Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - Aurios Inc. | Financial_Report.xls |
| EX-31.2 - EXHIBIT 31.2 - Aurios Inc. | ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - Aurios Inc. | ex31-1.htm |
| EX-32.1 - EXHIBIT 32.1 - Aurios Inc. | ex32-1.htm |
| EX-99.1 - EXHIBIT 99.1 - Aurios Inc. | ex99-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
| [X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2013
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number: 000-53643
Aurios Inc.
(Exact name of registrant as specified in its charter)
| Arizona | 86-1037558 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
7608 N. Shadow Mountain Rd.
Paradise Valley, AZ 85253
(Address of principal executive offices)
(602) 321-1313
(Registrant’s telephone number, including area code)
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
| Common Stock, no par value |
| (Title of class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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.
| Large accelerated filer [ ] | Accelerated filer [ ] | ||
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]
As of June 30, 2013, the aggregate market value of the registrant’s common equity held by non-affiliates computed by reference to the average of closing bid and ask prices ($0.08) of the registrant’s most recently completed second fiscal quarter was: $104,800.
There were 3,678,000 shares of the registrant’s common stock issued and outstanding as of March 11, 2014.
Documents Incorporated by Reference: None.
FORM 10-K
AURIOS INC.
DECEMBER 31, 2013
Table of Contents
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Note Regarding Forward Looking Statements
This Annual Report contains forward-looking statements as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “intends,” and other variations of these words or comparable words. In addition, any statements that refer to expectations, projections or other characterizations of events, circumstances or trends and that do not relate to historical matters are forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.
As used in this Annual Report, “Aurios,” the “Company,” “we,” “us,” or “our” refer to Aurios Inc., unless otherwise indicated.
Until December 31, 2012 we produced, marketed and distributed vibration isolation products to the high-end audio and video markets in the United States and in certain foreign countries. Our products were the Classic MIB, the PRO MIB, the Isotone MIB, the Series 100 Component Shelf, a shelf product, and Pivot Points, a spike mount product.
Advanced Vibration Technologies Inc., an Arizona corporation (“AVT”), held the patents respecting our products in the United States and Taiwan. On February 25, 2010 AVT granted us a non-exclusive world-wide license to produce and sell the Pro Max MIB, the Classic MIB and the Isotone MIB under the patents (the “AVT License”). We paid a royalty of 5% of our net sales to AVT for the AVT License. On March 26, 2010, True Gravity Enterprises, Inc. (“TGE”) sold the federally registered trademark respecting the “Aurios” name to us for nominal consideration. We outsourced the manufacture of our products to several qualified machine shops in the Phoenix metropolitan area.
The AVT License terminated on December 31, 2012 because AVT sold its business to a third party that is a competitor with the products of Aurios. We sold our remaining inventory and other assets relating to our vibration isolation business effective May 31, 2013 to TGE, an affiliate of our President and principal shareholder.
We now have nominal assets and are seeking a new business opportunity. We plan to identify, evaluate, and investigate various companies with the intent to conduct a reverse merger transaction under which we would acquire a target company with an operating business to continue the acquired company’s business as a publicly-held entity. There can be no assurance that we will find a suitable acquisition candidate or, if we do, that the terms will be favorable to our existing shareholders.
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Our common stock is quoted on the OTC Bulletin Board under the symbol “AURZ.”
Effective August 31, 2009, we adopted a 2.5-for-1 forward split of all of our outstanding common stock. All common stock shares and the conversion rate of the Preferred Stock, warrants and options reflected within this report have been adjusted to reflect the split.
Our corporate offices are located at 7608 N. Shadow Mountain Rd., Paradise Valley, Arizona 85253 and our telephone number is (602) 321-1313.
Employees
We have no employees.
Not Applicable.
ITEM 1B. Unresolved Staff Comments.
None.
ITEM 2. Description of Property.
Our executive office consists of use of office space and storage, to the extent required, that our President has provided to us in his residence located at 7608 N. Shadow Mountain Road, Paradise Valley, AZ 85253 without charge. We believe that our current facilities are adequate to meet our operational needs for the upcoming year.
We are not involved in any pending litigation, legal proceedings or claims.
ITEM 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Principal Market and Price Range of Common Stock
Our common stock trades on the OTC Bulletin Board (OTCBB) under the symbol “AURZ.” The following table sets forth the high and low closing bid prices for our common stock as reported by the OTCBB. The trading in our common stock has been minimal during the periods shown. The closing price of the common stock on February 28, 2014 was $0.11 per share. The quotations reflect interdealer bid prices without retail markup, markdown or commission and may not represent actual transactions.
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| Year Ended December 31, 2012 | High | Low | |||||||
| 1st Quarter | $ | 0.30 | $ | 0.06 | |||||
| 2nd Quarter | 2.00 | 0.30 | |||||||
| 3rd Quarter | 0.35 | 0.15 | |||||||
| 4th Quarter | 0.49 | 0.10 | |||||||
| Year Ended December 31, 2013 | High | Low | |||||||
| 1st Quarter | $ | 0.49 | $ | 0.49 | |||||
| 2nd Quarter | 0.49 | 0.05 | |||||||
| 3rd Quarter | 0.20 | 0.10 | |||||||
| 4th Quarter | 0.13 | 0.08 | |||||||
Holders of Common Stock and Preferred Stock
We had approximately 43 shareholders of record of our common stock as of March 15, 2014.
Dividend Policy
We have not declared or paid cash dividends on our shares of common stock. The holders of the shares of common stock will be entitled to non-cumulative dividends on the shares of common stock, when and as declared by our board of directors, in its discretion. We intend to retain all future earnings, 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
In July 2007 our stockholders approved the 2007 Stock Option and Restricted Stock Plan (the “Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. A total of 625,000 shares of our common stock are reserved for issuance under the Plan. We have not granted any options under the Plan. Any options that may be granted under the Plan must be at exercise prices not less than the fair market value of such stock at the date of grant, may be exercisable immediately or vest over time as directed by our Board of Directors and would have expiration dates not more than ten years after the date of grant.
The following table sets forth certain information regarding the Company’s equity compensation plans as of December 31, 2013.
| Plan category | Number
of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number
of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Equity compensation plans approved by stockholders | 625,000 | $ | -0- | 625,000 | ||||||||
| Equity compensation plans not approved by stockholders | -0- | -0- | -0- | |||||||||
| Total | 625,000 | $ | -0- | 625,000 | ||||||||
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Recent Issuances of Unregistered Securities
On August 14, 2012, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann III, respectively all of whom are principal shareholders of the Company, advanced a total of $6,820 to the Company. Each advance bears interest at a rate of 6.0% per annum, with principal and interest due on September 14, 2014. On November 26, 2012, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann III, respectively all of whom are principal shareholders of the Company, advanced a total of $7,000 to the Company. Each advance bears interest at a rate of 6.0% per annum, with principal and interest due on November 26, 2014. As of December 31, 2013 and 2012, there was combined accrued interest on the August 2012 and November 2012 notes of $829 and nil, respectively. See “Item 13. Certain Relationships and Related Transactions, and Director Independence.”
On April 12, 2013, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann, all of whom are principal shareholders of the Company, advanced a total of $7,025. We repaid these advances in September 2013 with interest at the rate of 6% per annum totaling approximately $116. See “Item 13. Certain Relationships and Related Transactions, and Director Independence.”
On November 25, 2013, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann III, respectively all of whom are principal shareholders of the Company, advanced a total of $3,000 to the Company. Each advance bears interest at a rate of 6.0% per annum, with principal and interest due on November 24, 2014.
ITEM 6. Selected Financial Data.
Not applicable.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.
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Factors that could cause or contribute to our actual results to differ materially from those discussed herein or for our stock price to be adversely affected include, but are not limited to: (i) our ability to find a new business opportunity; (ii) our independent registered public accounting firm expressed a going concern opinion; (iii) our ability to raise additional working capital that we may require and, if available, that such working capital will be on terms acceptable to us; (iv) our ability to implement a new business plan; (v) economic and general risks relating to business; (vi) our dependence on key personnel; (vii) our ability to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as it may be required; (viii) our nonpayment of dividends and lack of plans to pay dividends in the future; (ix) future sale of a substantial number of shares of our common stock that could depress the trading price of our common stock, if it trades, lower our value and make it more difficult for us to raise capital; (x) our additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock; (xi) the illiquidity of the public market for our common stock; (xvii) the price of our stock is likely to be highly volatile because of several factors, including a relatively limited public float; and (xiii) indemnification of our officers and directors.
General
The following discussion should be read in conjunction with our Financial Statements and notes thereto. The following discussion contains forward-looking statements, including, but not limited to, statements concerning our plans, anticipated expenditures, the need for additional capital and other events and circumstances described in terms of our expectations and intentions. You are urged to review the information set forth under the captions for factors that may cause actual events or results to differ materially from those discussed below.
Overview
We were formed in August 2001 by our former parent, TGE. Our corporate offices are located at 7608 N. Shadow Mountain Blvd., Paradise Valley, AZ 85253 and our telephone number is (602) 321-1313.
We produced, marketed and distributed vibration isolation products to the high-end audio and video markets in the United States and in certain foreign countries. Our products included the Classic MIB, the PRO MIB, the Isotone MIB, the Series 100 Component Shelf, a shelf product, and Pivot Points, a spike mount product.
Our vibration isolation products produced superior sound quality by sharpening, not softening, the sound. AVT holds the patents respecting our products in the United States and Taiwan. AVT granted us a non-exclusive world-wide license to sell the products under the patents (“AVT License”). The AVT License automatically renewed each year until December 31, 2012, when it was terminated. We paid AVT a royalty of 5% of our net sales for the license. We outsourced the manufacture of our products to several qualified machine shops in the Phoenix metropolitan area. On March 26, 2010, TGE assigned its federally registered trademark respecting the “Aurios” name to us in consideration of $100.
The AVT License terminated on December 31, 2012 because AVT sold its business to a third party who was a competitor with the products of Aurios. We liquidated or sold our remaining inventory. In 2013, we sold our remaining, assets, less cash, to TGE in satisfaction of a Note Payable owing to TGE. The principal amount owing on the Note Payable to TGE was $44,121 and the accrued and owing interest was $18,042 as of May 31, 2013.
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Given this development, we are now a shell company with nominal assets. We are seeking a new business opportunity. We plan to identify, evaluate, and investigate various companies with the intent to conduct a reverse merger transaction under which we would acquire a target company with an operating business to continue the acquired company’s business as a publicly-held entity. There can be no assurance that we will find a suitable acquisition candidate or, if we do, that the terms will be favorable to our existing shareholders.
For the Years Ended December 31, 2013 and 2012
Results From Operations
Revenues
Since our inception, our activities have focused on product and market development with a nominal level of operations. We discontinued our sales of such products on December 31, 2012 because our AVT License terminated. We thus had no revenues for the year ended December 31, 2013 and had $8,908 in revenues for the year ended December 31, 2012.
Most of our sales were made through audio equipment distributors, with the balance being direct retail sales. For the year ended December 31, 2012, we had 27%, 25%, 10% and 31% of sales to Music Direct, Absolute Hi End, Mike McKool and Non Stop Audio, respectively, which were four of our distributors. No other customer accounted for more than 10% of sales in the 2012 fiscal year. There were no sales in 2013.
Cost of Sales
We had no cost of sales on units sold for the year ended December 31, 2013 because we are no longer selling product compared to cost of sales on units sold for the year ended December 31, 2012 of $7,884 (88.5% of revenues).
Gross Margin
Gross margin for the year ended December 31, 2013 was $-0- (0% of revenues) because we sold no product in 2013 compared to $1,024 (11.5% of revenues) for the year ended December 31, 2012.
Other Income
We had other income for the year ended December 31, 2013 of $32,200 and $50,650 of other income for the year ended December 31, 2012. The other income we had for the year ended December 31, 2013 related to deposits made by third parties under agreements in anticipation of a possible transaction. We did not reach a definitive agreement with such parties on the possible transactions and we recorded income upon expiration of the agreement relating to the forfeiture of the deposits. The other income we had for the year ended December 31, 2012 related to standstill agreements we entered into with FastLane Retail Systems, Inc. providing for exclusivity in negotiations between the parties for a possible transaction. We did not reach a definitive agreement with FastLane on the possible transaction and we recorded income upon expiration of the standstill agreements.
General and Administrative Expenses
In fiscal 2013 and 2012, our President provided administrative services to us, and office and warehouse space for us in his residence at no cost to us. In the year ended December 31, 2013, we had additional expenses consisting of legal expenses of $13,248 and accounting expenses of $28,888, most of which were related to complying with our reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In the year ended December 31, 2012, we had additional expenses consisting of legal expenses of $13,772 and accounting expenses of $35,751, most of which were related to complying with our reporting obligations under the Exchange Act.
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Interest Expense
Interest expense was $5,567 and $8,797 for the years ended December 31, 2013 and 2012, respectively. The decrease was primarily related to satisfaction of the Note payable to TGE.
Income Tax Provision
We had a potential tax provision benefit of approximately $8,700 and $5,600 for the years ended December 31, 2013 and 2012, respectively, arising from losses generated during the aforementioned periods. We have fully reserved against these benefits due to the uncertainty of their realization.
Net Loss
For the reasons listed above, for the years ended December 31, 2013 and 2012, we recorded a net loss of $22,281 and $14,388, respectively, an increase in our net loss of $7,893.
Basic and Diluted Loss per Share
The basic and diluted loss per share were <$0.01> and <$0.00> for the years ended December 31, 2013 and 2012, respectively, for the reasons previously noted.
Liquidity and Capital Resources
Our independent registered public accounting firm has rendered a going concern opinion. We provided for our cash requirements in 2013 and 2012 from loans from our three principal shareholders and from certain stand-still fees we received from third parties in 2013 and 2012. In this regard, we received a deposit of $12,000 in February 2013 from a third party with whom we were discussing a possible merger transaction and a $10,000 loan in July 2013 from a third party and a deposit of $10,200 towards the closing of a merger. The deposit was forfeited and the loan was retained and recognized as income because no transaction ultimately occurred between the parties.
We believe that we will obtain sufficient capital to operate for the next twelve months through the sale of debt or equity securities, deferral of payment of certain accounts payable, extension of outstanding debt obligations and, if we are able to, by generating operating income through the acquisition of an operating entity that produces positive cash flow. We can make no assurances that we will be successful in this regard. If our revenues do not increase and our cash flow is not positive or not sufficient to meet our working capital needs, we will need to seek to raise capital through the sale of our equity or debt securities. We have no commitments for obtaining such financing and there can be no assurance that we could obtain the necessary funds or obtain them on terms favorable to us. Any future financing may be on terms that substantially dilute the ownership interests of present shareholders. If we are unable to raise sufficient additional capital as necessary, we may have to suspend or contract our activities or cease activities entirely. We do not anticipate that we will have any large capital requirements over the next twelve months.
As of December 31, 2013, we had a working capital deficit of $203,328 and no long-term debt.
Capital Commitments
We had no material commitments for capital expenditures.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements as of December 31, 2013 and December 31, 2012.
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Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles. Preparation of the statements in accordance with these principles requires that we make estimates, using available data and our judgment, for such things as valuing assets, accruing liabilities and estimating expenses.
Our significant accounting policies are summarized in Note 1 to our financial statements included in Item 8 “Financial Statements” of this report. The selection and application of any accounting policy may involve some level of subjective judgments and estimates in their selection and application, and may be susceptible to uncertainties and changing conditions.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
ITEM 8. Financial Statements and Supplementary Data.
The financial statements of the Company are included as an exhibit to this Form 10-K commencing on page F-1.
ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
ITEM 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our President, Chief Executive Officer and Chief Financial Officer, Paul Attaway, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on his evaluation as of December 31, 2013, the end of the period covered by this Annual Report on Form 10-K, he concluded that our disclosure controls and procedures were not effective, for the reasons discussed below, at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Exchange Act, including this Annual Report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; | ||
| ● | Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | ||
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the filing of our Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on our assessment using those criteria, management believes that, as of December 31, 2013, our internal control over financial reporting was not effective based on those criteria.
In connection with our evaluation, we identified a material weakness in our internal control over financial reporting as of December 31, 2013. A material weakness is a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner. The material weakness related to our Company is due to not having the adequate personnel to address the reporting requirements of a public company. We do not believe that this material weakness has resulted in deficient financial reporting because we have worked through the audit process to review our transactions to assure compliance with professional standards. Accordingly, while we identified a material weakness in our system of internal control over financial reporting as of December 31, 2013, we believe that we have taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the year ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, such controls.
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None.
ITEM 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names, positions and ages of our directors and executive officers. Our directors were elected by the unanimous written consent of our stockholders in lieu of a meeting. Our 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 | 50 | President, Chief Financial Officer and Director since 2001 | ||
| Timothy Louis | 49 | Secretary, Treasurer and Director since 2004 |
Paul Attaway has served as an officer and director of the Company since its incorporation in August 2001. In 1997, Mr. Attaway founded True Gravity Enterprises, Inc., a privately held corporation that designed and manufactured vibration control solutions for the semiconductor and life science industries and he has been its principal shareholder and executive officer since then. TGE sold substantially all of its assets to AVT in February 2010. In April 2010, Attaway co-founded CTP Funding, LLC (“CTP”), a private mortgage lender. He practiced law for two years from 1988 to 1990 in Phoenix, Arizona with Streich Lang Weeks & Cardon. From 1990 to 1995, he worked for a family business, MM Systems Corporation, which manufactures and sells building materials worldwide. From 1995 to 1997, Mr. Attaway left the family business and started Tekton Inc., a privately held corporation that designs and manufactures seismic isolation systems for network server racks. Mr. Attaway sold Tekton, Inc. in 2004. Mr. Attaway holds a B.S.B.A. with a major in finance from Georgetown University and a J.D. from the University of Georgia School of Law. Mr. Attaway divides his time between TGE, CTP and the Company as the businesses require in a manner sufficient to discharge his fiduciary duties to all three entities.
Timothy Louis has served as an officer and director of the Company since July 2004. Since 1995, Mr. 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 Company, TGE, The rSmart Group, BH USA and PIVOT Cycles, Inc. He has served as a board member of companies such as Johnson Polymer, Inc (an affiliate company of S.C. Johnson Wax) and non-profit companies 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. From 1990 to 2002 he was an owner/director of Frye-Louis Capital Management, Inc., a high net worth family asset management firm based in Chicago. The firm was sold to Credit Suisse Private Bank in 2002. Mr. Louis has a B.S. in Communication Disorders and a M.A. in Audiology and Hearing Impairment from Northwestern University, and a M.B.A. in Financial Management and Markets from Arizona State University.
Board of Directors and Committee Meetings
Our Board of Directors held four meetings during the fiscal year ended December 31, 2013. In addition, our Board of Directors acted by unanimous written consent during fiscal year ended December 31, 2013. Both of our directors attended at least 75% of the meetings of the Board of Directors in the fiscal year ended December 31, 2013. We have no Committees of our Board. Our directors are expected, absent exceptional circumstances, to attend all Board meetings and meetings of any committees on which they serve.
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Committees of the Board of Directors
We do not have Audit, Compensation or Nominating and Governance Committees. Our full Board of Directors discharges the duties that such committees would normally have. We do not have such committees because of our stage of development and because our Board of Directors consists of only two members.
Our full Board is comprised of two Directors, one of whom is independent, as defined by the rules and regulations of the Securities and Exchange Commission. The members of our Board of Directors are Paul Attaway and Timothy Louis. The Board of Directors determined that Mr. Louis qualifies as an “audit committee financial expert,” as defined under the rules and regulations of the Securities and Exchange Commission, and is independent as noted above.
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Company’s independent accountants must be approved in advance by the Board to assure that such services do not impair the accountants’ independence from the Company. Our full board of directors performs the equivalent functions of an audit committee, therefore, no policies or procedures other than those required by SEC rules on auditor independence, have been implemented.
Report of the Board of Directors Serving the Equivalent Functions of an Audit Committee
Review and Discussion with Management
Our Board has reviewed and discussed with management our audited financial statements for the fiscal year ended December 31, 2013, and the report by our independent registered public accounting firm thereon, the process designed to achieve compliance with Section 404 of the Sarbanes-Oxley Act of 2002, our assessment of internal control over financial reporting.
Review and Discussions with Independent Registered Public Accounting Firm
Our Board has discussed with Semple, Marchal & Cooper, LLP, our independent registered public accounting firm for fiscal year 2013, the matters the Board, serving the equivalent functions of an audit committee, is required to discuss, which includes, among other items, matters related to the conduct of the audit of our financial statements.
Our Board also has received the written disclosures and the letter from Semple, Marchal & Cooper, LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with Semple, Marchal & Cooper, LLP any relationships that may impact its independence, and satisfied itself as to the independent registered public accounting firm’s independence.
Conclusion
Based on the review and discussions referred to above, the Board, serving the equivalent functions of the audit committee, approved our audited financial statements for the fiscal year ended December 31, 2013 be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 for filing with the Securities and Exchange Commission.
Board of Directors’ Role in the Oversight of Risk Management
We face a variety of risks, including credit, liquidity and operational risks. In fulfilling its risk oversight role, our Board of Directors focuses on the adequacy of our risk management process and overall risk management system. Our Board of Directors believes that an effective risk management system will (i) adequately identify the material risks that we face in a timely manner; (ii) implement appropriate risk management strategies that are responsive to our risk profile and specific material risk exposures; (iii) integrate consideration of risk and risk management into our business decision-making; and (iv) include policies and procedures that adequately transmit necessary information regarding material risks to senior executives and, as appropriate, to the Board or relevant committee.
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Our Board of Directors oversees risk management for us. Accordingly, the Board schedules time for periodic review of risk management, in addition to its other duties. In this role, the Board receives reports from management, certified public accountants, outside legal counsel, and to the extent necessary, from other advisors, and strives to generate serious and thoughtful attention to our risk management process and system, the nature of the material risks we face, and the adequacy of our policies and procedures designed to respond to and mitigate these risks.
Board Leadership Structure
Our Board of Directors does not have a Chairman of the Board due to its small size. Because we do not have a Chairman of the Board, our Board of Directors does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. Our Board of Directors believes that it should be free to make a choice from time to time in any manner that is in the best interests of us and our shareholders. If our Board determines that a Chairman of the Board is needed, the Board will appoint a Chairman of the Board whose appointment is in the best interest of the Company and its shareholders. Our Board has determined that our Board leadership structure is appropriate given the size of our Board and the nature of our business.
Stockholder Communications with the Board of Directors
Stockholders may communicate with the Board of Directors by writing to us as follows: Aurios Inc., attention: Corporate Secretary, 7608 N. Shadow Mountain Road, Paradise Valley, AZ 85253. Stockholders who would like their submission directed to a particular member of the Board of Directors may so specify and the communication will be forwarded as appropriate.
Process and Policy for Director Nominations
Our full Board will consider candidates for Board membership suggested by Board members, management and our stockholders. In evaluating the suitability of potential nominees for membership on the Board, the Board members will consider the Board’s current composition, including expertise, diversity, and balance of inside, outside and independent directors. The Board considers the general qualifications of the potential nominees, including integrity and honesty; recognized leadership in business or professional activity; a background and experience that will complement the talents of the other board members; the willingness and capability to take the time to actively participate in board and committee meetings and related activities; the extent to which the candidate possesses pertinent technological, political, business, financial or social/cultural expertise and experience; the absence of realistic possibilities of conflict of interest or legal prohibition; the ability to work well with the other directors; and the extent of the candidate’s familiarity with issues affecting our business.
While the Board considers diversity and variety of experiences and viewpoints to be important factors, it does not believe that a director nominee should be chosen solely or mainly because of race, color, gender, national origin or sexual identity or orientation. Thus, although diversity may be a consideration in the Board’s process, it does not have a formal policy regarding the consideration of diversity in identifying director nominees.
Stockholder Recommendations for Director Nominations. Our Board of Directors does not have a formal policy with respect to consideration of any director candidate recommendation by stockholders. While the Board of Directors may consider candidates recommended by stockholders, it has no requirement to do so. To date, no stockholder has recommended a candidate for nomination to the Board. Given that we have not received director nominations from stockholders in the past and that we do not canvass stockholders for such nominations, we believe it is appropriate not to have a formal policy in that regard. We do not pay a fee to any third party to identify or evaluate or assist in indentifying or evaluating potential nominees.
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Stockholder recommendations for director nominations may be submitted to the Company at the following address: Aurios Inc., attention: Corporate Secretary, 7608 N. Shadow Mountain Road, Paradise Valley, AZ 85253. Such recommendations will be forwarded to the Board for consideration, provided that they are accompanied by sufficient information to permit the Board to evaluate the qualifications and experience of the nominees, and provided that they are in time for the Board to do an adequate evaluation of the candidate before the annual meeting of stockholders. The submission must be accomplished by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate with a background check.
Stockholder Nominations of Directors. The bylaws of the Company provide that in order for a stockholder to nominate a director at an annual meeting, the stockholder must give timely, written notice to the Secretary of the Company and such notice must be received at the principal executive offices of the Company not less than 120 days before the date of its release of the proxy statement to stockholders in connection with its previous year’s annual meeting of stockholders. Such stockholder’s notice shall include, with respect to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person, including such person’s written consent to being named in the proxy statement as a nominee, serving as a director, that is required under the Securities Exchange Act of 1934, as amended, and cooperating with a background investigation. In addition, the stockholder must include in such notice his name and address, as they appear on the Company’s records, of the stockholder proposing the nomination of such person, and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, the class and number of shares of capital stock of the Company that are owned beneficially and of record by such stockholder of record and by the beneficial owner, if any, on whose behalf the nomination is made, and any material interest or relationship that such stockholder of record and/or the beneficial owner, if any, on whose behalf the nomination is made may respectively have in such business or with such nominee. At the request of the Board of Directors, any person nominated for election as a director shall furnish to the Secretary of the Company the information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.
To be timely in the case of a special meeting or if the date of the annual meeting is changed by more than thirty (30) days from such anniversary date, a stockholder’s notice must be received at the principal executive offices of the Corporation no later than the close of business on the tenth day following the earlier of the day on which notice of the meeting date was mailed or public disclosure of the meeting date was made.
Code of Ethics and Conduct
Our Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors. Our Code of Ethics and Conduct is intended to ensure that our employees act in accordance with the highest ethical standards. A copy of our Code of Ethics and Conduct may be obtained by sending a written request to us at 7608 N. Shadow Mountain Road, Paradise Valley, AZ 85253, Attn: Paul Attaway and the Code of Ethics and Conduct is filed as an exhibit to this Annual Report on Form 10-K.
Section 16(a) Beneficial Ownership Reporting
Section 16(a) of the Exchange Act, requires our executive officers and directors, and persons who own more than ten percent (10%) of our common stock, to file with the Securities and Exchange Commission reports of ownership of, and transactions in, our securities and to provide us with copies of those filings. To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2013, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with during fiscal year 2013.
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ITEM 11. EXECUTIVE COMPENSATION.
The table below sets forth all cash compensation paid or proposed to be paid by us to the chief executive officer and the most highly compensated executive officers, and key employees for services rendered in all capacities to us during fiscal years 2013 and 2012.
Summary Compensation Table
| Name
and Principal Position (a) | Year
(b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Option Awards ($) (f) | Non-Equity Incentive Plan Compensation ($) (g) | Nonqualified Deferred Compensation Earnings ($) (h) | All Other Compensation ($) (i) | Total ($) (j) | |||||||||
| Paul Attaway, President and Chief Financial Officer | 2013 2012 | No compensation paid or options issued | ||||||||||||||||
Timothy Louis, Secretary and Treasurer | 2013 2012 | No compensation paid or options issued | ||||||||||||||||
Mr. Attaway and Mr. Louis received no compensation in 2013 and 2012.
Compensation Policy. Our executive compensation plan is based on attracting and retaining qualified professionals who possess the skills and leadership necessary to enable us to achieve earnings and profitability growth to satisfy our stockholders. We must, 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 compensation package are considered in total. Wherever possible, objective measurements will be utilized to quantify performance, but many subjective factors still come into play when determining performance.
Compensation Components. We expect that the main elements of our compensation 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 prior year, with considerations given for increase. During 2013 and 2012 the executive officers received no compensation. As we grow and if financial conditions improve, we plan to establish base salaries for all executive officers and to review them periodically for possible adjustments. At the appropriate point, we will base salary adjustments on both the individuals and our performance and will include both objective and subjective criteria specific to each executive’s role and responsibility with us.
Stock Options. No stock options were issued to our officers during fiscal years 2013 and 2012.
Bonuses. To date, we have not granted bonuses. When considered, our bonuses will be related to meeting certain performance criteria that are directly related to areas within the executive’s responsibilities with us, such as production of product and sales of product to customers. If we grow, we will create a more defined bonus program to attract and retain our employees at all levels.
Other. At this time, we have no profit sharing plan in place for employees. However, this is another area of consideration to add such a plan to provide yet another level of compensation to our compensation plan.
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Stock Options. The board of directors adopted the 2007 Stock Option and Restricted Stock Plan (the “Plan”) on July 1, 2007 and the shareholders approved the Plan on July 8, 2007. The Plan authorizes us to issue up to 625,000 shares of our common stock upon exercise of options and grant of restricted stock awards. We have not issued any options under the Plan.
Employment Contracts; Termination of Employment and Change-in-Control Arrangements. We have no employment or change-in-control agreements with either Paul Attaway or Timothy Louis.
Compensation Committee Interlocks and Insider participation
Our Board of Directors functions as our compensation committee. Mr. Louis is not currently and has not ever been an employee of the Company.
Outstanding Equity Awards at Fiscal Year-End
Option Awards |
Stock Awards | |||||||||||||||||
Name (a) |
Number
of |
Equity |
Equity |
Option |
Option |
Number
of |
Market |
Equity |
Equity | |||||||||
| 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 2013.
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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 625,000 shares of our common stock upon exercise of options and grant of restricted stock awards. We have not issued any options under the Plan.
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 stock awards, and (ii) to non-employee directors and consultants non-qualified stock options and restricted stock. Our Board of Directors will administer the Plans by making recommendations 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 allows 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, immediately after the grant, stock possessing more than 10% of the combined 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 common stock on the date of grant. Non-statutory stock options may have exercise prices as determined by our Board of Directors.
The Board of Directors 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 transferability, risk of forfeiture and other restrictions and that may be forfeited in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Board of Directors.
Compensation of Directors
Directors who are neither our employees nor of our affiliates receive no cash compensation for serving on our Board of Directors. We have one independent director. We reimburse independent directors for any travel or other out-of-pocket expenses related to their service on the Board of Directors. When we add independent Board members we expect that they will receive compensation of options or shares of common stock of the Company for each 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
Name (a) |
Fees |
Stock |
Option |
Non-Equity |
|
All
Other |
Total | |||||||
| Paul Attaway, President, Chief Financial Officer and Director |
No compensation paid or awards made in 2013 and 2012. | |||||||||||||
| Timothy Louis, Secretary, Treasurer and Director | No compensation paid or awards made in 2013 and 2012. | |||||||||||||
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of December 31, 2013, the number and percentage of outstanding shares of common stock beneficially owned by (a) each person known by us to beneficially own more than five percent of such stock, (b) each director of the Company, (c) each named officer of the Company, and (d) all our directors and executive officers as a group.
| Name and Address of Beneficial Owner(1) | Amount
and Nature of Beneficial Ownership(2) | Percent of Class(4) | ||||||
| Paul Attaway(3) (4) | 1,254,666 | 33.5 | ||||||
| Timothy Louis | 100,000 | 2.4 | ||||||
| Ira J. Gaines(4) | 656,666 | 17.5 | ||||||
| Christian J. Hoffmann, III(4) (5) | 606,666 | 16.2 | ||||||
| All officers and directors as a group (two persons) | 1,354,666 | 35.02 | ||||||
| (1) | The address of these persons is c/o 7608 N. Shadow Mountain Rd., Paradise Valley, 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 Company and the Company’s former parent company. | |
| (4) | Includes 33,333 shares of common stock issuable to each person upon exercise of a warrant exercisable within sixty (60) days and includes 33,333 shares for each person issuable upon conversion of Series A Convertible Notes. See “Certain Relationships and Related Transactions, and Director Independence.” | |
| (5) | Mr. Hoffmann is a partner of Quarles & Brady LLP, the former legal counsel of the Company. Such law firm holds a promissory note convertible into 147,490 shares of common stock and a warrant exercisable to purchase 147,490 shares of our common stock. Mr. Hoffmann disclaims ownership of such shares and they are not included in his totals in the table. |
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ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
The Company had a note payable to a related party, TGE, in the amount of $-0- and $44,121 as of December 31, 2013 and 2012, respectively, bearing interest at a rate of 8.25%. All outstanding principal and interest was originally due and payable on December 15, 2010 and such date was extended several times to January 15, 2014. Effective May 31, 2013, the Company sold all of its assets relating to its vibration isolation products to TGE for a price of $62,161, which was the outstanding principal balance and accrued interest on the note due as of May 31, 2013. The assets included the existing product inventory and other assets, which was $1,155 and $474, respectively, at May 31, 2013, assembly devices, drawings, trade name and related intellectual property. The note payable to TGE has been satisfied by the exchange of the note for the assets, which extinguished the Company’s obligation to TGE.
The Company and TGE, its affiliate and former parent, entered into an administrative services/rental agreement with TGE on January 1, 2009. Under such agreement, TGE performs certain administrative duties for Aurios and provides it office space as required at $1,500 per month. Aurios has no employees and contracts with TGE for all services. Paul Attaway controls TGE as its principal shareholder, and an officer and director. This agreement was terminated on February 25, 2010 as a result of the sale of substantially all of TGE’s assets to AVT. Mr. Attaway provided administrative services, office and warehouse space in his residence to the Company in 2013 and 2012 at no cost.
On April 12, 2013, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann, all of whom are principal shareholders of the Company, advanced a total of $7,025. These advances were repaid in September 2013 with interest at the rate of 6% per annum totaling approximately $116.
During 2013 and 2012, the Company paid $13,248 and $13,772, respectively, in fees to Quarles & Brady LLP, in which Mr. Hoffmann, a principal shareholder of the Company, is a partner. The principal shareholder also performed or supervised a majority of the legal services performed for the Company.
On December 15, 2010 the Company sold $10,000 principal amount of a Series A Convertible Note (the “Series A Note”) to Paul J. Attaway, President, a director and principal shareholder of the Company. The Series A Note bears interest at 6% per annum, was due and payable on December 14, 2013 and is convertible into common stock at a price of $0.30 per share. Maturity has been extended to December 15, 2014. In connection with each Series A Note, the Company issued a warrant exercisable to purchase 33,333 shares of common stock at a price of $0.30 per share through December 14, 2020. Also on such date the Company sold two additional Series A Notes, each in the principal amount of $10,000, to Ira J. Gaines and Christian J. Hoffmann, III, both principal shareholders of the Company, and issued each of them a warrant to purchase 33,333 shares of common stock. The Series A Notes and warrants were on the same terms as those issued to Mr. Attaway.
In December 2010 we issued the law firm of Quarles and Brady, LLP, our former legal counsel, a Series B Convertible Note in the principal amount of $44,248 to represent amounts we owed to such firm under certain outstanding invoices. Such Note was due and payable on January 15, 2013, bears interest at 3% per annum and is convertible into shares of our common stock at a price of $0.30 per share for a total of 147,490 shares. Maturity has been extended to December 15, 2014. The Note is payable prior to its maturity date if the Company raises $100,000 or more from the sale of its debt or equity securities to one or more third parties in a transaction or series of transactions or in the event of a merger, sale of all or substantially all of its assets or similar transaction. In addition, the Company issued warrants in connection with the Note, which warrants are exercisable to purchase 147,490 shares of common stock at a price of $0.30 per share through December 30, 2020. Mr. Hoffmann, a principal shareholder of the Company, is a partner of Quarles & Brady, LLP.
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On August 14, 2012, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann III, respectively all of whom are principal shareholders of the Company, advanced a total of $6,820 to the Company. Each advance bears interest at a rate of 6.0% per annum, with principal and interest due on September 14, 2014. On November 26, 2012, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann III, respectively all of whom are principal shareholders of the Company, advanced a total of $7,000 to the Company. Each advance bears interest at a rate of 6.0% per annum, with principal and interest due on November 26, 2014. As of December 31, 2013 and 2012, there was combined accrued interest on the August 2012 and November 2012 notes of $829 and nil, respectively.
On November 25, 2013, Ira J. Gaines, Paul Attaway and Christian J. Hoffmann III, respectively all of whom are principal shareholders of the Company, advanced a total of $3,000 to the Company. Each advance bears interest at a rate of 6.0% per annum, with principal and interest due on November 24, 2014.
Director Independence
Paul Attaway and Timothy Louis are the sole directors of the Company. Mr. Attaway is not considered “independent” in accordance with rule 5605(a)(2) of the NASDAQ Marketplace Rules. The Board of Directors has determined that Mr. Louis is independent in accordance with the Nasdaq and SEC rules. We are currently traded on the OTC Bulletin Board, which does not require that a majority of the board be independent. If we ever become an issuer whose securities are listed on a national securities exchange or on an automated inter-dealer quotation system of a national securities association, which has independent director requirements, we intend to comply with all applicable requirements relating to director independence.
ITEM 14. Principal Accounting Fees and Services.
The following table is a summary of the fees billed to us by Semple, Marchal & Cooper, LLP for professional services for the fiscal years ended December 31, 2013 and December 31, 2012:
| Fee Category: | Fiscal 2013 Fees | Fiscal 2012 Fees | ||||||
| Audit Fees | $ | 21,000 | $ | 29,100 | ||||
| Audit-Related Fees | 0 | 0 | ||||||
| Tax Fees | 1,500 | 1,500 | ||||||
| All Other Fees | 0 | 0 | ||||||
| Total Fees | $ | 22,500 | $ | 30,600 | ||||
Audit Fees. Such amount consists of fees billed for professional services rendered in connection with the audit of our annual financial statements and review of the interim financial statements included in our quarterly reports. It also includes services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
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Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.
Tax Fees. Tax fees consist of fees billed for professional services related to tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers and acquisitions, and international tax planning.
All Other Fees. Consists of fees for services other than the services reported above. In fiscal 2013 and 2012, there were no fees related to this category.
Our Board of Directors’ practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our independent registered public accounting firm. All of the fees shown above were approved by the Board of Directors functioning as the audit committee.
The audit report of Sample, Marchal & Cooper, LLP on the financial statements of the Company for the year ended December 31, 2013 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles except as it relates to the substantial doubt of the Company’s ability to continue as a going concern. The audit report for the year ended December 31, 2012 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles except as it relates to the substantial doubt of the Company’s ability to continue as a going concern.
During our fiscal years ended December 31, 2013 and 2012, there were no disagreements with Semple, Marchal & Cooper, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to Semple, Marchal & Cooper, LLP’s satisfaction would have caused it to make reference to the subject matter of such disagreements in connection with its reports on the financial statements for such periods.
During our fiscal years ended December 31, 2013 and 2012, there were no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).
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ITEM 15. Exhibits, Financial Statement Schedules.
| Exhibit Number |
Description | Incorporated by Reference to: | Filed Herewith | |||
| 3.1 | Articles of Incorporation of the Company, dated August 9, 2001. | Exhibit 3.1 of the Company’s Form S-1, filed May 8, 2009, No. 333-150881 (the “S-1”). | ||||
| 3.2 | Amendment to the Articles of Incorporation of the Company, dated September 28, 2007. | Exhibit 3.2 of the S-1. | ||||
| 3.3 | Amendment to the Articles of Incorporation of the Company, dated October 10, 2007. | Exhibit 3.3 of the S-1. | ||||
| 3.4 | By-laws of the Company. | Exhibit 3.4 of the S-1. | ||||
| 3.5 | Amended and Restated By-laws of the Company. | Exhibit 3.5 of the Company’s Form 10-K, filed March 31, 2010, No. 000-53643. | ||||
| 4.1 | Form of Common Stock Certificate. | Exhibit 4.1 of the S-1. | ||||
| 4.2 | Form of Series A Convertible Preferred Stock Certificate. | Exhibit 4.2 of the S-1. | ||||
| 5.1 | Opinion of Quarles & Brady LLP as to the legality of securities being registered (includes consent). | Exhibit 5.1 of the S-1. | ||||
| 10.1 | 2007 Stock Option and Restricted Stock Plan. | Exhibit 10.1 of the S-1. | ||||
| 10.2 | Form of Stock Option Agreement (ISO and Non-Qualified) 2007 Stock Option Plan. | Exhibit 10.2 of the S-1. | ||||
| 10.3 | License Agreement with True Gravity Enterprises, Inc., dated July 2, 2007. | Exhibit 10.3 of the S-1. | ||||
| 10.4 | Management and Rental Agreement between True Gravity Enterprises, Inc. and the Company dated January 1, 2007. | Exhibit 10.4 of the S-1. | ||||
| 10.5 | Promissory Note between the Company and True Gravity Enterprises, Inc., dated January 1, 2007, in the principal amount of $44,121.35. | Exhibit 10.5 of the S-1. | ||||
| 10.6 | Stock Purchase Agreement between True Gravity Enterprises, Inc. and Paul Attaway, dated December 31, 2007. | Exhibit 10.6 of the S-1. | ||||
| 10.7 | Form of Subscription Agreement related to 2007 private placement of preferred shares. | Exhibit 10.7 of the S-1. | ||||
| 10.8 | Management and Rental Agreement between True Gravity Enterprises, Inc. and the Company dated January 1, 2009. | Exhibit 10.8 of the S-1. | ||||
| 10.9 | License Agreement with Advanced Vibration Technologies Inc. | Exhibit 10.9 of the Company’s Form 10-K, filed April 15, 2011, No. 000-53643. | ||||
| 10.10 | Management and Rental Agreement between Advanced Vibration Technologies Inc. and the Company dated February 25, 2010 | Exhibit 10.10 of the Company’s Form 10-K, filed April 15, 2011, No. 000-53643. | ||||
| 10.11 | Asset Purchase and Sale Agreement between Aurios Inc. and True Gravity Enterprises, Inc. | Exhibit 10.11 of the Company’s Form 10-Q, filed August 19, 2013 | ||||
| 14.1 | Code of Ethics and Conduct. | Exhibit 14.1 of the Company’s Form 10-K, filed April 15, 2011, No. 000-53643. | ||||
| 23.1 | Consent of Semple, Marchal & Cooper LLP. | Exhibit 23.1 of the S-1. | ||||
| 23.2 | Consent of Quarles & Brady LLP (Included in 5.1 above). | Exhibit 5.1 of the S-1. | ||||
| 31.1 | Certification of Paul Attaway, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 31.2 | Certification of Paul Attaway, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 99.1 | Audited Financial Statements of Aurios Inc. as of and for the years ended December 31, 2013 and 2012. | X | ||||
| 101.INS* | XBRL Instance Document. | |||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document. | |||||
| 101.CAL* | XBRL Calculation Linkbase Document. | |||||
| 101.DEF* | XBRL Taxonomy Definition Linkbase Document | |||||
| 101.LAB* | XBRL Taxonomy Labels Linkbase Document. | |||||
| 101.PRE* | XBRL Taxonomy Presentation Linkbase Document. |
* XBRL related information in Exhibit 101 to this annual report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: March 21, 2014 | ||
| Aurios Inc. | ||
| By: | /s/ Paul Attaway | |
| Name: | Paul Attaway | |
| Title: | President, Chief Executive Officer, | |
| Chief Financial Officer and Director | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature and Title | Date | |
| /s/ Paul Attaway | March 21, 2014 | |
| Paul Attaway, President, Chief Executive Officer, | ||
| Chief Financial Officer, | ||
| Principal Accounting Officer and Director | ||
| /s/ Timothy Louis | March 21, 2014 | |
| Timothy Louis, Secretary, Treasurer and Director |
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