware of the demand for vibrat ion isolation products in the high -end audio and video market. TGE designs and manufactures vibration
isolation devices for use in high-end applications. These products are sold through a wholly -o wned subsidiary called Vistek Inc. In response to
the demand, TGE developed a bearing called the Media Isolation Bearing Series 1.0 (the “MIB 1.0”). In August 2001, TGE incorporated us as
its wholly-o wned subsidiary to promote the sale of Aurios MIB products. We ceased being a wholly -o wned subsidiary of TGE in June 2007
and TGE ceased being a shareholder of the Co mpany on December 31, 2007.
Since 2001 and the development of the MIB 1.0, we have refined the product design and manufacturing processes. As a result, w e
introduced the Series MIB 1.1, the Series MIB 1.2, the Isotone and the PRO Media Isolation Bearings.
Our experience has led us to select three bearings, the Classic MIB, the Isotone MIB, and the PRO M IB, as our products. The Classic
MIB and the PRO MIB bearings may be aug mented with an additional level of isolation that is placed on top of these bearings.
Our annual sales have declined fro m appro ximately $255,000, on an unaudited basis, to current levels. The init ial downward tr end in
sales was due to a poor working relationship with our first distributor. Payment fro m 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 wer e not successful.
The next d istributor we selected was too small to sell a large quantity of product. By mid -2004, we only had one distributor, located in
Chicago, with who m we continue to work. We have done little to support the product line since 2004 due to a lack of resources .
Business Strategy
We believe we can increase the sales of our products through a three-pronged strategy. First, we intend to introduce and promote new
products to keep the Aurios name and products prominent in the audiophile market, wh ich includes the home theater market. Sec ond, we plan
to promote sales of our products on-line with a new web site to capitalize on the popularity of social networks and on-line sales promotional
tools. Finally, we plan to strengthen our distributor network both domestically and internationally.
We will emp loy our business strategy at low cost in an effort to preserve our capital. We plan to utilize strategic partnerships with outside
vendors under which they would provide their services at a co mpetitive fee or earn their fee as a percentage of a transaction . If we utilize the
latter approach, we will not incur any cos ts until we make a sale.
New Product Development. We intend to introduce one or two new products into the audiophile market. By introducing new products, we
aim to maintain our position as a product leader and innovator in the audiophile market. The two ne w products include a speaker shelf
incorporating Aurios bearings and a speaker tune-mass-damper.
The shelf product incorporates four bearings, and will be protected by the patent we license fro m TGE. The shelf will be positio ned on
the floor and provide the same level of isolation as our bearings product. TGE developed the initial prototype and, based on our tests, it has
proven effective at isolating sensitive components from vibrat ions. We have asked TGE to make some cos metic changes to the sh elf to achieve
the aesthetic look and feel required and expected in the high -end audio-video market. TGE has committed to delivering the next prototype by
the end of November 2008.
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The speaker tune-mass-damper is designed to be placed on top of a speaker. A tune -mass -damper p revents unwanted resonance by
tuning a structure off its own natural frequency. Our tune -mass-damper will incorporate the patented technology we license from TGE. The
initial p rototypes of the tune-mass-damper have been developed. Our next step is to design and develop the packaging for the
tune-mass-damper. We intend for the final product development of the tune-mass-damper to be co mplete by the end of November 2008.
We plan to deliver samples of the two new products to Stereophile magazine and other audiophile focused print and online mag a zines for
their rev iew. These med ia outlets regularly review products and can help build interest and demand for a product. Our goal is to have reviews
and products available for the 2008 Christmas shopping season and the large tradeshows in 2009.
TGE manufactured the prototypes for our two new products as part of its obligation under our management fee arrangement. W e incur no
expenses until the final products are finished, then we purchase components for the manufacture of finished products for resa le and as samples
for product reviewers, such as Stereophile magazine and other media outlets as discussed above. Consequently, we can develop these new
products at min imal cost. We anticipate spending approximately $2,500 on samp les of our two new products. In addition, we wil l spend
approximately $2,500 on inventory for the new products so we have product readily available for res ale.
On-line Marketing . We intend to develop a new web page. To acco mplish this task, we selected a website developer, Gatesix Inc.,
located in Phoenix, Arizona. The web page will emp loy the latest flash technology giving the web page a more current look and feel. The web
page currently utilizes a revolutionary shopping cart developed by Ustrive2, Inc. (“Ustrive2”). Ustrive2 develops innovative on-line selling
tools. The shopping cart on our web page was developed with Ustrive2 technology on display at www.cartfly.co m . The shopping cart is unique
because it can be easily embedded into other web pages, including the social networking sites such as Facebook and MySpace.
Since our on-line store (the shopping cart) can be embedded in an infinite nu mber of sites, we intend to develop an affiliate program.
Under this program, we will arrange for individuals and co mpanies to embed the Aurios shopping cart on their web pages. When a purchase is
made at our store, we will share a portion of our net profits with such individual or co mpany. Ustrive2 is finalizing the technology required to
make our affiliate program function and it intends the technology to be complete by the end of November 2008.
We anticipate investing approximately $7,500 on a new web page. The tech nology that Ustrive2 is developing is made available at no
initial cost to users, like us. Ustrive2 earns a transactional fee when we make a sale utilizing one of its tools. Therefore, we can emp loy these
new tools at little to no cost to us.
Strengthened Distribution. We intend to identify strong, high-end brick and mortar distributors within the major metropolitan regions in
the United States and provide these distributors with aggressive pricing to give them incentive to embed our shopping carts o n their web sites.
Through integrating our on-line sales and marketing approach with that of our distributors, our distributors will continue to market our products
without fear that potential customers can simply by-pass them and purchase directly fro m us. Recently we engaged a distributor in the
Netherlands (Music Matters, www.music-matters.org ). Sales fro m th is distributor have been steady and are expected to grow in the second half
of 2009 in response to the distributor’s independent advertising. We can negotiate distributions agreements telephonically and through the
exchange of documents on-line. Thus, we can manage our relationship with the distributor in the Netherlands without incurring travel costs.
Market and Industry Overview
The market for audio co mponent vibration isolation products is audiophiles. While audiophiles may be relat ively few in nu mber when
compared to the general public, they are typically high income, college educated, professionals who are willing to pay a prem iu m for even the
slightest improvement in sound and video quality.
The market for audiophile accessories is limited by the number of audiophiles. These customers tend to want the best and most current
product available. After a few years on the market, a new accessory or product ceases to be “new” and then the product cannot command the
same premiu m. In this type of market, manufacturers must either transition the product into the broader mass market or contin ually introduce
new products or variations on previous products to maintain their reputation as being innovative and on the cutting -edge of technology.
The demand for high performance entertain ment electronics is fueled by the consumer ’s desire for a more realistic and involvin g sound
experience when watching television, mov ies or when listening to music. The h igher resolution, range and dynamic power of contemporary
consumer’s audio and video systems reveal critical sound subtleties that were masked by older technologies. We believe that consumers are
demanding products capable of providing a more fulfilling audio experience and are searching for
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products that can deliver movie theater quality and mo re authentic sound to their home theaters. This demand and interest in sound quality has
lead to new product development in the industry aimed at assisting the consumer secure the desired heightened entertainment e xperience. We
believe that we can tap the growing ho me theater market to in crease sales of our products as consumers demand larger, better quality screens
and theater-quality sound for their home theaters.
Isolating entertainment media sources, such as CD p layers, turntables, DVD/ Laserdisc video players, speakers, amplifiers and
high-resolution televisions, fro m vibrat ions improves the quality of sound reproduction. While sound reproduction is enhanced thro ugh
reducing the transmission of vibrations from the environ ment into the audio component, a significant benefit also results from removing the
vibration energy created by these audio components that would otherwise reverberate and distort sound reproduction.
Our Technol ogy
Most vibration isolation products on the market today deal with the problem o f vibrat ion by dampening the v ibration energy. In
dampening the vibration energy, such energy is converted to heat and this energy conversion dampens the vibrations and alters the reproduced
sound. The effect is a softening of the sound and is analogous to the effect a filter on a came ra would have on the picture qualit y of a
photograph.
Our technology conserves energy and does not convert the energy to heat. By conserving energy, the vibrations are removed and the
sound quality is sharpened, not softened. To the audiophile, the sharpen ing effect produces a truer sound than sound reproduced with the sound
dampening products on the market.
The Products
We offer three Media Isolation Bearings: the Aurios Pro Max Media Isolation Bearing, the Aurios Classic Media Isolation Bearing and
the Aurios Isotone Media Isolation Bearing. We sell the last of the foregoing products to one distributor and it is a variation of t he Classic
Bearing. The manner in which the bearings alter body wave transmissions is a function of material selection, surface ha rness, and material
volume, to name just a few of the parameters that will impact how the sound/image is reproduced.
The Pro Max replaces the Aurios Pro bearing, and is engineered to offer the same performance and at an attractive wholesale p rice: $250
to $395 at the wholesale level for a package of three. The size of the Pro Max is approximately one inch high and two and one -half inches in
diameter. The Pro Max:
• re-configures the effective mass of the original Pro bearing and adds 2% more mass to the critical wave pathway;
• reduces the critical surface contact areas by 25%, thus enhancing the level of decoupling; and
• reduces costs through its new symmetrical design.
The Pro Max 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 can be used under DVD/ CD players, amps , preamps,
turntables and power conditioners.
The Aurios Classic Media Isolation Bearing lacks the girth of the Pro Max bearings. This slimmed down model is the most popular
bearing in the Aurios product line. These bearings are also placed under amps, preamps, CD/ DVD p layers, turntables, spea kers and power
conditioners. The price of the Classic is fro m $99 to $199 on a wholesale basis for a bo x of three. The size of the Classic is appro ximately one
inch high and one and one-half inches in diameter.
License Agreement
TGE holds the patents respecting our products in the United States and Taiwan. An application is pending in Japan. TGE also h olds a
federally registered trademark respecting the “Aurios” name used in connection with the products. We have a non -exclusive worldwide license
fro m TGE to produce the Aurios Pro Max Med ia Isolation Bearing, Aurios Classic Media Isolation Bearing and the Aurios Isotone Media
Isolation Bearing, and to sell these products under the Aurios name. We pay a royalty of 5% of our net sales to TGE for this license, with a
minimu m annual royalty of $2,500. Th is license with TGE automatically renews every two years as long as total royalty payment s exceed
$2,500 each year, unless we do not pay TGE the minimu m annual royalty or unless the agree ment is terminated: (i) due to a material breach
that is not cured within 60 days of notice of such breach; (ii) by written statement by one of the parties of such party’s inability or
unwillingness to perform pursuant to the terms and conditions of the license agreement; or (iii) due to a change of control or ownership or
control of one party by or to any third party who is a competitor of the other party.
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Sales and Marketing
Historical Review
Fro m the early stages of our product development fro m the first quarter 2000 t hrough 2002, we sold our product through a single master
distributor. This distributor was responsible for advertising, delivering samp les to influential product reviewers and sellin g the product
downstream. This single distributor would select regional storefronts through which the product would be re-sold. We supported this distributor
with a web site and a limited number of samples.
The relationship with this distributor deteriorated as a result of slow payment and non -payment by the distributor’s customers. Beginning
in 2003, we sold our product directly wh ile we searched for a new d istributor. Sales were made to resellers within in the Un ited States.
In the second quarter 2003, we selected a new national d istributor. Unfortunately, this distributor was too small and could not purchase a
sufficiently large volu me o f our product to justify the discounted price we were offering it. Therefore, in the second quarte r 2004, we
terminated our relationship with this distributor and abandoned our approach of using a single master distributor.
Since the second quarter 2004, we have sold to a variety of resellers and end users. In every instance, the price charged is a function of
the volume purchased. Consequently, resellers buying in volu me will pay a lower price t han an end user purchasing product for his needs only.
In the second quarter 2004, we only had one distributor, located in Chicago, with whom we continue to work. While we have d on e little to
support the product line since 2004 through late 2007 due to lack o f resources, we have added a few foreign distributors through which we have
received intermittent sales. Sales outside the Unites States constitute approximately 20% o f total sales.
New Sales and Marketing Strategy
The funds we raised in 2007 will allo w us to reinvigorate our approach to marketing. We will now employ a strategy of developing an
online sales and marketing approach that will be integrated with that of a strengthened distributor network. The introduction of new products
will bring new v isibility to the Co mpany.
As with most markets, the internet impacted the audiophile market tremendously. Before the internet, manufacturers typically distributed
their products through brick-and-mortar storefronts that primarily sold high-end, specialty stereo systems. Stores were encouraged to carry an
inventory of products so they could quickly service their customers. A manufacturer could conceivably sell to thousands of sp ecialty stores.
Initially, the internet made it difficult to bring audio products to the market through storefronts because these stores would not carry
inventory. The storefronts would only carry a samp le of the product and then place orders as needed. This distribution structure evolved
because audiophiles could purchase audio accessories either directly fro m the manufacturer online or fro m internet based companies with little
overhead, and therefore, pay a lower price for the product. Consequently, it was not practical to support a network of storef ronts because the
distributors were reluctant to support a product if they feared the manufacturer could easily go around them with online sales through the
company’s web page.
Consequently, in the early stages of the internet, storefronts (aka “the middleman”) were threatened by the internet. The storefronts that
survived did so by selling expertise. The internet brought an explosion of smaller manufacturers to the market. The middleman became the
trusted advisor that an audiophile could turn to for help in distilling all the info rmation regard ing the products offered in the audiophile market.
Furthermore, in-ho me audio/video systems have become very comp licated and support beyond installation is now often required.
The role of the storefront as the trusted advisor was enhanced by the popularity of blogs and other “social networking” websites that have
developed as the internet has evolved from a static source of information to a dynamic, o rganic mediu m for the exchange of in format ion. Over
the last several years, we believe that the internet experienced a paradig m shift. In the internet’s infancy, in formation online was created,
controlled and pushed from one side of the web to its users. We believe that the internet has evolved into an entirely differ ent environment
coined “Web 2.0.” In the current Web 2.0 world, websites are dynamic, non-static and many are built on the contributions of millions of
participants. This content developed by those who do not own the web site is called user-generated-content or “UGC.”
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Social networks, b logs and other UGC sites have provided the most dynamic new aspects of this Web 2.0 wo rld. According to Dow Jones
Newswires article “Facebook Surpasses MySpace To Become Social-Networking King” dated August 13, 2008, “[t]he nu mber of
social-network users grew 9% in North A merica but leapt 25% g lobally to 580.5 million people.” With the explosion of the “social web”
environment, millions of people now network, bro wse content and build extensive online contacts.
The “social web” is comprised of internet users who want to communicate quickly with large audiences. As a result, social networking
has completely altered the way online informat ion and med ia is exchanged. Furthermore, s mall budget merchants that embrace blogging and
social networking can build ext remely effective advertising campaigns. These marketing campaigns are referred to as “viral” campaigns.
We intend to capitalize on these changes and have developed a new web page. We plan t o have our web page employ various social
networking features by the end of November 2008. Specifically, our web page utilizes a viral shopping cart that can be shared and embedded
on any web page. We plan to build an affiliate program with popular persona l profile destinations on websites, such as MySpace and Facebook.
We intend to share the net profits we receive with the indiv iduals and companies when we sell our product through their web p ages.
We plan to have our web page host one or more blogs authored and maintained by individuals who carry in fluence within the audio/video
market. We will receive the benefit of traffic to the blog and the blogger receives the benefit of traffic to our web site. Hosting a blog is a
low-cost method we intend to emp loy to draw traffic to our web site.
We intend to integrate our website with those of our distributors by embedding our shopping cart on the distributors ’ websites. When a
sale of our product is made through one of such websites, we will pay the distributor a fee based on a percent of the transaction amount for
allo wing placement of our shopping cart on the distributor’s website. We will carry out the order fu lfillment function.
Competiti on
There are nu merous other companies, includ ing Kinetics Systems, Inc., Bright Star, Audioquest, Final Labs and Symposium, that are
engaged in the business of manufacturing or selling vibration isolation products. Many of these companies have substantially greater resources
than we do and enjoy established production facilities and processes, market presence, distribution networks and market share. It is likely that
any or all of these other companies are in the process of, and have allocated substantially more resources in, developing the ir own products that
are or would be co mpetitive with our products.
The isolation products available include rubber feet, conical metal feet, constrained layer shelving, air isolation platforms , corkboards,
and various roller bearing products. The companies selling these products range fro m national manufacturers of air isolation bearings and tables
to small proprietorships.
The following summarizes certain of the principal co mpetitive products available:
Townshend Audio Seismic Sinks: Pneumatic (passive) platform, wh ich is a constrained layer of a co mposite of steel and Isodamp
rubber. It uses air bladders to cut the transmission of vertical vibrat ions.
Vibrap lane Platform: Manufactured by Kinetics Systems, Inc. and sold by Sounds of Silence, which is in Nashua,
New Hampshire.
Bright Star: Wood platforms resting on a sand-filled base. The product dampens the energy, but does not
convert it.
Audioquest: A variety of cone and ball shaped feet manufactured by Sorbethane.
Final Labs: Japanese company that manufactures the Daruma roller bearing. It sells in the United States
market through an importer in M iami.
Symposiu m Roller Blocks: This is a very small Un ited States company with a roller -type bearing product. Applications are
limited by weight carry ing capacity of bearing and construction.
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Patents
TGE filed fo r patent protection in Japan (Patent Application Nu mber 2002-507194), and TGE o wns the following patents on an invention
titled “Mechanical Signal Filter” wh ich protect the Aurios Pro Max and Aurios Classic Media Isolation Bearings. TGE filed for patent
protection in Japan (Patent Application Nu mber 2002-507194), and TGE o wns the following patents on an invention titled “Mechanical Signal
Filter” which protect the Aurios Pro Max and Aurios Classic Media Isolation Bearings.
Country Patent Number Date Filed Date Issued Expiration Date
USA 6,520,283 6/29/2001 2/18/2003 6/29/2021
Taiwan I235798 6/29/2001 4/14/2005 6/29/2021
Under our license agreement with TGE, TGE has the right to enforce and defend the patents from infringement and to bear the a ssociated
costs. There can be no assurance that any of TGE’s pending or future patent applications will be issued with the scope of the claim sought, if at
all. There also can be no assurance that any patents TGE may obtain will not be invalidated, circu mvented or challenged. Furt hermore, there
can be no assurance that others will not develop technologies that are similar or superior to TGE’s technology or design around any patents it
owns. Unauthorized parties may attempt to copy aspects of the Aurios products or to obtain or use information that we or TGE regard as
proprietary. In addit ion, the laws of some foreign countries do not p rotect patent rights as fully as do the laws of the United States. There can be
no assurance that TGE’s means of protecting the foregoing proprietary rights in the United States or abroad will be adequate or that others will
not independently develop similar or superior technology.
Empl oyees
We have no employees. We plan to outsource our principal functions until we ach ieve a scale that requires us to reconsider th is business
model. TGE provides ad min istrative support and personnel to us at $1,500 per month under an admin istration services/rental ag reement that
expires on December 31, 2008.
DESCRIPTION OF PROPERTY
TGE provides office space to us as needed and the monthly administrative fee we pay to it includes a charge for our rent. We sublease
approximately 500 square feet space from TGE in a 12,120 square foot facility located in Phoenix, Arizona and ca n expand such space up to an
additional 1,000 square feet.
Subsequent to December 31, 2007, we relocated our office space. Our executive office consists of approximately 500 square feet and is
located at 1741 W. University Drive, Su ite 146, Tempe, AZ 85281 . Th is office space is provided to us by TGE as needed and the $1,500
monthly ad min istrative fee we pay to it includes a charge for our rent.
LEGAL PROCEEDINGS
We are not involved in any pending litigation, legal proceedings or claims.
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MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUIT Y
AND RELATED STOCKHOLDER MATTERS
There is no public market for our co mmon stock. We intend to have our common stock included for trading on the OTC Bu llet in Board,
provided that we can have a market maker file an applicat ion on our behalf, o r other public market after the registration statement, of wh ich this
prospectus is a part, becomes effective.
The selling security holders will sell their shares of our common stock at $0.15 per share. If eventually our co mmon stock is listed on the
OTC Bulletin Board or on any other public market, the selling shareholders will sell their shares at the prevailing market prices or at privately
negotiated prices. There can be no assurance that we will find a market maker to file an applicat ion to include our co mmon stock in the OTC
Bulletin Board.
None of the issued and outstanding shares of our common stock is subject to options or warrants. Our Preferred Stock is conve rtible into
our common stock. As of October 31, 2008, there were 896,000 shares of our common stock outstanding and 460,000 shares of Preferred stock
that is convertible into 460,000 shares of common stock. We are registering 77,200 shares of our outstanding common stock and 122,800
shares of common stock issuable upon the conversion of the Preferred Stock in this registration statement.
Holders of Common Stock and Preferred Stock
We had approximately 26 shareholders of record of our co mmon stock and Preferred Stock as of October 31, 2008.
Dividend Policy
We have not declared or paid cash dividends on our shares of common stock. The holders of the shares of common stock purchased
pursuant to this prospectus will be entitled to non-cumu lative div idends on the shares of common stock, when and as declared by our board of
directors, in its discretion. We intend to retain all future earn ings, if any, for our business and do not anticipate paying cash dividends in the
foreseeable future.
Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our
financial condition, results of operations, capital requirements, general business conditions and such other factors as our board of directors
may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth certain information regarding the Co mpany ’s equity compensation plans as of December 31, 2007.
No. of securities to
be issued
upon exercise of Weighted average No. of securities
outstanding exercise price of remaining available
options, outstanding for future issuance
warrants options, warrants under equity
Plan category and rights and rights compensation plans
Equity co mpensation plans approved by stockholders 250,000 $ -0- 250,000
Equity co mpensation plans not approved by stockholders -0- -0- -0-
Total 250,000 $ -0- 250,000
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MANAGEMENT’S DIS CUSSION AND ANALYS IS OF FINANCIAL CONDITION
AND RES ULTS OF OPERATION
The following discussion should be read in conjunction with our Financial Statements and notes thereto appearing elsewhere in this
registration statement. The follo wing d iscussion contains forward -looking statements, including, but not limited to, statemen ts concerning our
plans, anticipated expenditures, the need for additional capital and other events and circu mstances described in terms of our exp ectations and
intentions. You are urged to review the informat ion set forth under the captions for factors th at may cause actual events or results to differ
materially fro m those discussed below.
Overview
We were formed in August 2001 by our former parent, TGE. Our corporate offices are located at 1741 W. Un iversity Drive, Suite 146,
Tempe, Arizona 85281 and our telephone number is (602) 426-1211.
We produce, market and distribute vibration isolation products to the high -end audio and video markets in the Un ited States and in certain
foreign countries. Our products are the Classic MIB, the PRO MIB and the Isotone.
Our vib ration isolation products produce superior sound quality by sharpening, not softening, the sound. Our products are pro tected by
patents both in the United States and Taiwan, and a patent is pending in Japan. TGE owns the patents relating to our pro ducts and it has granted
us a non-exclusive world-wide license to sell the products under the patents and to use the Aurios trademark in connection with the products.
The license automatically renews for every t wo years as long as we are in co mp liance with its terms. We pay TGE a royalty of 5% of our net
sales for the license. Our minimu m royalty pay ment under the license is $2,500 per year. We outsource the manufacture of our products to
several qualified machine shops in the Phoenix metropolitan area.
For the Six Months E nded June 30, 2008
Liquidity and Capital Resources. Our auditors have rendered a going concern opinion. We provided for our cash requirements in the first
and second quarter of 2008 through a combination of operating income and through capital we raised in 2007 through the sale o f Preferred
Stock in a private placement, yielding $115,000 in gross proceeds. We believe these proceeds will provide us sufficient capital to operate
without requiring us to raise additional capital in the next eighteen months. To meet our need for cash in the future, we wil l use our cash
reserves and we intend to generate operating income, through which we expect to generate positive cash flow. Positive cash flo w will be
realized by increasing our annual revenues to $100,000 between Ju ly 1, 2008 and June 30, 2009. We do not anticipate we will have any large
capital requirements over the next twelve to twenty-four months because we have already incurred and paid most of the expenses related to our
new product development and our public registration. In addit ion, our vendors will manu facture small quantities of our products quickly and
charge us the same lower prices as we would be charged for larger orders. Therefore, with this arrangement with our vendors, we can place
smaller orders with our vendors and will not have to incur the cost of surplus inventory. If these sources are insufficient to meet our cash needs,
then we will be required to raise capital through private placements or public offerings of our debt and equity securities or through loans from
third parties. If we are unable to raise additional cap ital as necessary, we will either have to suspend or contract operations or cease operations
entirely.
As of June 30, 2008, we had working capital of $74,883 and $44,121 of long -term debt (unaudited).
Results From Operations
Revenues - Since our inception, our activities have focused on product and market development with a no minal level of operations.
Revenues for the six months ended June 30, 2008 and June 30, 2007 were $7,067 and $17,613, respectively. We do not believe the decrease in
revenues is indicative of an overall lo wer level of interest in our products, but instead, we believe this is the result of o ur distrib utors placing
fewer large orders in order to carry s maller inventory. Because our distributors desire to carry lower inventory, we must pro mote sales to the
end user through advertising in order to increase our revenues. Our new web page was launched on October 31, 2008 and we p lan to begin our
internet based advertising efforts in the fourth quarter of 2008. Such efforts are designed to create end user demand.
Cost of Sales - The cost of sales on units sold for the six months ended June 30, 2008 totaled $4,188 (59% of revenues) on the products,
as compared to $9,866 (56% of revenues) for the six months ended June 30, 2007. The cost of sales for the six months ended June 30, 2008
was lower than for the same period in 2007 due to declining sales.
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Gross Margin - Gross margin for the six months ended June 30, 2008 was $2,879 (40% of revenues) as compared to $7,747 (43% of
revenues) for the six months ended June 30, 2007.
Operating Expenses
All selling and operating expenses, as well as research and development expenses, are incurred through a contractual relat ion ship with
TGE. TGE performs these services under an administrative services agreement with us. These expenses were $9,000 in the si x months ended
June 30, 2008 and 2007. In the six months ended June 30, 2008, we had additional expenses consisting of legal expenses of $30,315,
accounting expenses of $19,612 and other expenses of $2,892 related to preparing us to become publicly held. In the quarter en ded six months
ended June 30, 2007, we had no additional expenses.
Interest Expense
Interest expense was $1,970 and $1,820 for the six months ended June 30, 2008 and 2007, respectively, an increase of $150. Th e interest
expense increased for the six months ended June 30, 2008 because the interest was compounded.
Income Tax Provision
The Co mpany had no tax provision for the six months ended June 30, 2008 and 2007 due to the uncertainty of the utilizat ion of the net
operating loss.
Net Loss As a result of the above, for the six months ended June 30, 2008 and 2007, we recorded net loss of $58,985 and $3,109,
respectively, a decrease of $55,876.
Basic and Diluted Loss per Share. The basic and diluted loss per share were $0.07 and $0.04 for the six months ended June 30, 2008 and
2007, respectively, for the reasons previously noted.
Capital Commitments
We had no material co mmit ments for capital expenditures.
For the Years Ended December 31, 2007 and 2006
Results From Operations
Revenues - Since our inception, our activities have focused on product and market development with a no minal level of operations.
Revenues for the year ended December 31, 2007 and December 31, 2006 were $23,686 and $52,067, respectively. Sales declin ed as a result of
lack of capital and reduced promotional efforts.
Cost of Sales - The cost of sales on units sold for the year ended December 31, 2007 totaled $11,132 (47% of revenues) on the products,
as compared to $23,195 (45% of revenues) for the year ended December 31, 2006. Cost of sales on a percentage of revenues increased due to a
lower volu me of product sales and lower economies of scale.
Gross Margin - Gross margin for the year ended December 31, 2007 was $12,554 (53% of revenues) as compared to $28,872 (55% of
revenues) for the year ended December 31, 2006.
Operating Expenses
All selling and operating expenses, as well as research and development expenses, are incurred through a contractual relat ion ship with
TGE. TGE performs these services under an administrative services agreement with us. These expenses were $18,000 in both 2007 and 2006.
In 2007, we had additional expenses consisting of legal expenses of $5,049, accounting expenses of $1,870 and other expenses of $149 related
to preparing us to make a private placement and become publicly held. In 2006, we had no additional expenses.
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Interest Expense
Interest expense was $3,640 and $0 fo r the years ended December 31, 2007 and 2006, respectively, an increase of $3,640. Th is increase
was due to interest on new loans required for working capital in 2007.
Income Tax Provision
The Co mpany had a tax provision of appro ximately $3,500 for the year ended December 31, 2006. For the year ended December 31,
2007, the Co mpany had a potential tax benefit of appro ximately $6,300 which it has fully reserved against.
Net Income (Loss) As a result of the above, for the years ended December 31, 2007 and 2006, we recorded net inco me (loss) of
($16,154) and $5,470, respectively, a decrease of $21,624.
Basic and Diluted Earnings (Loss) per Share. The basic and diluted earnings (loss) per share were ($0.03) and $5.47 for the y ears ended
December 31, 2007 and 2006, respectively, for the reasons previously noted.
Capital Commitments
We had no material co mmit ments for capital expenditures.
Controls and Procedures
In connection with the preparation of this registration statement, we carried out an evaluation under the supervision and with the
participation of our management, including the President and Chief Financial Officer, as of June 30, 2008 of the effectivenes s of the design and
operation of our internal controls and procedures. Based upon this evaluation, these officers concluded that, as of June 30, 2008, our controls
and procedures were effective. We did not include a report of management ’s assessment regarding internal control over financial report ing or
an attestation report of the company’s registered public accounting firm due to the transition period established by rules of the Securities
Exchange Co mmission for newly public co mpanies.
Code of Ethics
A copy of our Code of Ethics may be obtained by sending a written request to us at 1741 W. Un iversity Drive, Suite 146, Temp e , AZ
85281, Attn: Paul Attaway.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements as of June 30, 2008 and December 31, 2007.
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 valu ing assets,
accruing liabilit ies and estimating expenses. The following is a discussion of what we feel is the most crit ical estima te 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.
Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (“FASB”) issued (SFAS) No. 159, “ The Fair Value Option for Financial
Assets and Financial Liabilities ” - including an amendment of FASB Statement No. 155. SFAS 159 provides companies
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Table of Contents
with an option to report selected financial assets and liabilities at fair value. SFAS 159 is effective as of the beginning o f an entity’s first fiscal
year that begins after November 15, 2007. The Co mpany does not believe that the adoption of SFAS No. 159 will have a material effect on our
results of operations or financial position.
In May 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FIN 48-1, Definition of Settlement in
FASB Interpretation No. 48 (“the FSP”). The FSP p rovides guidance about how an enterprise should determine whether a tax p osition is
effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively
settled on complet ion of e xamination by a taxing authority if the entity does not intend to appeal or lit igate the result and it is remote that the
taxing authority would examine or re -examine the tax position. The Co mpany applied the provisions of the FSP upon adoption of FIN 48, with
no impact to the Co mpany.
In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” , an amend ment of ARB No. 51 (“SFA S 160”). SFAS 160 changes the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. This n ew consolidation
method significantly changes the accounting for transactions with minority interest holders. SFAS 160 is effective for fiscal years beginning
after December 15, 2008 with early application prohibited. The Co mpany is currently evaluating the impact of adopting SFAS 160 on its ’
financial statements, however, we do not believe the adoption of SFAS 16 0 will have a material impact on our financial statements.
In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised 2007), Business Combinations
(“SFAS 141R”). SFAS 141R establishes principles and requirements for ho w an acquirer in a business combination recognizes and measures in
its financial statements the identifiable assets acquired, the liab ilit ies assumed and any noncontrolling interest in the acq uiree at the acquisition
date fair value. SFAS 141R significantly changes the accounting for business combinations in a nu mber of areas including the treatment of
contingent consideration, preacquisition contingencies, transaction costs, in -process research and development and restructuring costs. In
addition, under SFAS 141R, changes in an acquired entity’s deferred tax assets and uncertain tax positions after the measurement period will
impact inco me tax expense. SFAS 141R provides guidance regarding what information to disclose to enable users of the financia l statements to
evaluate the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning afte r December 15,
2008 with early application prohibited. The Co mpany is currently evaluating the impact of adopting SFAS 141R on its’ financial statements,
however, we do not believe the adoption of SFAS 141R will have a material impact on our financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities an amend ment of
FASB Statement No. 133” (“SFAS 161”). SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity ’s derivative
instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Co mpany is currently
assessing the impact of SFAS 161 on its ’ financial statements, however, we do not believe the adoption of SFAS 161 will have a material
impact on our financial statements.
In May 2008, the FASB issued SFAS No. 162, “The Hierarch of Gene rally Accepted Accounting Principles ” (“SFAS 162”). SFAS 162
identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of fin ancial statements.
SFAS 162 is effective 60 days following the SEC’s approval of the Public Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting Princip les.” The imp lementation of this standard will not have a
material impact on our financial position and results of operations.
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DIRECTORS, EXECUTIV E OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, positions and ages of our directors and executive officers. Our directors were elec ted by the
unanimous written consent of our stockholders in lieu of a meet ing. Ou r directors are typically elected at each annual meeting and serve for one
year or until their successors are elected and qualify. Officers are elected by our board of directors and their terms of office are at the discretion
of our board.
Name Age Position With Company
Paul Attaway 44 President, Ch ief Financial Officer and Director
Timothy Louis 44 Secretary, Treasurer and Director
Paul Attaway has served as an officer and director of the Co mpany since its incorporation in August 2001. In 1997, M r. Attaway founded
True Gravity Enterprises, Inc., a privately held corporation that designs and manufactures vibration control solutions for th e semiconductor and
life science industries, and he has been its principal shareholder and executive officer since then. He practiced law for two years from 1988 to
1990 in Phoenix, Arizona with Streich Lang Weeks & Cardon. Fro m 1990 to 1995, he wo rked for a family business, MM Systems Corporation,
which manufactures and sells building materials wo rld wide. Fro m 1995 to 1997, Mr. Attaway left the family business and started Tekton Inc., a
privately held corporation that designs and manufactures seismic isolation sys tems for network server racks. M r. Attaway sold Tekton, Inc. in
2004. M r. Attaway holds a B.S.B.A. with a major in finance fro m Georgetown University and a J.D. fro m the Un iversity of Georgia School of
Law. M r. Attaway div ides his time between TGE and the Co mpany as the two businesses require in a manner sufficient to discharge his
fiduciary duties to both entities.
Timothy Louis has served as an officer and director of the Co mpany since July 2004. Since 1995, M r. Louis has been the principal of
Desert Capital Investments, L.L.C., a venture capital investment firm. Its venture investments include Frye -Louis Capital Management,
Mobility Electronics, The Schirf Brewing Co mpany, TGE, The rSmart Group, BH USA and PIVOT Cycles, Inc. He has served as a boa rd
membe r of co mpanies such as Johnson Polymer, Inc (an affiliate co mpany of S.C. Johnson Wax) and non -profit co mpanies such as A.T. Still
University, Desert Voices Oral Learning Center and The Phoenix Art Museum. Since 2001 he has served as the Vice President - Finance at The
rSmart Group, a provider of enterprise open source applications in the global education software and services market. Fro m 19 90 to 2002 he
was an owner/director of Frye-Louis Capital Management, Inc., a h igh net worth family asset management firm based in Chicago. The firm
was sold to Credit Su isse Private Ban k in 2002. Mr. Louis has a B.S. in Co mmun ication Disorders and a M.A. in Audiology and Hearing
Impairment fro m No rthwestern University, and a M.B.A. in Financial Management and Markets fro m Arizona State University .
Until further determination by the board, the full Board of Directors will undertake the duties of the Audit Co mmittee and Co mpensation
Co mmittee of the Board of Directors. On or befo re the effect iveness of this Registration St atement we will appoint two independent directors
as defined by the rules and regulations of the Securities and Exchange Co mmission to the Audit Co mmittee.
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EXECUTIV E COMPENS ATION
The table below sets forth all cash compensation paid or proposed to be paid by us to the chief executive officer and the mos t highly
compensated executive officers, and key emp loyees for services rendered in all capacit ies to us during fiscal years 2007 and 2006.
Summary Compensation Table
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Stock Option Plan Compensation All Other
Year Salary Bonus Awards Awards Compensation Earnings Compensation Total
Name (a) (b) ($) (c) ($) (d) ($) (e) ($) (f) ($) (g) ($) (h) ($) (i) ($) (j)
Paul Attaway, 2007 No co mpensation paid or options issued
President and Chief 2006
Financial Officer
Timothy Louis, 2007 No co mpensation paid or options issued
Secretary and Treasurer 2006
Mr. Attaway and Mr. Louis received no compensation in 2007 and 2006. Mr. Attaway will receive a salary at the annual rate of $20,000
after our revenues exceed an annual rate of $75,000.
Compensation Policy . Our executive co mpensation plan is based on attracting and retaining qualified p rofessionals who possess the
skills and leadership necessary to enable us to achieve earnings and profitability growth to satisfy our stockholders. We mus t, therefore, create
incentives for these executives to achieve both company and individual performance objectives through the use of performance-based
compensation programs.
No one component is considered by itself, but all forms of the co mpensation package are considered in total. Wherever possible,
objective measurements will be utilized to quantify performance, but many subjective factors still co me into play when determining
performance.
Compensation Components. We expect that the main elements of our co mpensation package will consist of base salary, stock options
and bonus.
Base Salary. The base salary for each executive officer will be reviewed and compared to the prio r year, with considerations given for
increase. During 2007 and 2006 the executive officers received no compensation. As we grow and if financial conditions continue to improve,
we plan to establish base salaries for all executive officers and to review them periodically for possible adjustments. At th e appropriate point,
we will base salary adjustments on both the individuals and our performance and will include both objec tive and subjective crit eria specific to
each executive’s ro le and responsibility with us.
Stock Options . No stock options were issued to our officers during fiscal years 2006 and 2007.
Bonuses. To date, we have not granted bonuses. When considered, our b onuses will be related to meeting certain performance criteria
that are directly related to areas with in the executive’s responsibilit ies with us, such as production of product and sales of product to customers.
If we gro w, we will create a more defined bonus program to attract and retain our emp loyees at all levels.
Other. At this time, we have no profit sharing plan in place for emp loyees. However, this is another area of consideration to add su ch a
plan to provide yet another level of co mpensation to our compensation plan.
Stock Options . The board of directors adopted the 2007 Stock Option and Restricted Stock Plan (the “Plan”) on Ju ly 1, 2007 and the
shareholders approved the Plan on July 8, 2007. The Plan authorizes us to issue up to 250,000 shares of our common stock upon exercise of
options and grant of restricted stock awards. We have not issued any options under the Plan.
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Outstanding Equity Awards at Fiscal Year-End
Option Awards Stock Awards
Equity
Incentive
Plan
Awards:
Market
or
Equity Payout
Incentive Value
Equity Number Plan of
Incentive of Market Awards: Unearned
Plan Shares Value of Number of Shares,
Number of Number of Awards: or Units Shares or Unearned Units
Securities Securities Number of of Units of Shares, or Other
Underlying Underlying Securities Stock Stock Units or Rights
Unexercised Unexercised Underlying That That Other That
Options Options Unexercised Option Option Have Have Rights That Have
(#) (#) Unearned Exercise Expiration Not Not Have Not Not
Exercisable Unexercisable Options (#) Price Date Vested Vested Vested Vested
Name (a) (b) (c) (d) ($) (e) (f) (#) (g) ($) (h) (#) (i) ($) (j)
Paul Attaway No outstanding equity awards.
Timothy Louis No outstanding equity awards.
The table above indicates that no options were granted under the Plan to directors and officers in fiscal 2007.
Stock Option Plan
The board of directors adopted the Plan on July 1, 2007 and the shareholders approved the Plan on July 8, 2007. The Plan authorizes us to
issue up to 250,000 shares of our common stock upon exercise of options and grant of restricted stoc k awards. We have not issued any options
under the Plan.
The Plan authorizes us to grant (i) to the key employees incentive stock options to purchase shares of common stock and non -qualified
stock options to purchase shares of common stock and restricted s tock awards, and (ii) to non-emp loyee directors and consultants non-qualified
stock options and restricted stock. Our Board of Directors will ad minister the Plans by making reco mmendations to the board or determinations
regarding the persons to whom options or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards.
The Plan allo ws for the grant of incentive stock options, non -qualified stock options and restricted stock awards. Incentive stock options
granted under the Plan must have an exercise price at least equal to 100% of the fair market value of the common stock as of the date of grant.
Incentive stock options granted to any person who owns, immed iately after the grant, stock possessing more than 10% of the co mb ined voting
power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise price at least equal to 110% of the fair
market value of the co mmon stock on the date of grant. Non -statutory stock options may have exercise prices as determined by our
Co mpensation Committee.
The Co mpensation Committee is also authorized to grant restricted stock awards under the Plan. A restricted stock award is a grant of
shares of the common stock that is subject to restrictions on trans ferability, risk of forfeiture and other restrictions and that may be forfeited in
the event of certain terminations of employ ment or service prior to the end of a restricted period specified by the Co mpensat ion Co mmittee.
Compensation of Directors
Directors who are neither our emp loyees nor of our affiliates receive no cash compensation for serving on our Board of Direct ors. We
have no independent directors but plan to appoint one or more after this registration statement is declared effective. We reimburse directors for
any travel or other out-of-pocket expenses related to their service on the Board of Directors. When we add outside Board memb ers we expect
that they will receive co mpensation of options or shares of common stock of the Co mpany for ea ch year for their service on the Board of
Directors and for serving without directors and officers ’ liability insurance in place.
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Director Compensation
Change in
Pension
Value and
Fees Nonqualified
Earned Non-Equity Deferred
Or Paid Stock Option Incentive Plan Compensation All Other
in Cash Awards Awards Compensation Earnings Compensation Total
Name (a) ($) (b) ($) (c) ($) (d) ($) (e) ($) (f) ($) (g) ($) (h)
Paul Attaway, No co mpensation paid or awards made
President, Ch ief Financial Officer
and Director
Timothy Louis, No co mpensation paid or awards made
Secretary, Treasurer and Director
Employment Contracts; Termination of Employment and Change-i n-Control Arrangements
We have no employment agreements with either Pau l Attaway or Timothy Louis.
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S ECURITY OWNERS HIP OF CERTAIN B ENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 31, 2008, the number and percentage of outstanding shares of common stock benef icially
owned by (a) each person known by us to beneficially own mo re than five percent of such stock, (b) each director o f the Co mp any, (c) each
named officer of the Co mpany, and (d) all our directors and executive officers as a group.
Percent
of
Amount and Class Assuming
Nature of Percent Conversion of
Beneficial of Preferred
Name and Address of Beneficial Owner (1) Ownership (2) Class (4) Stock (5)
Paul Attaway (3)
456,000 50.89 33.62
Timothy Louis 40,000 4.47 2.95
Ira J. Gaines 200,000 22.32 14.75
Christian J. Hoffmann, III (6)
200,000 22.32 14.75
All officers and directors as a group (two persons) 496,000 55.36 36.57
(1) The address of these persons is c/o 1741 W. Un iversity Drive, Suite 146, Tempe, Arizona 85281.
(2) The foregoing beneficial owners hold investment and voting power in their shares.
(3) Paul Attaway owns 66% of the capital stock of TGE, which is a former shareholder of the Co mpany and the Company’s former parent
company.
(4) Assuming 896,000 shares of common stock outstanding.
(5) Assumes the conversion of the outstanding 460,000 shares of Preferred Stock into 460,000 shares of common stock.
(6) Mr. Hoffmann is a partner of Quarles & Brady LLP, the legal counsel of the Co mpany.
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TRANS ACTIONS WITH RELATED PERSONS, PROMOTERS
AND CERTAIN CONTROL PERSONS
Paul Attaway is an officer, director and principal shareholder of the Co mpany and the principal shareholder, director and an officer of our
founder and former parent co mpany, TGE. On June 11, 2007, Mr. Attaway purchased 455,000 shares of common stock of the company for
$455, which is $0.001 per share. On December 31, 2007, Mr. Attaway purchased all 1,000 shares of common stock of the Co mpany held by
TGE for $250, wh ich is $0.25 per share.
On June 11, 2007, Timothy Louis, an officer and director the Co mpany, purchased 40,000 shares of common stock of the Co mpany for
$40, wh ich is $0.001 per share. Also on June 11, 2007, Christian J. Hoffmann, III, a partner of Quarles & Brady LLP, legal counsel of the
Co mpany, purchased 200,000 shares of common stock for $.001 per share for a total of $200. On Ju ly 11, 2007, Ira J. Gaines, a principal
shareholder of the Co mpany, purchased 200,000 shares of common stock for $.05 per share for a total of $10,000.
The Co mpany and TGE, its affiliate and former parent, entered into a license agreement on July 2, 2007, wh ich is renewab le on an
automatic basis for additional consecutive three-year terms on certain conditions. Aurios pays a royalty of five percent (5%) of its gross sales to
TGE under the terms of the license. Also under this license agreement, TGE licensed Aurios the right to produce, distribute and sell the Classic
MIB and PRO M IB products and to use the Aurios trademark in connection with such products. Because Paul Attaway controls both TGE and
Aurios as the principal shareholder of each co mpany, the license agreement was not the result of arm’s length negotiations between the two
companies. While Mr. Attaway believes the terms to be fair to each co mpany, there can be no assurance in this regard. In the event of a dis pute
between Aurios and TGE in connection with the license agreement, Mr. Attaway will recuse himself fro m the dispute and let the other
director(s) of both companies deal with the dispute. See “Description of Business - License.”
The Co mpany and TGE, its affiliate and former parent, entered into an administrative services/rental agreement with TGE on January 1,
2007. Under such agreement, TGE performs certain ad ministrative duties for Aurios and provides it office space as required at $1,500 per
month. Aurios has one employee and contracts with TGE for all services. Pau l Attaway controls TGE as its principal shareholder, and an
officer and director.
The Co mpany has a note payable to TGE in the amount of $44,121 as of June 30, 2008 and December 31, 2007, bearing interest at a rate
of 8.25%. All outstanding principal and interest due and payable shall be paid on December 15, 2010. As of June 30, 2008 and December 31,
2007 there was accrued interest of $5,610 and $3,640, respectively.
The Co mpany had a balance due fro m (to) TGE in the amount of ($680) and $1,057 at June 30, 2008 and December 31, 2007,
respectively.
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DIS CLOS URE OF COMMISS ION POS ITION OF
INDEMNIFICATION FOR S ECURITIES ACT LIAB ILITIES
The Arizona Business Corporation Act, under which the Co mpany is organized, permits the inclusion in the articles of incorpor ation of a
provision limit ing or eliminating the potential monetary liability of d irectors to a corporation or its shareholders by reason of their conduct as
directors. The provision would not permit any limitation on or the elimination of liability of a director for disloyalty to h is corporation or its
shareholders, failing to act in good faith, engaging in intentional misconduct or a knowing violat ion of the law, obtaining an improper personal
benefit or paying a dividend or approving a stock repurchase that was illegal under the Arizona Business Corporation Act. Accordingly, the
provisions limit ing or eliminating the potential monetary liability of directors permitted by Arizona law apply only to the “duty of care” of
directors, i.e., to unintentional errors in their deliberations or judgments and not to any form of “bad faith” conduct.
The Articles of Incorporation of the Co mpany contain a provision which eliminates the personal monetary liab ility of d irectors to the
extent allo wed under Arizona law. Accordingly, a shareholder is able to prosecute an action against a director for monetary d amages only if he
can show a breach of the duty of loyalty, a failure to act in good faith, intentional misconduct, a knowing violat ion of law, an improper personal
benefit or an illegal d ividend or stock repurchase, as referred to in the amend ment, and not “negligence” or “gross negligence” in satisfying his
duty of care. Arizona law applies only to claims against a director arising out of his role as a director and not, if he is a lso an officer, his role as
an officer or in any other capacity or to his responsibilit ies under any other law, such as the federal securities laws.
In addition, the Co mpany’s Articles of Incorporation and Bylaws provide that it will indemnify its directors, officers, emp loyees and
other agents to the fullest extent permitted by Arizona law. Insofar as indemn ification for l iabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, it has been advised
that in the opinion of the Securities and Exchange Co mmission such indemnification is against public policy as exp ressed in the Securit ies Act
and is, therefore, unenforceable. In the event that a claim fo r indemn ification against such liabilities (other than the payment by the Co mpany
of expenses incurred or paid by a director, officer o r controlling person of the Co mpany in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, t he Co mpany will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdic tion the
question whether such indemnificat ion by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
No pending lit igation or proceeding involving a d irector, officer, employee or other agent of the Co mpany as to which indemni fication is
being sought exists, and the Company is not aware of any pending or threat ened material lit igation that may result in claims for indemn ification
by any director, officer, employee or other agent.
Insofar as indemnificat ion for liabilit ies arising under the Securit ies Act may be permitted to directors, officers or person s controlling the
Co mpany pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchang e
Co mmission such indemnificat ion is against public policy as expressed in the Securities Act and is therefore unenforceab le.
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WHER E TO GET MORE INFORMATION
It is our intent to become a reporting co mpany under the Securities Exchange Act of 1934, as amended, up on the effectiveness of this
Prospectus. You may obtain annual, quarterly, and special reports and other information that the Co mpany files with the SEC. You may read
and copy any document that it files with the SEC at the SEC’s Public Reference Roo m, 100 F Street, N.E., Washington, DC 20549. You may
obtain information on the operation of the Public Reference Roo m by calling the SEC at 1 -800-SEC-0330.
When we become a reporting company, our filings may also be accessed through the SEC ’s website ( http://www.sec.gov ). We will
provide a copy of any or all documents incorporated by reference herein (exclusive of exhib its unless such exh ibits are specifically
incorporated by reference therein), without charge, to each person to whom this Prospectus is delivered , upon written or oral request to Aurios
Inc., 1741 W. University Drive, Su ite 146, Tempe, Arizona 85281; Telephone (602) 426-1211. Our website is www.aurios.net.
We will furn ish record-holders of our securities with annual reports containing financial statements, audited and reported upon by our
independent auditors, quarterly reports containing unaudited interim financial information and such other periodic report s as we determine to
be appropriate or as may be required by law. If we are not required by law to deliver an annual report, we will voluntarily s end an annual report
with audited financial statements to our security holders.
33
Table of Contents
FINANCIAL STATEMENTS
Aurios Inc.
Financi al Report
June 30, 2008
(Unaudited)
Table of Contents
Table of Contents
Financial Statements:
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockhol ders’ Equi ty F-4
Statements of Cash Fl ows F-5
Notes to the Financial Statements F-6
F-1
Table of Contents
AURIOS INC.
CONDENS ED B ALANCE S HEETS
June 30, December 31,
2008 2007
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 100,222 $ 115,806
Accounts receivable, net 165 —
Inventory 18,810 15,035
Due fro m related party — 1,057
Total Assets $ 119,197 $ 131,898
LIAB ILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Accounts payable $ 43,634 $ —
Due to related party 680 —
Total Current Liab ilit ies 44,314 —
Long-Term Liabilit ies
Accrued interest - related party 5,610 3,640
Note payable - related party 44,121 44,121
Total Liab ilities 94,045 47,761
Stockholders’ Equity:
Preferred stock - no par value; 10,000,000 shares authorized, 460,000 shares issued and outstanding
at June 30, 2008 and December 31, 2007 115,000 115,000
Co mmon stock - no par value; 90,000,000 shares authorized, 896,000 shares issued and outstanding
at June 30, 2008 and at December 31, 2007 10,795 10,795
Accumulated deficit (100,643 ) (41,658 )
Total Stockholders’ Equity 25,152 84,137
Total Liab ilities and Stockholders ’ Equity $ 119,197 $ 131,898
The Accompanying Notes are an Integral
Part of the Condensed Financial Statements
F-2
Table of Contents
AURIOS INC.
CONDENS ED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30
2008 2007
Sales $ 7,067 $ 17,613
Cost of Sales 4,188 9,866
Gross Profit 2,879 7,747
General and Administrative Expenses 59,848 9,000
Total Costs and Expenses 59,848 9,000
Loss from Operat ions (56,969 ) (1,253 )
Other (Income) / Expense
Interest Expense 1,970 1,820
Other Expense 46 36
2,016 1,856
Net Loss $ (58,985 ) $ (3,109 )
Loss per share - basic and diluted $ (0.07 ) $ (0.04 )
Weighted average shares outstanding 896,000 73,555
The Accompanying Notes are an Integral
Part of the Condensed Financial Statements
F-3
Table of Contents
AURIOS INC.
CONDENS ED STATEMENT OF CHANGES IN STOCKHOLDERS ’ EQUIT Y
For the year ended December 31, 2007, and the six months ended J une 30, 2008
Total
Stockholders’
Accumulated Equity
Common Stock Preferred Stock Deficit (Deficit)
Shares Amount Shares Amount
Balance at December 31, 2006 1,000 $ 100 — $ — $ (25,504 ) $ (25,404 )
Proceeds from issuance of common stock 895,000 10,695 10,695
Proceeds from issuance of preferred stock — — 460,000 115,000 — 115,000
Net loss for the year ended December 31, 2007 — — — — (16,154 ) (16,154 )
Balance at December 31, 2007 896,000 10,795 460,000 115,000 (41,658 ) 84,137
Net loss for the six months ended June 30, 2008
(Unaudited) (58,985 ) (58,985 )
Balance at June 30, 2008 (Unaudited) 896,000 $ 10,795 460,000 $ 115,000 $ (100,643 ) $ 25,152
The Accompanying Notes are an Integral
Part of the Condensed Financial Statements
F-4
Table of Contents
AURIOS INC.
CONDENS ED STATEMENTS OF CAS H FLOWS
(Unaudited)
Six Months Ended
June 30,
2008 2007
Cash flows fro m operating activ ities:
Net Loss $ (58,985 ) $ (3,109 )
Adjustments to reconcile net loss to net cash used by operating activities:
Changes in Assets and Liabilit ies:
Accounts receivable (165 ) (16,189 )
Inventory (3,775 ) 2,336
Accounts payable 43,634 7,536
Accrued interest - related party 1,970 1,820
Due to related party 1,737 9,100
Net cash provide (used) by operating activities (15,584 ) 1,494
Cash flows fro m financing activ ities:
Proceeds from issuance of common stock — 695
Net cash provided by financing activities — 695
Net change in cash and cash equivalents (15,584 ) 2,189
Cash and cash equivalents at beginning of period 115,806 —
Cash and cash equivalents at end of period $ 100,222 $ 2,189
Supplemental Information:
Interest paid $ — $ —
Income taxes paid $ — $ —
The Accompanying Notes are an Integral
Part of the Condensed Financial Statements
F-5
Table of Contents
AURIOS INC.
NOTES TO CONDENS ED FINANCIAL S TATEMENTS
Note 1
Summary of Significant Accounti ng Policies, Nature of Operations and Use of Es ti mates
Presentation of Interim Information:
The condensed financial statements included herein have been prepared by Aurios Inc. (“we,” “us,” “our” or the “Co mpany”) without audit,
pursuant to the rules and regulations of the United States Securities and Exchange Co mmission (“SEC”) and should be read in conjunction with
our Annual Report on the financial statements of Aurios Inc. for the years ended December 31, 2007 and 2006 included in this Form S-1
Amend ment No. 1, as filed with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Certain informat ion
and footnote disclosures normally included in financial statements prepared in accordance with accounting princip les generally accepted in the
United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures, which are made are
adequate to make the information presented not misleading. Further, the condensed financial statements reflect, in the opinio n of management,
all normal recurring adjustments necessary to present fairly our financial position at June 30, 2008 and the results of our operations and cash
flows fo r the periods presented. The December 31, 2007 condensed balance sheet data was derived from audited financial statements, but does
not include all disclosures required by accounting principles generally accepted in the Un ited States of America. The results of operations for
the six months ended June 30, 2008 are not necessarily indicat ive of the results to be expected for the fu ll year.
Nature of Corporati on
Aurios Inc. (the “Co mpany”) is a Corporat ion which was duly formed and organized under the laws of the State of Arizona on August 7, 2001.
The principal business activity of the Co mpany is the market ing of vibrat ion and motion control technology into the audio/vid eo markets. The
Co mpany’s sales occur throughout the United States and internationally. Aurios is a former wholly -owned subsidiary of True Gravity
Enterprises Inc. (“TGE”). On December 31, 2007, the principal shareholder of the Co mpany, who is also a director and officer of the Co mpany,
purchased all of the stock of the Co mpany owned by TGE. Through June 30, 2007, TGE paid all Co mpany expenses including payroll and
vendors. It charged the Co mpany $1,500 per month as a rent and management fee and also charged the intercompany account for vendor
payables. Beginning June 30, 2007, the Co mpany began paying its vendors, but continued to contract with TGE for rent and for services
performed by TGE. TGE continues to charge the Company $1,500 per month.
Use of Esti mates
The preparation of financial statements in conformity with accounting principles generally accepted in the Un ited States of A merica requires
management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclos ure of contingent assets and
liab ilit ies at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting p eriod. Actual results
could differ fro m those estimates.
Revenue Recogni tion
The Co mpany derives its revenues primarily fro m the sale of v ibration and motion control technology through sales on the Company ’s website
and its distributors. Revenues are recognized at the time the sale is comp leted and shipped. Once shipped, title to the produ cts, as well as the
risks and rewards of ownership, passes to the customers.
Cash and Cash Equi valents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liqu id investments purchased wit h an initial
maturity of three (3) months or less.
Accounts Recei vable
The Co mpany provides for potentially uncollectib le accounts receivable by use of the allowance method. The allowance is provided based
upon a review of the individual accounts outstanding, and the Co mpany ’s prior history of uncollectible accounts receivable. As of June 30,
2008 and December 31, 2007 there was no provision for
F-6
Table of Contents
AURIOS INC.
NOTES TO CONDENS ED FINANCIAL S TATEMENTS (Continued)
Note 1
Summary of Significant Accounti ng Policies, Nature of Operations and Use of Es ti mates (Continued)
Accounts Recei vable (continued)
uncollectible trade accounts receivable. The Co mpany does not accrue interest charges on delinquent accounts receivable. T he 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 components used in assembling vib ration control bearings. Management has deemed no reserve for excess or obsolete inventor y is necessary
as of June 30, 2008.
Deferred Income Taxes
Deferred inco me taxes are provided on an asset and liability method, whereby deferred tax assets and liabilit ies are recognized for deductible
temporary d ifferences and operating loss carryforwards. Deferred tax liab ilit ies are recognized for taxable te mporary d ifferences. Deferred tax
assets are reduced by a valuation allowance when it is more likely than not that the carryforwards will not be utilized. Defe rred tax assets and
liab ilit ies are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Co mpany filed consolidated tax returns
with their former Parent through June 2007. The Parent absorbed the net losses of the Company pursuant to a tax sharing agree ment, which
calls for any inco me tax receivable or payable be remitted to, or paid by, the Parent.
New Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (“FASB”) issued (SFAS) No.159, “ The Fair Value Option for Financial Assets
and Financial Liabilities ” - including an amend ment of FASB Statement No. 155. SFAS 159 provides co mpanies with an option to report
selected financial assets and liabilit ies at fair value. SFAS 159 is effect ive as of the beginning of an entity ’s first fiscal year that begins after
November 15, 2007. The Co mpany applied the provisions of SFAS 159, with no impact on the Co mpany.
In May 2007, the Financial Accounting Standards Board (“ FASB”) issued FASB Staff Position No. FIN 48-1, Definition of Settlement in
FASB Interpretation No. 48 (“the FSP”). The FSP p rovides guidance about how an enterprise should determine whether a tax p osition is
effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively
settled on complet ion of examination by a taxing authority if the entity does not intend to appeal or lit igate the result and it is remote that t he
taxing authority would examine or re -examine the tax position. The Co mpany applied the provisions of the FSP upon adoption of FI N 48, with
no impact to the Co mpany.
In December 2007, the Financial Accounting Standards Board (“ FASB”) issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” , an amendment of A RB No. 51 (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests and classified as a co mponent of equity. This new consolidation met hod significantly
changes the accounting for transactions with minority interest ho lders. SFAS 160 is effective for fiscal years beginning after December 15,
2008 with early application prohibited. The Co mpany is currently evaluating the impact of adopting SFAS 160 on its ’
F-7
Table of Contents
AURIOS INC.
NOTES TO CONDENS ED FINANCIAL S TATEMENTS (Continued)
Note 1
Summary of Significant Accounti ng Policies, Nature of Operations and Use of Es ti mates (Continued)
New Accounting Pronouncements (Continued)
financial statements, however, we do not believe the adoption of SFAS 160 will have a material impact on our financial statements.
In December 2007, the Financial Accounting Standards Board (“ FASB”) issued SFAS No. 141 (revised 2007), Business Comb inations
(“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in
its financial statements the identifiable assets acquired, the liab ilit ies assumed and any noncontrolling interest in the acq uiree at the acquisition
date fair value. SFAS 141R significantly changes the accounting for business combinations in a nu mber of areas including the treatment of
contingent consideration, preacquisition contingencies, transaction costs, in -process research and development and restructuring costs. In
addition, under SFAS 141R, changes in an acquired entity ’s deferred tax assets and uncertain tax positions after the measurement period will
impact inco me tax expense. SFAS 141R provides guidance regarding what informat ion to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning afte r December 15,
2008 with early application prohibited. The Co mpany is currently evaluating the impact of adopting SFAS 141R on its ’ financial statements,
however, we do not believe the adoption of SFAS 141R will have a material impact on our financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities an amend ment of FASB
Statement No. 133” (“SFAS 161”). SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity ’s derivative instruments
and hedging activities. SFAS 161 is effect ive for fiscal years beginning after November 15, 2008. The Co mpany is currently assessing the
impact of SFAS 161 on its’ financial statements, however, we do not believe the adoption of SFAS 161 will have a material impact on our
financial statements.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles ” (“SFAS 162”). SFAS 162
identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of fin ancial statements.
SFAS 162 is effective 60 days following the SEC’s approval of the Public Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting Princip les.” The imp lementation of this standard will not have a
material impact on our financial position and results of operations.
Earnings Per Share
Statement of Financial Accounting Standards No. 128, “Earnings per Share,” (“SFA S 128”) provides for the calculat ion of Basic and Diluted
earnings per share. Basic earnings per share includes no dilution and is computed by dividing inco me available to common shar eholders by the
weighted average number of co mmon 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, 2008 and December 31, 2007, there were 460,000 shares of Series A Convertib le Preferred Stock convertib le into 460,000
common shares. These shares were not included in the determination of diluted earnings per share as their effect was anti-d ilutive. Holders of
the Series A shares shall be entitled to receive dividends as declared fro m time to time by the Board of Directors. Since the ir issuance no
dividends have been declared on the preferred stock.
F-8
Table of Contents
AURIOS INC.
NOTES TO CONDENS ED FINANCIAL S TATEMENTS (Continued)
Note 2
Related Party Transacti ons
The Co mpany has a balance due to a related party, TGE in the amount of $680 at June 30, 2008 and a balance due fro m a related party, TGE in
the amount of $1,057 at December 31, 2007.
The Co mpany has a note payable to a related party, TGE in the amount of $44,121 as of June 30, 2008 and December 31, 2007, bearing interest
at a rate of 8.25%. All outstanding principal and interest due and payable shall be paid on December 15, 2010. As of June 30, 2008 and
December 31, 2007 there was accrued interest of $5,610 and $3,640 respectively.
On December 31, 2007 the Co mpany’s principal shareholder and an officer and director o f the Co mpany, purchased all of the Co mpany ’s stock
owned by TGE.
The Co mpany had a balance due to related party, TGE in the amount of $44,121 as of December 31, 2006. The balance represents a trade
payable by the Company for production costs incurred by TGE. As of December 31, 2006, there was no accrued interest. This was converted
into the above note payable on January 1, 2007.
In addition, TGE manufactured the Co mpany’s product and paid all related costs incurred therein through June 30, 2007. These costs included
materials and labor, as well as any overhead expenses. The Co mpany paid a fee of $1,500 per month to TGE t o co mpensate it for
administrative expenses and the use of TGE’s facilit ies.
Subsequent to June 30, 2007, the Co mpany no longer uses TGE to manufacture its products; however, it continues to pay a monthly rent and
administrative fee to TGE in the amount of $1,500.
In July 2007 the Co mpany entered in to a non-exclusive License Agreement with a related party, TGE, g iving the Co mpany rights in various
patents, pending applications for patents and trademarks in various countries of the world, including the Un it ed States. The Company shall pay
the related party five percent (5.0%) of worldwide net sales of the licensed products. In October 2007, the License Agreement was amended to
state that the royalty would begin to accrue on January 1, 2008. On June 30, 2008, the accrued royalty owing fro m the Co mpan y to TGE was
$680.
TGE shares common management with the Co mpany and both the Co mpany and TGE have the same majority owner.
Note 3
Accounts Recei vable
Accounts Receivable consists of:
June 30, December 31,
2008 2007
Accounts Receivable $ 165 $ —
Less: Allowance for Doubtful Accounts — —
$ 165 $ —
F-9
Table of Contents
AURIOS INC.
NOTES TO CONDENS ED FINANCIAL S TATEMENTS (Continued)
Note 4
Concentrati on of Credit Risk
The Co mpany maintains cash accounts at a financial institution. Deposits not to exceed $100,000 are in sured by the Federal Deposit
Insurance Corporation. At June 30, 2008 and December 31, 2007, the Co mpany had uninsured cash and cash equivalents of $222
(Unaudited) and $18,763, respectively.
Note 5
Stockhol ders Equity
Preferred Stock:
On September 27, 2007, the Co mpany amended its Articles of Incorporation to authorize the Co mpany to issue up to 10,000,000 shares of no
par value preferred stock, with such rights, preferences, privileges and restrictions as determined by its board of directors .
Series A Convertible Preferred Stock:
On December 14, 2007, the Co mpany completed a private placement of Preferred Stock pursuant to the terms of a Series A Preferred Stock No
Par Value per Share Agreement with accred ited investors. The Series A Preferred Stock was issued at $0.25 per share. Each Series A
Convertible Preferred Stock is convertible into the Co mpany ’s common stock at a price of $0.25 per share after n inety (90) day s from the date
of issuance. The Series A Preferred Shares are redeemable, at the op tion of the Co mpany on or after the second anniversary of the date of
issuance, plus all accrued but unpaid dividends, on the follo wing basis: 1) $0.30 per share if redeemed on or after the secon d anniversary of the
date of issuance; 2) $0.35 per share if redeemed on or after the third anniversary of the date of issuance and; 3) $0.40 per share if redeemed on
or after the fourth anniversary of the date of issuance. The Company will file a reg istration statement to register the conve rsion shares under the
Securities Act of 1933 (“the Securities Act”), as amended, and all applicab le state securities laws within one hundred twenty (120) days after
the conclusion of the offering of the Series A Shares by the Company. After such registration statement is declared effective, the Co mpany will
keep it effective for the shorter of one year or until the holders can make use of Ru le 144 under the Securities Act.
Co mmon Stock:
On September 27, 2007, the Co mpany amended its Articles of Incorporation to authorize the Co mpa ny to issue up to 90,000,000 shares of no
par value Co mmon Stock.
Stock Options:
The Co mpany, under its 2007 Stock Option Plan, is authorized to grant options for up to 250,000 shares of common stock, no pa r 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 co mmon 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 board. At June 30, 2008 and December 31, 2007 no stock options have been granted.
F-10
Table of Contents
AURIOS INC.
NOTES TO CONDENS ED FINANCIAL S TATEMENTS (Continued)
Note 6
Income Taxes
The provisions for income tax expense consist of the follo wing:
June 30,
2008 2007
Deferred:
Income tax benefit at statutory rates $ 23,000 $ 1,200
Valuation allo wance of net operating loss (23,000 ) (1,200 )
$ — $ —
The Co mpany’s deferred tax asset consists of the following:
June 30,
2008 2007
Deferred tax asset:
Net operating loss carryforward $ 26,800 $—
Less: Valuation allowance (26,800 ) —
Net deferred tax asset $ — $—
During the year ended December 31, 2006 and through June 30, 2007, the net operating loss carryforward was consolidated by the Parent
company pursuant to a tax sharing agreement. No interco mpany receivable was recorded due to the uncertainty of the utilizat io n of the net
operating loss carryforward by the Parent.
Note 7
Going Concern
The Co mpany has incurred an accumulated deficit and has had negative cash flows fro m its operations. Realization of the Co mpa ny’s assets is
dependent upon the Co mpany’s ability to meet its future financing requirements, and the success of future operations. These factors raise
substantial doubt about the Co mpany’s ability to continue as a going concern (Refer to auditor’s report fo r the year ended December 31, 2007
financial statements). The financial statements do not include any adjustments that might be necessary if the Co mpany is unable t o continue as
a going concern.
No assurances can be given that the Co mpany will be able to raise additional cap ital, when needed or at all, or that such capital, if available,
will be on terms acceptable to the Co mpany. In the event the Company is unable to raise additional funds, it could be require d t o either
substantially reduce or terminate its operations.
Currently the Co mpany has no extensive expansion plans that would require significant infusions of capital into its operations. As such, a
principal stockholder of the Co mpany has verbally co mmitted to provide the necessary funding to maintain operations of the Co mpany for at
least the next twelve months.
F-11
Table of Contents
FINANCIAL STATEMENTS
Aurios Inc.
Financi al Report
December 31, 2007 and December 31, 2006
Table of Contents
FINANCIAL STATEMENTS
Index to Fi nancial Statements:
Report of Independent Registered Public Accounting Firm FB-2
Balance Sheets FB-3
Statements of Operations FB-4
Statements of Stockhol ders’ Equi ty FB-5
Statements of Cash Fl ows FB-6
Notes to the Financial Statements FB-7
FB-1
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors
Aurios Inc.
We have audited the accompanying balance sheets of Aurios Inc. as of December 31, 2007 and 2006 and the related statements of operations,
changes in stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the
Co mpany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Co mpany Accounting Oversight Board (United St ates). Those
standards require that we plan and perfo rm the audit to obtain reasonable assurance about whether the financial statements ar e free of material
misstatement. The Co mpany is not required to have, nor were we engaged to perform, an audit of its internal control over finan cial reporting.
Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circu mstances, but not for the purpose of expressing an opinion o n the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we exp ress no such opinion. An audit also includes examin ing, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for ou r opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position o f Aurios Inc. at
December 31, 2007 and 2006 and the results of its operations, changes in stockholders ’ equity (deficit ) and its cash flows for th e years then
ended, in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the Co mpany will continue as a going concern. As discu ssed in Note
7 to the financial statements, the Co mpany has suffered recurring losses fro m operations and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management ’s plans in regard to these matters are also described in Note 7. The financial
statements do not include any adjustments that might result fro m the outcome of this uncertainty.
/s/ Semple, Marchal & Cooper, LLP
Phoenix, Arizona
April 9, 2008
FB-2
Table of Contents
AURIOS INC.
BALANCE S HEETS
December 31, December 31,
2007 2006
ASSETS
Current Assets:
Cash and cash equivalents $ 115,806 $ —
Accounts receivable, net — —
Inventory 15,035 18,717
Due fro m related party 1,057 —
Total Assets $ 131,898 $ 18,717
LIAB ILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current Liabilities:
Due to related party $ — 44,121
Total Current Liab ilit ies — 44,121
Long-Term Liabilit ies
Accrued interest - related party 3,640 —
Note payable - related party 44,121 —
Total Liab ilities 47,761 44,121
Stockholders’ Equity (Deficit):
Preferred stock - no par value; 10,000,000 shares authorized, 460,000 shares issued and
outstanding at December 31, 2007 and no shares authorized at December 31, 2006 115,000 —
Co mmon stock - no par value; 90,000,000 shares authorized, 896,000 and 1,000 shares issued and
outstanding at December 31, 2007 and 2006, respectively 10,795 100
Accumulated deficit (41,658 ) (25,504 )
Total Stockholders’ Equity (Deficit) 84,137 (25,404 )
Total Liab ilities and Stockholders ’ Equity (Deficit) $ 131,898 $ 18,717
The Accompanying Notes are an Integral Part
of the Financial Statements
FB-3
Table of Contents
AURIOS INC.
STATEMENTS OF OPERATIONS
Years Ended
December 31,
2007 2006
Sales $ 23,686 $ 52,067
Cost of Sales 11,132 23,195
Gross Profit 12,554 28,872
Bad Debt — 1,904
General and Administrative Expenses 25,068 18,000
Total Costs and Expenses 25,068 19,904
Income / (Loss) fro m Operations (12,514 ) 8,968
Other (Income) / Expense
Interest Expense 3,640 —
Income Tax Expense — 3,498
3,640 3,498
Net Inco me (Loss) $ (16,154 ) $ 5,470
Earnings per share - basic and diluted $ (0.03 ) $ 5.47
Weighted average shares outstanding 482,329 1,000
The Accompanying Notes are an Integral Part
of the Financial Statements
FB-4
Table of Contents
AURIOS INC.
STATEMENT OF CHANGES IN S TOCKHOLDERS ’ EQUIT Y (DEFICIT)
Years Ended December 31, 2007 and 2006
Total
Stockholders’
Accumulated Equity
Common Stock Preferred Stock Deficit (Deficit)
Shares Amount Shares Amount
Balance at December 31, 2005 1,000 $ 100 — $ — $ (30,974 ) $ (30,874 )
Net inco me for the year ended December 31, 2006 — — — — 5,470 5,470
Balance at December 31, 2006 1,000 100 — — (25,504 ) (25,404 )
Proceeds from issuance of common stock 895,000 10,695 10,695
Proceeds from issuance of preferred stock — — 460,000 115,000 — 115,000
Net inco me (loss) for the year ended December 31,
2007 — — — — (16,154 ) (16,154 )
Balance at December 31, 2007 896,000 $ 10,795 460,000 $ 115,000 $ (41,658 ) $ 84,137
The Accompanying Notes are an Integral Part
of the Financial Statements
FB-5
Table of Contents
AURIOS INC.
STATEMENTS OF CASH FLOWS
December 31,
2007 2006
Cash flows fro m operating activ ities:
Net Inco me (Loss) $ (16,154 ) $ 5,470
Adjustments to reconcile net inco me (loss) to net cash used by operating activities:
Bad debt provision — 1,904
Changes in Assets and Liabilit ies:
Accounts receivable — (1,904 )
Inventory 3,682 (18,717 )
Accrued interest - related party 3,640 —
Due to related party (1,057 ) 13,247
Net cash used by operating activities (9,889 ) —
Cash flows fro m financing activ ities
Proceeds from issuance of common stock 10,695 —
Proceeds from issuance of preferred stock 115,000 —
Net cash provided by financing activities 125,695
Net change in cash and cash equivalents 115,806 —
Cash and cash equivalents at beginning of period — —
Cash and cash equivalents at end of period $ 115,806 $ —
Supplemental Information:
Interest paid $ — $ —
Income taxes paid $ — $ —
The Accompanying Notes are an Integral Part
of the Financial Statements
FB-6
Table of Contents
AURIOS INC.
NOTES TO FINANCIAL STATEMENTS
Note 1
Summary of Significant Accounti ng Policies, Nature of Operations and Use of Es ti mates
Nature of Corporati on
Aurios, Inc. (the “Co mpany”) is a Corporation wh ich was duly formed and organized under the laws of the State of Arizona on August 7, 2001.
The principal business activity is the marketing of v ibration and motion control technology in to the audio / video markets. The Co mpany’s
sales occur throughout the United States and internationally. Aurios is a former wholly -owned subsidiary of True Gravity Enterprises Inc.
(“TGE”). On December 31, 2007, the principal shareholder of the Co mpany, who is also a director and officer of the Co mpany, purchased all
of the stock of the Co mpany owned by TGE. Through June 30, 2007, TGE paid all Co mpany expenses including payroll and vendors. It
charged the Company $1,500 per month as a rent and management fee and also charged the intercompany account for vendor payables.
Beginning June 30, 2007, the Co mpany began paying its vendors, but continued to contract with TGE for rent and for services performed by
TGE. TGE continues to charge the Company $1,500 per month.
Use of Esti mates
The preparation of financial statements in conformity with accounting principles generally accepted in the Un ited States of A merica requires
management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and
liab ilit ies at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting p eriod. Actual results
could differ fro m those estimates.
Revenue Recogni tion
The Co mpany derives its revenues primarily fro m the sale of v ibration and motion control technology through sales on the Compan y’s website
and its distributors. Revenues are recognized at the time the sale is comp leted and shipped. Once shipped, title to the products, as well as the
risks and rewards of ownership, passes to the customers.
Cash and Cash Equi valents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liqu id investments purchased wit h an initial
maturity of three (3) months or less.
Accounts Recei vable
The Co mpany provides for potentially uncollectib le accounts receivable by use of the allowance method. The allowance is provided based
upon a review of the individual accounts outstanding, and the Co mpany ’s prior history of uncollectible accounts receivable. As of
December 31, 2007 and 2006, a prov ision for uncollect ible trade accounts receivable has been established in the amounts of $0 and $4,1 04,
respectively. The Co mpany does not accrue interest charges o n 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. The Co mpany regularly assesses inventory quantities on
hand and record provisions for excess and obsolete inventory based primarily on its estimated forecast of product demand. Inventory consists
primarily of co mponents used in assembling vib ration control bearings. Management has deemed no reserve for excess or obsolet e inventory is
necessary as of December 31, 2007.
FB-7
Table of Contents
AURIOS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 1
Summary of Significant Accounti ng Policies, Nature of Operations and Use of Es ti mates (Continued)
Deferred Income Taxes
Deferred inco me taxes are provided on an asset and liability method, whereby deferred tax assets and liabilit ies are recognized for deductible
temporary d ifferences and operating loss carryforwards. Deferred tax liab ilit ies are recognized for taxable temporary d iffere nces. 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
liab ilit ies are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Co mpany filed consolidated tax returns
with their former Parent through June 2007. The Parent absorbed the net losses of the Company pursuant to a tax sharing agreement, which
calls for any inco me tax receivable or payable to be remitted to, or paid by, the Parent.
New Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (“FASB”) issued (SFAS) No.159, “ The Fair Value Option for Financial Assets
and Financial Liabilities ” - including an amend ment of FASB Statement No. 155. SFAS 159 provides co mpanies with an option to report
selected financial assets and liabilit ies at fair value. S FAS 159 is effect ive as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. The Co mpany does not believe that the adoption of SFAS No. 159 will have a material effect on our results of operations
or financial position.
In May 2007, the Financial Accounting Standards Board (“ FASB”) issued FASB Staff Position No. FIN 48-1, Definition of Settlement in
FASB Interpretation No. 48 (“the FSP”). The FSP p rovides guidance about how an enterprise should determine whether a tax p osition is
effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively
settled on complet ion of examination by a taxing authority if the entity does not intend to appeal or lit igate the result and it is remote that t he
taxing authority would examine or re -examine the tax position. The Co mpany applied the provisions of the FSP upon adoption of FI N 48, with
no impact to the Co mpany.
In December 2007, the Financial Accounting Standards Board (“ FASB”) issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” , an amendment of A RB No. 51 (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests and classified as a co mponent of equity. This new consolidation met hod significantly
changes the accounting for transactions with minority interest ho lders. SFAS 160 is effective for fiscal years beginning after December 15,
2008 with early application prohibited. The Co mpany is currently evaluating the impact of adopting SFAS 160 on its consolidat ed financial
statements, however, we do not believe the adoption of SFAS 160 will have a material impact on our financial statements.
FB-8
Table of Contents
AURIOS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 1
Summary of Significant Accounti ng Policies, Nature of Operations and Use of Es ti mates (Continued)
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In December 2007, the Financial Accounting Standards Board (“ FASB”) issued SFAS No. 141 (revised 2007), Business Comb inations
(“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in
its financial statements the identifiable assets acquired, the liab ilit ies assumed and any noncontrolling interest in the acquiree at the acquisition
date fair value. SFAS 141R significantly changes the accounting for business combinations in a nu mber of areas including the treatment of
contingent consideration, preacquisition contingencies, transaction costs , in-process research and development and restructuring costs. In
addition, under SFAS 141R, changes in an acquired entity ’s deferred tax assets and uncertain tax positions after the measurement period will
impact inco me tax expense. SFAS 141R provides guidance regarding what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning afte r December 15,
2008 with early application prohibited. The Co mpany is currently evaluating the impact of adopting SFAS 141R on its consolidated financial
statements, however, we do not believe the adoption of SFAS 141R will have a material impact on our financial statements.
Earnings Per Share
Statement of Financial Accounting Standards No. 128, “Earnings per Share,” (“SFA S 128”) provides for the calculat ion of Basic and Diluted
earnings per share. Basic earnings per share includes no dilution and is computed by dividing inco me available to common shareholders by the
weighted average number of co mmon shares outstanding for the period. Diluted earnings per share reflect the potential dilutio n of securities
that could share in the earnings of an entity. The Co mpany does not have any dilutive securities as of December 31, 2006.
As of December 31, 2007, there were 460,000 shares of Series A Convertible Preferred Stock convertible into 460,000 co mmo n shares. These
shares were not included in the determination of diluted earnings per share as their effe ct was anti-dilutive. Holders of the Series A shares shall
be entitled to receive div idends as declared fro m t ime to time by the Board of Directors. Since their issuance no dividends h ave been declared
on the preferred stock.
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AURIOS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2
Related Party Transacti ons
The Co mpany has a balance due from a related party, TGE in the amount of $1,057 and $0 at December 31, 2007 and 2006, respectively.
The Co mpany has a note payable to related party, TGE in the amount of $44,121 as of December 31, 2007, bearing interest at a rate of 8.25%.
All outstanding principal and interest due and payable shall be paid on December 15, 2010. As of December 31, 2007 there was accrued
interest of $3,640.
On December 31, 2007 the Co mpany’s principal shareholder and an officer and director o f the Co mpany, purchased all of the Co mpany ’s stock
owned by TGE.
The Co mpany has a balance due to related party, TGE in the amount of $44,121 as of December 31, 2006. The balances represent a trade
payable by the Company for production costs incurred by TGE. As of December 31, 2006, there was no accrued interest. This was converted
into the above note payable on January 1, 2007.
In addition, TGE manufactured the Co mpany’s product and paid all related costs incurred therein through June 30, 2007. These costs include
materials and labor, as well as any overhead expenses. The Co mpany paid a fee of $1,500 per month to TGE to co mpensate it for
administrative expenses and use of TGE’s facilities.
Subsequent to June 30, 2007, the Co mpany no longer uses TGE to manufacture its products; however, it continues to pay a monthly rent and
administrative fee to TGE in the amount of $1,500.
In July 2007 the Co mpany entered in to a non-exclusive License Agreement with a related party, TGE, g iving the Co mpany rights in various
patents, pending applications for patents and trademarks in various countries of the world, including the Un ited States. The Company shall pay
the related party five percent (5.0%) of worldwide net sales of the licensed products. In October 2007, the License Agreement was amended to
state that the royalty would begin to accrue on January 1, 2008.
TGE shares common management with the Co mpany and both the Co mpany and TGE have the same majority owner.
Note 3
Accounts Recei vable
As of December 31, 2007 and 2006, accounts receivable consists of:
December 31, December 31,
2007 2006
Accounts Receivable $ — $ 4,104
Less: Allowance for Doubtful Accounts — (4,104 )
$ — $ —
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AURIOS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 4
Concentrati on of Credit Risk
The Co mpany maintains cash accounts at a financial institution. Deposits not to exceed $100,000 are insured by the Federal De posit Insurance
Corporation. At December 31, 2007 and 2006, the Co mpany had uninsured cash and cash equivalents of $18,763 and $0, respectively.
Note 5
Stockhol ders Equity
Preferred Stock:
On September 27, 2007 the Co mpany amended its Articles of Incorporation to authorize the Co mpany to issue up to 10,000,000 shares of no
par value preferred stock, with such rights, preferences, privileges and restrictions as determined by its board of directors .
Series A Convertible Preferred Stock:
On December 14, 2007, the Co mpany completed a private placement of Preferred Stock pursuant to the terms of a Series A Co nvertible
Preferred Stock Private Placement Memorandum with accredited investors. The Series A Convertible Preferred Stock was issued at $0.25 per
share. Each Series A Convertible Preferred Stock is convertible into one share of the Company ’s common stock at a price of $0.25 per share
after ninety (90) days fro m the date of issuance. The Series A Preferred Shares are redeemab le, at the option of the Co mpany on or after the
second anniversary of the date of issuance, plus all accrued but unpaid dividends, on the follo wing basis: 1) $0.30 per share if redeemed on or
after the second anniversary of the date of issuance 2) $0.35 per share if redeemed on or after the third anniversary of the date of issuance and
3) $0.40 per share if redeemed on or after the fourth anniversary of the date of issuance. The Company co mmitted to file a re g istration
statement to register the conversion shares under the Securities Act of 1933 (“the Securities Act”), as amended, and all applicab le state
securities laws within one hundred twenty (120) days after the conclusion of the offering of the Series A Shares by the Compan y. After s uch
registration statement is declared effective, the Co mpany will keep it effective for the shorter of one year or until the holders can make use of
Rule 144 under the Securit ies Act.
Co mmon Stock:
On September 27, 2007 the Co mpany amended its Articles of Incorporation to authorize the Co mpany to issue up to 90,000,000 shares of no
par value Co mmon Stock.
Stock Options:
The Co mpany, under its 2007 Stock Option Plan, is authorized to grant options for up to 250,000 shares of common stock, no pa r 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 co mmon 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 board. At December 31, 2007 no stock options have been granted.
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AURIOS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 6
Income Taxes
The provisions for income tax expense consist of the follo wing:
December 31,
2007 2006
Deferred:
Income tax benefit (expense) at statutory rates $ 6,300 $ (2,100 )
Valuation allo wance of net operating loss (6,300 ) 2,100
$ — $ —
The Co mpany’s deferred tax asset consists of the following:
December 31,
2007 2006
Deferred tax asset:
Net operating loss carryforward $ 3,800 $ —
Less: Valuation allowance (3,800 ) —
Net deferred tax asset $ — $ —
During the year ended December 31, 2006 and through June 30, 2007, the net operating loss carryforward was consolidated by the Parent
company pursuant to a tax sharing agreement. No interco mpany receivable was recorded due to the uncertainty of the utilizat io n of the net
operating loss carryforward by the Parent.
Note 7
Going Concern
The Co mpany has incurred an accumulated deficit and has had negative cash flows fro m its operations. Realization of the Co mpa ny’s assets is
dependent upon the Co mpany’s ability to meet its future financing requirements, and the success of future operations. These factors raise
substantial doubt about the Co mpany’s ability to continue as a going concern (Refer to auditor’s report on page F-2). The financial statements
do not include any adjustments that might be necessary if the Co mpany is unable to continue as a going concern.
No assurances can be given that the Co mpany will be able to raise additional cap ital, when needed or at all, or that such cap ital, if available,
will be on terms acceptable to the Co mpany. In the event we are unable to raise additional funds, we could be required to eith er substantially
reduce or terminate our operations.
Currently the Co mpany has no extensive expansion plans that would require sign ificant infusions of capital into its operations. As such, a
principal stockholder of the Co mpany has verbally co mmitted to provide the necessary funding to maintain operations of the Co mpany for at
least the next twelve months.
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Until , all dealers that effect transactions in these securities, whether or not partici pating in this offering, may be required to
deli ver a prospectus. This is in addi tion to the dealers ’ obligati on to deli ver a pros pectus when acting as underwriters and wi th res pect
to their unsol d allotments or subscriptions. No dealer, salesman or any other person has been authorized to gi ve any information or to
make any representation not contained in this pros pectus in connecti on with the offer made by this prospectus. If gi ven or made, such
informati on or representation must not be relied upon as having been authorized by the Company. This pros pectus does not cons titute
an offer of any securities other than the registered securities to which i t relates or an offer to any person i n any jurisdiction in which
such an offer woul d be unl awful. Neither deli very of this prospectus nor any sale made hereunder shall under any circumstance s create
an i mplication that information contained herein is correct as of any ti me subsequent to the date of this pros pectus.
AURIOS INC.
200,000 shares
common stock
no par value
PROSPECTUS
November , 2008
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Other Expenses o f Issuance and Distribution .
The following table sets forth the estimated costs and expenses of the Company in connection with the offering described in the
registration statement.
Securities and Exchange Co mmission Registration Fee $ 1.00
Legal Fees and Expenses 30,000
Accounting Fees and Expenses 5,000
Other Expenses 1,000
Total Expenses $ 36,001
Indemni ficati on of Directors and Officers.
The Arizona Business Corporation Act, under which the Co mpany is organized, permits the inclusion in the articles of incorpor ation of a
provision limit ing or eliminating the potential monetary liability of d irectors to a corporation or its shareholders by reason of their conduct as
directors. The provision would not permit any limitation on or the elimination of liability of a director for disloyalty to h is corporation or its
shareholders, failing to act in good faith, engaging in intentional misconduct or a knowing violat ion of the law, obtaining an improper personal
benefit or paying a dividend or approving a stock repurchase that was illegal under the Arizona Business Corporation Act. Accordingly, the
provisions limit ing or eliminating the potential monetary liability of directors permitted by the Law apply on ly to the “duty of care” of
directors, i.e., to unintentional errors in their deliberations or judgments and not to any form of “bad faith” conduct.
The Articles of Incorporation of the Co mpany contain a provision which eliminates the personal monetary liab ility of d irectors to the
extent allo wed under Arizona law. Accordingly, a shareholder is able to prosecute an action against a director for monetary d amages only if he
can show a breach of the duty of loyalty, a failure to act in good faith, intentional misconduct, a knowing violat ion of law, an improper personal
benefit or an illegal d ividend or stock repurchase, as referred to in the amend ment, and not “negligence” or “gross negligence” in satisfying his
duty of care. The Law applies only to claims against a director arising out of his role as a director and not, if he is also an officer, his ro le as an
officer or in any other capacity or to his responsibilit ies under any other law, such as the fede ral securities laws.
In addition, the Co mpany’s Articles of Incorporation and Bylaws provide that the Company will indemnify its directors, officers,
emp loyees and other agents to the fullest extent permitted by Arizona law. Insofar as indemn ification for liabilities arising under the Securit ies
Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or o therwise, the
Co mpany has been advised that in the opinion of the Securities and Exchange Co mmission such indemn ification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Co mpany in the successful defense
of any action, suit or proceeding) is asserted by such director, officer o r controlling person in connection with the securit ies being registered,
the Co mpany will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropria te
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by
the final ad judication of such issue.
No pending lit igation or proceeding involving a d irector, officer, employee or other agent of the Co mpany as to which indemni fication is
being sought exists, and the Company is not aware of any pending or threatened material lit igation that may result in claims for indemn ification
by any director, officer, employee or other agent.
Recent Sales of Unregistered Securities
In June and July 2007, the Co mpany made private placements of shares of its common s tock to: (i) Pau l Attaway, an officer, director and
principal shareholder of the Co mpany and the principal shareholder, director and an officer of our founder and former parent co mpany;
(ii) Timothy Louis, an officer and director the Co mpany; (iii) Christian J. Hoffmann, III, a partner of Quarles &
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Brady LLP, legal counsel of the Co mpany; and (iv) Ira J. Gaines, a principal shareholder of the Co mpany. Mr. Attaway, Mr. Louis and
Mr. Hoffmann purchased 455,000, 40,000 and 200,000 shares of common stock of the Co mpany , respectively, for $.001 per share. Mr. Gaines
purchased 200,000 shares of common stock for $.05 per share. The Co mpany ’s officers and directors sold the shares of common stock. The
shares were issued in reliance on the exemptions fro m registration set forth in Section 4(2) o f the Securities Act.
The Co mpany made a private placement of shares of its Series A Convertible Preferred Stock (“Preferred Stock”) to accredited investors
at a price of $0.25 per share for $115,000 of gross proceeds fro m August to December 2007. The Co mpany ’s officers and directors sold the
Preferred Stock. The shares were issued in reliance on the exemptions fro m registration set forth in Section 4(2) o f the Securities Act.
Exhibits
Exhibit
Number Description
3.1 Articles of Incorporation of the Co mpany, dated August 9, 2001.**
3.2 Amend ment to the Articles of Incorporation of the Co mpany, dated September 28, 2007.**
3.3 Amend ment to the Articles of Incorporation of the Co mpany, dated October 10, 2007.**
3.4 By-laws of the Co mpany.**
4.1 Form of Co mmon Stock Certificate.**
4.2 Form of Series A Convertib le Preferred Stock Certificate.**
5.1 Opinion of Quarles & Brady LLP as to the legality of securities being registered (includes consent).*
10.1 2007 Stock Option and Restricted Stock Plan.**
10.2 Form of Stock Option Agreement (ISO and Non-Qualified) 2007 Stock Option Plan.**
10.3 License Agreement with True Gravity Enterprises, Inc., dated July 2, 2007.**
10.4 Management and Rental Agreement between True Gravity Enterprises, Inc. and the Co mpany dated January 1, 2007.**
10.5 Pro missory Note between the Co mpany and True Gravity Enterprises, Inc., dated January 1, 2007, in the principal amount of
$44,121.35.**
10.6 Stock Purchase Agreement between True Gravity Enterprises, Inc. and Paul Attaway, dated December 31, 2007.**
10.7 Form of Subscription Agreement related to 2007 p rivate placement of preferred shares.*
23.1 Consent of Semp le, Marchal & Cooper LLP.**
23.2 Consent of Quarles & Brady LLP (Included in 5.1 above)
23.3 Consent of Semp le, Marchal & Cooper LLP.*
24.1 Power o f Attorney.**
* Filed herewith.
** Filed Previously
Undertakings
(a) Rule 415 Offering. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which o ffers or sales are being made, a post -effective amend ment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising after the effective date of the reg istration statement (or the most
recent post-effective amend ment thereof) wh ich, individually or in the aggregate, represent a fundamental change in the
informat ion set forth in the registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such informat ion in the reg istration statemen t;
(2) That, for the purpose of determin ing any liab ility under the Securit ies Act of 1933, each such post -effective amend ment shall b e
deemed to be a new registration statement relating to the securities offered therein, and the offering of such secu rities at that time
shall be deemed to be the in itial bona fide offering thereof.
(3) To remove fro m registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
(h) Request for acceleration of effective date:
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Insofar as indemnificat ion for liabilit ies arising under the Securit ies Act may be permitted to directors, officers and controlling persons of
the smaller reporting company pursuant to the foregoing provisions, or otherwise, the smaller report ing issuer has been advised that in the
opinion of the Securit ies and Exchange Co mmission such indemnification is against public policy as expressed in the Securitie s Act and
is, therefore, unenforceable. In the event that a claim for indemnification against such liabilit ies (other than the payment by the smaller
reporting company of expenses incurred or paid by a director, officer or controlling person of the smaller reporting co mpany in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the smaller reporting company will, unless in the opinion of its counsel the matter has been set tled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnificat ion by it is against public policy
as expressed in the Securities Act and will be governed by the final adjudicat ion of such issue.
(i) Reliance on Rule 430A :
(1) For purposes of determining any liability under the Securities Act of 1933, the info rmation o mitted fro m the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the re gistrant
pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securit ies Act shall be deemed to be part of this reg istration statement as of
the time it was declared effective.
(2) For the purpose of determin ing any liab ility under the Securit ies Act o f 1933, each post-effective amend ment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the in itial bona fide o ffering thereof.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form S -1 and authorized this Form S-1 to be signed on its behalf by the undersigned, in the city of
Phoenix, state of Arizona on November 4 , 2008.
AURIOS INC.,
an Arizona corporation
/s/ Paul Attaway
Name: Paul Attaway
Title: President, Ch ief Executive Officer, Chief
Financial Officer, Principal Accounting
Officer and Director
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following pe rsons in the
capacities and on the date stated:
Signature and Title Date
/s/ Paul Attaway November 4 , 2008
Paul Attaway, President, Ch ief Executive Officer, Chief Financial
Officer, Principal Accounting Officer and Director
/s/ Timothy Louis November 4 , 2008
Timothy Louis, Secretary, Treasurer and Director
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Exhibits
Exhibit
Number Description
3.1 Articles of Incorporation of the Co mpany, dated August 9, 2001.**
3.2 Amend ment to the Articles of Incorporation of the Co mpany, dated September 28, 2007.**
3.3 Amend ment to the Articles of Incorporation of the Co mpany, dated October 10, 2007.**
3.4 By-laws of the Co mpany.**
4.1 Form of Co mmon Stock Certificate.**
4.2 Form of Series A Convertib le Preferred Stock Certificate.**
5.1 Opinion of Quarles & Brady LLP as to the legality of securities being registered (includes consent).*
10.1 2007 Stock Option and Restricted Stock Plan.**
10.2 Form of Stock Option Agreement (ISO and Non-Qualified) 2007 Stock Option Plan.**
10.3 License Agreement with True Gravity Enterprises, Inc., dated July 2, 2007.**
10.4 Management and Rental Agreement between True Gravity Enterprises, Inc. and the Co mpany dated January 1, 2007.**
10.5 Pro missory Note between the Co mpany and True Gravity Enterprises, Inc., dated January 1, 2007, in the principal amount of
$44,121.35.**
10.6 Stock Purchase Agreement between True Gravity Enterprises, Inc. and Paul Attaway, dated December 31, 2007.**
10.7 Form of Subscription Agreement related to 2007 p rivate placement of preferred shares.*
23.1 Consent of Semp le, Marchal & Cooper LLP.**
23.2 Consent of Quarles & Brady LLP (Included in 5.1 above)
23.3 Consent of Semp le, Marchal & Cooper LLP.*
24.1 Power o f Attorney.**
* Filed herewith.
** Filed Previously
Exhi bit 5.1
November 3, 2008
Securities and Exchange Co mmission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Aurios Inc.
Ladies and Gentlemen :
This firm is counsel for Aurios Inc., an Arizona corporation (the “Co mpany”). As such, we are familiar with the Articles of Incorporation
and Bylaws of the Co mpany. We have also acted as counsel for the Co mpany with respect to certain matters in connection with t he preparation
of the Registration Statement on Form S-1 registering up to an aggregate of 200,000 shares of the Co mpany’s common stock, no par value (the
“Shares”), of which 122,800 are shares of common stock issuable upon the conversion of outstanding Series A Convertib le Preferred Sto ck into
common stock, under the Securit ies Act of 1933, as amended. In addit ion, we have examined such documents and undertaken such further
inquiry as we consider necessary for rendering the opinion hereinafter set forth below.
Based upon the foregoing, it is our opinion that:
1. The Co mpany is a corporation validly existing and in good standing under the laws of the State of Arizona; and
2. W ith respect to 77,200 of the Shares, such shares are duly and validly issued, fully paid and nonassessable. With respect to the
remain ing 122,800 Shares, such shares, when issued, will be duly and validly issued, fully paid and nonassessable.
A member of our firm is a principal shareholder of the Co mpany. We acknowledge that we are referred to under the heading “Interest of
Named Experts and Counsel” of the prospectus which is part of the Reg istration Statement and we hereby consent to the use of our name in
such Registration Statement. We further consent to the filing of this opinion as Exhib it 5.1 to the Registration Statement.
Very tru ly yours,
/s/ Quarles & Brady LLP
Quarles & Brady LLP
Exhi bit 10.7
AURIOS INC.
SUBSCRIPTION AGREEMENT
(For Accred ited Investors)
Gentlemen:
The following information is furn ished as the undersigned ’s subscription for shares of Series A Convertible Preferred Stock, no par value
per share (the “Shares”), issued by AURIOS INC., an Arizona corporation (the “Co mpany”), and for you to determine whether I am qualified
to purchase Shares from the Co mpany pursuant to Regulation D pro mu lgated under the Securities Act of 1933, as amended (the “Securit ies
Act”), and comparable p rovisions of applicable state securities laws. I, the undersigned, understand that you will rely upon the following
informat ion for purposes of such determination, and that the Shares will not be registered under the Securities Act in relian ce u pon the
exemption fro m reg istration provided by Sections 3(b) and 4(2) of the Securities A ct, Regulation D thereunder, and co mparable provisions of
applicable state securities laws.
I further understand I may be required to supply a balance sheet, prior years ’ federal inco me tax returns or other appropriate
documentation to verify and substantiate my status as an Accredited Investor.
ALL INFORMATION CONTAINED IN THIS SUBSCRIPTION A GREEM ENT WILL BE TREATED CONFIDENTIA LLY. However,
it is agreed that you may present this document to such parties as you deem appropriate if called upon to establish t hat the proposed offer and
sale of the Shares is exempt fro m registration under the Securities Act or meets the requirements of applicable state securit ies laws. I
understand that if I make a false statement, it will constitute a violation of my representa tions and warranties under this Subscription
Agreement and may also constitute a violation of law, for wh ich the Co mpany can make a claim for damages against me. My investment in the
Shares will not be accepted until the Co mpany determines that I satisfy all of the suitability standards set forth in the Private Placement
Memorandu m, dated August 1, 2007 (the “Memorandum”). See “Who May Invest.”
I, the undersigned Subscriber, hereby supply you with the following in formation and representations:
1. Full Name:
2. Residence Address (not a P.O. B ox address) and Telephone Number:
( ) -
3. Business Address and Telephone Number:
( ) -
-1-
4. State in which the undersigned maintains princi pal residence:
5. State in which the undersigned is registered to vote:
6. If this investment is to be made by an Entity ( i.e. Company, Corporation, Pension Plan, Profit-Sharing Plan), the undersigned
further represents to you as follows :
(a) Name and Address of Entity Making Pu rchase (use full legal name):
(b) Name and address of Person Making Investment Decision on behalf of Above Entity:
(c) Position or Tit le of Person Making Investment Decision in the Above Entity:
7A. I certify that I am an Accredited Investor because I qualify under at least one of the foll owing categ ories:
(PLEASE CHECK APPROPRIATE CATEGORY)
a. $1,000,000 Net Worth Natural Person.
A natural person whose individual net worth, or joint net wo rth with that person’s spouse, at the time of his or her purchase exceeds
$1,000,000.
b. $200,000 Income Natural Person.
A natural person who had “Individual Income” in excess of $200,000 in each of the two most recent years or joint income with that
person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income lev el in t he
current year. (See definition of “Individual Inco me” under the caption “Who May Invest” of the Memorandum).
c. Company, Corporate or Other Entity Investors.
The investor is a partnership, corporation or unincorporated association and all of the equity owners of that entity qualify as Accredited
Investors under subparagraph (a) or (b) above. Investors that check this subparagraph (c) must furnish a separate copy of this Subscription
Agreement for each equity owner with items 1 through 7B co mpleted and executed on the Investor Signature Page by such equity owner.
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d. Revocable or Grantor Trust.
The Investor is a revocable or grantor trust and each Person with the power to revoke the trust qualifies as an Accredited In vestor under
(a) or (b) above. Investors that check this subparagraph (d) must furnish a separate copy of this Subscription Agreement for each Person
with the power to revoke the trust with items 1 through 7B co mp leted and executed on the Investor Signature Page by such Pers on.
e. Investment Decision by Plan Fi duciary.
The Investor is an employee benefit plan with in the meaning of Title I of the Emp loyee Retirement Income Security Act of 1974, and the
investment decision is made by a Plan fiduciary, as defined in Section 3(21) of such Act which is a bank, savings and loan association,
insurance company or registered investment advisor.
f. Self-Directed Plan — Investment Decision Solely by Accredited Investor.
The Investor is a qualified pro fit sharing or defined contribution Plan, the Plan provides for segregated accounts for each P lan Participant,
the governing documents of the Plan provide that each participant may d irect the trustee to invest his or her fund s in the investment
vehicles of his or her choice and the purchase of the Shares is made pursuant to an exercise by the Plan Participant, who is an Accredited
Investor under subparagraph (a) or (b) above, of such power to direct the investments of his or her segregated account. This Subscription
Agreement must be completed and executed by such Plan Part icipant.
g. Institutional Investor.
Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts, or si milar business trust or
partnership, not formed for the specific purposes of acquiring the Shares offered through the Memorandum, with total assets in excess of
$5,000,000.
h. Director, Executi ve Officer, or General Partner of the Issuer.
Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer.
7B. I further represent to you as follows:
(i) Emp loyer and Position of Person Making Investment Decision:
(ii) Prior Emp loy ment (five years) of Person Making Investment Decision:
Emp loyer (1)
(2)
Nature of Duties (1)
(2)
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Dates of Emp loy ment (1)
(2)
8. Representations and Warranties. I, the undersigned, represent and warrant as follows:
(a) I have received the Memorandum, have carefully rev iewed the Memorandum, and have relied solely on the information contained
therein, and information otherwise provided to me in writ ing by the Co mpany. I understand that all documents, records and books
pertaining to this investment have been made available by the Co mpany for inspection by me or my attorney, accountant and Purchaser
Representative. I am familiar with the Co mpany’s business objectives and the financial arrangements in connection therewith. The
Shares I am purchasing are the kind of securities that I wish to hold for investment and the nature of the Shares are consistent wit h my
investment program. My advisor(s) and I have had a reasonable opportunity to ask questions of and receive answers fro m the of ficers and
directors of the Co mpany concerning the Company and the Shares. All such questions have been answered to my fu ll satisfaction . I, or
my representatives, have made such investigation of the facts and circumstances set forth in the Memorandum and exhib its thereto in
connection with any purchase of the Shares as I have deemed necessary. No representations have been made or in formation fu rnished to
me or my advisor(s) relat ing to the Co mpany or the Shares that are in any way inconsistent with the Memo randum.
(b) Subject to the terms and conditions hereof, I hereby irrevocably tender this Subscription Agreement for the purchase of the S hares
indicated in Paragraph 12 belo w and shall pay for such Shares in the manner set forth in such Paragraph. I am aware that the subscription
made herein is irrevocable, but that the Company has the unconditional right to accept or reject this subscription, in whole or in part, and
that the sale of the Shares pursuant hereto is subject to the approval of certain lega l matters by legal counsel and to other conditions. If
my subscription is not accepted for any reason whatsoever, or, if the offering made through the Memorandum is terminated, my money
will be returned in full, without any interest that may be earned thereon, and the Company will be relieved of any responsibility or
liab ility that might be deemed to arise out of my offer to subscribe for the Shares.
(c) I and, if applicable, my Pu rchaser Representative have carefully rev iewed the Memorandum. I have, eit her alone or together with my
Purchaser Representative, such knowledge and experience in business and financial matters as will enable me to evaluate the m erits and
risks of the prospective investment and to make an in formed investment decision. I am also aware that no state or Federal agency has
reviewed or endorsed the Memorandum or the Shares, that the Shares involve a high degree of economic risk, and that there may be no
public market fo r the Shares.
(d) I have been advised and am fully aware that investing in the Shares is a speculative and uncertain undertaking, the advantages and
benefits of which are generally limited to a certain class of investors, and that the Shares may be sold only to persons who understand the
nature of the proposed operations of the Company and for who m the investment is suitable. I represent that I meet such suitability
requirements.
(e) I have relied on my own tax and legal adviser and my own investment counselor with respect to the income tax and investment
considerations of being an investor as described in the Memo randum.
(f) I meet the requirements of a purchaser as set forth in the Memorandum under the caption “Who May Invest.”
-4-
(g) I understand that the Co mpany has not registered the Shares or the Co mmon Stock issuable upon conversion of the Shares (the
“underlying Shares”) under the Securities Act, or the applicable securities laws of any state in reliance on exemptions fro m registration. I
further understand that such exempt ions depend upon my investment intent at the time I acquire the Shares. I therefore repres ent and
warrant that I am purchasing the Shares for my o wn account for investment and not with a view to distribution, assignment, res ale or
other transfer of the Shares or the Underlying Shares. Except as specifically stated herein, no other person has a direct or indirect
beneficial interest in the Shares or the Underlying Shares. Because the Shares and the Underlying Shares are not registered, I am aware
that I must hold them indefinitely unless they are registered under the Act and any applicable state securitie s laws or I must obtain
exemptions fro m such registration. I acknowledge that the Co mpany is under no duty to register the Shares or the Underlying S hares or
comply with any exemption in connection with my sale, transfer or other disposition under applicab le rules and regulations, except as
described in the Memorandum. I understand that if I desire to sell, assign, transfer, hypothecate or in any way alienate or e ncu mber the
Shares or the Underlying Shares in the future, the Co mpany can require that I provide, at my own expense, an opinion of counsel
satisfactory to the Company to the effect that such action will not result in a vio lation of applicable federal or state secu rities laws and
regulations or other applicable federal or state laws and regulations.
(h) The solicitation of an offer to purchase the Shares was directly commun icated to me and any Purchaser Representative that I m ight have
through the Memorandum to which this Subscription Agreement is attached as an Exh ibit. At no time was I presented with or solicited
by or through any leaflet, public pro motional meeting, circu lar, newspaper or magazine art icle, radio or television advertise men t or any
other form of general advertising in connection with such communicated offer.
(i) I recognize that my investment in the Shares involves certain risks and I (and my Purchaser Representative) have taken full cognizance of
and understand all of the risk factors related to the business objectives of the Company and the purchase of the Shares, including those
risk factors set forth under the caption “RISK FA CTORS” in the Memorandum.
(j) All information that I have provided herein, including, without limitation, in formation concerning myself, my financial posit ion and my
knowledge of financial and business matters and that of my Purchaser Representative, is correct and complete as of the date hereof, and
if there should be any material change in such information prior to the acceptance of this Subscription Agreement, I will immed iately
provide the Co mpany with such information.
(k) If the Subscriber is a corporation, partnership, trust, unincorporated association or other entity, it is authorized and othe rwise duly
qualified to purchase and hold the Shares subscribed hereunder, and such entity has not been formed for the specific purpose of acquiring
the Shares. If the Subscriber is a trustee and is acquiring the Shares for the trust of wh ich he is a trustee, he has sought the advice of
counsel regarding whether the purchase of the Shares is an authorized trust investment and has been advised by counsel that after
reviewing the applicable state law and the terms of the trust instrument, such counsel is of the opinion that the undersigned has the
authority to purchase the Shares for the trust.
(l) If the Subscriber is an indiv idual, he or she is 21 years of age, or if the Subscriber is an association, all o f its members are of such age.
9. Restricti ve Legend. I hereby acknowledge and consent to the placement of the following restrictive legend o n the certificate(s) and
other documents(s) representing the Shares:
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THE SECURITIES REPRESENTED BY THIS INSTRUM ENT HA VE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AM ENDED, OR THE SECURITIES LAWS OF ANY STATE AND MA Y NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRA NSFERRED, EXCEPT UPON DELIVERY TO THE COMPA NY OF AN OPINION OF
COUNSEL, SATISFACTORY TO THE BOARD OF DIRECTORS, THAT A N EXEMPTION FROM SUCH REGISTRATIO N IS
AVAILA BLE AND THAT SUCH TRANSFER WILL NOT RESULT IN ANY VIOLATION OF THE LAW.
10. Indemni ficati on. I agree to indemn ify and hold harmless the Company, its officers and directors fro m and against all damages, losses,
costs and expenses (including reasonable attorney’s fees) which they may incur by reason of my failure to fulfill any of the terms or
conditions of this Subscription Agreement, or by reason of any untrue statement made herein or any breach of the representations and
warranties made herein or in any document that I have provided to the Company.
11. Miscellaneous.
(a) I agree that I may not cancel, terminate or revoke this Subscription Agreement or any covenant hereunder and that this Subscr iption
Agreement shall survive my death or disability and shall be binding upon my heirs, executors, ad min istrators, successors and assigns.
(b) This Subscription Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the Stat e of
Arizona.
(c) Within five days after receipt of a written request from the Co mpany, I agree to provide such information and to execute and deliver such
documents as may reasonably be necessary to comply with any and all laws and ordinances to which the Co mpany is subjec t.
12. Subscription.
(a) I hereby subscribe for Shares at $.25 per Share fo r a total subscription of $ .
(b) I hereby tender to the Company a check made payable to “AURIOS, INC.” in the amount subscribed above under 12(a) above;
Signature Date
13. Registration and Address
Mr./Mrs./Ms.
(Please Print Name(s) in which the Shares are to be reg istered hereunder.)
(Please Print the Social Security or Taxpayer ID Nu mber of each Noteholder)
-6-
Co mmunicat ions to be sent to (check one):
Ho m
e Business
Please check wh ich address you use on your income tax returns:
Ho m
e Business
Form of Ownershi p (check one)
(a) Individual Ownership
(b) Joint tenants with right of survivorship (both or all parties ’ signatures required)
(c) Co mmun ity Property (one signature required if the Shares are held in one name; two if held in both names)
(d) Tenants in Co mmon (all part ies ’ signatures required)
(e) Co mpany*
(f) Corporation*
(g) Partnership*
(h) Other* (Trust, etc.) (please specify)
* IF (e), (f), (g), or (h) A RE CHECKED, DOCUM ENTS, INCLUDING PA RTNERSHIP OR CORPORATE RESOLUTION,
AUTHORIZING SUBSCRIBER TO MAKE INVESTM ENT M UST ACCOMPANY SUBSCRIPTION.
Mail or Deli ver Subscription Funds and Documents to:
AURIOS, INC.
4405 E. Baseline Road, Su ite 120
Phoenix, AZ 85042
SUBSCRIPTION A CCEPTED:
AURIOS INC.,
an Arizona corporation
By:
Name:
Its:
Date:
-7-
Exhi bit 23.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Aurios Inc.:
As independent registered certified public accountants, we hereby consent to the reference to our firm under the caption “Experts” in the
Registration Statement on Form S-1, A mend ment No. 1 (the “Reg istration Statement”) of Aurios Inc. (the “Co mpany”) and to the incorporation
in the Reg istration Statement of our report dated April 9, 2008, included in the Co mpany’s Financial Statements for the year ended
December 31,2007.
/s/ Semple, Marchal & Cooper, LLP
Phoenix, Arizona
October 31,2008
INDEPENDENT M EM BER OF THE BDO SEIDMAN A LLIANCE
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