UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the ~~quarterly~~three ~~period~~months ended March 31, ~~2008~~2009

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

For the transition period from _______________ to __________________

Commission File No. 001-31332

nCoat, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	98-0375406
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

7237 Pace Dr.

PO Box 38

Whitsett, NC 27677-9118

(Address of principal executive office, zip code)

Registrant’s telephone number, including area code: (336) 447-2000

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 at least the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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 [ ] Smaller reporting company [X]

Non-accelerated filer o Smaller reporting company x

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

Yes o No x

As of May 1613, ~~2008~~2009, there were 97102,~~428~~108,~~650~~606 shares of the registrant’s common stock, $0.0001 par value, outstanding.

nCoat, Inc.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, ~~2008~~2009

FORWARD-LOOKING INFORMATION

Statements in this report concerning the future sales, expenses, profitability, financial resources, product mix, market demand, product development and other statements concerning the future results of operations, financial condition and business of nCoat, Inc., are “forward-looking” statements as defined in the Securities Act of 1933 and Securities Exchange Act of 1934. Investors are cautioned that the Company’s actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment, including competition, need for increased acceptance of products, ability to continue to develop and extend our brand identity, ability to anticipate and adapt to a competitive market, ability to effectively manage rapidly expanding operations, amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure, ability to provide superior customer service thereon , dependence upon key personnel and the like. Additionally, words such as “anticipates,” “expect,” “intend,” “estimates,” “seeks,” “may,” “could,” “plan,” “believes,” and similar words and phrases may indicate forward-looking statements. The Company’s most recent filings with the Securities and Exchange Commission, including reports on Form 8-K, contain additional information concerning many of these risk factors, and copies of these filings are available from the Company upon request and without charge. The Company disclaims any obligation or intention to update any forward looking statement in this report.

As discussed herein, on February 14, 2007, Tylerstone Ventures Corporation (“Tylerstone”) entered into a share exchange agreement with nCoat, Inc. (“nCoat”), whereby the nCoat shareholders received a majority of the voting equity interests of Tylerstone and nCoat was therefore considered to have acquired Tylerstone for financial reporting purposes.

References in this Quarterly Report to the “Company” or “nCoat” refer both to nCoat, Inc., a private company (which changed its name to nCoat Automotive, Inc. prior to the share exchange), for the periods prior to February 14, 2007, and to nCoat, Inc. (formerly Tylerstone Ventures Corporation), a public company, and its subsidiaries for the periods following February 14, 2007. References to “Tylerstone” refer solely to the corporate entity for the periods prior to February 14, 2007.

nCoat, Inc.

TABLE OF CONTENTS

		Page
		Number
Part I – FINANCIAL INFORMATON
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2008, and December 31, 2007 (Unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2009, and December 31, 2008 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007 (Unaudited)	4
	Condensed Consolidated Statements of Operations for Three Months Ended March 31, 2009 and 2008 (Unaudited)	4
	Condensed Consolidated Statement of Shareholders’ Equity (Deficit) for the Three Months Ended March 31, 2008 (Unaudited)	5
	Condensed Consolidated Statement of Shareholders’ Deficit for the Three Months Ended March 31, 2009 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009, and 2008 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1813
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2621
Item 4.	Controls and Procedures	26
Item 4T.	Controls and Procedures	21
Part II – OTHER INFORMATION
Item 1.	Legal Proceedings	2823
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2823
Item 3.	Defaults Upon Senior Securities	3024
Item 4.	Submission of Matters to a Vote of Security Holders	3024
Item 5.	Other Information	3024
Item 6.	Exhibits	3125
Signature Page		3327

PART I

THE FINANCIAL STATEMENTS INCLUDED HEREIN ARE NOT AUDITED OR REVIEWED. NCOAT HAS NOT ACCUMULATED ENOUGH CASH TO PAY THE AUDIT FEE TO COMPLETE THE AUDIT OF ITS 2008 FINANCIALS PRIOR TO SUBMISSION OF THIS REPORT. FOLLOWING PAYMENT OF THE AUDIT FEE, NCOAT AUDITORS WILL COMPLETE THE AUDIT AND NCOAT WILL FILE AN AMENDED FORM 10K AND 10Q.

FINANCIAL INFORMATION

Item 1 – Financial Statements

~~nCOAT~~NCOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2008 2007 ASSETS Current Assets Cash $ 230,796 $ 201,878 Trade receivables, net 1,033,799 934,337 Security subscription receivable - - Inventory 169,858 172,477 Other current assets 39,914 62,449 Deferred income tax assets 45,769 45,769 Total Current Assets 1,520,136 1,416,910 Property and Equipment, net 2,206,881 2,333,815 Intangible Assets, net 2,711,358 2,975,948 Total Assets $ 6,438,375 $ 6,726,673 LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIT) Current Liabilities Accounts payable $ 2,502,975 $ 2,227,834 Accrued liabilities 2,304,761 1,960,608 Accrued income taxes - Current portion of notes payable 1,984,510 1,984,510 Accrued consulting obligation 500,000 500,000 Current portion of obligations under capital leases 153,568 153,568 Total Current Liabilities 7,445,814 6,826,520 Long-Term Liabilities Notes payable, net of current portion 12,861,831 12,657,024 Obligations under capital leases , net of current portion 287,020 328,165 Deferred income taxes 154,744 154,744 Total Long-Term Liabilities 13,303,595 13,139,933 Stockholders' Equity (Deficit) Common stock - $0.0001 par value; 500,000,000 shares authorized; 96,650,451 shares and 33,660,000 shares outstanding, respectively 9,665 9,665 Additional paid-in capital 22,240,781 22,240,781 Accumulated deficit (36,561,480 ) (35,490,226 ) Total Stockholders' Equity (Deficit) (14,311,034 ) (13,239,780 ) Total Liabilities and Stockholders' Equity (Deficit) $ 6,438,375 $ 6,726,673

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31			December 31
	2009			2008
ASSETS	(Unaudited)			(Unaudited)
Current Assets
Cash	$	31,960		$	42,134
Trade receivables, net		492,212			767,160
Inventory		74,196			88,778
Other current assets		105,056			99,281
Deferred income tax assets		-			-
Total Current Assets		703,424			997,353
Property and Equipment, net		1,527,528			1,677,037
Intangible Assets, net		2,192,079			2,375,091
Total Assets	$	4,423,031		$	5,049,481

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	3,446,337		$	3,476,203
Accrued liabilities		934,623			794,571
Accrued Interest		52,394,069			17,872,582
Accrued Registration Liability		73,110,307			23,358,690
Deferred revenue		675,842			759,176
Current portion of notes payable		700,630,927			298,734,128
Derivative Premium Payable		120,348			120,348
Accrued consulting obligation		-			500,000
Current portion of obligations under capital leases		120,298			121,988
Total Current Liabilities		831,432,751			345,737,686
Long-Term Liabilities
Notes payable, net of current portion		150,322			150,322
Obligations under capital leases , net of current portion		191,667			206,112
Deferred income taxes		97,262			97,262
Total Long-Term Liabilities		439,251			453,696
Stockholders' Equity (Deficit)
Common stock - $0.0001 par value; 500,000,000 shares authorized; 102,108,606 shares outstanding		10,211			10,211
Additional paid-in capital		22,295,667			22,295,667
Accumulated deficit		(849,754,849	)		(363,447,779	)
Total Stockholders' Equity (Deficit)		(827,448,971	)		(341,141,901	)
Total Liabilities and Stockholders' Equity (Deficit)	$	4,423,031		$	5,049,481

The accompanying notes are an integral part of these condensed consolidated financial statements.

NCOAT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended
	March 31,
	2008			2007
Net Sales	$	2,909,483		$	1,250,683
Cost of Goods Sold		1,858,965			1,327,904
Gross Profit (Loss)		1,050,518			(77,221	)
General and Administrative Expense		1,625,360			2,206,675
Sales and Marketing Expenses		282,374			375,439
Loss from Operations		(857,216	)		(2,659,335	)
Interest Expense		214,038			231,312
Loss Before Income Taxes		(1,071,254	)		(2,890,647	)
Income Tax Benefit		-			-
Net Loss	$	(1,071,254	)	$	(2,890,647	)
Basic and Diluted Loss per Share	$	(0.01	)	$	(0.05	)
Basic and Diluted Weighted-Average
Shares Outstanding		89,496,127			59,099,450

(Unaudited)

	For the Three Months Ended
	March 31
	2009			2008
	(Unaudited)			(Unaudited)
Net Sales	$	2,423,542		$	2,909,483
Cost of Goods Sold		1,141,793			1,858,965
Gross Profit		1,281,749			1,050,518
Operating Expenses
General and Administrative Expense		1,087,833			1,625,360
Research and Development Costs		79,709			-
Sales and Marketing Expenses		153,930			282,374
Total Operating Expenses		1,321,472			1,907,734
(Loss) from Operations		(39,723	)		(857,216	)
Redemption premium interest expense		(486,181,192	)		---
Other Interest expense		(21,640	)		(214,038	)
Gain on derivative liability valuation		---			-
Net Loss	$	(486,242,555	)	$	(1,071,254	)

Basic and Diluted Loss per Share	$	(4.76	)	$	(0.01	)

Basic and Diluted Weighted-Average Shares Outstanding		102,108,606			89,496,127

The accompanying notes are an integral part of these condensed consolidated financial statements.

nCoat, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
					Additional						Total
	Common Stock				Paid-In			Accumulated			Stockholders'
	Shares		Amount		Capital			Deficit			Equity
Balance - December 31, 2005		27,993,332		2,799		3,773,186			(1,666,779	)		2,109,206
		5,666,668		567		1,499,433			-			1,500,000
									(6,718,955	)		(6,718,955	)
Balance - December 31, 2006		33,660,000	$	3,366	$	5,272,619		$	(8,385,734	)	$	(3,109,749	)
Shares issued to investor		1,130,910		113		(113	)		-			-
Vested and nonvested shares issued to
employees and consultants as compensation,
net of forfeitures		13,284,090		1,328		1,220,716			-			1,222,044
Shares issued upon the exercise of warrants		3,740,000		374		(204	)		-			170
Shares issued to the former shareholders of
Tylerstone Venture Corporation		37,200,000		3,720		(3,720	)		-			-
Shares issued upon conversion of debentures
and related accrued interest		5,171,718		518		2,585,342			-			2,585,860
Beneficial debt conversion rights		-		-		5,391,985			-			5,391,985
Warrants issued with convertible debt		-		-		5,656,056			-			5,656,056
Convertible debt placement agent warrants		-		-		998,108			-			998,108
Shares issued to convertible debt placement
agent		880,400		88		113,484			-			113,572
Shares issued in acquisition of MCC, Inc.		1,333,333		133		906,533			-			906,666
Shares issued upon conversion of liability
payable to former owner of MCC, Inc.		250,000		25		99,975			-			100,000
Net loss		-		-		-			(27,104,492	)		(27,104,492	)
Balance - December 31, 2007		96,650,451	$	9,665	$	22,240,781		$	(35,490,226	)	$	(13,239,780	)
Net loss									(1,071,254	)		(1,071,254	)
Balance - March 31, 2008		96,650,451		9,665		22,240,781			(36,561,480	)		(14,311,034	)

NCOAT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT

For the Three Months Ended March 31, 2009

(Unaudited)

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Deficit
Balance - December 31, 2008(Unaudited)		102,108,606	$	10,211	$	22,295,667	$	(363,512,294	)	$	(341,206,416	)
Shares issued upon conversion of
accrued interest											-
Compensation related to vested and
nonvested shares issued to employees,
net of forfeitures											-
Reclassification of fair value of warrants
to derivative liability.											-
Partial conversion of convertible note											-
Conversion of convertible note											-
Net Loss								(486,242,555	)		(486,242,555	)
Balance - March 31, 2009 (Unaudited)		102,108,606	$	10,211	$	22,295,667	$	(849,754,849	)	$	(827,448,971	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

nCOAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,	2008			2007
Cash Flows From Operating Activities
Net loss	$	(1,071,254	)	$	(2,890,647	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		207,420			107,250
Amortization of intangible assets		264,590			128,175
Amortization of discount and deferred loan costs and accretion
of notes payable		-			-
Compensation expense paid by issuance of common stock		-			929,230
					170
Deferred income tax benefit		-			-
Changes in assets and liabilities, net of effects from purchase of MCC, Inc.:
Accounts receivable		(99,462	)		58,811
Inventory		2,619			9,109
Other current assets		22,535			4,597
Accounts payable		275,141			428,677
Accrued liabilities		344,153			100,460
Net Cash Used in Operating Activities		(54,258	)		(1,124,168	)
Cash Flows From Investing Activities
Payment for the purchase of property and equipment		(80,486	)		(3,663	)
Payment for purchase MCC, Inc., net of cash acquired		-			-
Net Cash Used in Investing Activities		(80,486	)		(3,663	)
Cash Flows From Financing Activities
Proceeds from issuance of notes payable, net of loan costs paid		500,000			-
Proceeds from issuance of warrants, net of offering costs paid		-			-
Proceeds from issuance of common stock					1,200,000
Principal payments on notes payable		(295,193	)		(3,405	)
					(493	)
Principal payments under capital lease obligations		(41,145	)		(31,002	)
Net Cash Provided by Financing Activities		163,662			1,165,100
Net Decrease in Cash		28,918			37,269
Cash at Beginning of Period		201,878			63,437
Cash at End of Period	$	230,796		$	100,706
Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	986,244		$	231,312
Supplemental Schedule of Noncash Investing and Financing Activities
In connection with the acquisition of MCC, Inc., liabilities were assumed as follows:
Fair value of assets acquired	$	7,142,826		$	-
Cash paid		(5,000,000	)		-
Common stock issued		(906,666	)		-
Liabilities assumed	$	1,236,160		$	-
Notes payable issued for the purchase of equipment and insurance	$	83,158		$	-
Capital lease obligation incurred for the lease of equipment		-			-
Note payable issued in settlement of accrued liabilities		150,000			-
Common stock issued upon conversion of notes payable and
accrued interest		2,685,859			-
Common stock issued for services of convertible debenture placement
agent recognized as deferred loan costs		113,572			-

NCOAT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended
	March 31,
	2009			2008
	(Unaudited)			(Unaudited)

Cash Flows From Operating Activities
Net loss	$	(486,242,555	)	$	(12,261,554	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		149,949			129,913
Amortization of intangible assets		183,012			169,500
Amortization of discount and deferred loan costs and accretion of notes payable					10,600,962
Compensation expense paid by issuance of common stock		-			185,287
Redemption premium on notes payable recognized as interest expense		486,182,192
Changes in assets and liabilities:
Accounts receivable		210,433			(83,172	)
Inventory		14,582			2,619
Other current assets		(5,776	)		25,613
Accounts payable		(21,118	)		281,865
Deferred revenue		(83,334	)
Accrued liabilities		(368,695	)		625,905
Net Cash Provided by Operating Activities		18,690			(323,062	)
Cash Flows From Investing Activities
Purchase of property and equipment		(440	)		(2,547	)
Net Cash Used in Investing Activities		(440	)		(2,547	)
Cash Flows From Financing Activities
Proceeds from issuance of notes payable		-			500,000
Principal payments on notes payable		(12,289	)		(362,784	)
Principal payments under capital lease obligations		(16,135	)		(41,142	)
Net Cash Used in Financing Activities		(28,424	)		96,074
Net Increase (Decrease) in Cash		(10,174	)		(229,535	)
Cash At Beginning of Period		42,134			295,961
Cash At End of Period	$	31,960		$	66,426
Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	489,910		$	986,244


Schedule of Noncash Investing and Financing Activities
Common stock issued upon conversion of accrued interest	$	-		$	-
Notes payable issued for the purchase of equipment and insurance		-			-
Reclassification of the fair value of derivative warrant liability		-			-
Common stock issued upon conversion of notes payable		-			-

The accompanying notes are an integral part of these condensed consolidated financial statements.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 ~~and 2007~~

(Unaudited)

~~Note~~THE 1FINANCIAL STATEMENTS INCLUDED HEREIN ARE NOT AUDITED OR REVIEWED. ~~Basis~~ ofNCOAT ~~Presentation~~HAS ~~and~~NOT ACCUMULATED ~~Description~~ENOUGH ofCASH ~~Business~~TO PAY THE AUDIT FEE TO COMPLETE THE AUDIT OF ITS 2008 FINANCIALS PRIOR TO SUBMISSION OF THIS REPORT. FOLLOWING PAYMENT OF THE AUDIT FEE, NCOAT AUDITORS WILL COMPLETE THE AUDIT AND NCOAT WILL FILE AN AMENDED FORM 10K AND 10Q.

~~Interim Financial~~Note Statements - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) for interim financial information and with the instructions to Form 10-Q1. ~~Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.~~ ~~The~~Basis accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements included in the Company’s current report on Form 10-K filed with the Securities and Exchange Commission on May 18, 2008. In the opinion of ~~management,~~ all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2008. Presentation

~~Nature~~Interim ofFinancial ~~Operations~~Statements -– ~~nCoat,~~The ~~Inc.~~accompanying ~~and~~unaudited ~~its~~condensed ~~subsidiaries~~consolidated ~~specialize~~financial statements have been prepared in accordance with accounting principles generally ~~nanotechnology~~accepted ~~research,~~in ~~licensing,~~the United States of America (“generally accepted accounting principles”) for interim financial information and with the ~~commercialization,~~instructions ~~distribution~~to ~~and~~Form ~~application~~10-Q. Accordingly, they do not include all of ~~nano~~the asinformation ~~well~~and asnotes required ~~multiple~~by ~~non-nano~~generally ~~surface~~accepted ~~coatings.~~accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s ~~specialized~~ ~~coatings~~annual ~~are~~consolidated financial ~~used~~statements byincluded in the ~~automotive,~~Company’s ~~diesel~~amended ~~engine,~~annual ~~trucking,~~report on Form ~~recreational~~10-K/A ~~vehicle,~~filed ~~motorcycle,~~with ~~aerospace~~the Securities and ~~oil~~Exchange ~~and~~Commission ~~gas~~on ~~industries~~April ~~for~~15, ~~heat~~2009. In the opinion of management, ~~corrosion~~all ~~resistance,~~adjustments ~~friction~~(consisting ~~reduction,~~only ~~bond~~of ~~strength~~normal ~~and~~recurring ~~appearance. Corporate~~accruals) ~~offices~~considered ~~and~~necessary ~~operations~~for ~~headquarters~~a ~~are~~fair ~~located~~presentation have been included. inOperating ~~Whitsett,~~results ~~North~~for ~~Carolina~~the ~~and~~three ~~application~~months ~~operations~~ended March 31, 2009, are ~~conducted~~not atnecessarily ~~facilities~~indicative ~~located~~of inthe ~~Bluffdale,~~results ~~Utah;~~that ~~Oklahoma~~may ~~City,~~be ~~Oklahoma;~~expected ~~Pascagoula, Mississippi;~~for ~~Quaker~~any ~~Town,~~future ~~Pennsylvania;~~periods ~~Tempe,~~or ~~Arizona;~~for ~~and~~the year ~~Whitsett~~ending December 31, ~~North Carolina~~2009.

~~Organization~~Nature ~~and~~of ~~Basis~~Operations of– ~~Presentation~~nCoat, ~~- On~~Inc., ~~February~~and 1its subsidiaries specialize in nanotechnology research, ~~2007~~licensing, and the ~~shareholders~~commercialization, ofdistribution and ~~nCoat,~~application ~~Inc.~~of ~~changed~~nano ~~its~~as ~~name~~well toas ~~nCoat~~multiple ~~Automotive~~non-nano ~~Group,~~surface ~~Inc~~coatings. ~~(referred~~The ~~to herein~~Company’s asspecialized ~~“nCoat”).~~coatings Onare ~~February~~used 14by the automotive, ~~2007~~diesel engine, ~~nCoat~~trucking, recreational ~~consummated~~vehicle, amotorcycle, ~~Share~~aerospace ~~Exchange~~and ~~Agreement~~oil and gas industries for heat ~~with~~management, ~~Tylerstone~~corrosion ~~Ventures~~resistance, ~~Corporation~~friction ~~(Tylerstone)~~reduction, ~~whereby~~bond ~~Tylerstone~~strength ~~acquired~~and ~~all~~appearance. Corporate ofoffices ~~the~~and ~~outstanding~~operations ~~common~~headquarters ~~stock~~are oflocated in ~~nCoat~~Whitsett, inNorth ~~exchange~~Carolina, ~~for~~and ~~the~~application ~~issuance~~operations ofare conducted at 50facilities located in Oklahoma City,~~840~~ Oklahoma; Quaker Town,~~000~~ ~~shares~~Pennsylvania; ofTempe, Arizona; ~~Tylerstone~~and ~~common~~Whitsett, ~~stock~~North Carolina.

~~The~~Principles ~~nCoat shareholders received a majority~~ of ~~the voting equity interests of Tylerstone~~ ~~and~~Consolidation ~~nCoat~~– ~~was~~The ~~therefore~~accompanying ~~considered~~unaudited toconsolidated ~~have acquired Tylerstone for~~ financial ~~reporting~~statements ~~purposes.~~include ~~Immediately~~the ~~prior~~operations, toaccounts ~~the~~and ~~share~~transactions ~~exchange,~~of nCoat ~~had~~Automotive 11Group,~~554,545~~ ~~shares of common stock outstanding~~Inc., ~~The~~High ~~share~~Performance ~~exchange~~Coatings, ~~was recognized as the recapitalization of nCoat into Tylerstone at historical cost in a manner similar to a 4~~Inc.~~4-for-1~~, ~~forward~~nTech, ~~stock split~~Inc., ~~The~~and ~~accompanying~~MCCI ~~consolidated financial statements have been restated on a retroactive basis~~ for all ~~periods~~ ~~presented~~periods ~~to reflect the shares issued to the nCoat shareholders under the Share Exchange Agreement~~presented. OnThese ~~February~~entities 2,are ~~2007,~~collectively ~~the~~referred ~~Tylerstone~~to ~~shareholders~~herein ~~amended~~as the ~~articles~~“Company” ofor ~~incorporation of Tylerstone to change its name to~~ “nCoat~~, Inc~~.” toAll ~~conform~~intercompany totransactions ~~the name of the operating company~~ and tobalances ~~increase the~~have ~~authorized~~been ~~common~~eliminated ~~stock~~in ~~to 500,000,000 shares, $0~~consolidation.~~0001 par value.~~

OnBusiness Condition– ~~June~~The accompanying unaudited condensed consolidated financial 29statements have been prepared on a going-concern basis, ~~2007~~which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses of $ 486,242,555 ~~nCoat~~and $1,071,254 ~~Inc.~~and provided ~~acquired~~$18,690 but used $323,062 of ~~all~~cash in operating activities during the three ~~capital~~months ~~stock~~ended ofMarch ~~MCC~~31, ~~Inc~~2009 and 2008, respectively. At ~~(Metallic~~March ~~Ceramic~~31, ~~Coatings~~2009, ~~Inc.~~the Company has a working capital deficiency of $830,729,327, oran accumulated ~~"MCCI")~~deficit of $849,754,849 ~~doing~~and ~~business~~a instockholders’ deficit of $ 827,448,971. Based on current operations, cash flows from operations have become positive and should remain positive for the ~~marketplace~~remainder ~~under~~of the year; ~~brand~~however, the Company will likely face negative income for the first half of ~~JET-HOT®~~the year ~~Coatings.~~ending ~~The~~December ~~results~~31, 2009. As of ~~MCCI~~March 31, 2009, the Company’s principal ~~operations~~sources ~~have~~of ~~been~~liquidity ~~included~~were $31,960 of cash and $492,212 of trade inaccounts receivable, while current liabilities totaled $ 831,432,751 at that date, of which $700,630,927 relates to notes payable that are due currently. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the ~~Company~~amount ~~from~~and ~~June~~classification ~~29,~~of liabilities that might be necessary should the ~~2007~~Company be unable to continue as a going concern.

The accompanying consolidated financial statements include the operations, accounts and transactions of nCoat, Inc., from February 14, 2007; of nCoat Automotive Group, Inc., for all periods presented; and of High Performance Coatings, Inc., nTech, Inc., and MCCI from the dates of their acquisition or formation, which entities for those periods are collectively referred to herein as the “Company” or “nCoat.” All intercompany transactions and balances have been eliminated in consolidation.

Business Condition– The accompanying 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 Company has incurred losses of $1,071,254 and $2,890,647 and used $54,258 and $1,124,168 of cash in operating activities during the three months ended March 31, 2008 and 2007, respectively. The Company has experienced losses from operations since inception and has an accumulated deficit of $36,561,480 as of March 31, 2008. At March 31, 2008, the Company had a working capital deficiency of $14,311,034. Based on current operations, cash flows from operations will likely be negative for at least two more quarters, and as a result throughout calendar year 2008. As of March 31, 2008, the Company’s principal sources of liquidity were $230,796 of cash and $1,033,799 of trade accounts receivable while current liabilities totaled $7,445,814 at that date. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2008 and 2007~~2009

(Unaudited)

~~These losses~~Licensing ~~from operations and negative cash flows have occurred while the Company~~Revenue ~~was~~Recognition ~~developing and~~– ~~commercializing~~Fees ~~products~~received ~~utilizing~~from alicensing ~~new and unique technology, opening a new facility, relocating its corporate headquarters and building an infrastructure to support~~ the Company’s ~~plan~~technology ~~for growth and~~to ~~development.~~customers ~~These~~is ~~activities continued~~recognized ~~throughout~~over ~~2007. This has placed a significant strain on~~ the ~~financial~~term ~~resources~~ of the ~~Company~~license agreements. ~~The~~ ~~ability~~Licensing fees ofreceived ~~the~~prior ~~Company~~ to ~~overcome~~recognition ~~these~~are ~~challenges~~accounted ~~depends~~for onas ~~its~~deferred ~~ability~~revenue. ~~to generate~~Sales ~~greater~~revenue ~~revenues~~excludes ~~and~~lease ~~reduce~~payments ~~its~~made ~~operating~~by ~~costs~~customers inon ~~order~~facilities ~~to achieve positive~~used ~~cash~~by ~~flows from operations, as well as~~ the ~~continued~~ ~~availability of debt and equity financing~~Company.

~~Capital~~Loss Per Common ~~requirements~~Share ~~during~~– ~~the~~Basic ~~next~~loss ~~twelve~~per ~~months~~share ~~will~~is ~~depend~~computed onby ~~numerous~~dividing ~~factors,~~net loss for the ~~including~~period by the ~~success~~weighted-average number of ~~our~~common ~~new~~shares ~~and~~outstanding. ~~current~~The nonvested ~~product~~common ~~lines,~~shares ~~obtaining~~issued ~~new~~as employee compensation are excluded from the ~~customers~~calculation ~~for~~of ~~our~~basic ~~products~~loss per share. Diluted loss per share reflects dilutive potential common shares outstanding during the period. During the twelve months ended December 31 2008, the ~~development~~following ofanti-dilutive ~~new~~potential ~~applications~~common ~~for~~share ~~our~~were ~~products,~~excluded ~~and~~from the ~~availability~~calculation of ~~resources~~diluted toloss ~~develop~~per ~~and~~share: ~~support~~1,837,800 ~~of our~~nonvested ~~products. Specifically,~~shares itof iscommon ~~anticipated~~stock; ~~that~~6,601,388,889 inshares ~~addition~~of tocommon ~~the~~stock ~~funds~~issuable upon ~~raised~~conversion inof ~~2007,~~notes wepayable; ~~could~~32,418,750 ~~need~~shares ~~approximately~~of $3common ~~million~~stock toissuable $6upon ~~million~~the exercise ~~over~~of warrants. During the ~~next~~ twelve months toended ~~pursue~~December ~~our~~31, 2007, ~~current~~potential ~~operating~~common ~~plan~~shares ~~and~~consisted anof ~~additional~~6,396,500 $5nonvested toshares of common ~~$10~~stock; ~~million~~42,534,722 toshares ~~advance~~of ~~further~~common ~~acquisitions~~stock ~~accretive~~issuable toupon ~~the~~conversion ~~Company’s~~of ~~present~~notes ~~business. The~~payable; ~~actual~~32,418,750 ~~amount~~shares isof ~~dependent~~common onstock ~~our~~issuable ~~success~~upon ~~in achieving~~ the ~~goals~~exercise ~~mentioned above~~of warrants.

~~Management~~Note ~~believes that the actions we have taken and are presently taking will provide the opportunity to continue as a going concern~~2. Acquisition ~~These actions have included engaging an investment banking firm to assist in raising capital, converting existing debt to equity, raising new capital in the form~~ of ~~Series A and B convertible promissory notes~~MCC, ~~acquiring of a major competitor, and consolidating products, services and facilities~~Inc. Current actions being taken include raising additional debt or equity capital, focused marketing of the Company’s products and negotiating sales agreements with plans that these agreements will enable the Company to generate sufficient cash flows for the Company to continue as a going concern. The timing of such fundraising efforts will depend on the extent to which we are able to increase revenues and the success of the investment banking firm and the Company in attracting new investment. We evaluate our working capital needs and operating plan assumptions regularly to determine whether adjustments to our cash and liquidity outlook are warranted, and we also review potential sources of financing on an ongoing basis. However, adequate funds may not be available when needed and there is no assurance that financing will be available or on terms acceptable to the Company. If we raise additional funds by issuing equity securities, existing stockholders may be subject to dilution. Furthermore, the failure to obtain additional working capital could prevent the Company from achieving its business objectives.

~~Loss~~On ~~Per Common~~June ~~Share–~~29, ~~Basic~~2007, ~~loss~~nCoat, ~~per~~Inc., ~~share~~completed isthe ~~computed~~acquisition byof ~~dividing~~all ~~net~~the ~~loss~~capital ~~for~~stock ~~the~~of ~~period~~MCC, byInc. ~~the~~("MCCI"), ~~weighted-average~~doing ~~number~~business ofin ~~common~~the ~~shares~~marketplace ~~outstanding.~~under ~~The~~the brand of ~~nonvested~~JET-HOT® ~~common~~Coatings. ~~shares~~MCCI ~~issued~~provides ashigh ~~employee~~performance ~~compensation~~coatings ~~are~~of ~~excluded~~metal ~~from~~parts ~~the~~for ~~calculation~~industrial ofand ~~basic~~personal ~~loss per share~~use. In ~~Diluted~~connection ~~loss~~with ~~per~~the ~~share~~acquisition ~~reflects~~of ~~dilutive~~MCCI, ~~potential~~the ~~common~~Company ~~shares~~entered ~~outstanding~~into ~~during~~a ~~the~~consulting ~~period.~~agreement ~~During~~with the ~~three~~former ~~months~~majority ~~ended~~shareholder ~~March31,~~of ~~2008,~~MCCI whereby the ~~following~~Company ~~anti-dilutive~~is ~~potential~~obligated ~~common~~to ~~share~~pay ~~were excluded~~the ~~from~~former ~~the~~majority shareholder ~~calculation~~consulting fees of ~~diluted~~$120,000 ~~loss~~annually, ~~per~~performance ~~share:~~bonuses ~~6,396,500~~equal ~~nonvested~~to ~~shares~~2.5% of ~~common~~net ~~stock;~~sales ~~42,534,722~~from ~~shares~~new ofcustomers, ~~common~~and ~~stock~~to ~~issuable~~purchase, ~~upon conversion~~for ofup ~~notes~~to ~~payable; 32~~$70,~~418~~000,~~750~~ ~~shares~~an automobile offor ~~common~~the ~~stock~~consultant. ~~issuable~~The ~~upon~~term ~~the exercise~~ of ~~warrants. During~~ the ~~three~~obligation ~~months~~for ~~ended~~the ~~March 31, 2008,~~consulting ~~3,740,000~~fees ~~shares~~and ofthe ~~common~~performance ~~stock~~bonuses ~~issuable~~is ~~upon~~through ~~exercise~~December of31, ~~warrants~~2009, ~~were anti-dilutive~~ and ~~were~~will ~~excluded~~continue for ~~from~~successive ~~the~~one-year ~~calculation~~periods ofunless ~~diluted~~terminated ~~loss~~by ~~per share~~either party.

Note 23. ~~Acquisition~~ Notes ~~of Tylerstone~~Payable

OnSeries A and B 6% ~~February~~Convertible 14Promissory Notes– From May 25, 2007 through June 18, ~~nCoat~~2007 (primarily ~~consummated~~on aMay ~~Share~~31, ~~Exchange~~2007), ~~Agreement~~the ~~with~~Company ~~Tylerstone~~issued $9,000,000 of Series A 6% ~~Ventures~~convertible ~~Corporation~~promissory notes (the “~~Tylerstone~~Series A Notes”) ~~whereby~~and ~~Tylerstone~~warrants ~~acquired~~to ~~all~~purchase 22,500,000 shares of ~~the outstanding~~ common stock ofexercisable ~~nCoat~~at in$1.00 ~~exchange~~per ~~for~~share ~~the~~through ~~issuance~~May ~~of 50~~31,~~840,000~~ ~~shares~~2012. ofThe ~~Tylerstone~~Series A Notes were originally convertible into common stock at $0.40 per ~~Tylerstone~~share ~~had~~through 37May 31,~~200~~ 2010,~~000~~ ~~shares~~when ofthe ~~common stock~~Series ~~outstanding~~A onNotes ~~February~~were ~~14, 2007~~due. ~~Tylerstone’s~~Accrued interest ~~only~~is ~~significant~~payable ~~asset~~quarterly. From ~~at February~~May 1431, 2007 through July 10, 2007, ~~was~~the Company also issued $23,250,000 of Series B 6% convertible promissory notes ~~receivable~~(the ~~from~~“Series ~~nCoat,~~B ~~which~~Notes”) ~~were offset~~and bywarrants $2to purchase 8,~~250~~125,000 shares of ~~convertible~~common stock ~~debentures~~exercisable ~~payable~~at to$0.80 aper ~~third~~share ~~party~~through May 31, 2010. The Series B Notes ~~reverse~~were ~~acquisition~~originally ofconvertible ~~Tylerstone~~into bycommon ~~nCoat~~stock ~~was~~at ~~recognized~~$0.40 byper ~~nCoat~~share asthrough ~~the~~May 31, ~~conversion~~2010, ofwhen the ~~$2,250,000~~Series B Notes were due. Accrued interest is payable quarterly. Conversion of the promissory notes ~~payable~~is tolimited ~~Tylerstone~~such ~~into~~that ~~the~~at ~~convertible~~any time a note ~~debentures~~holder ~~and~~cannot ~~the~~own ~~constructive~~more ~~issuance~~than 4.99% of the ~~37,200,000~~Company’s ~~shares~~outstanding of common stock. The conversion price is adjustable to match any additional issuances of ~~Tylerstone~~common ~~that~~stock at ~~remained~~prices ~~outstanding~~lower ~~for~~than nothe ~~consideration~~current conversion price.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2008 and 2007~~2009

(Unaudited)

~~Note~~The 3common stock into which the Series A Notes are convertible and the related warrants are subject to certain registration rights. ~~Acquisition~~ Per the registration rights agreement, the Company is obligated obtain the effectiveness of ~~MCC~~a registration statement, ~~Inc~~which has not occurred, and to keep the registration statement effective until all the registered shares of common stock are sold by the note holders. If the company fails to obtain effectiveness of the registration statement, the Company is required to pay partial liquidated damages of 1% per month of the aggregate purchase price paid by the Series A note holders, or $90,000 per month. Interest is charged on unpaid damages at the rate of 18% per annum. The Company recognized a registration payment liability at the date of the issuance of the Series A notes and has adjusted the liability to $73,110,307 at March 31, 2009, for estimated payments to be made under the registration rights agreement. The carrying value of the registration payment liability is adjusted to reflect the fair value of the registration payment liability at each balance sheet date.

OnUpon ~~June~~the ~~29,~~occurrence ~~2007,~~of ~~nCoat~~certain default or triggering events, the ~~Inc~~notes holders may demand redemption of the Series A and Series B notes., ~~completed~~The triggering events include failure to provide notice and pay the ~~acquisition~~related ofpartial ~~all~~liquidated damages to the ~~capital~~note ~~stock~~holders within one day of ~~MCC,~~ ~~Inc.~~the ~~("MCCI"),~~following ~~doing~~events: ~~business~~failure into file the registration ~~marketplace~~statement ~~under~~or obtain its effectiveness by the ~~brand~~required ofdates; ~~JET-HOT®~~failure ~~Coatings~~to respond to comments by the U.S. ~~MCCI~~Securities ~~provides~~and ~~high~~Exchange ~~performance~~Commission within ~~coatings~~15 days of ~~metal~~receipt ~~parts~~of ~~for~~those comments; suspension from trading or listing ~~industrial~~on ~~and~~a ~~personal~~market; ~~use.~~failure ~~The~~to ~~purchase~~convert ~~consideration~~shares ~~paid~~upon request; failure to ~~the~~qualify ~~MCCI~~new debt ~~stockholders~~as ~~consisted~~permitted debt under the terms of ~~$5,000,000~~the inSeries ~~cash~~A and ~~the~~Series ~~issuance~~B ofNotes; ~~1,333,333~~and ~~shares~~failure to make payments under the terms of ~~common~~the ~~stock~~promissory notes. ~~The~~Upon ~~common~~the occurrence ~~stock~~of ~~issued~~a ~~was~~triggering ~~placed~~event, ~~into~~the anholders ~~escrow to~~have bethe ~~available~~right to ~~compensate~~require the Company ~~pursuant~~to redeem their notes at an amount equal to the ~~indemnification obligations~~total of unpaid accrued interest, unpaid liquidated damages and the ~~MCCI~~face ~~stockholders~~amount asof ~~set~~the ~~forth~~notes inmultiplied by the ~~related~~greater ~~stock~~of ~~purchase~~(i) ~~agreement. The~~125% ~~escrow~~during ~~will~~the ~~terminate~~first on12 months of the ~~earlier~~term of the ~~date~~note onor 115% thereafter or ~~which~~(ii) upon the occurrence ~~escrow~~of ~~agent~~certain ~~receives~~of ~~instructions~~the tolisted ~~terminate~~triggering events, the ~~escrow~~closing ~~from~~market ~~all of~~price of the ~~shareholders~~Company’s ~~and~~common stock on the ~~Company,~~date orof the ~~eighteenth~~triggering ~~month~~event ~~anniversary~~divided by the closing market price on the first day of each month following the triggering event. The conversion price also decreases to the closing market price on the first day of each month following the ~~transaction~~triggering event.

~~The~~In ~~common~~December ~~stock~~2007, ~~issued~~the ~~was~~Company ~~valued~~entered atinto ~~$906,666,~~an oragreement with the Series A and Series B note holders whereby the Series A and Series B note holders agreed to waive certain triggering events in exchange for the modification of the conversion price to $0.6825 per share and for Company agreeing to pay partial liquidated damages to the note holders for triggering events occurring on or after February 29, ~~based~~2008. However, on February 29, 2008, the Company failed ~~market~~to ~~value~~obtain effectiveness of the ~~Company’s~~required ~~common~~registration ~~stock~~statement. On April 1, 2008, July 1, 2008 and on ~~June~~October 291, ~~2007~~2008, the Company failed to pay accrued interest to the Series A and B note holders. As ~~The~~a ~~total~~result, the Series ~~consideration~~A ~~paid~~and toB ~~acquire~~notes ~~MCCI~~became due on demand at a redemption premium as described above. At September 30, 2008, the carrying value of the Series A and B notes has been adjusted to $598,~~906~~995,~~666~~833 ~~was~~for ~~allocated~~the toincrease in the ~~assets~~redemption price. As of the date of this report, and as event subsequent to the end of the accounting ~~liabilities~~period ending September 30, 2008, there has been only one note holder that has given demand for the redemption of ~~MCCI~~its ~~based~~Series ~~upon~~A ~~their~~note. The ~~fair~~note ~~values~~was originally issued May 31, 2007, with the face amount of $1,500,000. The note holder has previously converted a portion of its note ($25,000) as reflected in the financial statements set forth herein. The ~~Company~~demand is infor the ~~process~~remaining balance of the note of $1,475,000 plus interest of ~~obtaining~~$232,183 ~~third-party~~multiplied ~~valuations~~by a 115% premium factor for a total demand of $1,963,209. As of the ~~intangible~~date ~~assets;~~of ~~thus~~this report, the demand ~~allocation~~had not been paid. As of the ~~purchase~~date ~~price~~of isthis ~~subject~~report, tono ~~refinement.~~other ~~The~~demand ~~estimated fair~~had ~~values~~been made by the remaining note holders for redemption of the ~~assets~~Series ~~acquired~~A and B Notes. At the ~~liabilities~~October ~~assumed~~1, on2008, conversion price of $0.015 per share, the ~~date~~Series A and B Notes are convertible into 6,601,388,889 shares of common stock. ~~acquisition~~However, ~~were~~there asare ~~follows:~~only 400,923,350 authorized, unissued shares of common stock available and, therefore, the notes payable cannot all be converted.

Current assets	$	717,917
Property and equipment		1,016,664
Intangible and other assets		5,408,245
Total assets acquired		7,142,826
Current liabilities		(714,239	)
Long-term liabilities		(521,921	)
Total liabilities assumed		(1,236,160	)
Net Assets Acquired	$	5,906,666

Unpaid accrued interest bears interest at 18% per annum. Under the terms of the Series A and B Notes, the unpaid accrued interest and the unpaid registration payment liability have also been increased by the redemption premium formula described above, which resulted in accrued interest on the Series A and B Notes of $ 52,394,069 and a registration payment liability $ 73,110,307 at March 31, 2009.

The estimated fair value of the intangible assets consists of the trade name of $1,866,135, proprietary technology of $1,762,897 and the customer base of $1,762,897. The trade name is not subject to amortization; the proprietary technology and the customer base have weighted-average estimated useful lives of seven and six years, respectively, over which they are being amortized.

On June 29, 2007, the Company entered into a consulting agreement with the former majority shareholder of MCCI whereby the Company has committed to pay the former majority shareholder consulting fees of $120,000 annually, performance bonuses equal to 2.5% of gross revenue from new customers, and to purchase, for up to $70,000, an automobile for the consultant. The term of the obligation for the consulting fees and the performance bonuses is through December 31, 2009, and will continue for successive one-year periods unless terminated by either party.

Note 4. Property and Equipment

	September 30,		December 31,
	2007		2006
Machinery and equipment	$	2,044,332	$	966,715
Computer and office equipment		123,916		247,791
Furniture and fixtures		39,007		39,007
Vehicles		158,182		27,701
Leasehold improvements		609,138		640,975
Total Property and Equipment		2,974,575		1,922,189
Less: Accumulated depreciation		549,224		272,698
Net Property and Equipment	$	2,425,351	$	1,649,491

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2008 and 2007~~2009

(Unaudited)

~~Note~~Notes ~~5. Intangible~~payable ~~Assets~~at March 31, 2009, and December 31, 2008, are summarized as follows:

	Original Weighted-Average		Gross Carrying			Accumulated Net		Carrying
		March 31,			December 31,
At September 30, 2007	Useful Life		Amount			Amortization		Amount
		2009			2008
Assets Not Subject to Amortization
6% $9,000,000 Series A convertible promissory notes; due on demand		$	513,494,412		$	218,215,000
Brand names and trademarks			$	2,374,137				$	2,374,137
6% $3,250,000 Series B convertible promissory notes; due on demand			185,441,176			78,812,500
Assets Subject to Amortization
Note payable, bearing interest at prime plus 1.0% (8.25% at December 31, 2007);
Non-compete and non-disclosure agreements	4.5 years			762,003		$	336,468		425,535
due March 2011			141,192			146,264
Certifications and licenses	10.0 years			508,002			139,700		368,302
Note payable, bearing interest at prime plus 1.0% (8.25% at December 31, 2007);
Customer base	5.4 years			2,561,186			459,182		2,102,004
payable on demand			280,364			280,364
Technology	7.6 years			2,234,613			157,304		2,077,309
Note payable; bearing interest at 8.35%, due November 7, 2007; in default
Trade secrets and formulas	10.0 years			943,432			188,688		754,744
Note payable to bank; secured by equipment; bearing interest at 8.75%:
Total Assets Subject to Amortization	5.6 years			7,009,236			1,281,342		5,727,894
payments due through 2010			13,121			14,670
Total Intangible Assets			$	9,383,373		$	1,281,342	$	8,102,031
Notes payable to a bank; secured by equipment; bearing interest at 6.75% to
7.75%; payments due through 2010
Notes payable, bearing interest at 5%; due September 1, 2007; in default			-			-
Note payable, bearing interest at 6%; payable on demand			-			-
Note payable to a bank; secured by equipment; bearing interest at 6.98%; payable in
monthly installments of $4,841 through February 2014			230,984			235,652
Notes payable; bearing interest at 10%; unsecured; due on demand			1,180,000			1,180,000
Total Notes Payable			700,781,249			298,884,450
Less: Current portion			700,630,927			298,734,128
Long-Term Notes Payable		$	150,322		$	150,322

At December 31, 2006	Original Weighted- Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Assets Not Subject to Amortization
Brand name and trademark		$	508,002			$	508,002
Assets Subject to Amortization
Non-compete and non-disclosure agreements	4.5 years		762,003	$	210,292		551,711
Certifications and licenses	10.0 years		508,002		101,600		406,402
Customer base	9.0 years		798,289		271,615		526,674
Technology	10.0 years		471,716		58,965		412,751
Trade secrets and formulas	10.0 years		943,432		117,930		825,502
Total Assets Subject to Amortization	6.9 years		3,483,442		760,402		2,723,040
Total Intangible Assets		$	3,991,444	$	760,402	$	3,231,042

The fair value of notes payable was determined based upon their short-term redemption requirements and based upon current market interest rates and totaled $700,781,249 at March 31, 2009. Future annual maturities of notes payable as of March 31, 2009, were as follows:

Years Ending December 31:
2009			1,295,932
2010			699,046,643
2011			72,919
2012			57,459
Thereafter			308,296
Total			700,781,249

Note 4. Derivative Warrant Liability

On March 31, 2009 the carrying value of the Series A and B promissory notes increased and their conversion prices decreased to a point that the Company does not have sufficient authorized, unissued shares of common stock to enable the conversion of the promissory notes and the exercise of outstanding warrants. Because the Company may be required to settle the outstanding warrants for cash, they became a derivative liability on March 31, 2008, and their fair value of $612,392 was reclassified from additional paid-in capital to a derivative liability.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~March~~September 3130, 2008 ~~and 2007~~

(Unaudited)

~~Note~~Due to 6decreases in the market value of the Company’s common stock, the fair value of the derivative warrant liability decreased to $120,348 at September 30, 2008, which resulted in the recognition of a gain on the derivative liability valuation of $19,703 during the three months ended September 30, 2008. ~~Notes~~ ~~Payable~~The fair value of the warrants at September 30, 2008, was determined using the Black-Scholes option pricing model with the following weighted-average assumptions: expected future volatility of 125%, risk-free interest rate of 2.8%, expected dividend yield of 0% and an expected life of 3.17 years. At September 30, 2008, there were 32,418,750 warrants outstanding that were exercisable at a weighted-average price of $0.92 per share. The weighted-average remaining contractual term was 3.17 years.

~~Revolving Credit~~Note ~~Loan Agreements – The Company had a $200,000 revolving credit loan agreement with a bank~~5. ~~The~~ Stock ~~related~~Compensation ~~promissory note accrued interest on the outstanding balance at the bank’s prime rate plus 1%. The balance of $195,720 was paid during the second quarter of 2007.~~Plan

~~Convertible~~On ~~Debentures–~~February ~~Through December 31~~2, ~~2006~~2007, the Company ~~borrowed~~adopted ~~$1,750,000 and~~a ~~through~~stock ~~February~~award ~~14,~~plan ~~2007,~~ (the ~~Company~~“Plan”) ~~borrowed~~and ~~an additional $500,000 from~~began ~~Tylerstone~~awarding ~~under~~shares ~~the terms~~ of acommon ~~$3,500,000~~stock ~~revolving~~and ~~line~~shares of ~~credit~~non-vested ~~agreement. The~~common ~~related~~stock ~~promissory~~to employees ~~note~~and ~~bore~~consultants ~~interest~~as oncompensation. ~~the~~The ~~outstanding~~non-vested ~~balance~~shares atvest ~~0.5%~~ over periods ~~prime,~~ranging ~~(8.75%~~from atimmediately ~~February~~upon ~~14,~~being ~~2007).~~issued ~~Upon~~to ~~the~~four ~~reorganization~~years. ofIf ~~nCoat~~an ~~into~~employee ~~Tylerstone~~terminates onemployment ~~February~~with ~~14, 2007,~~ the ~~amounts~~Company ~~due~~prior ~~under~~to the ~~revolving~~shares ~~credit~~vesting, ~~line~~the ~~with~~non-vested ~~Tylerstone~~portion ~~were~~of inthe ~~substance~~shares ~~converted~~are ~~into~~be ~~$2,250,000~~forfeited ofand ~~convertible debentures~~returned ~~payable~~ to ~~a third parties (~~the ~~“debenture holders”)~~Company. As Onof ~~May~~September 1430, ~~2007~~ 2008, ~~the~~employees ~~Company~~holding ~~issued an additional $250~~235,000 ofnon-vested ~~convertible~~shares ~~debenture under~~have ~~the~~terminated ~~same~~their ~~terms.~~employment ~~The~~with ~~convertible~~the ~~debentures~~Company ~~bore~~but ~~interest~~have atnot ~~prime~~forfeited ~~plus 0.5%~~ and returned ~~were~~those ~~due~~shares ~~from~~to ~~October~~the ~~23,~~Company. ~~2007~~The ~~through~~Company ~~April~~is 9,at ~~2008.~~risk ~~Principal~~that ~~and~~it ~~accrued interest~~may ~~under~~not obtain back the ~~debentures~~forfeited ~~was~~shares. ~~convertible~~Accordingly, ~~from~~ the ~~date~~Company ofhas ~~issuance,~~not ~~into common~~accounted ~~stock~~for atthose shares ~~$0.50~~as ~~per share~~forfeited.

~~Management~~Compensation ~~determined~~related ~~the~~to ~~fair value of~~ the ~~common~~shares ~~stock~~awarded onis ~~February 14, 2007~~ based on a third-party valuation of the Company’s common stock, an assessment of estimated future cash flows and the market value and discounted market value of the Company’s common stock for a short period of time after February 14, 2007. Based upon ~~management’s assessment of~~ the fair value of the ~~Company’s~~awards ~~common stock of $0.129 per share~~ on ~~February 14, 2007,~~ the ~~debenture holders did not receive a~~ ~~beneficial~~dates ~~conversion~~awarded ~~option.~~or ~~This~~modified ~~conclusion~~as isdetermined ~~based~~by on the ~~fair~~Black-Scholes ~~value of the~~option-pricing ~~common~~model ~~stock~~applied ~~into~~to ~~which~~awards ~~the~~expected ~~debentures~~to ~~are~~vest ~~convertible~~and ofrecognized ~~$580,500~~by ~~being~~the ~~less~~graded-vesting ~~than~~method ~~the~~applied ~~$2,250,000~~to ~~face~~awards ~~amount~~expected ofto ~~the convertible debentures~~vest. ~~The~~Compensation ~~$250,000~~expense ofrelated to ~~convertible~~non-vested ~~debenture~~shares ~~issued~~held onby ~~May~~terminated ~~14,~~employees ~~2007~~will ~~resulted~~be inreversed ~~that~~when ~~debenture~~and ~~holder~~if ~~receiving~~those ashares ~~beneficial~~are ~~conversion~~returned ~~option~~to ~~of $155,000;~~ the ~~resulting discount on the note payable was recognized as interest expense through August 24, 2007~~Company.

InA summary ~~connection~~of ~~with~~ the ~~issuance~~status of the ~~debentures, the~~ Company’s ~~granted~~nonvested ~~registration rights to the debenture holders, which required the Company to file a registration statement by April 15, 2007, registering the resale of the~~ shares ~~issuable~~ ~~upon conversion~~ of ~~the~~common ~~debentures~~stock ~~and~~as to use reasonable, commercial, best efforts to have the registration statement declared effective within 90 days thereafter. The debenture holders consented to waive this registration requirement provided that the shares issuable upon conversion were included in the next subsequent registration of ~~the~~March ~~Company’s shares~~31, ~~which obligation was~~ ~~fulfilled by the Company.~~2008:

Under the conversion terms of the convertible debentures, $2,000,000 of the convertible debentures and $67,752 of related accrued interest were converted into 4,135,503 shares of common stock at $0.50 per share during the second quarter of 2007. During the third quarter of 2007, the remaining $500,000 of the convertible debentures and $18,108 of related interest were converted into 1,036,215 shares of common stock at $0.50 per share. At September 30, 2007, none of the debentures remained outstanding.

				Weighted-Average
				Award-Date
Nonvested Shares of Common Stock	Shares			Fair Value
Award		13,309,090		$	0.144
Vested		(10,902,190	)	$	0.129
Forfeited		(402,000	)	$	0.129
Nonvested at December 31, 2008		2,004,900		$	0.139

~~Loans Payable –~~ As ~~part~~ of December a31, ~~facility lease agreement~~2008, ~~the~~there ~~Company~~was ~~financed leasehold improvements through the lessor. Loans of~~ $~~283~~100,~~203~~471 ~~and $230,000 were incurred and under the terms~~ of ~~the~~total ~~agreement~~unrecognized ~~the~~compensation ~~loans bear interest at 1% over prime,~~expense orrelated ~~8.75%~~to atnonvested ~~September~~share-based ~~30,~~compensation ~~2007. The~~arrangements ~~agreement~~granted ~~requires~~under the ~~Company to~~ ~~make~~Plan. ~~monthly~~That ~~payments,~~cost ~~plus~~is ~~interest,~~expected ~~through~~to ~~March~~be ~~2011. A~~recognized ~~balloon payment~~over ofa ~~$264,792~~weighted-average ~~was~~period ~~due on May~~ of 1~~, 2007~~.4 ~~Prior~~years tofrom ~~the~~December ~~due date of the balloon payment~~31, ~~the~~2008.There ~~Company~~were ~~and~~no ~~the~~additional ~~note~~vestitures ~~holder~~in ~~agreed to modify~~ the ~~repayment terms of~~ ~~the~~first ~~balloon~~quarter ~~payment to payment upon demand. All other terms~~ of ~~the notes remained the same~~2009.

~~From~~Note ~~March 30, 2007 through May 4, 2007 the Company borrowed $355,783 from a consultant to the Company and issued notes which were due on September 1, 2007 and bear interest at 5% per annum~~6. Common The note holder agreed to modify the repayment terms to payment upon demand. From August 31, 2007 through September 25, 2007, the Company borrowed $200,000 from an investor and issued notes which are due on demand and bear interest at 10% per annum.Stock

In January 2008, the Company issued 1,554,198 shares of its common stock as payment of interest on the Series A and B promissory notes payable. The shares were valued at $185,261, or $0.12 per share, based on the amount of accrued interest paid, which approximated the market value of the common stock on the date issued.

In August, 2008, the Company received a Notice of Conversion from one of the Holders of Notes, seeking to convert $25,000 into common shares at $.02 per share. The Company issued 1,250,000 as a result of such conversion.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2008 and 2007~~2009

(Unaudited)

~~At the~~Note ~~time the Company acquired MCCI there existed a $251,000 loan between MCCI and its majority shareholder~~7. ~~That~~ ~~loan~~Deferred ~~was~~Income ~~converted into a $151,000 promissory note; bearing interest at 6%; payable in monthly installments of $15,670 and 250,000 shares of the Company’s common stock.~~Taxes

~~Note and Warrant~~Deferred ~~Financing~~income ~~Agreement–~~taxes Onconsisted ~~September 28, 2005, nCoat, Inc. received $3,000,000~~ of ~~proceeds from~~ the issuance of a promissory note payable to a family trust along with warrants to purchase 3,740,000 shares of common stock for $170. Interest on the note accrued at 18% per annum and was payable in quarterly payments of $135,000 through September 30, 2006 when principal and unpaid accrued interest were due. Effective September 30, 2006, the parties agreed to extend the maturity date of the note and the payment of any accrued interest until March 31, 2007. The Company agreed to pay the family trust a fee of $200,000, due at the note’s maturity. The fee was recognized as interest expense on the date of the extension. The note was secured by 7,333,333 shares of common stock of nCoat, Inc. held by companies owned by officers and directors of nCoat, Inc. The family trust further extended the term for repayment of the note until such time as the Company raised additional financing and the Company agreed to increase the interest rate on this note to 36% per annum to compensate the holder for the extension. The $3,000,000 of principal on the promissory note, $477,286 of accrued interest and the $200,000 fee were paid on June 5, 2007.following:

The warrants were exercisable on the earlier of September 28, 2008, the date the Company closed an initial public offering of its common stock, or ten days preceding the date of a reorganization, merger or sale of substantially all of the assets of the Company and expired if not exercised on December 31, 2010. The warrants were exercised by the family trust immediately prior to the February 14, 2007, reorganization of nCoat into Tylerstone.

	March 31,			March 31,
	2009			2008
Deferred Tax Liabilities
Property and equipment	$	293,344		$	205,078
Intangible assets		1,146,574			1,146,574
Total Deferred Tax Liabilities		1,439,918			1,351,652
Deferred Tax Assets
Allowance for doubtful accounts		120,008			67,882
Accrued consulting obligation		-			193,100
Accrued PTO		210,477			83,718
Operating loss carryforwards		6,640,543			6,640,543
Total Deferred Tax Assets		6,971,028			6,985,243
Valuation Allowance		(5,531,110	)		(5,633,591	)
Net Deferred Tax Liability	$	-		$	-

Series A and B 6% Convertible Promissory Notes– From May 25, 2007 through June 18, 2007 (primarily on May 31, 2007), the Company issued $9,000,000 of Series A 6% convertible promissory notes (the “Series A Notes”) and warrants to purchase 22,500,000 shares of common stock exercisable at $1.00 per share through May 31, 2012. The Series A Notes are convertible into common stock at $0.40 per share through May 31, 2010, when the Series A Notes are due. Accrued interest is payable quarterly. From May 31, 2007 through July 10, 2007, the Company issued $3,250,000 of Series B 6% convertible promissory notes (the “Series B Notes”) and warrants to purchase 8,125,000 shares of common stock exercisable at $0.80 per share through May 31, 2010. The Series B Notes are convertible into common stock at $0.40 per share through May 31, 2010, when the Series B Notes are due. Accrued interest is payable quarterly. The Company issued the placement agent 1,793,750 warrants that are exercisable at $0.40 per share through May 31, 2012. The Series A and B private placement offerings included $800,000 of advances received from the note holders during March and April 2007 before the notes were issued. The Company received $11,318,936 of proceeds from the issuance of the Series A and Series B convertible notes and warrants, net of cash offering costs of $931,064.

The common stock into which the Series A Notes are convertible, the related warrants and the common stock issued upon conversion of the $2,500,000 convertible debentures described above are subject to certain registration rights. Per the registration rights agreement, the Company was required to file a registration statement within 45 calendar days of the first closing of $1,000,000 or more of the private placement offering of the Series A Notes, which filing obligation was met, and the Company is required to have the registration statement declared effective within 75 calendar days of the initial filing. After the registration statement is declared effective, the Company is required to keep the registration statement effective until all the registered shares of common stock are sold. In the event that the Company fails to accomplish any of these requirements, the Company will be required to pay partial liquidating damages of 1% per month of the aggregate purchase price paid by the Series A note holders, or $90,000 per month. If the Company fails to pay the prescribed damages within 7 days of the date payable, interest will be charged at a rate of 18% per annum. In accordance with FASB Staff Position (FSP) EITF 00-19-2, Accounting for Registration Payment Arrangements , and SFAS No. 5, Accounting for Contingencies , the registration payment liability has been adjusted to $450,000 at September 30, 2007 for estimated payments to be made under the registration rights agreement. The value of this registration payment liability will be adjusted to reflect the fair value of the liability at each balance sheet date until all related obligations have been met.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 and 2007

(Unaudited)

The Series A and Series B Notes become redeemable upon demand of the note holders upon the occurrence of certain default or triggering events. Upon a triggering event, the holders have a right to require the Company to redeem their notes at an amount equal to any accrued interest, accrued and unpaid liquidated damages plus the greater of (A) the conversion amount to be redeemed multiplied by 125% during the first 12 months of the term of the note or 115% thereafter, or (B) the conversion amount to be redeemed multiplied by the quotient of (i) the closing sale price at the time of the triggering event (or at the time of payment of the redemption price, if greater) divided by (ii) the conversion price. There are 14 triggering events in the Series A Notes and 13 triggering events in the Series B Notes. Among the major triggering events are failure provide notice and pay the related partial liquidated damages to the note holders within one day of the following events: failure to file the registration statement or obtain its effectiveness by the required dates, failure to respond to comments by the U.S. Securities and Exchange Commission within 15 days of receipt of those comments, suspension from trading or listing on a market, failure to convert shares upon request, failure to qualify new debt as permitted debt under the terms of the Series A and Series B Notes and failure to make payments under the terms of the promissory notes.

Conversion of the promissory notes is limited such that at any time a note holder cannot own more than 4.99% of the Company’s outstanding common stock. The conversion price is adjustable to match any additional issuances of common stock at prices lower than $0.40 per share or the effects of any stock splits or stock dividends.

The fair value of the warrants issued with the Series A Notes, as determined by the Black-Scholes option pricing model, was $12,113,496 using the following weighted-average assumptions: volatility of 87%; risk-free interest rate of 4.86%; expected life of 5 years and estimated dividend yield of 0%. The warrants issued with the Series B Notes were valued at $3,744,616 using the following weighted-average assumptions: volatility of 87%; risk-free interest rate of 4.86%; expected life of 3 years and estimated dividend yield of 0%. The placement agent warrants were valued at $998,108 using the following weighted-average assumptions: volatility of 87%; risk free interest rate of 4.86%; estimated life of 5 years and estimated dividend yield of 0%.

The value of the placement agent warrants issued and the cash offering costs were allocated on a pro-rata basis to the underlying instruments of the offering. The Company capitalized $975,786 of deferred loan costs. These costs were amortized to interest expense through August 24, 2007. The proceeds from issuance of the Series A and Series B Notes were allocated to the notes and the warrants based upon their relative fair values. This allocation resulted in allocating $5,236,985 to the beneficial conversion option, $5,656,056 to the warrants, $998,108 to the placement agent warrants, $270,000 to the registration payment liability and none to the notes payable. The resulting $12,250,000 discount to the Series A and Series B Notes and the deferred loan costs were amortized to interest expense August 24, 2007.

The Company filed a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) on July 12, 2007 registering the common stock into which the Series A Notes are convertible and the shares of common stock underlying the warrants and received comments on the registration statement from the SEC on August 8, 2007. The Company did not respond to those comments by August 23, 2007 as required by the terms of the Series A and Series B Notes; therefore a triggering event occurred on August 24, 2007 when the Company failed to notify the note holders of the failure to respond to the SEC’s comments or to pay the related $90,000 of liquidated damages to the Series A note holders. As a result, the Series A and Series B Notes became due upon demand at 125% of their original face amount or $15,312,500. During September 2007, the Company issued $200,000 of proceeds from issuing notes payable that were not permitted loans under the terms of the Series A and Series B Notes. The Company’s failures to notify the note holders of each of the issuances of the $200,000 of non-permitted notes payable were additional triggering events.

The Company did not obtain effectiveness of the registration statement on September 25, 2007 and failed to notify the note holders on September 26, 2007, which are an additional triggering event. As a result, the conversion price of the common stock was changed that date, under the terms of the Series A and Series B notes, to $0.36 per share. As a result, the Series A and Series B notes became convertible into 42,534,722 shares of common stock. No additional beneficial conversion option was recognized as a result of the modification of the conversion price since the beneficial conversion option is limited to the proceeds allocated to the notes payable and all of the proceeds were allocated to the original beneficial conversion option.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 and 2007

(Unaudited)

Notes payable at September 30, 2007 and December 31, 2006 are summarized as follows:

	September 30,		December 31,
	2007		2006
6% $11,250,000 Series A convertible promissory notes; due on demand	$	11,250,000	$	-
6% $4,062,500 Series B convertible promissory notes; due on demand		4,062,500		-
$200,000 Revolving credit line payable to a bank		-		195,720
Convertible debentures; bore interest at 0.5% over prime rate; converted in 2007		-		1,750,000
Note payable; paid June 5, 2007		-		3,000,000
Note payable, bearing interest at prime plus 1.0% (8.75% at September 30, 2007);due March 2011		182,198		230,000
Note payable, bearing interest at prime plus 1.0% (8.75% at September 30, 2007); payable on demand		280,364		283,203
Note payable; bearing interest at 8.35%, payments due through November 7, 2007		13,232		-
Notes payable to a bank; secured by equipment; bearing interest at 6.75% to 7.75%; payments due through 2010		14,581		-
Notes payable to a bank; secured by equipment; bearing interest at 6.75% to 7.75%; payments due through 2010		50,732		67,007
Notes payable, bearing interest at 5%; payable on demand		355,783		-
Note payable, bearing interest at 6%; payments due through May 2008		121,873		-
Note payable to a bank; secured by equipment; bearing interest at 6.98%; payable in monthly installments of $4,841 through February 2014		298,708		-
Notes payable; bearing interest at 10%; unsecured; due on demand		200,000		-
Total Notes Payable		16,829,971		5,525,930
Less: Current portion		16,394,398		5,305,021
Long-Term Notes Payable	$	435,573	$	220,909

The fair value of notes payable was determined based upon current market interest rates and was $16,829,971 at September 30, 2007. Future annual maturities of notes payable, exclusive of unamortized discounts, as of September 30, 2007, were as follows:

Years Ending December 31:
2007	$	16,226,888
2008		194,912
2009		119,803
2010		103,980
2011		69,240
Thereafter		115,148
Total	$	16,829,971

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 and 2007

(Unaudited)

Note 7. Stock Compensation Plan

On February 2, 2007, the Company adopted a stock award plan (the “Plan”) and began awarding shares of common stock and shares of nonvested common stock to employees and consultants as compensation. The nonvested shares vest over periods ranging from immediately upon being issued to four years. If an employee terminates employment with the Company prior to the shares vesting, the nonvested portion of the shares will be forfeited and returned to the Company. The nonvested shares are being held in an escrow by a third party. Compensation related to the shares awarded is based upon the fair value of the awards expected to vest, as determined by the Black-Scholes option pricing model and recognized by the graded-vesting method over the period each award vests. The Company recognized $1,222,044 of related compensation expense during the nine months ended September 30, 2007.

A summary of the status of the Company’s nonvested shares of common stock as of September 30, 2007 and changes during the nine months then ended were as follows:

				Weighted-Average
				Award-Date
Nonvested Shares of Common Stock	Shares			Fair Value
Award		13,309,090		$	0.144
Vested		(6,887,590	)	$	0.129
Forfeited		(25,000	)	$	0.129
Nonvested at March 31, 2008		6,396,500		$	0.160

As of March 31, 2008, there was $526,683 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.3 years from September 30, 2007. The total fair value of the shares that vested during the three months ended March 2008 was $982,107.

Note 8. Common Stock

In addition to shares of common stock issued as part of the stock compensation plan, on February 2, 2007, 1,130,910 shares of common stock were issued to a shareholder to whom the company had issued 5,666,668 shares of common stock for $1,500,000 in June 2006. The additional shares were to increase the number of shares issued for the original cash consideration and was recorded during February 2007 for no additional consideration. On February 14, 2007, 3,740,000 shares of common stock were issued upon the exercise of warrants for $170. On March 23, 2007, the Company issued 880,400 shares of common stock to an investment banker for its services in facilitating a debt or equity offering. The shares were valued at $113,572, or $0.129 per share, and were recognized as deferred loan costs. On August 17, 2007, $100,000 of principal on a note payable to the former majority shareholder of MCCI was converted into 250,000 shares of common stock.

On January 19, 2008 and January 29, 2008, the Company issued 1,554,198 shares of its common stock as payment of interest on the Series A Notes and Series B Notes.

Note 9. Income Taxes

Accrued income taxes at September 30, 2007 consisted of $108,975 of federal and state income taxes assumed in the acquisition of MCC, Inc. on June 29, 2007. There was no benefit or provision for income taxes during the three months ended March31, 2008. The net deferred income tax liability consisted of the following at March 31, 2008 and December 31, 2007:

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 and 2007

(Unaudited)

	September 30,			December 31,
	2007			2006
Deferred Tax Liabilities
Property and equipment	$	10,062		$	9,332
Intangible assets		3,129,004			1,205,179
Total Deferred Tax Liabilities		3,139,066			1,214,511
Deferred Tax Assets
Amortization of discount on notes payable		5,973,549			-
Allowance for doubtful accounts		71,647			36,001
Accrued consulting obligation		193,100			186,500
Operating loss carryforwards		5,945,691			3,001,627
Total Deferred Tax Assets		12,183,987			3,224,128
Valuation Allowance		(9,044,921	)		(2,009,617	)
Net Deferred Tax Liability	$	-		$	-

During the nine months ended September 30, 2007, the deferred tax valuation allowance increased by $9,117,667 from operations and decreased by $2,082,363 from the deferred tax effects of acquiring MCC, Inc.

Subsequent events

The following events took place subsequent to March 31, 2008.

2. At March 31, 2008, we were in technical breach of the Securities Purchase Agreement and the related Series A and B Convertible Notes and Registration Agreement (collectively the “Note Agreements”). This technical breach was due to (i) our failure to have the registration statement registering the shares underlying the warrants issued in connection with the Series A and Series B Notes effective by February 8, 2008, (ii) our failure to pay partial liquidated damages of $90,000, and (iii) our failure to pay interest accrued to March 31, 2008.

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 and 2007

(Unaudited)

Although no demand was made, the applicable provisions of the Note Agreements provide that in the event of a breach, within the first 12 months following closing, the holders are entitled to demand immediate redemption of all, or any portion of, the face value of the Series A Notes and Series B Notes, along with a 25% redemption premium and setting the note conversion price to the stock value on that date.

As a result, the full face value of the Notes and redemption premium are shown on our Balance Sheet as current liabilities at September 30, 2007. In the three month period ending September 30, 2007, we expensed all remaining debt discount related to the Series A and B Notes, the 25% redemption premium, all remaining deferred loan costs as well as providing for an additional $450,000 of potential liquidating damages until the registration of the underlying securities is completed. The note conversion price was reset to $0.36 per share.

At the commencement of the second fiscal quarter of 2008, additional interest, payable to the Series A and Series B note holders was not paid, putting the Company into technical breach of the financing documentation.

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

This management’s discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report on Form10-Q.

This management’s discussion and analysis, as well as other sections of this report on Form10-Q, may contain “forward-looking statements” that involve risks and uncertainties, including statements regarding our plans, future events, objectives, expectations, forecasts, or assumptions. Any statement that is not a statement of historical fact is a forward-looking statement, and in some cases, words such as “believe,” “estimate,” “ project,” “expect,” “intend,” “may,” “anticipate,” “plans,” “seeks,” and similar expressions identify forward-looking statements. These statements involve risks and uncertainties that could cause actual outcomes and results to differ materially from the anticipated outcomes or results, and undue reliance should not be placed on these statements. These risks and uncertainties include, but are not limited to uncertainties discussed in filings made with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The following Management’s discussion and Analysis of financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand nCoat, Inc., our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes thereto contained in Item 1 of this report. This overview summarizes MD&A, which includes the following sections:

Overview – a general description of our business and the markets in which we operate; our objective; our areas of focus; and challenges and risks of our business.

Significant Accounting Policies – a discussion of accounting policies that require critical judgments and estimates.

Results of Operations – an analysis of our Company’s consolidated results of operations for the three years presented in our consolidated financial statements. Except to the extent that differences among our operating segments are material to an understanding of our business as a whole, we present the discussion in the MD&A on a consolidated basis.

Liquidity and Capital Resources – an analysis of cash flows; off-balance sheet arrangements and aggregate contractual obligations; the impact of foregoing exchange; an overview of financial position; and the impact of inflation and changing prices.

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affect the financial condition and results of operations of the Company as a whole. This discussion should be read in conjunction with our financial statements as of ~~December~~September 3130, ~~2007~~2008, and the year then ended and the notes accompanying those financial statements.

Overview

nCoat, Inc., was incorporated as Tylerstone Ventures Corporation under the laws of the state of Delaware on September 24, 1998, with authorized common stock of 25,000,000 shares at a par value of $.001. Tylerstone was formed to develop a commercially profitable mining claim, including phases of data acquisition, aerial photograph interpretation, base map preparation, prospecting and report writing, as described in the appropriate periodic reports filed by the Company with the United State Securities and Exchange Commission (the “SEC or “Commission”).

In the fall of 2006, the Tylerstone management began discussions with the management of nCoat, Inc. These discussions and eventual negotiations considered the possible mutual interest between the parties for possible economic business opportunities because by becoming a wholly owned subsidiary of Tylerstone, our shareholders could get greater liquidity because Tylerstone’s common stock is publicly traded on the OTC Bulletin Board and Tylerstone would gain an operating subsidiary.

On February 3, 2007, Tylerstone entered into Share Exchange Agreement (the “Agreement”) with nCoat Auto (formerly known as nCoat, Inc.) for the purpose of acquiring all of the issued and outstanding shares of common stock of nCoat Auto, par value $0.001 per share (“nCoat Auto Common Stock”), in exchange for new shares of Tylerstone’s common stock, par value $0.0001 per share (“Company Common Stock”).

On February 14, 2007, the parties to the Agreement completed the final steps of that Agreement (the “Closing”) as contemplated by the Agreement. Pursuant to the terms of the Agreement, the Company acquired 11,554,545 shares of nCoat Auto’s Common Stock from all shareholders of nCoat Auto which represented 100.0% of the issued and outstanding shares of nCoat Auto’s Common Stock, in exchange for 2,542,000 pre-split shares of the Company’s Common Stock, which represented 57.75% of the issued and outstanding shares of Company Common Stock. As a part of the Agreement, our existing shareholders returned 750,000 outstanding pre-spilt shares of Company Common Stock for no consideration which shares were canceled. Within a few days of the formal closing, our forward 20:1 split of the Common Stock was recognized by NASDAQ.

In connection with the Closing, Tylerstone changed its name to nCoat, Inc. As used in this Report, the terms, “nCoat,” “Company,” and “Registrant” means nCoat, Inc., and its subsidiaries, taken as a whole, unless the context indicates otherwise. The historical financial information contained herein, prior to the Closing refers to the historical financial information of the nCoat Auto.

Background and History of nCoat Auto and its Operating Subsidiaries and Affiliates

We specialize in nanotechnology research, licensing, and the commercialization, distribution and application of nano-formulated, as well as traditional, surface coatings. Our specialized coatings are used by the automotive, diesel engine, trucking, recreational vehicle, motorcycle, aerospace and oil and gas industries for heat management, corrosion resistance, friction reduction, bond strength and appearance. Operations are headquartered in Whitsett, North Carolina, along with our largest production facility. In addition, the Company maintains satellite production facilities in Bluffdale, Utah; Tempe, Arizona; Oklahoma City, Oklahoma; Pascagoula, Mississippi; and Quakertown, Pennsylvania. As previously reported by us, we have historically had franchise agreements in France, New Zealand and Australia under which we have sold a minimal volume of its coatings to the franchisees. As of the date of this filing, the franchise agreements in Australia had been terminated either by the expiration of the original term of the franchise agreement or due to the closure of the franchisee’s business. We are currently evaluating restructuring the relationships with the operations in New Zealand and France.

nCoat Auto operated as an unincorporated association from September 25, 2004, until January 2005 when it was incorporated in Delaware under the name and style of NanoCoat, Inc. NanoCoat, Inc. was a development stage enterprise until it completed the acquisition of High Performance Coatings, Inc. (“HPC”) on September 30, 2005. In the fall of 2006, NanoCoat, Inc., in the interest of going forward with branding and other commercial marketing efforts, elected to change its name to nCoat, Inc. and then later to nCoat Automotive Group, Inc. to allow for the nCoat/Tylerstone merger. From September 30, 2005, the date of the HPC acquisition, nCoat has been a fully operating company.

In May 2006, nCoat Auto formed nTech, Inc. (“nTech”), a Delaware corporation that is a wholly owned subsidiary, designated to develop and hold proprietary intellectual property for the nCoat Auto group of companies. On June 29, 2007, we acquired all of the common stock of MCC, Inc. (Metallic Ceramic Coatings, Inc., or "MCCI"), a Pennsylvania corporation doing business under the brand name of Jet-Hot®.

Part of our business focuses on nanotechnology research, licensing, and the commercialization, distribution and application of nano-formulated, as well as traditional, surface coatings. Nanotechnology is the branch of science dealing with manipulating, building, and organizing material from extremely small particles, some at the molecular level. These diminutive particles can be combined in new, disruptive materials that have unique properties.

We have developed a business strategy to commercialize these new products, we have focused thus far on our specialized coatings that are used by the automotive, diesel engine, trucking recreational vehicle, motorcycle, aerospace and oil and gas industries for heat management, corrosion resistance, friction reduction, bond strength and appearance.

Since inception, we have focused our resources on the following areas:

1) Develop proprietary nanotechnology coatings formulations into commercially viable nano-formulated coatings and materials products.

2) Fund the acquisitions of profitable high performance coating (surface treatment) companies in a highly fragmented cottage industry and to provide operating and expansion capital for growth of those acquisitions.

3) Exploit the organic growth prospects in HPC, MCCI and in all future acquisitions. (See discussion below.)

4) Provide a corporate structure for the daily management of all companies, interests, and stock held by nCoat and its subsidiaries, including preparation of all accounting and finance, operations, information, marketing, sales, human resource, management and other systems and process to support transition and integration of an aggressive acquisition strategy.

5) Create competitive diversification by incorporating a “distributed” production model into the specialty coatings industry that is currently rare in the high performance coatings arena.

6) Create competitive diversification by incorporating a “licensing” model into our business plans. This licensing will allow us to provide other applicators with our coatings.

7) Operate nTech, HPC and MCCI and other future acquisitions to develop, integrate and sell commercially viable proprietary nano-formulated and traditional coatings products.

In anticipation of achieving growth through acquisitions and internal growth of existing operating entities, we added facilities, personnel, systems and processes to support business growth and acquisition activities. Details of these expenses are discussed below.

In September 2005, we acquired HPC, a 23-year-old Oklahoma company that has specialized in thermal barrier, corrosion resistant, lubritic and appearance high performance coatings for the motor sports and other industries. Building on these race car roots, we expanded HPC’s market-base beyond coating specialized engines and exhaust systems, to include corporate accounts of manufacturers of commercial trucks, recreational vehicles, defense applications, motorcycles, aerospace components, aviation parts, oil and gas industry suppliers, energy producers and other sophisticated users, while continuing to provide coatings and services to the after-market customer.

On June 29, 2007, we acquired MCCI, a primary competitor of HPC. Management believes that MCCI’s 26-year market share growth and customer base in automotive aftermarket and original equipment manufacturing (OEM) markets could effectively double the revenues of nCoat.

Our management and science advisors, together with HPC’s and MCCI’s management, have determined that many of the coatings produced and used by us could be reformulated and patented into nano-formulated coatings, creating more efficient and effective coatings than currently produced by the industry. nTech has developed trade secret formulations using nano-scale particles to enhance the performance of its coatings. Currently, we have applied for five patents on our newly nano-formulated coatings and processes which are unique and novel to the industry. With the acquisition of MCCI, nCoat’s customer-base of over 9,000 companies and individuals is presently being served by 200 employees.

Our principal business strategy includes the following components:

Acquisitions. We completed the acquisition, transition and integration of HPC and MCCI which have given us a base of operations and market presence. ~~During~~As capital, the economy ~~next~~and ~~three~~opportunities ~~years~~allow, we will identify additional specific target companies for acquisition. The high performance coating industry includes a number of “sub-niche” sectors, such as corrosion and thermal management coatings solar and alternative energy equipment manufacturing, thermal and corrosion management coatings for orbital and non-orbital aircraft and aircraft engine manufacturing, self-healing coatings for continuous corrosion management, hard-face coatings for the gas and oil and aerospace industries, piston manufacturing and protection, lubritic dry film coatings, anti-porosity/anti-oxidation ~~coating~~coatings, ~~for~~conformal coatings used to control ~~weapons~~corrosion and ~~military~~fugitive ~~applications~~dust on printed circuit boards and microchips, gas and oil tools, valves and pipelines, marine applications, ~~both~~for in engine parts and anti-fouling technologies to name just a few. The fragmentation of the industry provides us with a large number of small to medium size companies that we will prudently investigate to determine ~~our~~both ~~best~~synergies ~~additions~~and diversification with respect to our first two acquisitions.

Internal Organic Growth. We have already ~~taken~~introduced into the existing “book of business” of our two subsidiaries ~~and introduced into it~~ additional products, both as cross sales opportunities from the ~~sister~~ sister company’s product lines as well as the introduction of nano-formulated coatings. Operationally we have created common core formulations that represent the best-of-breed from all sources acquired or owned. Our emphasis on the after-market retail customer iscontinues to be one of the two major ~~sectors~~ segments of our business. In additional to the aftermarket sector, we ~~have already developed and are presently developing~~continue ~~additional~~to develop customers in the OEM ~~sector~~market segment. ~~One~~ A ofstrong ~~our~~source ~~strongest sources~~ for internal organic growth in the next three years is anthe continued emphasis by the manufacturers of diesel, gasoline and hybrid fueled engines to meet demanding environmental requirements imposed on their respective industries as we seek to improve emissions, fuel economy and safety. nCoat also continues to innovate new nano-products that meet the needs of our customers. nCoat is completing the development of a new anti-oxidation nano-coating to eliminate discoloration of chrome on vehicle exhaust systems. This product appears to be a unique innovation that to the knowledge of the Company is not offered by any other competitive company. nCoat expects these kinds of new products to create cross selling opportunities with existing customers and opportunities to expand the market base for product offerings to existing and new market segments. nCoat expects these product opportunities to add to the internal growth of customer base and revenues.

~~Distributed~~Licensed ~~Model~~Application and Joint Venture Development. ~~The~~We ~~“distributed”~~continue ~~business~~to ~~model~~work isto ~~our~~develop ~~establishment~~technology oflicensing and/or joint venture business agreements to establish on-site coatings application as part of the assembly-line process within the manufacturing and/or assembly process of a large customer. WenCoat ~~have already~~current ~~undertaken~~has ~~this~~two ~~approach~~OEM customers ~~with~~employing ~~one~~a oflicensing ~~our~~model ~~OEM customers~~ and ~~are~~continues ~~presently in~~to ~~discussion~~have discussions with other ~~others~~prospects. The savings on handling, shipping, inventory, logistics management and other similar expenses that comes from having the on-site ~~“plant”~~process is the ~~main~~principle ~~element~~benefit ~~of interest~~ for our larger ~~customers. We~~ ~~are presently in discussion with other~~ customers ~~to increase the awareness of the benefits of this approach~~.

Licensing Intellectual Property. ~~Within~~We ~~the~~continue ~~next twelve months, we intend~~ to enter into protective “field of use” licensing with ~~some of the~~ manufacturers that ~~may be~~are tier-one suppliers of large OEM companies or who deploy a ~~distributed production~~licensed application or joint venture model as described above. However, unlike the ~~distributed~~licensed application and/or joint venture model where application expertise and management control are inherent elements of the model, our “field of use” license agreements supply proprietary coatings to third parties already applying coating at their plants. The license agreements will be limited to targeted applications and industries where nCoat is not likely to engage in application services in the future and are structured as ~~joint~~ joint ventures to avoid creating competition in our own current market space.

Strengthen nTech's research and development efforts. We have entered into a series of discussions with outside research and development groups, including technology transfer offices of universities, private laboratories and other small start-up technology companies for the express purpose of continuing to strengthen and exploit our research and development capacities. We expect to formalize these discussions prior to the end of the fourth quarter of this year. All of nTech’s research activities are focused on projects that can show commercialization within three to six months, rather than long term R&D projects. Many research projects are driven by direct requests from customers seeking immediate solutions to present critical problems.14

Strengthen nTech's research and development efforts. On January 15, 2008, nCoat announced that North Carolina Agricultural and Technical State University (NC A&T) in Greensboro, North Carolina, and nCoat Inc. had established a technical collaboration agreement for characterization and development of nanotechnology based materials and industrial coatings. The Memorandum of Understanding (“MOU”) was signed December 20th, 2007 with the Division of Research and Economic Development at the university’s campus in Greensboro, North Carolina. Under the MOU, nCoat collaborates with NC A&T’s Center for Advanced Materials and Smart Structures (CAMSS) in areas of advanced composites, carbon nanotubes, nano enhanced slurry coatings and metallic degradation from extreme thermal and chemical environments. CAMSS has a track record in nano-science based advanced materials as applied to thin film research, nano-composites, tribological and environmental coatings.

CAMSS is an extensively equipped and staffed materials research facility located on the campus of NC A&T in Greensboro a few miles from nCoat’s location in Whitsett. CAMSS is a NC A&T-wide umbrella center receiving support from the National Science Foundation (Center for Research Excellence in Science and Technology), Department of Energy, Department of Defense (Center for Nanoscience and Nanomaterials), Air Force, and many industries. The center has extensive nano characterization equipment including recent multiple innovations in atomic and electron scanning microscopy and optical technologies. NC A&T has been recognized as one of the leading nano materials research and development centers in the United States.

The agreement outlines joint efforts between nCoat and NC A&T to identify, characterize, develop and commercialize new nano technology enhancements for functional coatings and materials with applications in aerospace, medical, energy, automotive, industrial, textile, advance composites, diesel engine applications and other industries.

Among other activities, the MOU is intended to establish a framework for conceptualization and implementation of R&D projects with subsequent commercialization. The agreement outlines governance of jointly and separately developed intellectual property and potential patent alliances for inventions. The agreement is also designed to establish joint revenues through technology licensing for commercial applications.

Some of the initial collaborative commercialization activities will be in the nano-structured surface engineered systems to improve thermal barrier, corrosion, tribological properties, biocompatibility and creating surface technologies that create a cleaner environment. The MOU also allows nCoat to collaborate with CAMSS on testing, prototyping and development of materials specific to enhancing nCoat industry needs.

This agreement and others under discussion with outside research and development groups, including technology transfer offices of universities, private laboratories and other small start-up technology companies are designed to continue to strengthen and exploit our research and development capacities while reducing R&D costs. All of nTech’s research activities are focused on projects that can show commercialization within three to six months, rather than long term R&D projects. Many research projects are driven by direct requests from customers seeking immediate solutions to immediate critical problems.

Acquisitions

Management believes that there is a strategic acquisition ~~opportunity~~opportunities resulting from the market dynamics of the high performance coatings markets. Acquisitions of HPC and Jet-Hot have further validated our strategic research. We expect to prudently search for, complete due diligence on and acquire other coatings companies ~~that~~in the future as allowed by available capital, cooperative economic conditions, internal financial conditions favorable to acquiring, and the ability of management to negotiate structures and valuation agreements favorable shareholder value. Key considerations for acquisitions include (i) have a customer base that includes enterprise level customers in a mature market, (ii) enjoy strong and stable market presence in our targeted primary markets, (iii) are profitable, (iv) have a brand presence similar to HPC, and Jet-Hot, and (v) have an existing product mix whose performance and functionality can be significantly improved by the integration of nanotechnology know-how.

Acquisition of Jet-Hot

With respect to the acquisition of Jet-Hot, we ~~believe~~have realized key synergies ~~to our business~~which ~~plan~~ include:

1. Jet-Hot ~~has~~had a plant in Arizona as ~~does~~did HPC. The plants ~~are~~were about 10 miles apart. WeThese ~~expect~~were toconsolidated ~~consolidate~~into ~~those~~a ~~plants~~single ~~prior to the end of the 4th quarter 2007~~location.

212. Jet-Hot plants are built for high through-put and packaging of individual aftermarket production. HPC plants are built for high volume of OEM parts production. Key strengths of each company have be used to create best-of-breed know-how at all operating plants.

23. ~~Jet-Hot~~Two ~~plants~~corporate ~~are~~headquarters ~~built~~existed. ~~for~~The ~~high through~~Jet-~~put~~Hot ~~and~~accounting, ~~packaging~~human ~~of individual~~resources, ~~aftermarket~~legal, ~~production.~~purchasing, ~~HPC~~sales ~~plants~~and ~~are~~marketing, ~~built~~R&D ~~for~~and ~~high~~company ~~volume~~management ofwere consolidated ~~OEM~~into ~~parts production~~our North Carolina headquarter.

34. ~~Two~~HPC ~~corporate~~and ~~headquarters~~JET-HOT ~~exist. We expect to consolidate accounting, human resources, legal, purchasing,~~ sales and marketing, ~~R&D~~groups ~~and~~were ~~company management. We~~consolidated ~~expect~~for ~~to consolidate the administration to the North~~maximum ~~Carolina~~production ~~headquarters~~and ~~prior~~efficiency, toincluding ~~the~~advertising ~~end of the 4th quarter of 2007~~budgets.

45. Jet-Hot ~~HPC~~R&D and ~~JET-HOT~~technical ~~sales~~services ~~and~~were ~~marketing groups will be~~ consolidated to nTech, for ~~maximum~~efficiency ~~production~~ and ~~efficiency,~~intellectual ~~including~~property ~~advertising budgets prior to the end of the 4th quarter of 2007~~synergies.

56. We ~~expect~~HPC toand ~~consolidate~~JET-HOT ~~R&D~~sales ~~and~~prospects ~~technical~~include ~~services~~many ~~to nTech~~of the same names, ~~for~~including ~~efficiency~~several ~~and~~where ~~intellectual~~the ~~synergies~~two ~~prior~~companies toare the ~~end~~only oftwo competitors for the ~~4th~~account. This ~~quarter~~list was sorted into HPC and MCCI responsibilities, creating a ofnon-competing ~~2007~~sales effort.

67. ~~HPC~~We ~~and~~have ~~JET-HOT~~acquired ~~sales~~sufficient ~~prospects~~market ~~include~~and ~~many~~operational ofexperience ~~the~~to ~~same~~realize ~~names,~~that ~~including~~a ~~several~~single ~~where~~coating ~~the~~entity ~~two~~has ~~companies~~a ~~are~~competitive ~~the~~disadvantage ~~only~~in ~~two~~attempting ~~competitors~~to ~~for~~create high ~~the~~volume ~~account.~~productions ~~We will~~of ~~sort~~both ~~this~~aftermarket ~~list~~parts ~~into~~and ~~HPC~~OEM ~~and~~parts. The addition of MCCI ~~responsibilities~~allows ~~and~~us to create ~~a non-competing~~focused ~~sales~~operations ~~effort~~for ~~before~~each ~~the end~~ of ~~the~~our ~~4th quarter~~major ofmarket ~~2007~~sectors.

78. WeCompetition ~~have~~between ~~acquired~~MCCI ~~sufficient market~~ and ~~operational~~HPC ~~experience~~for tostand-alone ~~realize~~coatings ~~that~~sales a(no applications ~~single~~services) ~~coating entity~~ has abeen ~~competitive~~eliminated ~~disadvantage~~and inwe ~~attempting~~are tooffering ~~create high~~“best ~~volume productions~~ of ~~both~~breed” ~~aftermarket~~coating ~~parts and OEM parts. The~~from ~~addition~~each ofcompany ~~MCCI allows us~~ to ~~create focused plants for each of our major market sectors~~customers.

89. JET-HOT ~~Competition~~has ~~between~~more ~~MCCI~~thermal ~~and~~barrier customers than HPC. ~~for~~HPC ~~stand-alone~~has more corrosion resistance and lubritic coatings ~~sales~~customers ~~(no~~than ~~applications services)~~JET-HOT. ~~will~~Cross beselling ~~eliminated~~now ~~and~~occurs wein ~~will~~each company’s ~~carry~~customer ~~one~~base ~~“best~~to ofattempt ~~breed”~~to ~~coating~~raise ~~from~~same-customer revenue. In addition, ~~each~~JET-HOT ~~area~~did innot ~~which~~sell weinternal ~~have~~engine ~~needs~~coatings. We ~~expect~~Their toproduct ~~complete~~line ~~this~~was ~~portion~~for ofcoatings ~~the~~on ~~integration~~external ~~before~~parts ~~the~~only. ~~end~~HPC ofinternal ~~the~~engine ~~4th~~coatings ~~quarter~~are now offered to all of ~~2007~~JET-HOT’s approximate 9000 annual individual aftermarket customers.

~~9. JET-HOT has~~Company ~~more thermal barrier customers than HPC. HPC has more corrosion resistance~~contact and lubritic coatings customers than JET-HOT. Cross selling can occur to each company’s customer base to raise same-customer revenue. In addition, JET-HOT does not currently sell internal engine coatings. Their product line is for coatings on external parts only. HPC internal engine coatings can now be offered to all of JET-HOT’s approximate 9000 annual individual aftermarket customers.information

Our headquarters’ address is 7237 Pace Drive, P.O. Box 38, Whitsett, NC 27377, and our phone number is (336) 447-2000.

Results of Operations

Performance in First ~~Quarter~~three Months of ~~2008~~2009 Compared to First ~~Quarter~~Three ofMonths ~~2007~~of 2008

Performance Overview

The ~~quarter~~comparative revenue for the three months ending March 31, 2008, to ~~quarter~~March ~~increase~~31, 2009, inshows ~~revenue~~a decrease of ~~approximately~~ $1485,941 or 16.7%. Much ~~million~~of ~~was~~this reduction is attributable ~~both~~to aftermarket sales. Aftermarket sales began to ~~the~~experience declines ~~June~~in 29August, ~~2007~~2008 ~~acquisition~~as ofconsumer ~~MCCI~~confidence plummeted and ~~the~~uncertain ~~increase in~~and ~~HPC~~negative ~~revenues. The~~economic ~~negative~~conditions ~~revenue~~began to impact ~~felt~~consumer byspending. ~~the~~Quarter ~~Company~~over quarter aftermarket sales experienced 60% reduction in ~~2007~~the fourth quarter of ~~from~~2008 as economic conditions and consumer uncertainty worsened. In the ~~introduction~~first quarter of a2009, ~~new~~aftermarket ~~engine~~sales ~~platform~~were bydown quarter over quarter, but recovered a ~~number~~significant portion of ~~nCoat’s~~the ~~customers has~~reduction ~~stabilized~~in the previous quarter. Additionally, OEM ~~however~~sales ~~there~~have isbeen annegatively ~~overall~~impacted ~~impact~~by reductions in ~~truck~~demand ~~sales~~with ~~relating~~diesel engine tomanufacturers. The weakness in this sector is may continue into the ~~higher~~fall. One ~~price~~media ofsource ~~fuel~~has ~~and~~cited ~~its~~engine ~~impact~~build ~~directly~~rates onas being down 60% over prior year, which was already well below ’07 levels. Revenues for the ~~operations~~quarter benifited from $500,000 credit resulting from cancellation of ~~large~~liability associated with Jeffry Homes case which ~~fleet~~was ~~owners~~settled in January of this year.

~~Cost~~ Beginning in 2007, our diesel engine manufacturing customers were required to introduce new engine platforms to meet new Environmental Protection Agency (EPA) requirements to lower harmful particulates in engine emissions in order to comply with Federal clean air standards. nCoat sells and applies corrosion resistant coatings created from that the use of ~~Sales~~new technology that aides diesel emissions systems to meet these new standards. The standards affected those engine platforms commencing in 2007 and the complete 2007 year was a period of “wait and see” as the new engineering was road-proven prior to the acceptance by the market. The downturn of active new unit purchases was further affected by the dramatic increase in fuel prices, followed on by the recession. Additionally, the national economic downturn and severe limitations on corporate credit resources beginning in the fall of 2008 continued the limitations of unit sales. Until economic activity shows signs of rebounding, and liquidity returns to the financial markets, transportation companies will tend to defer capital expenditures regarding rolling stock. Once markets begin to thaw a combination of aging fleets, increasing EPA requirements, and potential government incentives will ultimately produce a surge of production to relieve this demand. Our earliest expectation would be that this may be in the fourth quarter of 2009, but potentially this weakness will continue into 2010.

Cost of ~~sales as a percentage~~ of sales decreased from 106% in the first quarter of 2006 to 64% for the quarter ended March 31, 2008. With the acquisition of MCCI, we have increased the percentage of our business related to after market products, which typically have a higher margin than our OEM products.Sales

~~General~~Cost of sales was $1,141,793 for the first three months of 2009, a reduction of 39% from the same period last year. The company continues to realize efficiencies stemming from closing Mississippi and ~~Administrative~~Utah plant ~~Expenses~~locations. Additionally we continue to improve processes and reduce variable cost and waste through our lean manufacturing program and Six-Sigma management training.

General and ~~administrative~~Administrative expenses for the quarter ended March 31, 200 decreased by approximately $580,000 and decreased as a percentage of sales from 176% to 55% for the same period in 2007. One of the strongest contributors to this reduction was that the 2007 general and administrative expenses included costs related to our commencement as a public company and the associated costs.Expenses

22General and administrative expenses for the three months ended March 31, 2009, decreased by approximately $538,000 or 33%. Management has instituted a number of steps designed to reduce these expenses including:

~~Sales~~1) Closing Mississippi and ~~Marketing~~Utah ~~Expense~~plant locations, relocating their capacity to other existing facilities.

~~Sales and~~2) Increasing ~~marketing expense for~~ the ~~three~~effectiveness ~~months ended March 31, 2008, decreased by approximately $93,000 and decreased to 10%~~ of ~~sales~~communications ~~compared to 30% for the same period in 2007. Management has restructured the marketing~~ and ~~sales group,~~reducing ~~consolidated the MCCI sales to North Carolina and revamped its commission~~unnecessary ~~structures to allow for more effective sales efforts~~travel.

~~Interest~~3) Realigning ~~Expense~~upper management positions to more closely track the size and present revenues of the Company.

~~The stabilization of the interest expense reflects the used of a portion of the finaincing raised in 2007 to reduce the high-rate interest the Company was incurring in 2007.~~17

~~Earnings~~Sales ~~per~~and ~~Share.~~Marketing Expense

AsSales aand ~~result~~marketing ofexpense for the ~~share~~three ~~exchange~~months ~~transaction~~ended ~~discussed~~March in31, ~~the filing~~2009, ~~exercise~~decreased ofby ~~warrants~~approximately $128,000 ~~conversion~~or of45% ~~debt~~compared to the ~~number~~same ofperiod ~~outstanding~~in 2008. Management ~~shares~~has ~~have~~restructured ~~increased~~the ~~to 96~~marketing and sales group,~~650,451~~ revamped commission structure and ~~the~~reduced ~~weighted~~print ~~average~~advertising ~~shares~~expense. However, management believes some expense reductions have ~~increased~~impacted ~~from~~aftermarket ~~33,660,000~~sales ~~for~~and that that further reductions to advertising and direct marketing and sales efforts will adversely impact both aftermarket and OEM sales efforts and thereby revenues and the ~~three~~overall ~~months~~financial ~~ended~~condition ~~September~~of ~~30,~~the ~~2006~~Company. toManagement believes ~~89,496,127~~that atsome ~~September~~increase ~~30,~~in marketing and sales expenditures will be ~~2007~~necessary to sustain sales and customer services.

~~The~~Interest ~~Company incurred losses of $18,253,678 and $2,462,397 during the three month periods ended September 30, 2007, and September 30, 2006, respectively.~~Expense

Management’s greatest concern remains that all of the significant positive changes that have been made to reach operating profitability have been overshadowed by the great impact seen in our financial reports of the interest expense which has been attributed to the contractual redemption premium computations. We are in technical default under the terms of the Series A and Series B Promissory Notes and hence are subject to the premium computed on a redemption right granted to the holders of the Notes. As of the date of this report, and as an event subsequent to the end of the accounting period ending September 30, 2008, management has received demand from only one note holder for the redemption of its Series A note. The note was originally issued May 31, 2007 with the face amount of $1,500,000. The note holder has previously converted a portion of its note ($25,000) as reflected in the financial statements set forth herein. The demand is for the remaining balance of the note of $1,475,000 plus interest of $232,183 multiplied by a 115% premium factor for a total demand of $1,963,209. As of the date hereof, the demand has not been paid. No other demand has been made by the remaining note holders for redemption of the Series A and B Notes. We have had no indication from the other Note holders of demand, or other negative impacts and are working to complete further negotiations with them in order to resturcture the triggering events which have lead to the accounting entries.

Earnings per Share

As a result of the share exchange transaction discussed in the overview section above, exercise of warrants and conversion of debt, the number of outstanding shares increased to 102,108,606 as of December 31, 2008. For the three month period ended March 31, 2009 there was a loss per share of 4.76.

Financial Statements, One-Time Charges and Capital Expenditures

WeCost ~~continued~~reduction toactivities ~~feel~~have ~~the~~been ~~effects~~underway ofsince ~~and~~funding ~~experience~~failed ~~higher costs related to~~in ~~preparing for accelerated growth through acquisitions and organic internal growth of existing operating entities~~2007. We Inhave ~~2006,~~included wereductions ~~added~~in ~~facilities,~~ personnel, ~~systems~~ ~~and~~consolidation ~~processes~~of facilities ~~to support business growth~~ and ~~acquisition~~emphasis ~~activities. These expenditures we discussed in the Company’s current report~~ on ~~Form~~lean 8Kmanufacturing ~~filed on May 18, 2007~~practices. ~~Areas where expenditures and one-time expenses~~Our ~~impacted~~resulting ~~the~~operational ~~first~~savings ~~nine~~have ~~months~~been ~~of 2007 were:~~encouraging.

1. Facilities – Since the first quarter of last year, facilities have been shut down in Mississippi and Utah. The capacity was shifted to other existing facilities, reducing our overhead and improving our labor productivity.

~~a. We~~Our plans ~~incurred~~call ~~additional~~for ~~expenses~~a ~~related~~second toOEM ~~the~~production ~~opening~~line ain ~~facility~~2009 ~~closer~~at toa ~~our customer~~cost ~~base~~of inapproximately $250,000 ~~North~~for ~~Carolina,~~its ~~tooling~~installation. Most ~~and~~of ~~prototyping~~this ~~for~~cost ~~new~~will ~~accounts,~~be for ~~aftermarket~~installation ~~finishing~~of existing equipment, ~~staging~~which ~~and~~has ~~cleaning~~been ~~equipment~~relocated ~~were~~due to the shutdown ~~added~~of the Mississippi and Utah plant locations.

b2. We Personnel ~~transferred~~- ~~additional~~The ~~production~~Company ofhas ~~high~~reduced ~~volume~~the “Hworkforce ~~Series”~~from ~~and~~over “S200 ~~Series”~~employees ~~OEM~~in July, 2007 to ~~accounts~~approximately 116 employees. This decrease comes from ~~the~~operating plants ~~HPC~~more ~~Utah~~efficiently ~~facility~~and toreducing the ~~North~~number ~~Carolina~~of ~~facility~~plant locations. Additionally ~~HPC~~the first quarter of last year included some ~~continued~~management topositions ~~retool~~which ~~the~~presumed ~~Utah~~full ~~facility~~funding toof ~~meet~~our ~~production~~investments ~~requirements~~and subsequent ~~for~~growth. The ~~high~~current management staff level is in line with ~~volume~~existing ~~“E-Series”~~business levels. We have focused on completion of Standard Operating Procedure documentation, preparation of information systems, accounting, human resource, production, ~~for~~communications, ~~new~~mixing ~~customers~~and inblending, strategic ~~the~~finance ~~diesel~~and ~~engine~~other ~~trucking~~systems to accommodate rapid growth from internal ~~industry~~and acquisition growth.

23. ~~Headquarters~~Research ~~Relocation~~and Development – Our expenditures for research and development were $79,709 for the three months ended March 31, 2009. These numbers were not broken out specifically in the first quarter of last year, however our total expenditures for the 2008 year as shown on our annual report totaled $376,165.

a4. ~~Corporate~~ Financing ~~headquarters~~- ~~was~~Expenses ~~moved~~in ~~from~~the ~~Utah~~first tothree ~~North~~months ~~Carolina This~~of ~~relocation began~~2008 inshow ~~2006~~Redemption ~~and~~premium ~~has~~interest expense ~~continued~~of ~~through 2007~~$486,181,192. This ~~Key~~is ~~employees~~the ~~have~~current ~~been~~calculation ~~relocated~~for the topenalty ~~North~~associated ~~Carolina~~with ~~and~~the ~~new~~default ~~offices~~on ~~were~~the ~~established~~A atand ~~the~~B ~~North~~notes ~~Carolina~~discussed at length ~~production~~elsewhere ~~facilities~~in this report.

~~3. Personnel~~19

a. The Company hired personnel in 2006 to ramp production, prepare for acquisition, transition and integration and to prepare for registration with the Securities and Exchange Commission. We have focused on completion of Standard Operating Procedure documentation, preparation of information systems, accounting, human resource, production, communications, mixing and blending, strategic finance and other systems to accommodate rapid growth from internal and acquisition growth.

4. Public Company Preparation

a. In the first quarter of 2007 one-time expenses were incurred in connection with preparation for merger with a publicly traded entity. Additional expenses were taken to close the shell acquisition transaction and affect the merger, prepare for application for public trading, meet SEC requirements, hire trading support entities and launce the public trading of the newly acquired shell. Expenses include:

i. Legal;

ii. Accounting, review and audit;

iii. Contracts with transfer agent;

iv. Printing and delivery of original stock certificates;

v. Retention and compensation of investment banking firm; and

vi. Public filings.

5. Research and Development

a. In 2006, research and development expenses nearly double the expected future research and development burden. Over 20% of 2006 revenue was spent to complete initial formulations of nano-formulated coatings, complete testing and commercialize the coatings with multiple customers. Research and Development in 2007 will be focused on further develop of new coatings, exploring the viability of exclusively licensing non proprietary coatings, prototyping and testing new coatings for customer parts and exploring new patents for further coating development

6. Non-recurring Marketing and Sales Costs

a. Marketing and sales set-up costs were realized in 2006 to establish systems and process to capture and track data and develop collateral materials and an internet presence for business development. Expenses in 2007 include development of sample materials demonstrating the efficacy of nCoat proprietary coatings, documentation supporting rapid account sigh-up and terms of business and market research to target key prospects.

7. Financing

a. The Company realized one-time expenses in 2006 for financing the purchase of HPC. Amortization expenses and note extension fees were included in interest expenses. Expenses in 2007 include fees relating to engaging advisors to assist the Company in future financings and expenses related to creating the strategic relationships necessary to successfully execute the business plan.

Liquidity and Capital Resources

nCoat is a company with limited operating history and experience upon which to base an evaluation of its performance. In September of 2005, we acquired High Performance Coatings, Inc. (“HPC”), an operational coatings company, which was responsible for the majority of our consolidated revenues. In 2006, we formed an intellectual property and development entity, nTech, Inc. (“nTech”), and in June 2007, we acquired all of the common stock of Metallic Ceramic Coatings, Inc. (“MCCI”), a primary competitor of HPC with 26 years of coatings experience and historical revenues similar to HPC.

On April 13, 2007, we converted $2,000,000 of convertible debentures and $67,752 of accrued interest into 4,135,503 shares of our common stock at $0.50 per share. The remaining $500,000 of convertible debentures, along with accrued interest of $18,107, was converted to 1,036,~~215shares~~215 shares of common stock at $0.50 per share on August 24, 2007.

From May 25, 2007, through July 9, 2007, we issued $9,000,000 of Series A 6% convertible promissory notes (the “Series A Notes”) and warrants to purchase 22,500,000 shares of common stock, exercisable at $1.00 per share through May 31, 2012. The Series A Notes are convertible into common stock at $0.40 per share through May 31, 2010 when the Series A Notes are due. On May 31, 2007, the Company issued $3,250,000 of Series B 6% convertible promissory notes (the “Series B Notes”) and warrants to purchase 8,125,000 shares of common stock at $0.80 per share through May 31, 2010. The Series B Notes are convertible into common stock at $0.40 per share through May 31, 2010 when the Series B Notes are due. The Series A and B private placement offerings included the conversion of $800,000 of advances from investors of which $700,000 had been received prior to March 31, 2007. The Company received $10,618,916 of proceeds from the issuance of the Series A and Series B convertible notes, net of the $700,000 of advances previously recognized and net of cash offering costs of $931,064.

24In the final stages of the offering, after we had closed on the purchase of MCCI, a subscribed investor did not fund its portion of offering. Our intended use of proceeds included retirement of debt and related accrued interest of $3,677,286, $5,000,000 for the acquisition of MCCI, payment of significant pre-offering liabilities and establishing a working capital reserve. The retirement of pre-offering liabilities and the working capital portion of the offering did not get raised prior to our contractual obligation to close the offering. This deficiency of the expected $6,500,000 in funding, combined with the seasonal lull in aftermarket and OEM revenues, caused us to experience a significant liquidity crisis. A number of our vendors turned our account over to collection agencies and at December 31, 2008, we had accounts payable in excess of $2.0 million over 120 days past due.

~~In the~~At ~~final~~December ~~stages~~31, 2008 we are in technical breech of the ~~offering,~~Securities ~~after~~Purchase Agreement weand ~~had~~the ~~closed~~related onSeries ~~the~~A ~~purchase~~and ofB ~~MCCI,~~Convertible aNotes and Registration ~~subscribed~~Agreement ~~investor~~(collectively ~~did~~the ~~not~~“Note ~~fund~~Agreement”). ~~its~~This ~~portion~~technical ofbreech ~~offering. Our~~is ~~intended~~due ~~use~~to ofour ~~proceeds~~failure ~~included~~to ~~retirement~~pay ofpartial ~~debt~~liquidating damages and ~~related~~failure ~~accrued~~to pay interest ofnCoat ~~$3,677,286,~~is ~~$5,000,000~~attempting ~~for~~to ~~the~~negotiate ~~acquisition~~a restructure of ~~MCCI,~~these ~~payment~~debenture ofnotes ~~significant~~to provide a ~~pre-offering~~work ~~liabilities~~out ~~and~~arrangement ~~establishing~~favorable ato ~~working~~both ~~capital~~current ~~reserve.~~debenture ~~The~~holders and ~~retirement~~shareholders. ofTo ~~pre-offering~~accomplish ~~liabilities~~this ~~and~~restructure, nCoat must raise in the ~~working~~next twelve (12) months, additional capital ~~portion~~to satisfy negotiated demands of the ~~offering~~current ~~did~~debenture ~~not~~holders ~~get~~and ~~raised~~to ~~prior~~pay toaged ~~our~~accounts ~~contractual~~payables ~~obligation~~current owed by nCoat to ~~close~~its ~~the offering~~vendors. ~~This~~ ~~deficiency~~Capital ofraised ~~the~~to ~~expected~~this ~~$3,500,000~~end inmay ~~funding,~~(1) ~~combined~~be accomplished in a ~~with~~debt instrument which will incur debt to the ~~seasonal~~Company, ~~lull~~and/or (2) be raised in ~~aftermarket~~an equity ~~and~~offering ~~OEM~~which ~~revenues,~~may ~~has~~create ~~caused~~significant usdilution to current shareholders, ~~experience~~or a(3) ~~significant~~not ~~liquidity~~be ~~crisis~~completed at all. A ~~number~~nCoat ofis ~~our~~seeking ~~vendors~~in ~~have~~the restructured a ~~turned~~negotiated ~~our~~settlement ~~account~~of ~~over~~all tooutstanding ~~collection~~penalties, ~~agencies~~interest, carrying charges and atprincipal ~~September~~accrued ~~30,~~under ~~2007,~~the wecurrent ~~had~~debenture notes. Any changes ~~accounts~~to ~~payable~~the inagreement ~~excess~~or ofto ~~$1.5~~accounting ~~million~~treatment ~~over~~described ~~120~~herein ~~days~~will ~~past~~be ~~due~~reflected in subsequent periods.

AtAlthough ~~September~~no 30demand has been made, ~~2007~~the weNote ~~are~~Agreement provides that in ~~technical~~the ~~breech~~event of a breech, within the ~~Securities~~first ~~Purchase~~12 months following closing, the holders are entitled ~~Agreement~~to ~~and~~demand immediate redemption of all, or any portion of, the ~~related~~face value of the Series A Notes and Series B ~~Convertible~~ Notes, ~~and~~along ~~Registration~~with a redemption ~~Agreement~~premium. This ~~(collectively~~premium is the ~~“Note~~greater ~~Agreement”).~~of ~~This~~25% ~~technical~~or ~~breech~~the isproduct ~~due~~of toa ~~our~~multiplicand ~~failure~~whose tonumerator ~~respond~~is tothe ~~SEC~~stock ~~comments~~price ~~within~~on 15the ~~days~~day ~~following~~of ~~receipt,~~the ~~failure~~default totrigger ~~have~~event divided by the ~~registration~~weighted ofmarket price at the ~~underling~~beginning ~~shares~~of ~~effective~~each month ~~within~~thereafter. As 75a ~~days~~result, the full face value of the Notes and ~~required~~redemption ~~filing~~premium ~~date,~~are ~~failure~~shown toon ~~pay~~our ~~partial~~Balance ~~liquidating~~Sheet ~~damages~~as ofcurrent ~~$90,000~~liabilities ~~and~~at ~~issuing~~December ~~$200~~31,~~000~~ ~~of unauthorized debt~~2008.

Although no demand has been made, the Note Agreement provides that in the event of a breech, within the first 12 months following closing, the holders are entitled to demand immediate redemption of all, or any portion of, the face value of the Series A Notes and Series B Notes, along with a 25% redemption premium and setting the note conversion price to the stock value on that date. As a result, the full face value of the Notes and redemption premium are shown on our Balance Sheet as current liabilities at September 30, 2007. In the three month period ending September 30, 2007, we have expensed all remaining debt discount related to the Series A and B Notes, the 25% redemption premium, all remaining deferred loan costs as well as providing for an additional $450,000 of potential liquidating damages until the registration of the underlying securities is completed. The note conversion price has been reset to $0.36 per share.20

~~Although~~We have ~~there~~been isactive noin ~~assurance~~our ~~that~~attempt ato ~~waiver~~reduce ~~will~~our belosses ~~granted,~~and orconserve ifcash. We have ~~granted~~had ~~the~~a ~~changes to~~reduction in work force and reduced the ~~Note~~number ~~Agreement~~of ~~that~~employees ~~would~~by bemore than ~~required,~~80. We weconsolidated ~~have~~operations ~~requested~~and aeliminated ~~waiver~~two offacilities in ~~these~~2008. During ~~breeches~~the ~~from~~first ~~the~~three ~~note~~months ~~holders.~~of ~~Any~~2009 ~~changes~~certain tomembers of the executive ~~agreement~~staff orelected to ~~accounting~~ ~~treatment~~defer ~~described~~all ~~above~~or ~~will~~a beportion ~~reflected~~of intheir ~~subsequent~~salaries totaling ~~periods~~$132,036.

WeAt ~~have~~March ~~been~~31, ~~active~~2009, inwe ~~our attempt to reduce our losses and conserve cash. We have~~ had aassets ~~reduction in work force and reduced head count by 40 employees. Following the acquisition~~ of ~~MCCI~~$ ~~we consolidated our two Arizona facilities. On August 31~~4,423,032 ~~2007~~ and ~~September~~current ~~14,~~liabilities ~~2007 certain salaried employees elected to defer all or a portion~~ of ~~their salaries totaling~~ $~~143~~831,~~473. On November 9~~367,180 including ~~2007~~the ~~all~~redemption ~~salaried~~premium ~~employees’~~set ~~compensation, totaling~~forth ~~$89,193, was deferred~~above. We ~~have~~Any ~~limited~~amounts ~~travel~~owed ~~and~~to ~~curtailed~~related ~~expenditures. Since~~parties ~~September~~have ~~30,~~no ~~2007~~specific weterms ~~have~~of ~~borrowed~~repayment anand ~~additional $440,000~~bear ~~from~~no ~~investors~~interest.

The Company’s continued existence and plans for future growth depend on its ability to continue to obtain the capital necessary, either through the issuance of additional debt or equity instruments, to operate until the profitability occurs through the generation of increased revenue and cost containment. We will need to continue to raise this capital to fund both the normal operating costs and expansion efforts. If we are not able to generate sufficient revenues and cash flows or obtain the necessary funding, we will be unable to continue as a going concern. As disclosed in the May 17, 2007, report of the independent auditors related to the Company’s financial statements for the fiscal year ended December 31, 2006, the Company’s recurring losses and negative cash flows from operations raises substantial doubt about the Company’s ability to continue as a going concern. Cash used for operating activities was $3,818,531 for the nine months ended September 30, 2007. The Company’s working capital deficiency as at September 30, 2007 was $19,260,463 with accumulated losses from the date of inception of $31,826,068.

As discussed above, we have taken, and continue to take, steps that will allow us to continue as a going concern. For example we have entered into a share exchange agreement with Tylerstone in February 2007; have engaged an investment banking firm to assist in raising new capital; have converted existing debt into equity; raised new capital; purchased a major competitor; consolidated facilities; strengthened the management team; increased operating activities focused on marketing our products; and negotiated sales agreements to enable us to generate sufficient cash flow to continue as a going concern. Nevertheless, if we do not receive sufficient funds to settle amounts owed to creditors and pay future expenses, there is the possibility that the Company would be unable to continue.

At September 30, 2007, we had assets of $12,023,878 and liabilities of $21,599,500. Amounts owed to related parties have no specific terms of repayment and bear no interest.

Off Balance Sheet Arrangements

The Company’s off-balance sheet arrangements include operating leases for it production facilities and office space.

Item 3 – Quantitative and Qualitative Disclosures About Market ~~Risks~~ Risk

~~None~~Item 4T – Controls and Procedures

Item 4 – Controls and Procedures

Management’s Report On Internal Control Over Financial Reporting

~~Management~~Evaluation isof ~~responsible~~disclosure ~~for~~controls ~~establishing~~ and ~~maintaining~~procedures. ~~adequate~~All ~~internal~~financial ~~control~~information ~~over~~contained in ~~financial~~this ~~reporting~~report is unaudited and un-reviewed. The accounting firm has reviewed our quarterly filings as ~~defined~~of in9/30/2008. ~~Rule~~nCoat ~~13a-15(f)~~has ~~under~~not produced enough cash flow to pay the ~~Exchange~~auditors ~~Act~~to complete the audit by the publication date of this report. ~~This~~Upon payment of the audit fees, the auditors will complete the ~~rule~~audit ~~defines~~and ~~internal~~an ~~control~~amended ~~over~~Form ~~financial~~10K ~~reporting~~and as10Q awill ~~process~~be ~~designed~~filed. byAll figures are presented in accordance with Generally Accepted Accounting Principles (GAAP), but have not been tested or ~~under~~validated by an outside firm as of yet. As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of, the ~~Company~~company’s management, including its Chief Executive Officer and Chief Financial Officer, toof ~~provide~~its ~~reasonable~~disclosure controls ~~assurance~~and ~~regarding~~procedures ~~the~~(as ~~reliability~~defined ~~of financial~~by ~~reporting~~Rules13a — 15(e)and 15d-15(e)under the Securities ~~preparation~~Exchange Act of ~~financial~~1934). ~~statements~~Based ~~for~~upon ~~external~~that evaluation, the Chief ~~purposes~~Executive inOfficer ~~accordance~~and ~~with~~Chief ~~U.S.~~Financial ~~GAAP.~~Officer ~~Our~~concluded ~~internal~~that ~~control~~the ~~over~~design ~~financial~~and ~~reporting~~operation ~~includes~~of ~~those~~these ~~policies~~disclosure controls and procedures ~~that:~~were effective as of the end of the period covered by this report.

~~• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;~~21

~~• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements~~ Changes in ~~accordance~~internal ~~with~~Controls ~~U.S.~~over ~~GAAP,~~Financial ~~and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and~~Reporting

•There ~~Provide~~have ~~reasonable~~been ~~assurance~~no ~~regarding~~changes ~~prevention~~in the orregistrant’s ~~timely~~internal ~~detection~~control ofover ~~unauthorized~~financial ~~acquisition,~~reporting ~~use~~that oroccurred ~~disposition of~~ during the ~~Company~~registrant’s ~~assets~~most recent fiscal quarter that ~~could~~has ~~have~~materially aaffected, ~~material~~or ~~effect~~is reasonably onlikely ~~the~~to ~~financial~~materially ~~statements~~affect our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, 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.22

With the participation of the Chief Executive Officer, who is currently also acting as the Company’s Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2007, as the result of control deficiencies, material weaknesses and significant deficiencies. Some of the material weaknesses found result from significant deficiencies in internal control that collectively constitute a material weakness.

An internal control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned duties, to prevent or detect misstatements on a timely basis. The Company has not established a formal audit committee forcing the Board to rely solely on the Chief Financial Officer for guidance and control compliance. The Company has not established a formal Audit Standard embodied in a series of preventative and detective control processes, again relying on the Chief Financial Officer during the course of daily accounting routines to establish policies and procedures that are tested forensically at the end of the period by the external auditors.

A material weakness is a significant deficiency or combination of significant deficiencies that results in a more than remote likelihood that a material misstatement in the annual or interim financial statements will not be prevented or detected. A significant deficiency is a single deficiency or combination of deficiencies that results in a more than remote likelihood that a misstatement of the annual or interim financial statements that is more than inconsequential will not be prevented or detected. A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting. The Company had the following material weaknesses and significant deficiencies at December 31, 2007:

• The monthly, quarterly and annual financial statement completion and closing processes lacked adequate preventative controls including timely general ledger account reconciliation and statement generation. • Subsidiary inventory records lacked recorded detail and information. • Stock transfer records, tracking and control lacked adequate controls • Point of Sales procedures lacked control in verification of services rendered. • Safeguarding of cash lacked adequate preventative controls including overnight safekeeping • Acquisition integration lacked consistent controls enabling the rapid incorporation of existingaccounting systems and procedures.

Despite all of these shortcomings with internal controls over financial reporting, management has reasonable assurance that there was no negative material effect on of the financial statements of the Company.

Remediation of Control Deficiencies, Material Weaknesses and Significant Deficiencies

We have implemented and will continue to implement changes to our processes to improve our internal control over financial reporting. The following steps have been taken subsequent to December 31, 2007, or are planned for the first half of 2008, to remediate the conditions leading to the above stated deficiencies and weaknesses:

Remediation Efforts on Control Deficiencies

• Management is presently seeking a Chief Financial Officer to replace James Dodd who retired onApril 18, 2008. The successful candidate will have the knowledge and training to undertake thedevelopment of an overall policy, procedure and governance document for Internal Control Standards

• Once the new Chief Financial Officer is named, he will be tasked by management to form a formalAudit Committee which will meet formally to implement and monitor the Standards created.

• Management will work directly with its external auditors in evaluating and refining the Standardsto meet current requirements.

• Management will undertake training to better understand their responsibility for effective controls

Remediation Efforts on the Internal Controls Surrounding the Financial Statement Closing Process

• Use of standard general ledger entries.

• Creation of procedures for subsidiary accounting system cut-off.

• Use of a disclosure control checklist.

• Completion of timely general ledger reconciliations in standard form.

• Establish reporting deadlines for each period.

Remediation Efforts on Subsidiary inventory records

• Inventory records for MMCI have already been redone, creating the basis for recording monthlychanges.

• Inventory records for nTech have already been redone, creating the basis for recording monthlychanges

• Specific personnel have been designated to maintain these records

Remediation Efforts on Stock Transfer records

• At the time a new CFO shall be named, management will establish a specific procedure fortracking the need to issue new certificates.

Remediation Efforts on Point of sales

• Formalization of appropriate documentation, including original purchase orders, plant trackingprocesses, shipping and invoicing shall be established at the time the new CFO is hired.

• Separation of accounting processes to include separate individuals to handle intake, processing,invoicing and collecting on coating service fees.

Remediation Efforts on Cash and other Company Asset safekeeping

• Cash on hand in any of the Company’s offices shall be limited to reasonable amounts necessaryfor petty cash purposes only.

• Regular bank deposits are required at each location.

Remediation Efforts on Acquisition Accounting Integration

• Financial recording delays and inaccuracies has been reduced by the Company’s use of a newintegrated accounting software system that was implemented on January 1, 2008

PART II

OTHER INFORMATION

Item 1 – Legal Proceedings

~~Jeffrey C.~~From ~~Holm et al. v. High Performance Coatings, Inc., Civil No. 080903021, Third~~time ~~Judicial~~to ~~District Court~~time, ~~Salt~~we ~~Lake~~may ~~County,~~become ~~State~~involved ofin ~~Utah. On~~various ~~February 20,~~lawsuits ~~2008, Jeffrey Holm~~ and ~~Thunderchief~~legal ~~Enterprises,~~proceedings ~~LLC~~which arise ~~(collectively,~~in the ~~“Plaintiffs”)~~ ~~filed~~ordinary acourse ~~complaint~~of ~~against High Performance Coatings, Inc~~business.~~, Nanocoat,~~ ~~Inc.,~~Litigation ~~Terry~~is R.subject ~~Holmes,~~to ~~Paul S. Clayson (collectively, the “nCoat~~inherent ~~Defendants”)~~uncertainties, and ~~others,~~an adverse result in ~~connection~~these ~~with~~or aother ~~stock~~matters ~~purchase~~may ~~agreement,~~arise afrom ~~consulting~~time ~~agreement,~~to antime ~~escrow~~that ~~agreement,~~may ~~and~~harm ~~other~~our ~~agreements~~business. ~~between~~As ~~certain~~ of the ~~parties. The~~date ~~Complaint brings claims for relief against the nCoat Defendants for breach~~ of ~~the~~this ~~consulting agreement~~Report, ~~slander, tortious interference~~ with ~~economic relations, breach of~~ the ~~stock purchase agreement,~~ ~~declaratory~~exception ~~relief relating to a non-compete agreement, and conversion. The Plaintiffs seek damages from the nCoat Defendants~~ of ~~approximately~~ ~~$740,000, plus~~ the ~~return~~case ofcited ~~certain designated personal property~~below, ~~together~~ ~~with~~we ~~damages~~were tonot beaware ~~proven~~of atany ~~trial, punitive damages, fees, costs, and~~ such ~~other relief as the court deems appropriate. The nCoat~~legal ~~Defendants~~proceedings ~~filed~~or ~~motions~~claims toagainst ~~quash service of~~ the ~~complaint,~~Company ~~but~~or noits ~~ruling~~subsidiaries onthat ~~the~~management ~~motions~~believes ~~had~~will ~~been~~have ~~issued~~a asmaterial ofadverse ~~the~~affect ~~date~~on ofbusiness ~~this~~development, ~~report. The Company~~financial ~~intends~~condition toor ~~defend~~operating ~~vigorously against these claims~~results.

First Tennessee Bank v. MCC Inc. and Michael Novakovic, Case No. CH-09-0558-1 Shelby County Chancery Court for the Thirtieth Judicial District at Memphis, TN. On April 17th, 2009 First Tennessee filed a complaint against MCC Inc. and Michael Novakovic (collectively, the “Plaintiffs”) claiming breach of contract regarding a promissory note. This note was originated February 15, 2007 by MCC Inc. First Tennessee claims beach based upon failure to give notice of change of control of business entity and for failure to keep payments current. The Complaint brings claims for accelerated balance due on the note for $240,384. The MCC Defendants are filing an Answer and the Company intends to vigorously defend its claims.

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

On ~~October~~January 2419, ~~2006,~~2008 weand ~~closed~~January ~~the~~29, ~~sale~~2008, ~~of a convertible debenture (~~the ~~“October Debenture”)~~Company inissued ~~the principal amount of $500~~1,~~000~~554,198 ~~to Maxum Fund Overseas (the “Debenture Holder”). The October Debenture is convertible into~~ shares of ~~our~~ its common stock atas apayment ~~conversion price~~ of ~~$0.50,~~interest ~~subject~~on tothe ~~adjustment,~~Series ~~and~~A isNotes ~~due~~ and ~~payable~~Series onB ~~October 23, 2007. Interest accrues on the outstanding principal~~Notes atfor ~~the rate of 0.5 percent above the prime~~ interest ~~rate~~due asfor ~~reported by~~ the ~~Wall Street~~third ~~Journal’s~~quarter ~~bank survey, and the interest is also convertible into shares~~ of ~~the Registrant’s common stock~~2007.

28On August 18, 2008, the Company issued 1,250,000 shares of its common stock as the result of a partial conversion of a Note holder’s principal, reducing that Note by $25,000.

On ~~November~~December 91, ~~2006~~2008, ~~we closed~~ the ~~sale~~Company ofissued ~~another convertible debenture (the “November Debenture”) in the principal amount of $500~~3,~~000~~031,956 toshare ~~the Debenture Holder. The November Debenture is convertible into shares~~ of ~~our~~its common stock atas the aresult ~~conversion price~~ of ~~$0.50,~~a ~~subject~~partial toconversion ~~adjustment, and is due and payable on November 8, 2007. Interest accrues on the outstanding principal at the rate~~ of ~~0.5~~ ~~percent~~a ~~above~~Note ~~the prime interest rate as reported by the Wall Street Journal~~holder’s ~~bank survey~~interest, ~~and~~reducing the ~~interest~~Note ~~is also convertible into shares of the~~by ~~Registrant’s common stock~~$10,000.

Additionally, on November 28, 2006, we closed the sale of another convertible debenture (the “December Debenture”) in the principal amount of $1,000,000, to the Debenture Holder. The December Debenture is convertible into shares of our common stock at a conversion price of $0.50, subject to adjustment, and is due and payable on November 27, 2007. Interest accrues on the outstanding principal at the rate of 0.5 percent above the prime interest rate as reported by the Wall Street Journal’s bank survey, and the interest is also convertible into shares of the Registrant’s common stock.

On February 6, 2007, we closed the sale of another convertible debenture (the “February Debenture”) in the principal amount of $250,000, to Coach Capital (“Coach”). The February Debenture is convertible into shares of our common stock at a conversion price of $0.50, subject to adjustment, and is due and payable on February 6, 2008. Interest accrues on the outstanding principal at the rate of 0.5 percent above the prime interest rate as reported by the Wall Street Journal’s bank survey, and the interest is also convertible into shares of the Registrant’s common stock.

On May 14, 2007, we closed the sale of another convertible debenture (the “May Debenture”) in the principal amount of $250,000, to Coach. The May Debenture is convertible into shares of our common stock at a conversion price of $0.50, subject to adjustment, and is due and payable on May 14, 2008. Interest accrues on the outstanding principal at the rate of 0.5 percent above the prime interest rate as reported by the Wall Street Journal’s bank survey, and the interest is also convertible into shares of the Registrant’s common stock.

On May 25, 2007, pursuant to a private offering of our securities (the “Offering”), we entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors relating to the sale by us of $550,000 principal amount of our Series A 6% Convertible Notes (the “Series A Notes”), and warrants (the “Series A Warrants”) to purchase up to an additional 1,375,000 shares of the Company’s common stock (the “Series A Warrant Shares”).

On May 31, 2007, pursuant to the Offering, we entered into Purchase Agreements with institutional and accredited investors for an additional $10.3 million, which includes $800,000 of outstanding indebtedness converted into the Offering. The securities sold by us in the May 31, 2007, closing consisted of $8,300,000 principal amount of Series A Notes; $2,000,000 principal amount of Series B 6% Convertible Notes (the “Series B Notes,” and together with the Series A Notes, the “Convertible Notes”); 22,125,000 Series A Warrants; and 5,000,000 Series B Warrants.

On June 12, 2007, pursuant to the Offering, we entered into a Purchase Agreement with an investor relating to the sale by us of $500,000 principal amount of Series B Notes and 1,250,000 Series B Warrants.

On June 18, 2007, pursuant to the Offering, we entered into a Purchase Agreement with certain investors relating to the sale by us of $150,000 principal amount of our Series A Notes and Warrants (the “Series A Warrants”) to purchase up to an additional 375,000 shares of our common stock (the “Series A Warrant Shares”).

On June 22, 2007, pursuant to the Offering, we entered into a Purchase Agreement with an investor relating to the sale by us of $500,000 principal amount of our Series B Notes, and 1,250,000 Series B Warrants.

On July 9, 2007, pursuant to the Offering, we entered into a Purchase Agreement with certain investors relating to the sale by us of $250,000 principal amount of our Series B Notes and Warrants to purchase up to an additional 625,000 shares of our common stock. In addition to the formal closing, we received directly from an individual a subscription agreement for $100,000 for a purchase of our Series B Notes and Series B Warrants.

The Company received $10,618,916 of proceeds from the issuance of the Series A and Series B convertible notes, net of the $700,000 of advances previously recognized and net of cash offering costs of $931,064.

On January 19, 2008 and January 29, 2008, the Company issued 1,554,198 shares of its common stock as payment of interest on the Series A Notes and Series B Notes.

The Debentures, the Series A Notes, the Series B Notes, the Series A Warrants, the Series B Warrants, and the shares discussed above were issued without registration under the 1933 Act in reliance on Section 4(2) of the 1933 Act and the rules and regulations promulgated thereunder.

There have been no repurchases of equity securities by nCoat during the years ended December 31, 2007 or 2006.

In each case, the securities were issued in connection with private transactions with accredited investors pursuant to Section 4(2) of the Securities Act and regulations promulgated ~~thereunder~~there under.

Proceeds from the sale of the above securities were and will be used for retirement of debt, acquisition of MCCI and working capital.

Item 3 – Defaults Upon Senior Securities

As set forth above, the Company was in technical breach of the underlying financing agreements until it obtained waivers as described in the 10-KKA report filed by the Company on ~~May~~August 191, 2008.

Item 4 – Submission of Matters to a Vote of Security Holders

None.

Item 5 – Other Information

~~Recent Developments~~None

~~Retirement of Chief Financial Officer~~24

The Company’s Chief Financial Officer James Dodd retired from the Company on April 18, 2008. As of the date of this report, the Company had undertaken a search for a new chief financial officer.

Series A and B Notes

At March 31, 2008, we were in technical breach of the Securities Purchase Agreement and the related Series A and B Convertible Notes and Registration Agreement (collectively the “Note Agreements”). This technical breach was due to (i) our failure to have the registration statement registering the shares underlying the warrants issued in connection with the Series A and Series B Notes effective by February 8, 2008, (ii) our failure to pay partial liquidated damages of $90,000, and (iii) our failure to pay interest accrued to March 31, 2008.

Late Filing of Annual Report, Delisting from OTC Bulletin Board

The Company, because of liquidity issues, was forced to delay its payment of the external auditors for previous work done by them on the Company’s financials and earlier year audits. As a result, the Company was unable to file its annual report by the March 31, 2008 deadline, or the extension period of April 15, 2008. In light of the delinquency of the filings, the Company has been removed from trading on the OTC Bulletin Board. As of the date of this Report, the Company was reviewing the possibility of appealing the delisting.

Item 6 – Exhibits

The following documents are filed as an exhibit to this Report:

Exhibit Description

3.1	Certificate of Incorporation (previously filed as an exhibit to a registration statement on Form SB-2, filed with the Commission on December 27, 2004, and incorporated herein by this reference).

3.2	Certificate of Amendment to Certificate of Incorporation (previously filed as an exhibit to a Current Report on Form 8-K, filed with the Commission on February 8, 2007, and incorporated herein by this reference).

3.3	Bylaws (previously filed as an exhibit to a registration statement on Form SB-2, filed with the Commission on December 27, 2004, and incorporated herein by this reference).

4.1	Convertible Debenture, dated October 24, 2006 (previously filed as an exhibit to a Current Report on Form 8-K, filed with the Commission on November 3, 2006, and incorporated herein by this reference).

4.2	Convertible Debenture, dated November 9, 2006 (previously filed as an exhibit to a Quarterly Report on Form 10-QSB, filed with the Commission on January 17, 2007, and incorporated herein by this reference).

4.3	Convertible Debenture, dated November 28, 2006 (previously filed as an exhibit to a Quarterly Report on Form 10-QSB, filed with the Commission on January 17, 2007, and incorporated herein by this reference).

4.4	Convertible Debenture, dated February 6, 2007 (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on July 12, 2007, and incorporated herein by this reference).

4.5	Convertible Debenture, dated May 14, 2007 (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on July 12, 2007, and incorporated herein by this reference).

10.1	Form of Securities Purchase Agreement (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.2	Form of Series A Notes (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.3	Form of Series A Warrants (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.4	Form of Series B Notes (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.5	Form of Series B Warrants (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.6	Form of Registration Rights Agreement (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.7	Form of Escrow Agreement (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.8	Form of Amendment to Escrow Agreement (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

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10.9	Form of Lockup Agreement (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 1, 2007, and incorporated herein by this reference).

10.10

Stock Purchase Agreement by and among nCoat, Inc., MCC, Inc., and Michael Novakovic and Phebe Novakovic, dated June 19, 2007 (previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on June 22, 2007, and incorporated herein by this reference).

10.11

Lease Agreement, dated May 15, 2001, between Remco Management Company, LLC, and HPC, (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

10.12

Lease Extension Agreement, dated June 1, 2006, between Remco Management Company, LLC, and HPC (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

10.13

Industrial Lease, dated October 15, 2005, between Ralf LLC, and HPC (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

10.14 Lease Agreement, dated February 21, 2006, between Mebane Warehouse, LLC, and HPC (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

10.15

Memorandum of Sublease, dated November 1, 2005, between Heritage One, L.L.C., Rocky Mountain Seed and Grain, and HPC(previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

10.16

Commercial Lease Agreement, dated October 13, 2005, between Philadelphia Suburban Development Corporation and MCCI(previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

10.17

Lease Agreement, dated January 22, 2007, between Milford Business Centre and MCCI (previously filed as an exhibit to a Registration Statement on Form SB-2, filed with the Commission on October 12, 2007, and incorporated herein by this reference).

31.1 Certification of the Chairman and Chief Executive Officer, Section 302 of Sarbanes-Oxley Act of 2002

31.1	Certification of the Chairman and Chief Executive Officer, Section 302 of Sarbanes-Oxley Act of 2002

32.1	Certification of the Chairman and Chief Executive Officer, Section 1350

~~32.1 Certification of the Chairman and Chief Executive Officer, Section 1350~~26

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 hereunto duly authorized.

	nCoat, Inc
	(Registrant)
Date: May 20, 2008	/s/ Paul Clayson
Date: May 15, 2009	/s/ Paul Clayson
	Paul Clayson
	Chief Executive Officer
	(Principal Executive Officer)
Date: May 20, 2008	/s/ Paul Clayson
Date: May 15, 2009	/s/ Paul Clayson
	Paul Clayson
	Chief Financial Officer
	Acting Chief Financial Officer
	(Principal Financial and Accounting Officer)

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