UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 2011

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

For the transition period from _______________ to _______________

Commission file number: 000-28161

AURI, INC.

(Exact name of Registrant as specified in its charter)

Delaware	33-0619264
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1200 North Coast Highway, Laguna Beach, California	92651
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code): (949) 793-4045

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

Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and ~~required~~posted toon beits ~~filed~~corporate byWeb ~~Section~~site, 13if orany, ~~15(d)~~every ofInteractive ~~the~~Data ~~Securities~~File ~~Exchange~~required ~~Act~~to be submitted and posted pursuant to Rule 405 of ~~1934~~Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2)~~post ~~has been subject to~~ such ~~filing~~files). ~~requirements~~Yes ~~for the past 90 days.~~ý No o

Yesý Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý No o

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

Large Accelerated Filer o		Accelerated Filer o

Non- Accelerated Filer o		Smaller reporting company ý
(Do not check if a smaller reporting company)

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

~~Yeso No ý~~As of November 10, 2011, there were 91,047,580 shares of the Registrant's common stock, $0.001 par value, outstanding.

AsCAUTIONARY ~~of August 9, 2011, there were 90,497,580 shares of common stock, $0.001 par value, outstanding.~~STATEMENT

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the provisions of the Private Securities Litigation Reform Act of 1995 which represent our projections, estimates, expectations or beliefs concerning among other things, financial items that relate to management’s future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”, “should”, “plans”, “believe”, “will”, “anticipate”, “estimate”, “expect” “project”, or “intend”, including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission (“SEC”) after the date of this Quarterly Report. Actual results may differ materially from any forward looking statement.

AURI, INC.

QUARTERLY REPORT

FORM 10-Q

TABLE OF CONTENTS

			Page
			Page No.
			No.
PART I - FINANCIAL INFORMATION			1
PART I - FINANCIAL INFORMATION
	ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	1
Item 1.		Condensed Consolidated Financial Statements.	3
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9
Item 2.		Management’s Discussion and Analysis of Financial Condition And Results of Operations.	9
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	14
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.	12
	ITEM 4.	CONTROLS AND PROCEDURES	14
Item 4.		Controls And Procedures.	12
PART II - OTHER INFORMATION			16
PART II - OTHER INFORMATION
	Item 1.	LEGAL PROCEEDINGS	16
Item 1.		Legal Proceedings.	13
	Item 1A.	RISK FACTORS	16
Item 1A.		Risk Factors.	13
	Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.	13
	Item 3.	DEFAULTS UPON SENIOR SECURITIES	17
Item 3.		Defaults Upon Senior Securities.	13
	Item 4.	[REMOVED AND RESERVED]	17
Item 4.		[Removed and Reserved]	13
	Item 5.	OTHER INFORMATION	17
Item 5.		Other Information.	13
	Item 6.	EXHIBITS	18
Item 6.		Exhibits.	14
SIGNATURES			15

~~The terms “we,” “us,” “our,” “the Company,” and “Auri,” as used in this Report on Form 10-Q refers to Auri, Inc., and its wholly owned subsidiary, Auri Footwear, Inc.~~ii

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

AURI, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2011			December 31, 2010
	September 30, 2011			December 31, 2010
ASSETS	(~~unaudited~~Unaudited)
Cash and cash equivalents	$	~~233~~108,~~060~~795		$	406,439
Accounts receivable – net		~~130~~177,~~198~~228			104,355
Due from factor		6829,~~423~~881			15,796
Inventory – net		~~325~~635,~~534~~960			226,773
Prepaid expenses and other assets		~~168~~72,~~235~~872			116,320
Deferred finance fee – net		-			18,778
Total current assets		~~925~~1,~~450~~024,736			888,461
Property and equipment – net		5792,~~896~~159			85,035
TOTAL ASSETS	$	~~983~~1,~~346~~116,895		$	973,496
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable	$	~~130~~190,~~263~~402		$	85,337
Accrued liabilities		90100,~~574~~702			46,132
Short-term note payable		~~100~~300,000			-
Short-term portion of long-term note payable		5062,~~000~~500			12,500
Short-term portion of long-term related party note payable		1620,~~667~~830			4,167
Short-term convertible note payable		-			500,000
Total current liabilities		~~387~~674,~~504~~434			648,136
Long-term note payable – net of short term portion		~~100~~87,~~000~~500			137,500
Long-term related party note payable – net of short term portion		3329,~~333~~170			45,833
TOTAL LIABILITIES		~~520~~791,~~837~~104			831,469
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock – $0.001 par value; 1,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock – $0.001 par value; 300,000,000 shares authorized, 59,735,360 shares issued and outstanding at December 31, 2010 and 89,991,580 shares issued and outstanding at June 30, 2011		89,992			59,735
Common stock – $0.001 par value; 300,000,000 shares authorized, 59,735,360 shares issued and outstanding at December 31, 2010 and 91,047,580 shares issued and outstanding at September 30, 2011		91,048			59,735
Additional paid in capital		5,~~579~~995,~~544~~019			4,451,596
Accumulated deficit		(5,~~207~~760,~~027~~276	)		(4,369,304	)
Total stockholders’ equity (deficit)		~~462~~325,~~509~~791			142,027
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	~~983~~1,~~346~~116,895		$	973,496
See accompanying notes to the unaudited condensed consolidated financial statements.

3See accompanying notes to the unaudited condensed consolidated financial statements.

AURI, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30, 2011

Three Months Ended June 30, 2010

Six Months Ended June 30, 2011

Six Months Ended June 30, 2010

Three Months Ended September 30, 2011

Three Months Ended September 30, 2010

Nine Months Ended September 30, 2011

Nine Months Ended September 30, 2010

Sales – net

~~169~~287,~~787~~453

~~221~~101,~~380~~682

~~473~~761,~~824~~277

~~360~~462,~~699~~381

Cost of goods sold

~~169~~260,~~975~~778

~~154~~99,~~180~~572

~~383~~643,~~029~~806

~~251~~351,~~750~~960

Gross profit

~~(188~~26,675

)

672,~~200~~110

90117,~~795~~471

~~108~~110,~~949~~421

Selling, general and administrative expenses

~~483~~542,~~628~~431

~~194~~151,~~108~~965

~~881~~1,~~273~~423,704

~~442~~594,~~792~~116

Loss from operations

(~~483~~515,~~816~~756

)

(~~126~~149,~~908~~855

)

(~~790~~1,~~478~~306,233

)

(~~333~~483,~~843~~695

)

Other income (expenses)

(2437,~~575~~496

)

(32,~~628~~713

)

(4784,~~245~~739

)

(36,~~751~~462

)

NET LOSS

(~~508~~553,~~391~~252

)

(~~130~~152,~~536~~568

)

(~~837~~1,~~723~~390,972

)

(~~337~~490,~~594~~157

)

Net loss per share – basic and diluted

0.01

0.00

0.0102

0.01

Weighted average shares outstanding – basic and diluted

8890,~~711~~526,~~360~~710

53,~~476~~312,~~364~~707

7983,~~685~~338,~~104~~686

5254,~~678~~563,~~418~~042

See accompanying notes to the unaudited condensed consolidated financial statements.

4See accompanying notes to the unaudited condensed consolidated financial statements.

AURI, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FROM DECEMBER 31, 2010 THROUGH ~~JUNE~~SEPTEMBER 30, 2011

(Unaudited)

	Preferred Stock				Common Stock				Additional Paid In			Accumulated	~~Accumulated~~
	Shares		Amount		Shares		Amount		Capital			Deficit	~~Deficit~~		Total	~~Total~~
Balance, December 31, 2010		---	$	---		59,735,360	$	59,735	$	4,451,596		$	$(4,369,304	~~(4,369,304~~)	)$	$142,027	~~142,027~~
Shares issued in reverse merger		---		---		27,816,220		27,817		(87,112	)		---	~~---~~		(59,295	~~(59,295~~)	)
Shares issued for cash		---		---		12,190,000		12,190		~~593~~967,810			---	~~---~~		970,000	~~595,000~~
Shares issued for convertible note		---		---		1,000,000		1,000		499,000			---	~~---~~		500,000	~~500,000~~
Shares issued for service		---		---		~~250~~306,000		~~250~~306		~~122~~163,~~250~~725			---	~~---~~		164,031	~~122,500~~
Net loss				---		---		---		---			(1,390,972	~~(837,723~~)	)	(1,390,972	~~(837,723~~)	)
Balance, June 30, 2011		---	$	---		89,991,580	$	89,992	$	5,579,544			$	(5,207,027	)	$	462,509
Balance, September 30, 2011		---	$	---		91,047,580	$	91,048	$	5,995,019		$	(5,760,276	)	$	325,791
See accompanying notes to the unaudited condensed consolidated financial statements.

5See accompanying notes to the unaudited condensed consolidated financial statements.

AURI, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months			Six Months
	Nine Months			Nine Months
	Ended			Ended
	June 30, 2011			June 30, 2010
	September 30, 2011			September 30, 2010
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(~~837~~1,~~723~~390,972	)	$	(~~337~~490,~~594~~157	)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation, amortization and other		32110,~~756~~580			2439,~~363~~376
Stock based compensation		~~122~~164,~~500~~031			33,593
Recovery of inventory reserve		428,631			48,~~109~~218
Allowance for bad debt		818,517			-
Changes in:
Accounts receivable		(3491,~~360~~390	)		39133,~~905~~549
Due from factor		(5214,~~627~~085	)		(6592,~~335)~~303	)
Inventory		(~~103~~437,~~392~~819	)		~~(30~~38,~~799~~111	)
Prepaid expenses and other current assets		~~(51,915)~~674			9(102,~~530~~689	)
Deferred finance fee		18,778			-
Accounts payable		99,362			(21,080	)
Accounts payable		39,223			(20,086)
Accrued expenses		50,171			7,427
Accrued expenses		40,042			(4,593	)
Net cash used in operating activities		(1,462,300	)		(445,955	)
Net cash used in operating activities		(813,570	)		(346,907	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments in connection with reverse merger		(49,192	)		-
Cash paid for purchase of property and equipment		(556,~~617~~152	)		(1125,~~201~~660	)
Net cash used in investing activities		(54105,~~809~~344	)		(1125,~~201~~660	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of short-term note payable		~~100~~300,000			-50,000
Proceeds from common stock sales		~~595~~970,000			~~350~~406,~~000~~250
Net cash provided by financing activities		~~695~~1,270,000			~~350~~456,~~000~~250
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(~~173~~297,~~379~~644	)		(815,~~108~~365	)
CASH AND CASH EQUIVALENTS - BEGINNING		406,439			22,931
CASH AND CASH EQUIVALENTS - ENDING	$	~~233~~108,~~060~~795		$	147,~~823~~566
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	-		$	-7,622
Cash paid for interest	$	-54,211		$	-7,186
NON-CASH INVESTING ACTIVITIES:
Assumption of liabilities acquired in reverse merger	$	10,~~115~~103		$	-
Conversion of convertible note into common stock	$	500,000		$	-

See accompanying notes to the unaudited condensed consolidated financial statements.

AURI, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~NOTES~~FOR TO THE ~~UNAUDITED~~THREE ~~CONDENSED~~AND ~~CONSOLIDATED~~NINE ~~FINANCIAL~~MONTHS ~~STATEMENTS~~ENDED SEPTEMBER 30, 2011AND 2010

JUNE 30, 2011

Note 1 – Management’s Representation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Auri, Inc., a Delaware corporation, and its wholly-owned subsidiary Auri Footwear, Inc., a California corporation (collectively “we”, “our” or the “Company”), have been prepared in accordance with ~~U.S. generally accepted~~ accounting principles ~~(GAAP)~~generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the ~~instructions~~requirements tofor reporting on Form 10-Q and Article 8 of Regulation S-X for smaller reporting companies promulgated by the Securities and Exchange Commission ~~(“SEC”)~~. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the financial position of the Company and the results of its operations and cash flows for the periods presented. ~~The~~Results ~~results of its operations~~ for the ~~six~~interim ~~months~~periods ~~ended June 30, 2011~~ are not necessarily indicative of the ~~operating~~ results to be obtained for the full year. These financial statements should be read in conjunction with the financial statements and related disclosures for the year ended December 31, 2010 included in the Company’s annual report on Form 10-K filed with the SEC on April 14, 2011.

The Company has evaluated subsequent events through the date of this filing, and determined that no subsequent events have occurred that would require recognition in the unaudited condensed consolidated financial statements or disclosure in the notes thereto other than as disclosed in the accompanying notes.

Note 2 – Organization and Summary of Significant Accounting Policies

The Company

Auri, Inc., a Delaware corporation, designs, develops, manufactures and sells men’s and women’s footwear. The Company utilizes unique technical materials and designs and incorporates those attributes with fashionable, contemporary styles~~, presenting the highest level of tactile, aesthetic and functional qualities available of any footwear brand offering~~. The Company’s footwear products are manufactured in China and sold primarily to retail outlets throughout the United States.

Reverse merger

On February 24, 2011, Wellstone Filter Sciences, Inc., a Delaware corporation, completed a merger and plan of reorganization pursuant to which it acquired Auri Design Group, LLC. The parties to the merger included Wellstone Filter Sciences, Inc, its principal stockholder, Auri Design Group, LLC, the members of Auri Design Group, LLC, and ADG Acquisition, Inc., a newly-formed California corporation and wholly-owned subsidiary of Wellstone Filter Sciences, Inc., into which Auri Design Group, LLC merged.

Wellstone Filter Sciences, Inc. acquired Auri Design Group, LLC by issuing 59,735,360 shares of common stock, constituting 68.3% of the outstanding shares after giving effect to their issuance and the cancellation of 65,735,360 shares (net) held by prior control persons of Wellstone Filter Sciences, Inc. After the closing, there were 87,551,580 shares of common stock outstanding. On April 14, 2011, Wellstone Filter Sciences, Inc., which was incorporated on April 20, 1994, changed its name to Auri, Inc.

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of Auri, Inc. and its wholly owned subsidiary, Auri Footwear, Inc., a California corporation. All intercompany accounts and transactions have been eliminated.

Note 3 – Going Concern

Our unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should it be determined that we are unable to continue as a going concern.

At ~~June~~September 30, 2011, we had $~~233~~108,~~060~~795 in cash and cash equivalents. We have expended substantial funds on product design and development and the launch of our products. As a result, we have historically experienced negative cash flows from operations since our inception and, unless we are able to generate sufficient revenues from product sales, we expect the negative cash flows from operations to continue for the foreseeable future.

7Therefore, our ability to continue our product development efforts is highly dependent on the amount of cash and cash equivalents on hand combined with our ability to raise additional capital to support our future operations through one or more methods, including but not limited to, issuing additional equity or debt.

~~Therefore~~In March 2011, ~~our~~we ~~ability~~commenced a private placement of units to ~~continue~~accredited ~~our~~investors ~~clinical~~(each ~~trials~~unit consisting of one share of common stock at $0.50 and ~~development~~one ~~efforts~~warrant isto ~~highly~~purchase ~~dependent~~one onshare ~~the~~of ~~amount~~common stock at an exercise price of ~~cash~~$1.00 ~~and~~per ~~cash~~share). ~~equivalents~~Effective onAugust ~~hand~~29, ~~combined~~2011, ~~with~~the ~~our~~private ~~ability~~placement memorandum was amended to ~~raise~~revise ~~additional~~the ~~capital~~units being offered to ~~support~~accredited ~~our~~investors ~~future~~(each ~~operations~~unit ~~through~~consisting of one orshare ~~more~~of ~~methods,~~common ~~including~~stock ~~but~~at ~~not~~$0.25 ~~limited~~and one warrant to purchase one share of common stock at an exercise price of $0.75 per share). As of September 30, ~~issuing~~2011, ~~additional~~we ~~equity~~had orraised ~~debt~~a total of $970,000 from this private placement. The private placement was terminated in October 2011.

With respect to financing our operations, in March 2011, we commenced a private placement of units to accredited investors (each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $1.00 per share). The units have been, and continue to be, offered at a price of $0.50 per unit. As of June 30, 2011, we had raised a total of $595,000 from this private placement.

Note 4 – Short Term Notes Payable

InOn June 3, 2011, the Company borrowed $100,000 ~~under~~from ~~a promissory note agreement with~~ an ~~individual~~investor. The ~~loan~~note bears an interest at 4% per annum and iswas due inand payable on October 3, 2011. The Company is currently in default under this note.

On August 18, 2011, the Company borrowed $200,000 from an investor. The note bears interest at 4% per annum and was due and payable on September 17, 2011. The note provides that if the principal and interest are not paid in full on September 17, 2011, the Company shall issue to the investor 100,000 common shares and an additional 100,000 shares each 30 days thereafter that the principal and interest is not paid in full. The Company is currently in default under this note. As a result, as of September 30, 2011, the Company owed the investor 100,000 shares and as of November 10, 2011, the Company owed the investor an additional 100,000 shares. The Company is in the process of issuing these shares to the investor.

Note 5 – Stockholders’ Equity

During the ~~six~~nine months ended ~~June~~September 30, 2011, wethe ~~received~~Company ~~total~~sold ~~proceeds of $595~~2,190,000 ~~from~~common ~~the~~shares and ~~sale~~warrants ofto 1purchase another 2,190,000 ~~units~~shares inof acommon ~~private~~stock ~~placement.~~to ~~Each~~eighteen ~~unit~~investors ~~consists~~for an aggregate of ~~one~~$970,000. ~~share~~The ofwarrants ~~common~~have ~~stock~~two ~~and~~different ~~one~~exercise ~~warrant~~prices, to1,690,000 ~~purchase~~warrants ~~one~~have ~~share~~an exercise price of ~~common~~$1.00 ~~stock~~per share and 500,000 warrants are at $10.0075 per share. The warrants are exercisable for a period of two years.

On June 20, 2011, the Company issued 1,000,000 ~~shares of~~ common ~~stock~~shares and warrants to purchase an additional 1,000,000 shares ~~of common stock~~ at $0.50 per share in ~~connection~~exchange ~~with~~for ~~the conversion of~~ a $500,000 convertible, callable subordinated debenture ~~by the holder of such debenture~~. The ~~warrant~~warrants isare exercisable for a period of two years.

The warrants, for the private placement units and the convertible debenture, were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.50-.74; warrant term of 2 years; expected volatility of 45.43% – 47.46%; and a discount rate of .38-.81%. The relative fair value of the stock and warrants were $878,670 and $216,330 respectively.

In April 2011, the Company issued 250,000 shares of common stock to an investor relations firm for services rendered. The shares were valued at $122,500 on the date of issuance. The $122,500 was recorded as additional equity with a corresponding charge to professional fees.

~~Note~~These 6warrants were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.50-.74; warrant term of 2 years; expected volatility of 45.43% – ~~Related~~49.19%; ~~Party~~and ~~Transactions~~a discount rate of .19%-.81%. The relative fair value of the stock and warrants were $1,206,833 and $264,441 respectively.

On ~~February~~July 111, 2011, the Company ~~borrowed~~entered into a twelve month investor relations consulting agreement. The agreement provides for an escalating monthly fee over the life of the agreement ranging from $254,000 ~~from~~- a$7,500 ~~major~~per ~~shareholder~~month. ~~pursuant~~In addition to athe ~~note~~monthly ~~that~~fee, ~~bore~~the ~~interest~~Company atis ~~10%~~required ~~per~~to ~~year~~issue ~~and~~56,000 ~~was~~common ~~secured~~shares byshortly after executing the ~~assets~~agreement ofand an additional 68,000 common shares six months after executing the ~~company~~agreement. The ~~due~~Company ~~date~~has ofthe right to terminate the ~~note,~~agreement ~~which~~at ~~was~~the ~~originally~~end ~~March~~of ~~10,~~the ~~2011,~~first ~~was~~six ~~extended~~months. onThe ~~March~~Company 31issued the required 56,000 shares in July 2011. The ~~note~~shares ~~was~~were ~~repaid~~valued inat ~~full~~$36,120 inon ~~April~~the ~~2011~~date of issuance and charged to professional fees expense.

Note 76 – ~~Subsequent~~Stock ~~Events~~Options

InOn ~~connection~~August ~~with~~15, ~~our~~2011, ~~private~~the ~~placement~~Company ofadopted ~~units~~its ~~which commenced in March~~ 2011, ~~from~~Stock ~~July~~Incentive 1,Plan ~~2011~~(the ~~to August 7~~“Plan”), ~~2011, we~~the ~~issued~~purpose ~~a total~~ of ~~450,000~~which ~~units~~is to ~~accredited~~promote ~~investors,~~the ~~each~~interests ~~unit~~and ~~consisting~~long-term ofsuccess ~~one share~~ of ~~common~~the ~~stock~~Company and ~~one~~its ~~warrant~~stockholders toby ~~purchase~~providing ~~one~~an ~~share~~incentive ofto ~~common~~attract, ~~stock~~retain atand ~~$1.00~~reward ~~per~~persons ~~share.~~performing ~~The~~services ~~warrants are exercisable~~ for athe ~~period~~Company ofand 2by ~~years. As~~motivating asuch ~~result,~~persons ~~during~~to ~~this~~contribute ~~period~~to wethe ~~have~~continued ~~raised~~growth aand ~~total~~profitability of ~~$225,000~~the inCompany. During ~~gross~~the ~~proceeds~~three ~~and~~months ~~issued~~ended aSeptember ~~total~~30, ~~of 450~~2011,~~000~~ ~~shares~~the ofCompany ~~common~~granted ~~stock~~options ~~and warrants~~ to purchase ~~another 450~~250,000 ~~shares of~~ common ~~stock.~~shares ~~The warrants were valued using the Black-Scholes option pricing model~~ with ~~the~~an ~~following~~exercise ~~assumptions: stock~~ price ~~on the measurement date~~ of $0.~~65-.67;~~58 ~~warrant~~per ~~term~~share ofand 2exercisable ~~years;~~until ~~expected~~August ~~volatility~~16, of2021 ~~45.43%;~~under ~~and~~the ~~a discount rate of~~ Plan.~~33-.44%.~~ ~~The~~All ~~relative~~250,000 ~~fair~~options ~~value~~vest ofon ~~the~~August ~~stock and warrants were $200~~16,~~882~~ ~~and $24,118 respectively~~2012.

OnThese ~~July~~options 1,have ~~2011 the Company entered into~~ a ~~twelve~~remaining ~~month~~contract ~~investor~~life ~~relations~~of ~~consulting agreement~~9.88 ~~The~~years, ~~agreement~~vested ~~provides~~August ~~for~~16, an2012 ~~escalating~~and ~~monthly~~have ~~fee~~a ~~over~~fair ~~the~~value ~~life~~ of ~~the agreement ranging from~~ $443,~~000-$7~~285,~~500~~ ~~per~~as ~~month.~~calculated Inusing ~~addition to~~ the ~~monthly~~Black-Scholes ~~fee,~~option ~~the~~pricing ~~Company~~model. isVariables ~~required~~used toin ~~issue~~the ~~56,000~~Black-Scholes ~~shares~~option-pricing ofmodel ~~common~~for ~~stock shortly after executing~~ the ~~agreement~~options ~~and~~included: an(1) ~~additional~~discount ~~68,000~~rate ~~shares~~ of ~~common stock six months after executing the agreement~~1.92%, ~~The~~(2) ~~Company~~expected ~~has~~term ~~the right to terminate the agreement at the end~~ of ~~the first six months~~9.88 ~~The~~years, ~~Company~~(3) ~~issued~~expected ~~the~~volatility ~~required 56,000 shares~~ of ~~common~~64.89% ~~stock~~and in(4) ~~July~~zero ~~2011~~expected dividends.

Stock option expense for the nine months ended September 30, 2011 totaled $5,411. As of September 30, 2011, there was approximately $37,874 of unrecognized option expense which is expected to be recorded through August 2012.

Note 7 – Recently Issued Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

Note 8 – Subsequent Events

On October 20, 2011, the Company borrowed $250,000 from an investor under a secured convertible promissory note. The note is due on July 20, 2012 and is secured by substantially all of the Company’s assets. The note is convertible into common stock anytime after 180 days from the issuance of the note and is convertible at 61% of the fair market value of a common share. Fair market value is defined as the lesser of (i) the closing bid price of the Company’s common stock for the trading day immediately preceding the date of conversion, and (ii) the quotient of the sum of the volume weighted average price of the Company’s common stock for each of the five trading days immediately preceding the date of conversion divided by five. In connection with the issuance of the note, the Company issued to the investor three-year warrants to purchase up to 1,025,000 shares at an exercise price of $0.35 per share.

The warrants were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.44; warrant term of 3 years; expected volatility of 69.10%; and a discount rate of .46%. The relative fair value of the warrants was $233,116.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

~~This~~The ~~Quarterly~~following ~~Report~~discussion onand ~~Form 10-Q~~analysis ~~contains~~should ~~“forward-looking~~be ~~statements”~~read ~~within~~in ~~the~~conjunction ~~meaning~~with ofour ~~the~~financial ~~provisions~~statements ofand the ~~Private~~related ~~Securities~~notes ~~Litigation~~to ~~Reform~~financial ~~Act~~statements ofincluded ~~1995~~elsewhere ~~which~~in ~~represent~~this ~~our~~report. This ~~projections,~~report ~~estimates,~~and ~~expectations~~our ~~or beliefs concerning among other things,~~ financial ~~items~~statements ~~that~~and ~~relate~~notes to ~~management’s future plans or objectives or to our future economic and~~ financial ~~performance. In~~statements ~~some~~contain ~~cases,~~forward-looking ~~you can identify these~~ statements, bywhich ~~terminology~~generally ~~such~~include asthe ~~“may”, “should”, “~~plans”, ~~“believe”,~~and ~~“will”,~~objectives ~~“anticipate”,~~of ~~“estimate”,~~management ~~“expect”~~for ~~“project”,~~future ~~or “intend”~~operations, including ~~their~~plans ~~opposites~~and orobjectives ~~similar~~relating ~~phrases~~to orour ~~expressions. You~~future ~~should~~economic beperformance ~~aware~~and ~~that~~our ~~these~~current ~~statements~~beliefs ~~are~~regarding ~~projections~~revenues orwe ~~estimates~~might asgenerate ~~to future events~~ and ~~are~~profits ~~subject~~we tomight aearn ~~number~~if ofwe ~~factors~~are ~~that~~successful ~~may~~in ~~tend~~implementing toour ~~influence~~business ~~the accuracy of the statements~~strategies. ~~These~~ ~~forward-looking~~Our ~~statements~~actual ~~should~~results ~~not~~could bediffer ~~regarded~~materially asfrom athose ~~representation~~expressed byin ~~the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on~~ these forward-looking statements, ~~which speak only~~ as ofa ~~the~~result ~~date~~ of ~~this Quarterly Report. We undertake no obligation to publicly revise~~ any ~~forward-looking~~number ~~statement to reflect circumstances or events after the date~~ of ~~this~~factors, ~~Quarterly~~including ~~Report~~those orset toforth ~~reflect~~under the ~~occurrence~~“Risk ofFactors” ~~unanticipated~~section ~~events. You should, however, review the factors~~ and ~~risks~~elsewhere ~~we describe~~ in ~~the~~this ~~reports~~report. weThe ~~file~~forward-looking ~~from~~statements ~~time to time with the Securities~~ and ~~Exchange~~associated ~~Commission~~risks ~~(“SEC”)~~may ~~after~~include, ~~the~~relate ~~date~~to ofor ~~this~~be ~~Quarterly~~qualified ~~Report.~~by ~~Actual~~other ~~results~~important ~~may~~factors, ~~differ~~including, ~~materially~~without ~~from any forward looking statement.~~limitation:

·	the projected growth or contraction in the industries within which we operate;

·	our business strategy for expanding, maintaining or contracting our presence in these markets;

·	anticipated trends in our financial condition and results of operations; and

·	our ability to distinguish ourselves from our current and future competitors.

We do not undertake to update, revise or correct any forward-looking statements.

Any of the factors described above or elsewhere in this report, including in the “Risk Factors” section of this report, or referenced from time to time in our filings with the Securities Exchange Commission, or SEC, could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.

Overview

We design and market Auri branded contemporary footwear for men and women in several unique styles. Our men’s line consists of both causal/sport shoes and fashion/dress shoes and an array of sandals, while our new women’s line, which debuted in February 2011, consists of an assortment of high-heel designs and flats. Our Fall 2011 women’s line will also include boots, wedges and platforms. ~~With~~Our ~~respect to both our men’s and women’s lines, as discussed in greater detail below, our~~ footwear is crafted with full grain and Italian leathers and hand burnished finishes, and incorporate the seamless fusion of next level technologies including active suspension systems, compression control and anti-fatigue, removable foot beds, Outlast® temperature regulating linings, Liquicell® ultra-thin liquid-filled interface technology, and encapsulated gel technologies, for what we believe is unparalleled performance and comfort. Our innovative design philosophy and solid business fundamentals earned Auri the #No. 8 spot on Forbes Magazine’s 2009 list of “America’s Most Promising Companies” ~~list~~ and we were the only footwear, fashion or apparel ~~brand~~company to make the list.

The following table compares the unaudited condensed consolidated statements of operations for the three month periods ended June 30, 2011 and 2010. This table provides you with an overview of the changes in the condensed consolidated statements of operations for the comparative periods, which are further discussed below.

Results of operations for interim periods covered by this quarterly report on Form 10-Q may not necessarily be indicative of results of operations for the full fiscal year.

	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010
Sales – net	$	169,787		$	221,380
Cost of goods sold		169,975			154,180
Gross profit		(188)			67,200
Selling, general and administrative expenses		483,628			194,108
Loss from operations		(483,816	)		(126,908	)
Other income (expenses)		(24,575	)		(3,628	)
Net loss	$	(508,391	)	$	(130,536	)
Net loss per share – Basic and diluted	$	0.01		$	0.00
Weighted average shares outstanding – Basic and diluted		88,711,360			53,476,364

~~RESULTS~~Results OFof ~~OPERATIONS~~Operations

~~For The~~ Three Months Ended ~~June~~September 30, 2011 Compared to ~~June~~the Three Months Ended September 30, 2010

~~Sales:~~The ~~For~~following ~~the~~table ~~three~~compares ~~months~~the ~~ended~~unaudited ~~June~~condensed ~~30,~~consolidated ~~2011,~~statements ~~our~~of ~~revenue~~operations ~~was $169,787 compared to $221,380~~ for the ~~same~~three ~~period~~month inperiods ~~the~~ended ~~prior~~September ~~year~~30, a2011 ~~decrease~~and ~~of 23%~~2010. This ~~decrease~~table isprovides ~~primarily~~you ~~related~~with toan aoverview ~~decrease~~of inthe ~~our~~changes ~~sales~~in ofthe ~~men’s~~condensed ~~footwear,~~consolidated ~~from~~statements ~~$130,311~~of inoperations ~~2010~~for tothe ~~$106,206~~comparative ~~in 2011~~periods, awhich ~~$24,105~~are orfurther ~~18%~~discussed ~~decrease~~below.

Cost of goods sold: For the three months ended June 30, 2011, cost of goods sold was $169,975 compared to $154,180 for the three months ended June 30, 2010.

	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010

Sales – net	$	287,453		$	101,682

Cost of goods sold		260,778			99,572

Gross profit		26,675			2,110

Selling, general and administrative expenses		542,431			151,965

Loss from operations		(515,756	)		(149,885	)

Other income (expenses)		(37,496	)		(2,713	)

Net loss	$	(553,252	)	$	(152,568	)

Net loss per share – Basic and diluted	$	0.01		$	0.00

Weighted average shares outstanding – Basic and diluted		90,526,710			54,563,042

~~Gross profit:~~ Sales. For the three months ended ~~June~~September 30, 2011 ~~gross profit decreased by $(67~~,~~388)~~ orour ~~100%~~revenue towas $~~(188) for 2011~~287,453 as compared to $67101,~~200~~682 infor the same ~~quarter~~period ofin the prior year, an increase of 182%. The ~~decrease~~men’s issegment ~~primarily~~grew ~~related~~in todoor acount ~~decrease~~over inthe ~~sales~~previous ofyear and our Fall 2011 men’s ~~and~~products ~~women’s~~were ~~footwear~~produced and delivered in August 2011, which was earlier than the delivery of our Fall 2010 line. As a ~~decrease~~result, more sales were generated earlier in ~~men~~the 2011 season as compared to the 2010 season. The significant growth in the women’s ~~gross~~segment ~~margin~~is asdirectly attributable to a ~~result~~broader and more comprehensive collection of ~~increased~~women’s ~~close~~footwear ~~out~~delivered ~~sales~~in the third quarter of 2011 as compared to ~~reduce~~the ~~inventory~~third ~~levels~~quarter of 2010. ~~Gross~~Core ~~margin~~products ~~decreased~~such ~~from~~as ~~30%~~ballerinas, inwedges and the ~~three~~new ~~months~~fashion ~~ended~~heel ~~June~~program ~~30,~~have ~~2010~~generated tosales 0%and provided growth in ~~the~~reorder ~~three~~business ~~months~~in ~~ended~~the ~~June~~third ~~30,~~quarter of 2011.

~~Operating~~Cost ~~expense: Operating expenses consist~~ of ~~sales,~~goods ~~marketing and general and administrative expenses~~sold. For ~~Operating~~the ~~expenses~~three ~~increased~~months byended ~~$289~~September 30,~~520,~~ ~~or 149%~~2011, ~~from~~cost ~~$194,108~~of ~~for~~goods ~~2010~~sold towas $~~483~~260,~~628~~778 ~~for~~compared ~~2011.~~to ~~A large portion of this increase,~~ $~~122~~99,~~500,~~572 ~~was due to the issuance of shares of common stock~~ for ~~services rendered by~~ the ~~Company’s~~three ~~investor~~months ~~relation~~ended ~~firm.~~September ~~The~~30, ~~shares~~2010 ofan ~~common~~increase ~~stock for this non-cash transaction were valued on the day~~ of ~~issuance~~$161,206, ofor ~~the shares~~162%. ~~The~~This ~~remaining~~ increase ~~consists~~is ofprimarily ~~additional~~due ~~costs~~to ~~incurred~~increased ~~for accounting~~sales, ~~legal~~warehouse, ~~investor~~freight ~~relations, as a result of becoming a public entity,~~ and ~~other~~duties ~~operating expenses~~costs.

~~Loss~~Gross ~~from~~profit. For ~~operations: Loss from operations for~~ the three months ended ~~June~~September 30, 2011, ~~was~~gross profit increased by $~~(483~~24,~~816)~~565 to $26,675, as compared to a$2,110 ~~loss~~in ~~from~~the ~~operations~~same quarter of ~~$(126,908)~~2010. ~~for~~This ~~the~~increase ~~same~~is ~~period~~primarily related to an increase in ~~2010,~~sales of men’s and women’s footwear and an increase in gross margin in the men’s footwear segment which was partially offset by higher warehouse and duties costs. Gross margin as a percentage of ~~$(356~~net sales increased from 2% during the three months ended September 30,~~908)~~ or2010 ~~281~~to 9% during the three months ended September 30, 2011.

Net loss: For the three months ended June 30, 2011, net loss was $(508,391), compared to a net loss of $(130,536) for the three months ended June 30, 2010. The increase in loss from operations is primarily due to our increased operating expenses during the current year period and a decrease in gross profit.

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Sales – net	$	473,824		$	360,699
Cost of goods sold		383,029			251,750
Gross profit		90,795			108,949
Selling, general and administrative expenses		881,273			442,792
Loss from operations		(790,478	)		(333,843	)
Other income (expenses)		(47,245	)		(3,751	)
Net loss	$	(837,723	)	$	(337,594	)
Net loss per share – Basic and diluted	$	0.01		$	0.01
Weighted average shares outstanding – Basic and diluted		79,685,104			52,678,418

~~For~~Operating ~~The~~expenses. Operating ~~Six~~expenses ~~Months~~consist ~~Ended~~of ~~June~~sales, marketing and general and administrative expenses. Operating expenses increased by $390,466, or 257%, from $151,965 for the three months ended September 30, 2010 to $542,431 for the three months ended September 30, 2011. ~~Compared~~A portion of this increase ($36,120) was due to ~~June~~the 30issuance of shares of common stock for services rendered by the Company’s investor relation firm. The shares of common stock for this non-cash transaction were valued on the day of issuance of the shares. The remaining increase consists of additional costs incurred for accounting, ~~2010~~legal, investor relations, as a result of becoming a public company, sales commissions, marketing expenses and increased costs relating to product development.

~~Sales:~~Loss ~~For~~from operations. Loss from operations for the ~~six~~three months ended ~~June~~September 30, 2011, ~~our revenue~~ was $~~473~~515,~~824~~756, compared to a loss from operations of $~~360~~149,~~699~~885 for the same period in ~~the prior year~~2010, an increase of ~~31%. This increase is primarily related to an increase in our sales of women’s footwear from~~ $~~110~~365,~~479 in 2010 to $234~~871,~~306~~ ~~in 2011, a $123,827~~ or ~~112~~244% ~~increase~~.

~~Cost~~Net ~~of goods sold:~~ loss. For the ~~six~~three months ended ~~June~~September 30, 2011, ~~cost~~net ofloss ~~goods sold~~ was $~~383~~553,~~029~~252, compared to a net loss of $~~251~~152,~~750~~568 for the ~~six~~three months ended ~~June~~September 30, 2010. The increase in net loss is primarily due to our increased operating expenses during the current year period and a decrease in gross profit.

~~Gross~~Nine ~~profit:~~Months ~~For~~Ended ~~the~~September ~~six months ended June~~ 30, 2011 ~~gross~~Compared ~~profit decreased by $18,154 or 17%~~ to ~~$90,795 for 2011, as compared to $108,949 in~~ the ~~same~~Nine ~~period~~Months ofEnded ~~the~~September ~~prior year. Gross margin decreased from~~ 30~~% in the six months ended June 30~~, 2010 to 19% in the six months ended June 30, 2011. The decrease is primarily related to a decrease in men’s gross margin as a result of increased close out sales to reduce inventory levels and increased distribution costs.

~~Operating~~The ~~expense:~~following ~~Operating~~table ~~expenses~~compares ~~consist~~the ofunaudited ~~sales,~~condensed ~~marketing~~consolidated ~~and~~statements ~~general~~of ~~and~~operations ~~administrative~~for ~~expenses.~~the ~~Operating~~nine ~~expenses~~month ~~increased~~periods byended ~~$438,481,~~September ~~or 99%~~30, ~~from~~2011 ~~$442,792~~and ~~for~~ 2010 ~~to $881,273 for 2011~~. AThis ~~large~~table ~~portion~~provides ofyou ~~this~~with ~~increase,~~an ~~$122,500,~~overview ~~was due to the issuance~~ of ~~shares of common stock for services rendered by~~ the ~~Company’s~~changes ~~investor~~in ~~relation firm. The shares of common stock for this non-cash transaction were valued on~~ the ~~day~~condensed ofconsolidated ~~issuance~~statements of ~~the~~operations ~~shares. The remaining increase consists of additional costs incurred~~ for ~~accounting, legal, and investor relations as a result of~~ the ~~merger,~~comparative ~~costs incurred as a new public entity~~periods, ~~additional~~which ~~patent~~are ~~legal~~further ~~costs~~discussed ~~and other operating expenses~~below.

Loss from operations: Loss from operations for the six months ended June 30, 2011 was $(790,478), compared to a loss from operations of $(333,843) for the same period in 2010, an increase of $(456,635) or 137%.

	Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010

Sales – net	$	761,277		$	462,381

Cost of goods sold		643,806			351,960

Gross profit		117,471			110,421

Selling, general and administrative expenses		1,423,704			594,116

Loss from operations		(1,306,233	)		(483,695	)

Other income (expenses)		(84,739	)		(6,462	)

Net loss	$	(1,390,972	)	$	(490,157	)

Net loss per share – Basic and diluted	$	0.02		$	0.01
Weighted average shares outstanding – Basic and diluted		83,338,686			54,563,042

Net loss: For the six months ended June 30, 2011, net loss was $(837,723), compared to a net loss of $(337,594) for the six months ended June 30, 2010. The increase in loss from operations is primarily due to our increased operating expenses during the current year period and a decreased gross profit.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents at the end of June 30, 2011 was $233,060. We had working capital of $537,946 and we had $133,333 long-term debt. In connection with our private placement of units, which commenced in March 2011, we have raised an aggregate of $595,000, including $400,000 in the second quarter of 2011. We believe that based upon our current financial position and available cash, cash equivalents and marketable securities, we will not meet all of our financial commitments and operating needs for the next twelve months unless we raise substantial additional proceeds from the private placement. See “Going Concern” at Note 3 to the unaudited condensed consolidated financial statements.

OPERATING ACTIVITIES

Cash used by operations was $813,570 for the six months ended June 30, 2011 compared to $346,907 for the six months ended June 30, 2010. Our primary source of negative operating cash flow for the six months ended June 30, 2011 was a net loss of $(837,723). Our investments in working capital increased during the six months ended June 30, 2011 primarily due to an increase in inventory and higher accounts receivable. The increase in inventory was the result of slower sales in the second quarter of 2011.

INVESTING ACTIVITIES

Net cash used in investing activities increased $43,608 from the second quarter of 2010.

FINANCING ACTIVITIES

During the six months ended June 30, 2011, net cash provided by financing activities was $695,000, which consisted of $595,000 proceeds from the sale of 1,190,000 shares of common stock and the issuance of a $100,000 short term note payable.

~~CONTRACTUAL~~Sales. For ~~OBLIGATIONS~~the nine months ended September 30, 2011, our revenue was $761,277 compared to $462,381 for the same period in 2010, an increase of $298,896 or 65%. This increase is primarily related to an increase in our sales of women’s footwear from $130,570 in 2010 to $359,546 in 2011, a $228,976 or 175% increase. In 2011 the women’s brand delivered two complete seasonal collections as compared to one and one-half seasonal collections in 2010. The overall growth of the business has been with new doors at the department store and better boutique level. New offerings in the core of the collection provided the majority of additional and new business. Clearance of obsolete product also provide sales at a lower gross margin.

~~Contractual~~Cost ~~obligations~~of ~~represent~~goods ~~future~~sold. For ~~cash~~the ~~commitments~~nine ~~and~~months ~~liabilities~~ended ~~under~~September ~~agreements~~30, ~~with~~2011, ~~third~~cost ~~parties,~~of ~~and~~goods ~~exclude~~sold ~~contingent~~was ~~liabilities~~$643,806 compared to $351,960 for ~~which~~the wenine ~~cannot~~months ~~reasonably~~ended ~~predict~~September ~~future~~30, ~~payments~~2010. The ~~following~~increase ~~chart~~is ~~represents~~primarily ~~our~~due ~~contractual~~to ~~obligations~~increased assales ofand ~~June 30~~warehousing, ~~2011,~~duties ~~aggregated~~and byshipping ~~type:~~costs.

			Payments Due By Period
	Total		<1 year		1-3 years
Note payable obligation	$	50,000	$	16,666	$	33,334
Note payable obligation		150,000		50,000		100,000
Note payable obligation		100,000		100,000
Operating leases, net		8,400		8,400
Total contractual obligations	$	308,400	$	175,066	$	133,334

Gross profit. For the nine months ended September 30, 2011 gross profit increased by $7,050 or 6% to $117,471, as compared to $110,421 in the same period in 2010. Gross margin as a percentage of net sales decreased from 24% in the nine months ended September 30, 2010 to 15% in the nine months ended September 30, 2011. This decrease is primarily related to a decrease in men’s gross margin as a result of increased close out sales to reduce inventory levels and increased distribution costs during the 2011 period as compared to the 2010 period.

Operating expense. Operating expenses consist of sales, marketing and general and administrative expenses. Operating expenses increased by $829,588, or 140%, from $594,116 during the nine months ended September 30, 2010 to $1,423,704 during the nine months ended September 30, 2011. A portion of this increase ($164,031,) was due to the issuance of shares of common stock for services rendered by the Company’s investor relation firms. The shares of common stock for this non-cash transaction were valued on the day of issuance of the shares. The remaining increase consists of additional costs incurred for accounting, legal, and investor relations as a result of the merger, costs incurred as a new public entity, additional patent legal costs, sales commissions, marketing expenses and increased costs relating to product development.

Loss from operations. Loss from operations for the nine months ended September 30, 2011 was $1,306,233, compared to a loss from operations of $483,695 for the same period in 2010, an increase of $822,538, or 170%.

Net loss. For the nine months ended September 30, 2011, we reported a net loss $1,390,972, compared to a net loss of $490,157 for the nine months ended September 30, 2010. This increase in net loss is primarily due to our increased operating expenses during the current year period and a decrease in gross profit.

Liquidity and Capital Resources

During the first nine months of 2011, we funded our operations from cash provided by operations, short-term notes payable and the issuance of units comprised of shares of our common stock and warrants to purchase shares of our common stock. Our cash and cash equivalents at the end of September 30, 2011 was $108,795. We had working capital of $350,301 and we had $116,670 long-term debt at September 30, 2011. In connection with our private placement of units, which commenced in March 2011, we have raised an aggregate of $970,000, including $375,000 in the third quarter of 2011. We believe that based upon our current financial position and available cash, cash equivalents and marketable securities, we will not meet all of our financial commitments and operating needs for the next twelve months unless we raise substantial additional proceeds through one or more methods, including but not limited to, issuing additional equity or debt. See “Going Concern” at Note 3 to the unaudited condensed consolidated financial statements.

Our available capital resources at September 30, 2011 consisted primarily of approximately $108,795 in cash and cash equivalents. We expect that our future available capital resources will consist primarily of cash on hand, cash generated from our business, if any, and future debt and/or equity financings, if any.

Cash used by operations was $1,462,300 for the nine months ended September 30, 2011 compared to $445,957 for the nine months ended September 30, 2010. Our primary source of negative operating cash flow for the nine months ended September 30, 2011 was a net loss of $1,390,972 and increased inventory levels, $437,819. Our investments in working capital increased during the nine months ended September 30, 2011 primarily due to an increase in inventory and higher accounts receivable. The increase in inventory was the result of slower sales than anticipated in the third quarter of 2011 and a large receipt of inventory in September 2011.

Net cash used in investing activities increased $79,684 from the third quarter of 2010 and consisted of additional production tooling costs and costs incurred in connection with the reverse merger.

During the nine months ended September 30, 2011, net cash provided by financing activities was $1,270,000, which consisted of $970,00 in proceeds from the sale of shares of common stock and the issuance of two short-term notes payable for $300,000.

Subsequent to September 30, 2011, we raised $250,000 through the issuance of a secured convertible promissory note to one accredited investor. The note is due and payable on July 20, 2012 and is secured by substantially all of our assets. The note is convertible into common stock anytime after 180 days from the issuance of the note and is convertible at a price equal to 61% of the fair market value of a share of common stock. Fair market value is defined in note to mean, on a given date, the lesser of (i) the closing bid price of the Company’s common stock for the trading day immediately preceding the date of conversion, and (ii) the quotient of (a) the sum of the volume weighted average price of the Company’s common stock for each of the five trading days immediately preceding the date of conversion, divided by five. In connection with the issuance of the note, we issued to the investor a three-year warrant to purchase up to 1,025,000 shares of our common stock at an exercise price of $0.35 per share.

We have been, and currently are, working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. At a minimum, we expect these covenants to include restrictions on our ability to pay dividends on our common stock. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations and product and service development efforts or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our technologies or potential products or other assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our proprietary technology and other important assets and could also adversely affect our ability to fund our continued operations and our product and service development efforts.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities for which we cannot reasonably predict future payments. The following chart represents our contractual obligations as of September 30, 2011, aggregated by type:

			Payments Due By Period
	Total		<1 year		1-3 years

Note payable obligation	$	50,000	$	20,830	$	29,170
Note payable obligation		150,000		62,500		87,500
Note payable obligation		100,000		100,000
Note payable obligation		200,000		200,000

Operating lease, net		26,400		26,400
Total contractual obligations	$	526,400	$	409,730	$	116,670

Critical Accounting Policies

The preparation and presentation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to establish policies and to make estimates and assumptions that affect the amounts reported in our interim unaudited condensed consolidated financial statements. In our judgment, our critical accounting policies, estimates and assumptions have the greatest potential impact on our consolidated financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. We believe the following critical accounting policy below updates, and should be considered in addition to, the critical accounting policies previously disclosed by us in Part II, Item 7 of our Annual Report for the fiscal year ended December 31, 2010.

Commitments. At September 30, 2011, we had no material capital commitments.

AtImpacts ~~June~~of ~~30,~~New ~~2011,~~Accounting ~~we had no material capital commitments.~~Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~Changes~~Not ~~in United States interest rates would affect the interest earned on our cash and cash equivalents~~applicable. Based on our overall cash and cash equivalents interest rate exposure at June 30, 2011, a near-term change in interest rates, based on historical movements, would not have a material adverse effect on our financial position or results of operations.

Because our three outstanding debt obligations all bear interest at a fixed rate, a near-term change in interest rates, based on historical movements, would not have any impact on our financial position or results of operations.

We have operated primarily in the United States. Accordingly, we have not had any significant exposure to foreign currency rate fluctuations.

ITEM 4. CONTROLS AND PROCEDURES.

~~The~~Evaluation ~~Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act~~ of ~~1934,~~Disclosure asControls ~~amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in its reports filed under the Exchange Act is recorded, processed, summarized~~ and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.Procedures

~~The~~We ~~Company~~conducted ~~carried out~~ an evaluation, under the supervision and with the participation of our management, including ~~its~~our Chief Executive Officer and Chief Financial Officer, our principal accounting officer, of the effectiveness of the design and operation of ~~its~~our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of ~~June~~1934, 30as amended, ~~2011~~or Exchange Act, ~~the~~means ~~end~~controls and other procedures of ~~the~~a ~~period~~company ~~covered~~that are designed to ensure that information required to be disclosed by ~~this~~the ~~Quarterly~~company ~~Report~~in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. ~~Based~~Disclosure oncontrols ~~that~~and ~~evaluation~~procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the ~~Company~~reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2011 that ~~its~~our disclosure controls and procedures were effective asat ~~of June 30, 2011 for~~ the ~~following~~reasonable ~~reason~~assurance level.

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~~Accounting~~Inherent ~~professional~~Limitations ~~standards~~on ~~require~~ the ~~Company’s~~Effectiveness ~~auditing firm to provide the Board~~ of Directors of the Audit Committee with certain information relating to the audit. The Company’s auditing firm issued a letter to the Audit Committee in which it proposed adjustments to the Company’s financial statements. The Company agreed to all the proposed adjustments and subsequently recorded such in the accounting records. The audited financial statements for the fiscal years ending December 31, 2010 and 2009 include these audit adjustments. In the judgment of the auditing firm the proposed adjustments could have a significant effect on the Company's financial reporting process. The Company has implemented policies and procedures to ensure compliance with GAAP accounting.Controls

~~There~~Management ~~were~~does nonot ~~significant~~expect ~~changes~~that inour ~~the~~disclosure ~~Company’s~~controls and procedures or our internal ~~controls~~control over financial reporting will prevent or detect all errors and all fraud. A control system, ~~during~~no ~~the~~matter ~~quarter~~how ~~ended~~well ~~June~~conceived 30and operated, ~~2011~~can provide only reasonable, not absolute, assurance that ~~have~~the ~~materially~~objectives ~~affected~~of the control systems are met. Further, orthe design of a control system must reflect the fact that there are ~~reasonably~~resource ~~likely~~constraints, and the benefits of controls must be considered relative to ~~materially~~their ~~affect,~~costs. Because of the ~~Company’s~~inherent limitations in a cost-effective control system, no evaluation of internal ~~controls~~control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In the ordinary course of business, we are at times subject to various legal proceedings and disputes. We currently are not aware of any such legal proceedings or claim that we believe will have, individually or in the aggregate, a material adverse effect on our business, operating results or cash flows.

ITEM 1A1. A. RISK FACTORS.

~~Our~~In addition to the other information set forth in this report, you should carefully consider the risk factor below and the factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, 2010 ~~contains~~filed awith ~~detailed~~the ~~discussion~~SEC ofon ~~certain~~April ~~risk~~14, ~~factors~~2011, ~~that~~which could materially ~~adversely~~ affect our business, ~~our~~financial ~~operating~~condition and results, orof operations. The risks described below and in our ~~financial~~Annual ~~condition~~Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on April 14, 2011, are not the only risks we face. ~~There~~Additional ~~have~~risks ~~been~~and nouncertainties ~~material~~not ~~changes~~currently known to ~~such~~us ~~risk~~or ~~factors~~that ~~during~~we ~~the~~currently ~~second~~deem ~~quarter~~to ~~ended~~be ~~June~~immaterial 30also may materially adversely affect our business, ~~2011~~financial condition and results of operations.

Without substantial additional financing, we may be unable to achieve the objectives of our current business strategy, which could force us to delay, curtail or eliminate our product and service development programs thereby adversely affecting our operations and the price of our common stock.

For the nine months ended September 30, 2011, we recorded a net loss of $1,390,972 and utilized cash in operations of $1,462,300. Our capital requirements for the next 12 months will continue to be significant. We have been, and currently are, working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. At a minimum, we expect these covenants to include restrictions on our ability to pay dividends on our common stock. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. In addition, our senior secured convertible debentures contain covenants that include restrictions on our ability to pay dividends on our common stock.

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

InDuring ~~connection~~the ~~with~~three ~~our~~months ~~private~~ended ~~placement~~September of30, ~~units~~2011, ~~during~~we entered into agreements with six accredited investors for the ~~three~~sale ~~months~~by ~~ended~~us ~~June~~of ~~30,~~an ~~2011~~aggregate of $375,000 weof ~~issued~~units ~~800~~comprised of an aggregate of 500,000 ~~units~~shares of common stock and warrants to ~~eight~~purchase ~~accredited~~up ~~investors~~to 500,000 ~~each~~shares ~~unit~~of ~~consisting~~common stock at an exercise price of ~~one~~$1.00 per share and units comprised of 500,000 shares of common stock and ~~one~~warrants ~~warrant~~ to purchase ~~one~~up ~~share~~to 500,000 shares of common stock at an exercise price of $10.0075 per share,. The warrants are exercisable for ~~gross~~a ~~proceeds~~period of ~~$400,000~~two years.

In connection with our private placement of units, during the period July 1 through August 9, 2011, we issued 450,000 units to three accredited investors, each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $1.00 per share, for gross proceeds of $225,000. The warrants are exercisable for a period of 2 years. 16

On ~~June~~August 2018, 2011, the Company issued 1a promissory note in the principal amount of $200,000 to one accredited investor. The note bears interest at a rate of 4% per annum and was due and payable on September 17, 2011. The note provides that if the principal and interest are not paid in full on September 17, 2011, the Company shall issue to the investor 100,000 shares of the Company’s common stock ~~and~~on aSeptember ~~warrant~~17, to2011 ~~purchase~~and an additional 1100,000~~,000~~ shares of common stock ateach an30 ~~exercise~~days ~~price~~thereafter ofthat $the principal and interest is not paid in full.50 ~~per~~The ~~share~~Company is currently in ~~connection~~default ~~with~~under ~~the~~this ~~conversion~~note. ofAs a ~~$500~~result, as of September 30, 2011, the Company owed the investor 100,000 ~~Convertible~~shares of common stock and as of November 10, ~~Callable~~2011, ~~Subordinated~~the ~~Debenture~~Company owed the investor an additional 100,000 shares of common stock. The ~~warrant~~Company is ~~exercisable~~in ~~for~~the aprocess ~~period~~of issuing these shares of ~~two~~common ~~years~~stock to the investor.

InOn ~~April~~July ~~2011~~1, 2011 the Company entered into a twelve month investor relations consulting agreement. Under the terms of this agreement the Company issued ~~250~~56,000 shares of common stock to anthe investor relations firm ~~for~~on ~~services~~July ~~rendered~~20, 2011. The shares were valued at $36,120 on the date of issuance. The $36,120 was recorded as additional equity with a corresponding charge to professional fees expense.

InOn ~~July~~August 15, 2011, the Company ~~issued~~adopted 56the 2011 Stock Incentive Plan (the “Plan”), the purpose of which is to promote the interests and long-term success of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the continued growth and profitability of the Company. During the three months ended September 30, 2011, the Company granted options to purchase 250,000 shares of common stock towith an ~~investor~~exercise ~~relations~~price ~~firm~~of ~~for~~$0.58 ~~services~~per ~~rendered~~share and exercisable until August 16, 2021 under the Plan. All 250,000 options vest on August 16, 2012.

The sale and issuance of the units, ~~the~~ common stock, and ~~the~~ warrants was completed in accordance with the exemption provided by Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), and/or Section 4(2) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

~~None~~On June 3, 2011, the Company issued a promissory note in the principal amount of $100,000 to one accredited investor. The note bears an interest at a rate of 4% per annum and was due and payable on October 3, 2011. The Company is currently in default under this note.

On August 18, 2011, the Company issued a promissory note in the principal amount of $200,000 to one accredited investor. The note bears interest at a rate of 4% per annum and was due and payable on September 17, 2011. The note provides that if the principal and interest are not paid in full on September 17, 2011, the Company shall issue to the investor 100,000 shares of the Company’s common stock on September 17, 2011 and an additional 100,000 shares of restricted common stock each 30 days thereafter that the principal and interest is not paid in full. The Company is currently in default under this note. As a result, as of September 30, 2011, the Company owed the investor 100,000 shares of common stock and as of November 10, 2011, the Company owed the investor an additional 100,000 shares of common stock. The Company is in the process of issuing these shares of common stock to the investor.

ITEM 4. [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS. (a) Exhibits:

ITEM 6. EXHIBITS.
(a)	Exhibits:
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
	32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. *
	101.INS**	XBRL Instance
	101.SCH**	XBRL Taxonomy Extension Schema
	101.CAL**	XBRL Taxonomy Extension Calculation
	101.DEF**	XBRL Taxonomy Extension Definition
	101.LAB**	XBRL Taxonomy Extension Labels
	101.PRE**	XBRL Taxonomy Extension Presentation

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *______________

31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

101.INS** XBRL Instance

101.SCH** XBRL Taxonomy Extension Schema

101.CAL** XBRL Taxonomy Extension Calculation

101.DEF** XBRL Taxonomy Extension Definition

101.LAB** XBRL Taxonomy Extension Labels

101.PRE** XBRL Taxonomy Extension Presentation

* Filed herewith

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

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

	AURI, INC.
Date: August 11, 2011	By:	/s/ ORI ROSENBAUM
Date: November 14, 2011	By:	/s/ ORI ROSENBAUM
		Ori Rosenbaum
		(signed both as an officer duly authorized to sign on behalf of the Registrant and principal financial officer and chief accounting officer)
		President, Chief Executive Officer and Chief Financial Officer (principal executive officer)

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