nCoat, Inc. - FORM 10-K - March 30, 2010

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

x	Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2009, or

o	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______________ to _____________.

Commission File No. 333-121660

nCoat, Inc.

(Exact name of registrant as specified in its charter)

Delaware	3470	98-0375406
(State or jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

7237 Pace Drive

P.O. Box 38

Whitsett, NC 27377

(336) 447-2000

(Address and telephone number of principal executive offices)

7237 Pace Drive

P.O. Box 38

Whitsett, NC 27377

(336) 447-2000

(Address of principal place of business or intended

and principal place of business)

Paul S Clayson

7237 Pace Drive

P.O. Box 38

Whitsett, NC 27377

(336) 447-2000

(Name, Address and telephone number of agent for service)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)

Required x Not Required o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 19, 2010 was approximately $348,204 calculated using a closing price of $.0028 per share on March 19, 2010. For purposes of this calculation, the registrant has included only the number of shares directly held by its officers and directors as of (and not counting shares beneficially owned on that date), in determining the shares held by non-affiliates.

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

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company þ

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 March 19, 2010, there were issued and outstanding 126,710,605 shares of our common stock.

nCoat, Inc.

2009 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

Part I
		Page

Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 2.	Properties	19
Item 3.	Legal Proceedings	20
Item 4.	Submission of Matters to a Vote of Security Holders	20

Part II

Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	22
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29
Item 9A.	Controls and Procedures	29
Item 9B.	Other Information	29

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	30
Item 11.	Executive Compensation	32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
Item 13.	Certain Relationships and Related Transactions, and Director Independence	36
Item 14.	Principal Accountant Fees and Services	37

Part IV

Item 15.	Supplementary Magagement's Discussion	38
Item 16.	Exhibits and Financial Statement Schedules	47

THE FINANCIAL STATEMENTS INCLUDED HEREIN ARE NOT AUDITED. NCOAT HAS NOT ACCUMULATED ENOUGH CASH TO PAY THE AUDIT FEE TO COMPLETE THE AUDIT OF ITS ANNUAL AND QUARTERLY FINANCIAL STATEMENTS FROM OCTOBER 2008 UP TO AND INCLUDING THIS 2009 FORM 10K PRIOR TO SUBMISSION OF THE REPORTS. FOLLOWING PAYMENT OF THE AUDIT FEE, NCOAT AUDITORS WILL COMPLETE THE AUDIT AND NCOAT WILL FILE AN AMENDED REPORTS FOR ALL FORM 10K AND FORM 10QSB REPORTS THAT HAVE NOT BEEN PREVIOUS AUDITED.

PART I

ITEM 1. BUSINESS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED BY nCOAT AND DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED BELOW IN THE SECTION “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” IN THE SECTION ENTITLED “FORWARD-LOOKING STATEMENTS,” AND ELSEWHERE IN THIS ANNUAL REPORT. WE DISCLAIM ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH OUR FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS DOCUMENT.

nCoat History

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, described in the appropriate periodic reports filed by the Company with the United States 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 was publicly traded on the OTC Bulletin Board and Tylerstone would gain an operating subsidiary.

On February 3, 2007, Tylerstone entered into a 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-split 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

Following the Closing, we changed our operations to those of nCoat Auto’s. As such, the discussions of our business in this Report include the new business focus as described below. Although we still hold title to the mineral claim in which, we have suspended our previous business activities and have determined that it is in our best interest to give up all rights to the mining claims.

nCoat is a technology development and business holding company. Through our subsidiaries, we develop, manufacture, distribute and service specialty nanotechnology coatings as well as traditional surface coatings, designed to provide heat management, corrosion resistance, friction reduction, abrasion protection, porosity reduction, enhanced appearance, and bond strength. Using nano-scale particles combined with proprietary binding technology, chemistry, and processes, we have developed surface treatment materials and processes that are used in a range of industries, including automotive, diesel engine, trucking, recreational vehicle, motorcycle, aerospace, and oil and gas industries.

As an integral part of our strategic plan, nCoat has acquired respected, customer-rich, coatings application companies in the fragmented high performance coatings industry and providing capital and nanotechnology-based product innovation to foster their growth. We then introduced our nano-coatings to the acquired company’s enterprise customers as the next generation of coatings technology. This acquisition process began in September 2005 with the acquisition of High Performance Coatings, Inc. (“HPC”) and continues with the acquisition of Metallic Ceramic Coatings, Inc. (“MCCI”), which has been doing business under the brand name of Jet-Hot®, in June 2007.

We are headquartered in Whitsett, North Carolina which includes our newest and largest production and mixing and blending plant which opened in October, 2006. In addition to the North Carolina headquarters, HPC and MCCI currently operate additional production plants in Oklahoma City, Oklahoma; Tempe, Arizona;. nCoat also owns a third operating entity named nTech, Inc. (“nTech”) which was formed to develop and hold proprietary intellectual property and to focus on executing our distributed production and licensing strategy. After acquisition of HPC and MCCI, nCoat operated ten manufacturing, administrative and mixing and blending facilities acquired in the transactions. The three current operating facilities remain after operating plants in Arizona, Mississippi Utah and Pennsylvania were closed and business and equipment were consolidated to the other plants to cut costs, increase operating efficiencies and reduce administrative oversight.

In preparation for anticipated growth through acquisitions and internal growth of existing operating entities, we incurred one-time expenses and capital expenditures in 2006 by adding facilities, personnel, systems and processes to support business growth and acquisition activities. In 2007 and 2008, following the transition and integration of our acquisition of MCCI, we began consolidation of administrative offices and satellite mixing and blending facilities to our North Carolina headquarters. In 2008, we closed the additional operating plants discussed above and closed the administrative offices and headquarters of MCCI in Pennsylvania and mixing and blending facilities in Pennsylvania and the HPC mixing and blending plant in Utah. In November 2009, we ceased operations at an application plant in Pennsylvania pending expiration of the lease in January, 2010. The Pennsylvania plant was vacated on January 31, 2010.

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 have expanded HPC's customer markets specialized engines and exhaust systems for automotive aftermarket customers, 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. HPC offers highly competitive thermal, corrosion, abrasion, and porosity management coatings. HPC is a recognized brand in performance coatings for automotive applications. nCoat introduced its first nano-coatings applications to customers of HPC and achieved its first OEM customers for nano-formulated products in the first quarter of 2006, approximately four months after first introduced. Since that time, HPC has moved over 70% of its revenue to sales and application of nano-coatings.

In June 2007, we acquired Metallic Ceramic Coatings, Inc. (“MCCI”), which was founded in 1981 and incorporated in 1983. At the time of the acquisition, MCCI’s corporate headquarters were located in King of Prussia, Pennsylvania. MCCI does business under their market brand, Jet-Hot. Jet-Hot was developed by MCCI under the trade name JET-HOT Coatings. Now in their third generation of performance enhancements, JET-HOT offers thermal barrier and corrosion resistance coatings applied on autos and motorcycles ranging from street rods and dragsters to classics and exotics, snowmobiles and over-the-road trucks. Jet-Hot also produces and applies coatings for improved durability, performance and appearance of manifolds, side pipes and valve covers. In accelerated salt-spray tests conducted in accordance with ASTM B117, JET-HOT corrosion barrier coatings last over 14 times longer than chrome and more that 140 times longer than high-temperature paint, enduring more than 5,000 hours.

Jet-Hot’s first products and customers were in military applications on jet-fighter engines and submarine parts subjected to high temperatures, cyclical stress loads and corrosive environments. Jet-Hot supplied proprietary coatings used to protect parts on aircraft-carrier launch systems for the US Navy and armored vehicles for the US Army. Shortly thereafter, Jet-Hot introduced automotive products for performance racing and consumer applications. Racing teams began to use the coatings for safety factors by reducing header-surface temperatures, quick cool down and horsepower enhancements. In the 1990s, JET-HOT became the only coating company to support racers with contingency-award payouts and continues to do so today.

Jet-Hot continues to innovate new coatings to add to their intellectual property portfolio of trade secret formulas, processes and equipment. Formulas include proprietary nano-formulated and micron particulate coatings primarily focused on ceramic/metallic technology innovations. Jet-Hot coatings have been transitioned to over 70% nanocoatings since nCoat acquired the company. Jet-Hot products are applied at all three nCoat facilities. Effective January 31, 2010 an original Jet-Hot plant Pennsylvania plant was closed.

Collectively, nCoat’s subsidiaries now have over 9,000 customers presently being served by 83 employees.

The Coatings Industry

The general global coatings industry is a long-established, $30 billion market with multiple competitors. The commodity coatings market segment which encompasses more than 85% of the market includes those coatings that are typically within the paint, varnish, sizing, primers and other metal pre-treatment product families. This segment has been dominated by large multi-national companies. These companies include Akzo Nobel Coatings, PPG Industries, Sherman-Williams, ICI Paints, DuPont Coatings & Color Technologies Group, BASF Coatings AG, SigmaKalon Group BV, Valspar Corp., Nippon Paint Co. Ltd., Kansai Paint Co., and Ltd. RPM, Inc., making up the top ten in annual revenues.

In the fragmented high performance coatings sector, the number of companies developing and are utilizing nanotechnology in their commercialized formulations and processes is growing. Typically companies with nano-scale products are small start-up companies working to achieving initial commercialization. In 2009, Lux Research estimated that approximately $3.3 billion of coatings that utilized nano-formulation were sold world-wide. Lux Research expects this market to grow to nearly $20 billion by 2015. nCoat products incorporate traditional coatings with components and processes that include micron-sized solid particulates as well as nano-scale formulations with additional properties. A micron is one-millionth of a meter. A nanometer is one-billionth of a meter. Nano-scale coatings typically use nano-particles between 5 and 100 nanometers in size. The relative size of this new scale deals with particles and processes one thousand times smaller than the traditional coatings on the market today, allowing for combinations, properties and processes that provide additional protections and performance.

The competition in the nano and micron formulation high performance coatings industry, a market segment of more than $4.0 billion in annual revenues, is characterized by hundreds of small privately owned coatings companies with market share in several market segments. Most of the US firms are small, local or regional applicators, with many that use supplied third-party coatings. No single company dominates the marketplace. This is especially true in the automotive original equipment manufacturers (“OEM”) and aftermarket industries. Resulting from the relative small size of competitors in this market space, there is little product research and innovation and even less production innovation. HPC excels because of its research and engineering expertise. HPC and Jet-Hot are two of fewer than twenty-five companies that could be considered large enough to be known nationally.

Our Product and Service Focus

We have multiple high performance coating products using proprietary chemical formulations for coating metallic, ceramic, fabric and multiple other materials. These coatings provide functionality that currently solves costly problems in many industries that arise from technology advances. Key emerging problems to be solved by these coatings include; (i) high heat generated by higher speeds of machines, (ii) tensile strength and heat resistance of new composite materials, (iii) corrosion and abrasion occurring in new areas of exploration (space, high altitude, water, extreme temperature conditions, etc.), (iv) degradation of common metals from high acidic and heat conditions to meet new, aggressive federal pollution restrictions, (v) abrasion created by miniaturization through computerization, and (vi) materials degradation from high speed manufacturing systems causing heat, bonding, and (vii) oxidation of chrome which discolors chrome pipes as engine operations create heat soak.

Following is a chart showing some of nTech’s proprietary high performance coatings, their functionality and some of the markets in which these coatings are or can be used:

Product	Functionality	Markets(s)
H-Series - Hi-Per Coat	High temperature coatings engineered to provide outstanding corrosion protection. Nano and micron formulations.	Automotive OEM, Automotive Aftermarket, Aerospace, Defense, Gas/Oil Production, Petro-Chemical Industry, Recreation, Vehicles, Heavy Trucking, Trucking Aftermarket, Racing, Medical , Marine
R-Series Hi-Per Coat Extreme	High temperature coatings designed specifically for the glass industry.	Glass Industries, Medical, Marine, Communication/Computer, Beverage
E-Series Hi-Per Coat Extreme	High temperature coating engineered to provide thermal fatigue oxidation protection up to 2,200° F while reducing temperatures by 48%. Nano and micron formulations.	Automotive OEM, Automotive Aftermarket, Aerospace, Defense, Gas/Oil Production, Heavy Trucking, Racing, Marine, Heavy trucking and Diesel Engine manufacturing.
S-Series (Solid Dry Films)	Coatings engineered to reduce friction. Nano and micron formulations.	Automotive Trucking, Diesel Engine, Motorcycle and Recreational Vehicle OEM, Automotive, Trucking, Diesel Engine, Motorcycle and Recreational Vehicle Aftermarket, Aerospace, Defense, Gas/Oil Production, Petro-Chemical
N-Series	Nano-formulated coatings, equipment and processes for anti-porosity applications.	Automotive, Trucking, Diesel Engine, Motorcycle, Recreational Vehicle and Performance Racing OEM and aftermarket

While we will continue to sell our traditional high performance coating products, we will also continue to focus in the near term on disruptive proprietary nanotechnology products developed at nTech to create highly differentiated market advantages and revenue from nano-formulated products.

We sell into two fairly distinct markets and market distribution approaches for each of these markets. The “aftermarket” coatings segment of our business includes small dealers, distributors, and individual users of our products and services. In most cases these are the hobbyist, the small race car or performance automobile owner. Our marketing methods here are media presence: internet web pages, advertising in trade journals and hobbyist periodicals, sponsorship of performance racing cars and drivers, handling of plant walk-in traffic, word of mouth, educational opportunities with trade schools and organizations and other retail-oriented marketing. The sale of services, coating or accessories is mostly regional to each of the plant locations. We generally receive the customer’s parts to be coated either by direct walk-in delivery or by normal mail or freight services. After we complete the application process, we return the parts by the same methods. Our OEM marketplace marketing is conducted in a manner that includes the media presence suggested above, however, we are much more involved with technical meetings with engineering staffs of the larger customer. The main thrust of our OEM activities, include, direct contact by sales personnel, personal relationships and referral from other large companies. With very few exceptions, the parts are truck shipped to the plant that will undertake the work, in most cases the closest plant to the customer. Once the work is completed, the finished work is shipped back the same way. We sell our coatings and ship finished work directly to customers, rather than through dealers or agents.

Sources and Availability of Raw Materials

Our proprietary blend of formulations begins with components that are readily available from a series of raw material vendors, including Brenntag Chemicals, Chemcentral Chemicals and Valimet, Inc. Our formulations include readily available ingredients, there are a number of supply sources and we have a diversified purchasing program. As a result, we are able to continually produce our coatings on a regular and manageable scale. We are not materially dependent on one or more suppliers and we do not have any agreement with any supplier.

Our Customers

Prior to acquisition, our operating company’s business was originally based largely on the small individual customer ranging from a single automotive racing enthusiast building a race car, or rebuilding a classic car or crafting a street rod on weekends. During the last three years we have expanded our market to include the regional tier one suppliers and OEM customers. We now derive as much as 70% of our revenues from our OEM customer base of more than fifty separate accounts. Currently, we are not dependent on one or a few major customers and no single customer represents more than 5% of our business. One reason we acquired MCCI, with its business emphasis in the aftermarket sector was to help us diversify our revenue base and industry concentration even further.

Sales and Marketing Efforts

Our sales efforts are focused on the auto-aftermarket industry, on the OEM industry and on Licensing opportunities. OEM sales prospects may be candidates for production at an HPC or MCCI plant or for on-site licensed production. Seven of our employees are responsible for sales and customer service.

Marketing efforts support all sales groups. Marketing activities include direct website sales, direct mail, trade shows, print advertising, internet advertising, racing sponsorships, public relations, collateral materials, and many others. Our marketing department is also responsible for corporate, division and product branding. Two of our employees are responsible for marketing.

In the fiscal year ended December 31, 2008 we spent $645,280 on sales and marketing efforts. In the fiscal year ended December 31, 2009 we spent $606,818 on sales and marketing.

Our Research and Development

nTech is engaged in an active and extensive research and develop program focused both on continual improvement of existing coatings and development of new coatings products and binders, including nano-formulated coatings. Research is conducted and testing performed at our proprietary labs and at North Carolina A&T State University, where we have signed a research collaboration agreement, and customer facilities. We also have developed a research agreement with the performance engine laboratory at the University of North Carolina Charlotte (UNCC) for research on the impact of nCoat coatings on engine fuel efficiency, performance and with bio fuels and other alternative fuel systems. In the fiscal year ended December 31, 2008 we spent $376,165 on research and development efforts. In the fiscal year ended December 31, 2009 we spent $321,421 on research and development. None of the expenses in these two categories has been borne directly by a customer or customers. nTech is responsible for blending and mixing all coatings for HPC and Jet-Hot.

Our Intellectual Property

nTech holds more than 100 proprietary coatings trade secrets, patent pending and patents with the majority held as proprietary trade secret intellectual properties. In addition, nTech has applied for six new patents on nano-formulated coatings, the application processes and equipment used to formulate and apply those coatings. Two of these patents were granted in 2008, nTech is also under exploration for patents on additional nano-formulations, equipment and/or processes. nTech holds additional engineering trade secrets on processes, procedures and equipment used to formulate and apply non-nano coatings.

All key employees have signed confidentiality and non-competition agreements with us. In addition, all employees are obligated to protect our confidential information. Where appropriate for our business strategy, management will continue to take steps to protect intellectual property rights.

nTech coatings are mixed in-house at facilities secured separately from application production facilities and administrative offices. Formulations are kept in multiple secure facilities off-site. nTech personnel working with coatings formulations sign stringent non-disclosure, non-circumvention and assignment agreements with nTech. nTech does not conduct customer tours of mixing facilities. A limited number of nTech employees under non-disclosure and assignment agreements have access to and full knowledge of proprietary formulations.

Our Facilities

As of the date of this Report, nCoat and its subsidiaries operate in facilities in three states: North Carolina, Oklahoma and Arizona.

Competition

The general coatings industry is a long-established market with multiple competitors. The industry has grown from $9.2 billion in annual revenue 2000 to over $30 billion at year end 2009. The commodity coatings market segment (paint, varnish, sizing, metal pre-treatments, etc.) is dominated by large multi-national companies, such as Akzo Nobel Coatings, PPG Industries, Sherman-Williams, ICI Paints, DuPont Coatings & Color Technologies Group, BASF Coatings AG, SigmaKalon Group BV, Valspar Corp., Nippon Paint Co. Ltd., Kansai Paint Co., and Ltd. RPM, Inc., making up the top ten in annual revenues.

The high performance coatings market segment had aggregate revenues of over $4.0 billion in 20098 with annual growth of over 12%. Competition in the high performance coatings industry (sometimes referred to as durable equipment coatings or specialty coatings) is characterized by more than 600 small coatings companies in the U.S. with average revenue under $3,000,000 annually and small market share in several market segments. The European market has over 900 small coatings companies. Many of these companies have one to several revenue accounts with major multi-national companies who employ their services for performance coatings. There are few large performance coatings companies operating in these industries. In the fragmented high performance coatings sector, the number of companies developing and are utilizing nanotechnology in their commercialized formulations and processes is growing. Typically companies with nano-scale products are small start-up companies working to achieving initial commercialization. In 2009, Lux Research estimated that approximately $3.3 billion of coatings that utilized nano-formulation were sold world-wide. Research expects this market to grow to nearly $20 billion by 2015. nCoat products incorporate traditional coatings with components and processes that include micron-sized solid particulates as well as nano-scale formulations with additional properties. A micron is one-millionth of a meter. A nanometer is one-billionth of a meter. Nano-scale coatings typically use nano-particles between 5 and 100 nanometers in size. The relative size of this new scale deals with particles and processes one thousand times smaller than the traditional coatings on the market today, allowing for combinations, properties and processes that provide additional protections and performance. Companies claiming to have nano-coatings sold directly into nCoat’s automotive market space include Ecology Coatings, Starfire Systems, Nanovere and Mayaterials. We have never seen any of these competitors in any competition for an account. Competitors with micron formulated coatings operating in industries nCoat serves include Swain Tech, Lincoln Industries, NIC, Airborne, Calico, Nitroplate and Techline.

We compete with others in our market segment through a continued media presence: internet web pages, advertising in trade journals and hobbyist periodicals, handling of plant walk-in traffic, word of mouth, educational opportunities with trade schools and organizations, sponsorships of performance racing cars and drivers and other retail-oriented marketing. The sale of aftermarket services, coating application or accessories is mostly regional to each of the plant locations. We generally receive the customer’s parts to be coated either by direct walk-in delivery or by normal mail or freight services. After we complete the application process, we return the parts by the same methods. Our OEM marketplace marketing is conducted in a manner that includes the media presence suggested above, however, we are much more involved with technical meetings with engineering staffs of the larger customer. The main thrust of our activities in this market segment includes direct contact by sales personnel, personal relationships and referral from other large companies. With very few exceptions, the parts are truck shipped to the plant that will undertake the work, in most cases the closest plant to the customer. Once the work is completed, the finished work is shipped back the same way. We sell our coatings and ship finished work directly to customers, rather than through dealers or agents.

Regulation

Governmental regulations, particularly those in the U.S. have had a two-edged impact on the coatings industry. There have been increasing concerns for the environment with the passage of regulations which restrict the amount of volatile organic compounds (VOCs) which can be released with the manufacture and application of both commodity and high performance coatings. There have been stricter regulations on the waste side of the coating manufacturing and application. This continuing upward pressure on the formulations and applications of coatings has required the industry to seek “cleaner” methods, and environmentally safer coatings. We have recognized these issues we are continually working to anticipate and adjust their proprietary formulation to meet the changing regulatory landscape. Because of the far-reaching effect of the same environmental issues that manufacturers of trucks, equipment, engines, and others including nCoat’s present and potential customer base are seeking higher and better performance from the coatings available in the marketplace. Recirculation of exhaust gases in internal combustion engines in attempt to lower the release of pollutants as mandated, has engine manufacturers seeking thermal and corrosion protection for engines now operating at hotter temperatures with increased corrosion because exhaust gases now introduced through the air intake systems.

Our operations are subject to the annual purchase and maintenance of permits allowing us to generate small amounts of potentially hazardous waste. Any such waste is stored for a very short time at the respective plant and picked up for disposal by professional waste handlers. The cost of the permits and the waste disposal for all of our operations is less than $10,000.00 a year.

In addition, nCoat may be subject to periodic routine inspections from the Environmental Protection Agency for VOC, nano-particle, air and water protection practices and the occupational Safety and Health Administration for workplace safety compliance.

Employees

As of December 31, 2009, we employed a total of approximately 83 persons in the United States. The follow table sets out the location and number of those employees:

Company	Location	Total
nCoat	North Carolina	14
	Utah	1

HPC	North Carolina	36
	Oklahoma	18
	Utah	1

nTech	North Carolina	4

MCCI	Pennsylvania	1
	Arizona	5
	North Carolina	3

TOTALS		83

* Note that HPC employees in Arizona are now accounted for as MCCI employees after the consolidation of the two plants.

ITEM 1A. RISK FACTORS

The short- and long-term success of nCoat is subject to certain risks, many of which are substantial in nature and outside the control of nCoat or its management. You should consider carefully the following risk factors, in addition to other information contained herein. When used in this Report, words such as “believes,” “expects,” “intends,” “plans,” “anticipates,” “estimates,” and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. Additionally, statements that relate to future business development, financial projections, capital raising, capital requirements, growth of markets or customer bases, or future business combinations may also include forward-looking statements. You should understand that several factors govern whether any forward-looking statement contained herein will or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including the strategies, plans and objectives relating to the products and the future economic performance of nCoat and its subsidiaries discussed above. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of any such statement should not be regarded as a representation by nCoat or any other person that the objectives or plans of nCoat will be achieved. nCoat disclaims any intention or obligation to update any forward-looking statement contained herein.

RISKS RELATED TO NCOAT BUSINESS

nCoat has not completed an audit of its financial statements as of the date of the filing of this report.

THE FINANCIAL STATEMENTS INCLUDED HEREIN ARE NOT AUDITED. AS OF THE FILING DATE OF THIS REPORT, NCOAT HAS NOT ACCUMULATED ENOUGH CASH TO PAY THE AUDITORS FEES TO COMPLETE THE AUDIT OF ITS ANNUAL AND QUARTERLY FINANCIAL STATEMENTS BEGINNING IN OCTOBER 2008 UP TO AND INCLUDING THIS 2009 FORM 10K PRIOR TO SUBMISSION OF THE REPORTS. FOLLOWING PAYMENT OF THE AUDIT FEE, NCOAT AUDITORS WILL COMPLETE THE AUDIT AND NCOAT WILL FILE AN AMENDED REPORTS FOR ALL FORM 10K AND FORM 10QSB REPORTS THAT HAVE NOT BEEN PREVIOUS AUDITED.

No assurance can be made that nCoat will be able to pay the auditor in a timely manner to provide audited statements for investors to review.

nCoat has been in technical default on its debenture notes for over twenty-seven (27) months and owes substantial amounts of interest, penalties, liquidated damages and default fees to its debenture holders.

Because of cash shortfalls beginning in September, 2007, nCoat has not paid cash interest payment to its debenture holders since October, 2007. nCoat paid interest in stock for the third quarter of 2007, but has not paid interest in any form since. Subject to provisions of the documentation governing technical and/or actual default of the debenture financings, nCoat is subject to significant increases in interest rates, increases in principal owed, compounded penalties for non-payment of interest and principal, liquidated damages, and other penalties, many of which are tied to changes in nCoat’s public stock prices. With nCoat’s current stock price under $.01/share, penalties create exorbitant cash and stock penalties currently owed by nCoat to its debenture holders. While nCoat has been in continual contact with its debenture holders and is seeking a re-structure agreement favorable to both debenture holders and shareholders of nCoat, there can be no assurance that such and agreement will ever be completed and nCoat could be subject to a declaration of actual default and thereby be subject to partial or complete liquidation of its assets by debenture holders.

nCoat is seeking a restructure of its current debenture debt and agreements and must raise additional capital to accomplish this restructure.

As mentioned above herein, nCoat is in technical default on its current debenture financing. nCoat is seeking and attempting to negotiate a restructure of these debenture notes to provide a work out arrangement favorable to both current debenture holders and shareholders. To accomplish this restructure, nCoat must raise as soon as possible, additional capital to satisfy negotiated demands of the current debenture holders and to pay aged accounts payables current owed by nCoat to its vendors. Capital raise to this end may (1) be accomplished in a debt instrument which will incur debt to the Company, and/or (2) be raised in an equity offering which may create significant dilution to current shareholders, or (3) not be completed at all. No assurance can be made the terms of the capital raise will provide enough capital to repay all Company debt or satisfy all current demand on the Company. There can be no assurance that nCoat will raise needed capital in time to forestall actual default of its debentures and subsequent possible liquidation of its assets.

Current global, national and local economic conditions have affected nCoat revenues in both aftermarket and OEM market sectors and these revenue decreases may continue for the foreseeable future.

Current global economic crisis world-wide in general has had a material negative impact on key industries from which nCoat derives a significant portion of its revenue and most of its profitability. Automotive revenues decreased in the fourth quarter of 2008 by 55% over same period revenues in 2007. Heavy duty truck sales have decreased 65% over 2007 and 2008 when compared with sales the two years previous. Year over year sales in 2009 in automotive industries were again siginificantly reduced over 2008. Consumer confidence and spending have decreased to levels lower than has been seen in the last 40 years. These factors have had a negative impact on nCoat revenues in both OEM and aftermarket market segments. nCoat total revenues in the fourth quarter of 2008 decreased 20% year over year with aftermarket sales decreasing over 40% in the same period. OEM sales decreased slightly during the period. Year over year nCoat revenues in 2009 were over 25% lower than 2008. Fourth quarter 2009 revenue for nCoat increased over fourth quarter 2008 due to increased diesel engines truck sales of 2009 platform trucks prior to the last mandated EPA emissions changes scheduled for inclusion on 2010 model diesel engines. nCoat expects first and second quarter revenues for truck sales to significantly weaker than same quarter sales in 2009 as new engine platforms are introduced to the market and as a result nCoat revenues in the first and second quarters of 2010 will be less than same quarter sales in 2009. nCoat expects additional decreases in OEM and aftermarket sales until automotive, trucking, motorcycle and aircraft sales begin to increase.

nCoat, HPC, and nTech have a limited operating history.

We are a company with limited operating history and experience. nCoat, Inc. was also limited in its operating history prior to the merger with Tylerstone. It had acquired HPC, a company with a 23-year operating history with all but the last seven years in performance automotive markets. While HPC’s operating history in its historical primary market is very strong, commercial success in the new OEM markets is limited. MCCI historical operating history is identical to that of HPC, nTech was formed three years ago and therefore has less operating history than nCoat or any of its other subsidiaries. Therefore both the Company all its operating subsidiaries have a limited number of current customers in the new target markets. Further, both the Company and its operating subsidiaries have experienced the need to refocus manufacturing to handle increased volume of OEM orders, which has required significant corporate cash resources and required significant management talent to accomplish. This change led to reduced cash reserves for operations and management disruption to the core after-market business. In addition, activities necessary to transition and integrate acquired companies and to consolidate operating facilities, management, employees and systems have required significant capital and management and employee time and attention. Recent negative impacts of the global financial crisis and subsequent decreased nCoat revenues have also required management time and attention. To meet its business plan, the Company will need to keep focused on business prospects, develop structured management and personnel responsibilities, and develop expansion plans for product development, production and customer services that can remain ahead of the prospective growth or shrinkage based on market conditions and financial status.

We will require substantial working capital to implement our business plan.

Projected success and growth are dependent on sufficient working capital to fund operations and product development. Management originally engaged investment bankers to assist in raising $20,000,000, of which $14,250,000 has been raised. Included in the capital raise discussed earlier in this document is additional capital to sufficiently fund operations, fund expansion of sales efforts, fund expansion of production capacity and operations, fund the development and growth of our products mix, and the capital raise may include an additional $5,000,000 to $10,000,000 to allow us to acquire accretive companies. All of these efforts are a part of our business strategic plan discussed herein. There is no assurance that any such additional funds will be available or available on terms and conditions acceptable to the Company. Further, if we are successful in raising such funds, there can be no assurance that such funds will be sufficient or that such operational activities will be successful within the anticipated timeframe. In such case, we could be required to seek additional investment on terms available in the marketplace, which could materially increase corporate indebtedness and subject us to high interest rates and/or dilute shareholders’ ownership positions. Furthermore, the failure to obtain additional working capital, if needed, could prevent us from achieving our business objectives.

We have incurred continuing losses, and we may not be able to operate profitably in the future

Through December 31, 2009, nCoat incurred losses totaling $ 574,239,722 and had negative shareholders’ equity of $937,752,016. If we are unable to attain profitability and restructure current debenture debt obligations we may need to cease operations.

We are experiencing a significant liquidity crisis and we may not obtain sufficient funding to continue operations.

We are experiencing a significant liquidity crisis. A number of our vendors have turned our accounts over to collection agencies and at December 31, 2009, we had accounts payable in excess of $2.0 million over 120 days past due. At December 31, 2009, we had cash on hand of $17,000, and net trade receivables of $450,626. We do not generate sufficient cash from our operations in any given month to meet our financing expenses and fund our operations. We have an immediate need for financing to pay such overdue accounts and fund our operations. Because we generate only enough income to support our current operations, we need immediate financing of approximately $2,500,000 to pay aged payables and notes.. There can be no assurance such financing will be available, or available on terms acceptable to the Company. If we are unable to obtain such financing, we will be unable to pay our liabilities, and we may need to cease operations.

Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our financial statements for the year ended December 31, 2007

Because none of our financial statements have been audited since third quarter 2008, including the financial statements for all of 2009 and including financials statements in this report, we again include this note from our 2007 Form 10K. Because we generated significant losses and required additional working capital to continue operations, our independent registered accounting firm included in its report for the year ended December 31, 2007 an explanatory paragraph to the effect that these conditions raised substantial doubt about our ability to continue as a going concern.

Our business strategy includes dependence on strategic partnerships with well-established corporations for business growth and development.

Our business strategy includes, among other elements the development of long-term strategic partnerships with well-established corporations. These companies include large original equipment manufacturers (OEM’s) that build parts, engines, pistons, or other components in the automotive and marine fields with which we could leverage our business using their book of business, or brand identification in the industry. We cannot dictate to those companies their business activities regarding our partnership, however, we expect to enter into agreements that will allow us to influence the partnership for mutual success. Our growth in this area of our business plan may be limited if we are either unable to identify and partner with these larger companies, or in the course of the partnership we are unable to execute our business plans.

Our products and technologies are subject to technological change and obsolescence.

Our products are subject to competitive technological advances and new competitive product introductions. Current competitors or new market entrants could introduce products with features that render products sold by the Company less marketable or obsolete. In addition, some of our services to large accounts provide products enabling customers’ technology to efficiently operate. There can be no assurances that our customers will continue to utilize their current technology innovations that require our products and services and new technology innovations that do not require our products and services may be used. Our future success will depend, to a certain extent, on the ability to adapt to technological change and to address market needs. There can be no assurance that we will be able to keep pace with technological change or the demands of the marketplace.

Many of our competitors may have greater capitalization or be better positioned in our markets.

The coatings industry includes large commodity coating providers, including BASF, Pittsburg Paint & Glass, and Sherwin-Williams to name three of the largest. Although we are in a much smaller niche segment of the coatings industry which includes a large number of small and regional providers, these larger companies may elect to develop operations and marketing into our niche of high performance coatings. These competitors possess greater capitalization, market presence and sales and distribution channels than the company and could, if they elected to directly compete, eliminate market advantages currently enjoyed by nCoat leading to significant loss of revenue and consequently lead to our failure.

Certain nCoat technologies are in the early stages of development.

While we do have marketable formulations that include formulas and coatings that we employ in generating revenues, we also have additional technologies that are not yet incorporated in our market mix. Our business plan is based, in part, on our ability to create additional nanoparticle formulations that exceed the performance of a number of our current coatings, as well as developing additional methods to improve the application process. We are developing coatings with greater thermal protection capabilities, with methods that will allow us to create more plant throughput for our OEM volume clients and direct development of new materials that will provide higher levels of performance. Some of our technologies are in an early stage of development. These technologies have not been extensively marketed or laboratory tested. In order to fully validate the commercial feasibility of the technologies, additional product research and development and extensive testing must be done. Any failures experienced by our technologies while in product development could negatively impact our performance and ability to achieve our business objectives.

We may experience difficulty integrating future acquisitions.

One of the elements of our business strategy is to continue to acquire other coatings companies. With each of the potential target, we undertake extensive due diligence to understand all aspects of the acquisition target, including its history, management, markets, operations, marketing, sales, finance, personnel, assets, intellectual property, risks, reputation, strengths, weaknesses, opportunities, threats, and synergies, etc. of all domestic and international business operations. Experience has shown that discovering all of the issues inherent in an acquisition leading to total seamless operations between us and the acquired company is impossible. We may, in the course of future acquisitions, meet unexpected difficulties in transitioning and integrating a new acquisition. Areas of potential difficulty may including inexperience in certain markets, , reactions of management or employees of the acquired company, lack of anticipated synergy with our core business, and/or missing historical information. Any of these issues may result in increased expenses, decreased revenues, loss of key personnel, or other impacts which could negatively affect the Company. In each acquisition nCoat negotiates a holdback of a portion of the purchase consideration for a period of time as we integrate the operations of the acquisition. There can be no assurance that the amount held back will be sufficient to offset the losses or expenses incurred should problems arise.

Our processes and equipment are subject to the risk of unexpected failures.

Our manufacturing processes are extremely specialized and depend on critical pieces of equipment, such as air compressors, ovens, application machinery, conveyor systems, overhead cranes, vehicles, computer and communications systems and other machinery that may have to be repaired or replaced. On occasion, equipment may be out of service as a result of unanticipated failures which may result in material plant shutdowns or periods of reduced production with significant expense and time delay. Interruptions in production capabilities will inevitably increase production costs and reduce nCoat sales and earnings. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated natural or man-caused events such as fires, explosions, floods, natural disasters, adverse weather conditions, or other unforeseen conditions. Furthermore, any interruption in production capability may require us to make large capital expenditures to remedy the situation, which could have a negative effect on our profitability and cash flows. Although we have business interruption insurance, management cannot provide any assurance that the insurance will cover all losses that could occur as a result of the equipment failures. In addition, longer-term business disruption could result in a loss of customers. If this were to occur, future sales levels, and therefore profitability, could be adversely affected.

There is no guarantee that we will be able to protect our intellectual property.

As part of our business strategy, we intend to accelerate investment in new technologies in an effort to strengthen and differentiate the product portfolio and make our manufacturing processes more efficient. As a result, we believe that the protection of proprietary intellectual property will become increasingly important to the business. Currently, we have patent applications pending. We expect to rely on a combination of patents, trade secrets, trademarks and copyrights to provide protection in this regard, but this protection might be inadequate. For example, pending or future patent applications might not be approved or, if allowed, the patents might not be of sufficient strength or scope. Conversely, third parties might assert that technologies infringe their proprietary rights. In either case, litigation could result in substantial costs and diversion of our resources, and whether or not we are ultimately successful, the litigation could hurt our business and financial condition.

We may incur significant costs to comply with the “controls and procedures” requirements of the securities laws.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002 or “SOX 404”, the Securities and Exchange Commission or “SEC” adopted rules requiring public companies to include a report of management on the company’s internal controls over financial reporting in their annual reports, including Form 10-KSB. In addition, the independent registered public accounting firm auditing a company’s financial statements must also attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting as well as the operating effectiveness of the company’s internal controls. nCoat Auto was not subject to these requirements until the Closing. Anticipating the possible Agreement, both the Company and nCoat Auto have evaluated internal control systems in order to allow management to report thereon, and independent auditors to attest to, the Company’s internal controls as required by these requirements of SOX 404. Under current law, the Company was subject to these requirements beginning with the management report for the annual report for the fiscal year ending December 2007 and auditor attestation for the Company’s 2008 annual report. Management can provide no assurance that the Company will be able to comply with all of the requirements imposed thereby. There can be no assurance that the Company will receive a positive attestation from the independent auditors. In the event nCoat identifies significant deficiencies or material weaknesses in its internal controls that cannot remediated in a timely manner or management is unable to receive a positive attestation from the independent auditors with respect to the Company’s internal controls, investors and others may lose confidence in the reliability of the Company’s financial statements.

We rely heavily on Company management.

Our ability to execute our business plan relies to a considerable extent on the efforts of Paul Clayson and Terry Holmes. In the event that the services of Mr. Clayson and Mr. Holmes become unavailable, we may not be able to achieve our business objectives.

Paul Clayson, our Chief Executive Officer and Chairman of our Board and Terry R. Holmes, our President and Chief Operating Officer are involved in other businesses which may cause them to devote less time to our business.

Paul Clayson, our Chief Executive Officer and Chairman of our Board and Terry R. Holmes, our President and Chief Operating Officer, serve as officers for other companies. In addition to serving as our Chief Executive Officer and Chairman of our Board, Mr. Clayson also serves as the President and Chief Operating Officer and equity partner of Sequoia Pacific Research Company, Inc. a nanotechnology company that presently has no day-to-day operational activity. Mr. Clayson devotes approximately 100% of his professional time, to our business. Mr. Holmes serves as Chief Executive Officer and Chairman of the Board of TelNetz, LLC, an ASP telephony and web service company and as Chief Executive Officer and Chairman of Sequoia Pacific Research Company, Inc. a nano-technology research, development and technology licensing company. In addition, he is involved with other minor business interests. Mr. Holmes devotes approximately 100% of his professional time to our business. Messrs. Clayson’s and Holmes’ involvement with other businesses have been handled after hours, and at time when there has been no conflict to date. One of the risks we face, however, may be the point in time where outside business involvement may cause them to allocate their time and services between us and other entities. Consequently, they may give priority to other matters over our needs which may materially cause us to lose their services temporarily which could affect our operations and profitability.

We are dependent on the services of our technical personnel.

The loss of any key personnel could have a material adverse impact on our business. Our future success depends, to a significant extent, on its ability to attract, train and retain technical and personnel. Recruiting and retaining capable personnel, particularly those with expertise in the industry, are vital to success. There is substantial competition for qualified technical personnel, and there can be no assurance that we will be able to attract or retain such personnel. If it is unable to attract and retain qualified employees, the business may be materially and adversely affected.

The market price of our common stock likely will be volatile and beyond our control.

As we are a relatively new company in the public market, the market price for our shares is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

	•	announcements of technological or competitive developments;

	•	regulatory developments in target markets affecting the Company, customers or competitors;

•

announcements regarding patent litigation or the issuance of patents to the Company or its competitors;

	•	announcements regarding new financings, acquisitions or other financial transactions;

	•	announcements of studies and reports relating to the conversion efficiencies of anticipated products of the Company or those of its competitors;

	•	Actual or anticipated fluctuations in nCoat quarterly operating results;

	•	Changes in financial estimates by securities research analysts;

	•	Changes in the economic performance or market valuations of other high performance coating industry companies;

	•	Addition or departure of the Company’s executive officers and key personnel;

	•	release or expiry of resale restrictions on other outstanding common shares;

	•	sales or perceived sales of additional shares to raise working capital

	•	global, national, regional or local economic conditions; and/or

	•	multiple additional unforeseen factors.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also have a material adverse effect on the market price of the Company’s shares.

Our ownership is highly concentrated in a few individuals.

There is a large portion of our stock owned by few individuals. As seen in the section Security Ownership of Certain Beneficial Owners and Management, 45.5% of our present outstanding voting securities are beneficially owned by a few shareholders. As a result, they possess significant influence and can influence election a majority of our board of directors and to authorize or prevent proposed significant corporate transactions. This concentrated ownership may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer. In addition, we anticipate additional financing efforts in order to complete our business strategy. Some or all of such financing may be acquired by a single person or a relatively small group of persons that could have the effect of further concentrating the ownership.

Trading in our common stock is limited.

Our common shares were originally quoted on the OTC Bulletin Board. Our common stock is now quoted on the Pink Sheet OTC Electronic Markets (“Pink Sheets”) and was moved to the Pink Sheets following rapid devaluation of our commons stock after our debenture holders forced a restructure of the terms of the debenture notes to pay accumulated interest. The Pink Sheets is a significantly more limited market than the New York Stock Exchange or NASDAQ system or the OTC Bulletin Board. The quotation of our shares on the Pink Sheets may result in a less liquid market available for existing and potential stockholders to trade shares of its common stock could depress the trading price of its common stock and could have a long-term adverse impact on our ability to raise capital in the future.

Holders of our common stock are subject to the risk of additional and substantial dilution to their interests as a result of the issuances of common stock in connection with the Series A Convertible Notes and Series A Warrants.

The following table describes the number of shares of common stock that were issued in connection with the conversion of the Convertible Debentures, and that would be issuable, assuming a full exercise of the Series A Warrants and assuming that the full principal amount of the Series A Notes outstanding as of the date of this Report (excluding any interest accrued) was converted into shares of our common stock, irrespective of the availability of registered shares, and further assuming that the applicable conversion or exercise prices at the time of such conversion or exercise were the following amounts:

Shares Issuable Upon Conversion of $9,000,000 Principal Amount of Series A Notes having a conversion price of $.25 per share		Shares Issuable Upon Exercise of Series A Warrants having an exercise of $1.00 per share		Shares Issued Upon the Conversion of Previously issued Debentures having a conversion price of $.50 per share		Total Shares Issued or Issuable in Connection with Conversion or Exercise of Series A Notes, Warrants, and Convertible Debentures
36,000,000		22,500,000		5,171,719		63,671,719

The table assumes the hypothetical exercise of all of the Series A Warrants at an exercise price of $1.00 per share, and a conversion of all of the principal of the Series A Notes at a conversion price of $.25 per share. As a result, we would issue a total of 63,671,719 shares of our common stock, which constitutes approximately 66% of the number of shares issued and outstanding prior to such issuances. In addition, there are shares underlying the Series B Notes and Warrants. The dilution factor of this additional series increases the shares to 84,796,719 or 88% of the issued and outstanding. Although there can be no guarantee that the Selling Shareholders will exercise the Series A Warrants or convert the Series A Notes, or the other holders of the Series B Notes and Warrants will exercise their warrants or convert their notes, should they choose to do so, holders of our common stock would experience substantial dilution of their interests and these factors may have a depressive effect upon the market price of our common stock. The impact of the exercise of the warrants in both cases is less because the Company would receive additional capital in exchange for the issuance of the shares, however the number of shares, the dilution and the impact of per share earnings will be affected. We have, for purposes of the table, not included the interest shares that may be payable under the terms of the Notes. As it stands the agreements provide for the payment of interest by share if and only if those shares are registered. To date the interest payments have been cash only.

There is an increased potential for short sales of our common stock due to the sales by the Selling Shareholders of shares issuable upon conversion or exercise of the Series A Notes and the Series A Warrants, and the shares of common stock that were issued upon conversion of the Convertible Debentures, which could materially affect the market price of our stock.

Downward pressure on the market price of our common stock that likely will result from sales by the Selling Shareholders of our common stock issuable upon conversion of the Series A Notes or exercise of the Series A Warrants, or the shares of common stock that were issued upon exercise of the Convertible Debentures, could encourage short sales of common stock by the Selling Shareholders or others. A "short sale" is defined as the sale of stock by an investor that the investor does not own. Typically, investors who sell short believe that the price of the stock will fall, and anticipate selling at a price higher than the price at which they will buy the stock. Significant amounts of such short selling could place further downward pressure on the market price of our common stock, which could make it more difficult for existing shareholders to sell their shares.

The restrictions on the number of shares issued upon exercise of the Series A Warrants and conversion of the Series A Notes may have little if any effect on the adverse impact of our issuance of shares in connection with exercise of the Series A Warrants and conversion of the Series A Notes, and as such, the Series A Selling Shareholders may sell a large number of shares, resulting in substantial dilution to the value of shares held by our existing shareholders.

The holders of Series A Notes and Series A Warrants (collectively, the “Series A Selling Shareholders”) are prohibited, except in certain circumstances, from exercising the Series A Warrants and converting amounts of the Series A Notes to the extent that the issuance of shares would cause any Series A Selling Shareholder to beneficially own more than 4.99% of our then outstanding common stock. These restrictions, however, do not prevent any Series A Selling Shareholder from selling shares of common stock received in connection with an exercise or conversion, and then receiving additional shares of common stock in connection with a subsequent exercise or conversion. In this way, a Series A Selling Shareholder could sell more than 4.99% of the outstanding common stock in a relatively short time frame while never holding more than 4.99% at one time. As a result, existing shareholders and new investors could experience substantial dilution in the value of their shares of our common stock.

The trading market for our common stock is limited, and investors who purchase shares from the Selling Shareholders may have difficulty selling their shares.

The public trading market for our common stock is limited. As of the date of this Report, our common stock was listed on the Pink Sheets. Nevertheless, an established public trading market for our common stock may never develop or, if developed, it may not be able to be sustained. The Pink Sheets is an unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than other markets. Purchasers of our common stock therefore may have difficulty selling their shares should they desire to do so.

It may be more difficult for us to raise funds in subsequent stock offerings as a result of the sales by the Selling Shareholders of our common stock issuable upon exercise or conversion of the Series A Notes and the Series A Warrants, and our common stock that was issued upon conversion of the Convertible Debentures.

As noted above, sales by the Selling Shareholders of common stock issuable upon conversion or exercise of the Series Notes or Series A Warrants, or of the common stock that was issued to the Selling Stockholders upon conversion of the Convertible Debentures, likely will result in substantial dilution to the holdings and interest of current and new shareholders. Additionally, as noted above, the volume of shares sold by the Selling Shareholders could depress the market price of our stock. These factors could make it more difficult for us to raise additional capital through subsequent offerings of our common stock, which could have a material adverse effect on our operations.

Our common stock is considered a penny stock. Penny stocks are subject to special regulations, which may make them more difficult to trade on the open market.

Securities in the OTC market are generally more difficult to trade than those on the Nasdaq National Market, the Nasdaq SmallCap Market or the major stock exchanges. In addition, accurate price quotations are also more difficult to obtain. The trading market for our common stock is subject to special regulations governing the sale of penny stock.

A "penny stock," is defined by regulations of the Securities and Exchange Commission as an equity security with a market price of less than $5.00 per share. However, an equity security with a market price under $5.00 will not be considered a penny stock if it fits within any of the following exceptions:

	•	the equity security is listed on Nasdaq or a national securities exchange;

	•	the issuer of the equity security has been in continuous operation for less than three years, and either has (a) net tangible assets of at least $5,000,000, or (b) average annual revenue of at least $6,000,000; or

•

the issuer of the equity security has been in continuous operation for more than three years, and has net tangible assets of at least $2,000,000.

If you buy or sell a penny stock, these regulations require that you receive, prior to the transaction, a disclosure explaining the penny stock market and associated risks. Furthermore, trading in our common stock would be subject to Rule 15g-9 of the Exchange Act, which relates to non-Nasdaq and non-exchange listed securities. Under this rule, broker-dealers who recommend our securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. Securities are exempt from this rule if their market price is at least $5.00 per share.

Penny stock regulations will tend to reduce market liquidity of our common stock, because they limit the broker-dealers' ability to trade, and a purchaser's ability to sell the stock in the secondary market. The low price of our common stock will have a negative effect on the amount and percentage of transaction costs paid by individual shareholders. The low price of our common stock may also limit our ability to raise additional capital by issuing additional shares. There are several reasons for these effects. First, the internal policies of many institutional investors prohibit the purchase of low-priced stocks. Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased on margin. Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced stocks. Finally, broker's commissions on low-priced stocks usually represent a higher percentage of the stock price than commissions on higher priced stocks. As a result, our shareholders will pay transaction costs that are a higher percentage of their total share value than if our share price were substantially higher.

Forward-looking statements

Certain of the statements contained in this Report (other than the historical financial data and other statements of historical fact) are forward-looking statements. These statements include, but are not limited to our expectations with respect to the development of a new offices or divisions; the achievement of certain revenue goals; the receipt of new business and contracts; and our intentions with respect to financing our operations in the future. Additional forward-looking statements may be found in the “Risk Factors” Section of this Report, together with accompanying explanations of the potential risks associated with such statements.

Forward-looking statements made in this Report are made based upon management’s good faith expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with such expectations, or that the effect of future developments on nCoat will be those anticipated by management. Forward-looking statements may be identified by the use of words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “anticipate,” “intends” and other words of similar meaning in connection with a discussion of future operating or financial performance.

You are cautioned not to place undue reliance on these forward looking statements, which are current only as of the date of this Report. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Many important factors could cause actual results to differ materially from management’s expectations, including those listed in the “Risk Factors” Section, as well as the following:

	•	unpredictable difficulties or delays in the development of new products and technologies;

	•	changes in U.S. or international economic conditions, such as inflation, interest rate fluctuations, foreign exchange rate fluctuations or recessions in nCoat’s markets;

•

pricing changes to our supplies or products or those of our competitors, and other competitive pressures on pricing and sales;

•

difficulties in obtaining or retaining the management, engineering, and other human resource competencies that we need to achieve our business objectives;

•

the impact on nCoat or a subsidiary from the loss of a significant customer or a few customers;

	•	risks generally relating to our international operations, including governmental, regulatory or political changes;

	•	Conversion of debt to a large number of shares by debenture holders.

	•	transactions or other events affecting the need for, timing and extent of our capital expenditures; and

	•	the extent to which we reduce outstanding debt.

ITEM 2.

PROPERTIES

All of the facilities of the Company are leased.

We lease 63,600 square feet of office and production space in Whitsett, North Carolina which houses our corporate headquarters and largest production facility. Our monthly lease payment is $20,600 per month. The terms of this lease expire

3/31/2011.

We lease 5,000 square feet of office space in King of Prussia, Pennsylvania which was formerly the corporate headquarters of MCCI. We vacated this space March 31, 2008 and subsequently subleased the space.

We rent, on a month-to-month basis, property in Oklahoma City, Oklahoma, with a monthly payment of $1,250.

We rent, on a month-to-month basis, a property in Tempe, Arizona, with a monthly payment of $6,676.

We believe that our current leased and rented space is sufficient to meet our needs for the next 12 months and that the property is currently in acceptable condition.

The following table set forth a summary of these leases:

Company	Location	Office Space		Production Space		Total		Annual Rent expense		Expiration Date
nCoat	North Carolina		12,000				12,000	$	247,200	3/31/11

HPC	North Carolina		*		51,600		51,600		**	3/31/11

	Oklahoma		*		17,000		17,000	$	15,000	N/A (month-to-month)

nTech	North Carolina		****				0		**	3/31/11

MCCI	Pennsylvania		5,000				5,000	$	65,000	12/31/10
	Pennsylvania		*		9,840		9,840	$	34,949	1/30/10

	Arizona		*		15,000		15,000	$	78,024	N/A (month-to-month)
TOTALS			17,000		93,440		110,440	$	440,173

*Although the table does not show office space in a number of the facilities, operational management personnel have offices within the site and the square footage set forth as production space includes these amounts.

** The North Carolina location lease encompasses nCoat, HPC and nTech under a single lease with an annual rent expense of $247,200.

**** nTech’s office personnel are presently sharing office space within the nCoat office space listed.

We believe that the facilities are well maintained, and are generally suitable and adequate for our current and projected operating needs.

ITEM 3.

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this Report, with the exception of the case cited below, which has been resolved subsequent to the close of our fiscal year, we were not aware of any such legal proceedings or claims against the Company or its subsidiaries that management believes will have a material adverse affect on business development, financial condition or operating results.

Jeffrey C. Holm et al. v. High Performance Coatings, Inc., Civil No. 080903021, Third Judicial District Court, Salt Lake County, State of Utah. On February 20, 2008, Jeffrey Holm and Thunderchief Enterprises, LLC (collectively, the “Plaintiffs”) filed a complaint against High Performance Coatings, Inc., Nanocoat, Inc., Terry R. Holmes, Paul S. Clayson (collectively, the “nCoat Defendants”), and others, in connection with a stock purchase agreement, a consulting agreement, an escrow agreement, and other agreements between certain of the parties. The Complaint brings claims for relief against the nCoat Defendants for breach of the consulting agreement, slander, tortuous interference with economic relations, breach of the stock purchase agreement, declaratory relief relating to a non-compete agreement, and conversion. The Plaintiffs sought damages from the nCoat Defendants of approximately $740,000, plus the return of certain designated personal property, together with damages to be proven at trial, punitive damages, fees, costs, and such other relief as the court deems appropriate. The nCoat Defendants filed an Answer and Counter-claim against the Plaintiffs for breach of contract, defamation, tortuous interference, violations of Utah Uniform Securities Act, common law fraud and misrepresentation, and declaratory relief and the Company continued its vigorous defense and prosecution of its claims throughout 2008.

As of January 2009, a settlement was reached whereby nCoat released the previously escrowed funds associated with the HPC purchase originally scheduled for release to Holm in August, 2008 and Jeffrey C. Holm dismissed with prejudice his civil suit against the Company and agreed to a two year non-compete agreement and the Company dismissed with prejudice its counterclaim against Holm.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

Our common stock trades on the Pink Sheets OTC Electronics markets under the symbol NCOA.pk. The following table sets forth the prices of our common stock as reported and summarized on the Pink Sheets since February 22, 2007. These prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

Calendar Quarter Ended	High Bid		Low Bid
2007 First Quarter	$	1.0900	$	0.5900
2007 Second Quarter	$	1.0500	$	0.6500
2007 Third Quarter	$	0.7300	$	0.3600
2007 Fourth Quarter	$	0.5250	$	0.1000

2008 First Quarter	$	0.2300	$	0.5000
2008 Second Quarter	$	0.0520	$	0.0150
2008 Third Quarter	$	0.0340	$	0.1000
2008 Fourth Quarter	$	0.0150	$	0.0011

2009 First Quarter	$	0.0017	$	0.0017
2009 Second Quarter	$	0.0100	$	0.0100
2009 Third Quarter	$	0.0050	$	0.0040
2009 Fourth Quarter	$	0.0035	$	0.0035

As of March 19, 2010, we had approximately 105 shareholders of holding 126,710,605 shares of common stock.

We have not paid, nor declared, any dividends on our common stock since our inception and do not intend to declare any such dividends in the foreseeable future. Our ability to pay dividends is subject to limitations imposed by Delaware law. Under Delaware law, dividends may be paid to the extent the corporation's assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business.

Penny Stock Rules

Our shares of common stock are subject to the "penny stock" rules of the Securities Exchange Act of 1934 and various rules under this Act. In general terms, "penny stock" is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, authorized for quotation from the NASDAQ stock market, issued by a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on the issuer's net tangible assets or revenues. In the last case, the issuer's net tangible assets must exceed $3,000,000 if in continuous operation for at least three years or $5,000,000 if in operation for less than three years, or the issuer's average revenues for each of the past three years must exceed $6,000,000.

Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of shareholders to sell their shares.

On May 22, 2009, the Company issued 5,000,000 shares of its common stock as the result of a partial conversion of a note holder’s interest, reducing that Note by $7,500.

On August 4, 2009, the Company issued 5,000,000 shares of its common stock as the result of a partial conversion of a note holder’s interest, reducing that Note by $7,500.

On October 12, 2009, the Company issued 5,333,333 shares of its common stock as the result of a partial conversion of a note holder’s interest, reducing that Note by $8,000.

On November 24, 2009, the Company issued 5,333,333 shares of its common stock as the result of a partial conversion of a note holder’s interest, reducing that Note by $8,000.

There have been no repurchases of equity securities by nCoat during the years ended December 31, 2009 or 2008.

ITEM 6.

SELECTED FINANCIAL DATA

The selected consolidated financial information set forth below is derived from our consolidated balance sheets and statements of operations as of and for the years ended December 31, 2008 and December 31, 2007. While the information for 2009 has been developed using Generally Accepted Accounting Practices (GAAP), this information has not yet been audited or reviewed by outside accounting firm. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included in this Report.

nCOAT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31			December 31
	2009			2008
ASSETS	(Unaudited)			(Unaudited)
Current Assets
Cash	$	17,062		$	42,134
Trade receivables, net		450,626			767,160
Inventory		162,710			88,778
Other current assets		55,036			99,281
Deferred income tax assets		-			-
Total Current Assets		685,434			997,353
Property and Equipment, net		1,234,994			1,677,037
Intangible Assets, net		1,845,717			2,375,091
Total Assets	$	3,766,145		$	5,049,481

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	3,501,602		$	3,476,203
Accrued liabilities		1,103,403			859,086
Accrued Interest		83,762,099			17,872,582
Accrued Registration Liability		132,683,572			23,358,690
Deferred revenue		425,840			759,176
Current portion of notes payable		696,800,082			298,734,128
Derivative Premium Payable		120,348			120,348
Accrued consulting obligation		-			500,000
Current portion of obligations under capital leases		123,419			121,988
Total Current Liabilities		918,520,365			345,802,201
Long-Term Liabilities
Notes payable, net of current portion		523,181			150,322
Obligations under capital leases , net of current portion		40,475			206,112
Deferred income taxes		97,262			97,262
Total Long-Term Liabilities		660,918			453,696
Stockholders' Equity (Deficit)
Common stock - $0.0001 par value; 500,000,000 shares authorized; 124,358,605 shares and 102,108,606 shares outstanding, respectively		12,277			10,211
Additional paid-in capital		22,324,601			22,295,667
Accumulated deficit		(937,752,016	)		(363,512,294	)
Total Stockholders' Equity (Deficit)		(915,415,138	)		(341,206,416	)
Total Liabilities and Stockholders' Equity (Deficit)	$	3,766,145		$	5,049,481

n COAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended						For the Twelve Months Ended
	December 31						December 31
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net Sales	$	1,904,549		$	1,695,214		$	7,327,146		$	9,901,588
Cost of Goods Sold		913,817			1,331,644			4,139,937			6,420,227
Gross Profit		990,732			363,570			3,187,209			3,481,361
Operating Expenses
General and Administrative Expense		916,685			986,056			3,630,752			5,496,474
Research and Development Costs		80,794			79,709			321,421			376,165
Sales and Marketing Expenses		149,138			153,930			606,818			645,280
Impairment Loss on Intangible Assets		-			-			-			-
Total Operating Expenses		1,146,617			1,219,695			4,558,991			6,517,919
(Loss) from Operations		(155,885	)		(856,125	)		(1,371,782	)		(3,036,558	)
Redemption premium interest expense		(27,103,349	)		(231,574,115	)		(573,098,351	)		(324,748,542	)
Other Interest expense		(181,917	)		---			(269,589	)		(69,582	)
Income from Bonus/Debt reduction		---						500,000
Gain on derivative liability valuation		---			---			-			492,044
Net Loss	$	(27,441,151	)	$	(232,430,240	)	$	(574,239,722	)	$	(327,362,638	)

Basic and Diluted Loss per Share	$	(0.26	)	$	(2.37	)	$	(5.47	)	$	(3.34	)

Basic and Diluted Weighted-Average Shares Outstanding		104,954,706			98,045,014			104,954,706			98,045,014

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS REPORT ON FORM 10-K CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED BY NCOAT AND DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS ANNUAL REPORT, WORDS SUCH AS "BELIEVES," "EXPECTS," "INTENDS," "PLANS," "ANTICIPATES," "ESTIMATES," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, ALTHOUGH THERE MAY BE CERTAIN FORWARD-LOOKING STATEMENTS NOT ACCOMPANIED BY SUCH EXPRESSIONS. ADDITIONALLY, STATEMENTS THAT RELATE TO THE FUTURE BUSINESS DEVELOPMENT, FINANCIAL PROJECTIONS, CAPITAL RAISING, CAPITAL REQUIRMENTS, GROWTH OF MARKETS OR CUSTOMER BASES, OR FUTURE BUSINESS COMBINATIONS MAY ALSO INCLUDE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED BELOW IN THE SECTION ENTITLED "INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS" AND UNDER THE HEADING "CERTAIN SIGNIFICANT RISK FACTORS," ABOVE. NCOAT, INC., SPECIFICALLY DISCLAIMS ANY OBLIGATION OR INTENTION TO UPDATE ANY FORWARD LOOKING STATEMENT.

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 8 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 31, 2009, and the year then ended and the notes accompanying those financial statements.

Overview

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 the next three years, we may 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 coatings, conformal coatings used to control corrosion and fugitive dust on printed circuit boards and microchips, gas and oil tools, valves and pipelines, marine applications for 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 may investigate to determine our both synergies and diversification with respect to our first two acquisitions. Both internal and external factors may affect our ability to or not to acquire additional companies including relative valuations of target companies, financial criteria, nCoat financial condition, macro economic conditions and other factors.

Internal Organic Growth. We have already taken the existing “book of business” of our two subsidiaries and introduced into it additional productsto cross sell from the sister company’s product lines introduced 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 is one of the two major segments of our business. In additional to the aftermarket sector, we continue to develop customers in the OEM market segment. A strong source for internal organic growth in the next three years is the 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.

Distributed Model Development. The “distributed” business model is our establishment of on-site coatings application as part of the assembly-line process within the manufacturing and/or assembly process of a large customer. nCoat currently has one OEM customer employing a distributed model and we continue to have discussions with others. The savings on handling, shipping, inventory, logistics management and other similar expenses that comes from having the on-site “plant” is the principle benefit for our larger customers.

Licensing Intellectual Property. We continue to enter into “field of use” licensing with manufacturers that are tier-one suppliers of large OEM companies or who deploy a distributed production model described above. However, unlike the distributed 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 and structured as joint ventures to avoid creating competition in our own current market space.

Strengthening 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 industry needs.

In March 2009, NC A&T was awarded a $25m Engineering Resource Center (ERC) grant from the National Science Foundation and was recognized as the first federal government designated historically black college or university (HBCU) to win such an award and one of very few universities nationwide to ever win an ERC grant. nCoat’s commercial development agreement with NC A&T played an important role in aiding NC A&T to obtain the grant and nCoat officers currently serve as key advisors and managers of the ERC, including as chair of the Industrial Advisory Board to the ERC. nCoat expects to commercially benefit from these activities.

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 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 search for, complete due diligence on and acquire other coatings companies that (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 have realized key synergies which include:

1. Jet-Hot had a plant in Arizona as does HPC. The plants are about 10 miles apart. These were consolidated into a single location.

2. 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.

3. Two corporate headquarters existed. The accounting, human resources, legal, purchasing, sales and marketing, R&D and company management were consolidated into our North Carolina headquarter.

4. HPC and JET-HOT sales and marketing groups were consolidated for maximum production and efficiency, including advertising budgets.

5. R&D and technical services were consolidated to nTech, for efficiency and intellectual synergies.

6. HPC and JET-HOT sales prospects include many of the same names, including several where the two companies are the only two competitors for the account. This list was sorted into HPC and MCCI responsibilities, creating a non-competing sales effort.

7. We have acquired sufficient market and operational experience to realize that a single coating entity has a competitive disadvantage in attempting to create high volume productions of both aftermarket parts and OEM parts. The addition of MCCI allows us to create focused plants for each of our major market sectors.

8. Competition between MCCI and HPC for stand-alone coatings sales (no applications services) has been eliminated and we are carrying “best of breed” coating from each area in which we have needs.

9. JET-HOT has more thermal barrier customers than HPC. HPC has more corrosion resistance 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements:


CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 2009 and 2008		F-1
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2009 and 2008		F-2
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2009 and 2008		F-3
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008		F-4
Notes to Consolidated Financial Statements		F-5

nCOAT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31			December 31
	2009			2008
ASSETS	(Unaudited)			(Unaudited)
Current Assets
Cash	$	17,062		$	42,134
Trade receivables, net		450,626			767,160
Inventory		162,710			88,778
Other current assets		55,036			99,281
Deferred income tax assets		-			-
Total Current Assets		685,434			997,353
Property and Equipment, net		1,234,994			1,677,037
Intangible Assets, net		1,845,717			2,375,091
Total Assets	$	3,766,145		$	5,049,481

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	3,501,602		$	3,476,203
Accrued liabilities		1,103,403			859,086
Accrued Interest		83,762,099			17,872,582
Accrued Registration Liability		132,683,572			23,358,690
Deferred revenue		425,840			759,176
Current portion of notes payable		696,800,082			298,734,128
Derivative Premium Payable		120,348			120,348
Accrued consulting obligation		-			500,000
Current portion of obligations under capital leases		123,419			121,988
Total Current Liabilities		918,520,365			345,802,201
Long-Term Liabilities
Notes payable, net of current portion		523,181			150,322
Obligations under capital leases , net of current portion		40,475			206,112
Deferred income taxes		97,262			97,262
Total Long-Term Liabilities		660,918			453,696
Stockholders' Equity (Deficit)
Common stock - $0.0001 par value; 500,000,000 shares authorized;124,358,605 shares and 102,108,606 shares outstanding, respectively		12,277			10,211
Additional paid-in capital		22,324,601			22,295,667
Accumulated deficit		(937,752,016	)		(363,512,294	)
Total Stockholders' Equity (Deficit)		(915,415,138	)		(341,206,416	)
Total Liabilities and Stockholders' Equity (Deficit)	$	3,766,145		$	5,049,481

F-1

n COAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended						For the Twelve Months Ended
	December 31						December 31
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net Sales	$	1,904,549		$	1,695,214		$	7,327,146		$	9,901,588
Cost of Goods Sold		913,817			1,331,644			4,139,937			6,420,227
Gross Profit		990,732			363,570			3,187,209			3,481,361
Operating Expenses
General and Administrative Expense		916,685			986,056			3,630,752			5,496,474
Research and Development Costs		80,794			79,709			321,421			376,165
Sales and Marketing Expenses		149,138			153,930			606,818			645,280
Impairment Loss on Intangible Assets		-			-			-			-
Total Operating Expenses		1,146,617			1,219,695			4,558,991			6,517,919
(Loss) from Operations		(155,885	)		(856,125	)		(1,371,782	)		(3,036,558	)
Redemption premium interest expense		(27,103,349	)		(231,574,115	)		(573,098,351	)		(324,748,542	)
Other Interest expense		(181,917	)		---			(269,589	)		(69,582	)
Income from Bonus/Debt reduction		---						500,000
Gain on derivative liability valuation		---			---			-			492,044
Net Loss	$	(27,441,151	)	$	(232,430,240	)	$	(574,239,722	)	$	(327,362,638	)

Basic and Diluted Loss per Share	$	(0.26	)	$	(2.37	)	$	(5.47	)	$	(3.34	)

Basic and Diluted Weighted-Average Shares Outstanding		104,954,706			98,045,014			104,954,706			98,045,014

F-2

nCOAT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(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											-
Conversion of convertible note 5/22/2009		5,000,000		500		7,000					7,500
Conversion of convertible note 8/04/2009		5,000,000		500		7,000					7,500
Conversion of convertible note 10/12/2009		5,333,333		533		7,467					8,000
Conversion of convertible note 11/24/2009		5,333,333		533		7,467		-			8,000
Net Loss								(574,239,722	)		(574,239,722	)
Balance - December 31, 2009 (Unaudited)		122,775,272	$	12,277	$	22,324,601	$	(937,752,016	)	$	(915,415,138	)

F-3

nCOAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Twelve Months Ended
	December 31,
	2009			2008
	(Unaudited)			(Unaudited)

Cash Flows From Operating Activities
Net loss	$	(574,239,722	)	$	(327,362,638	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		502,417			599,232
Amortization of intangible assets		529,374			593,772
Compensation expense paid by issuance of common stock		-			247,696
Redemption premium on notes payable recognized as interest expense		573,356,605			325,753,121
Gain on derivative warrant liability		-			(492,044	)
Changes in assets and liabilities:
Accounts receivable		316,534			167,177
Inventory		(73,932	)		83,699
Other current assets		44,245			114,768
Accounts payable		25,399			1,263,540
Deferred revenue		(333,336	)		759,176
Accrued liabilities		(255,683	)		(1,441,037	)
Net Cash Provided by Operating Activities		(128,099	)		286,462
Cash Flows From Investing Activities
Purchase of property and equipment		(251,545	)		(43,080	)
Payment for purchase MCC Inc., net of cash acquired		-			-
Net Cash Used in Investing Activities		(251,545	)		(43,080	)
Cash Flows From Financing Activities
Proceeds from issuance of notes payable		540,000			500,000
Deferred income taxes		-			(163,313	)
Changes in stock and paid-in-capital		31,000			(144,435	)
Principal payments on notes payable		(306,049	)		(535,828	)
Principal payments under capital lease obligations		(164,206	)		(153,633	)
Net Cash Used in Financing Activities		100,745			(497,209	)
Net Increase (Decrease) in Cash		(278,899	)		(253,827	)
Cash At Beginning of Period		295,961			295,961
Cash At End of Period	$	17,062		$	42,134
Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	105,254		$	489,910

F-4

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

Note 1. Basis of Presentation and Description of Business

Financial Statements - The accompanying unaudited annual condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) for condensed financial information and with the instructions to Form 10-K for Small Businesses. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the year ended December 31, 2009 are not necessarily indicative of the results that may be expected for any future periods.

Nature of Operations - nCoat, Inc. and its subsidiaries specialize in nanotechnology research, licensing, and the commercialization, distribution and application of nano as well as multiple non-nano surface coatings. The Company’s 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. Corporate offices and operations headquarters are located in Whitsett, North Carolina and application operations are conducted at facilities located in Oklahoma City, Oklahoma; Quaker Town, Pennsylvania; Tempe, Arizona; and Whitsett, North Carolina.

Principles of Consolidation – The accompanying consolidated financial statements include the operations, accounts and transactions of nCoat, Inc., High Performance Coatings, Inc. and nTech, Inc. for all periods presented, of nCoat, Inc. from February 14, 2007 and of MCCI from June 29, 2007. These entities 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 $574,239,722 and $327,362,638 and using $128,099 and generating $286,462of cash in operating activities during the years ended December 31, 2009 and 2008 respectively. The Company has experienced losses from operations since inception and has an accumulated deficit of $937,752,016 as of December 31, 2009 which include over $920,000,000 in penalties, interest, and carrying charges resulting from non-payment of interest due on debenture financing the company engage in beginning May 31, 2007. . At December 31, 2009, the Company had a working capital deficiency of $915,415,138. Based on current operations, cash flows from operations were positive for the second half of calendar year 2009. As of December 31, 2009, the Company’s principal sources of liquidity was $450,626 of trade accounts receivable while current liabilities totaled $918,520,365 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.

F-5

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

Licensing Revenue Recognition – Fees received from licensing the Company’s technology to customers is recognized over the term of the license agreements. Licensing fees received prior to recognition are accounted for as deferred revenue. Sales revenue excludes lease payments made by customers on facilities used by the Company.

Loss Per Common Share – Basic loss per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding. The nonvested common shares issued as employee compensation are excluded from the calculation of basic loss per share. Diluted loss per share reflects dilutive potential common shares outstanding during the period. During the twelve months ended December 31 2009, the following anti-dilutive potential common shares were excluded from the calculation of diluted loss per share: no nonvested shares of common stock; 17,379,242,650 shares of common stock issuable upon conversion of notes payable; 32,418,750 shares of common stock issuable upon the exercise of warrants. During the twelve months ended December 31, 2008, potential common shares consisted of 1,837,800 nonvested shares of common stock; 6,601,388,889 shares of common stock issuable upon conversion of notes payable; 32,418,750 shares of common stock issuable upon the exercise of warrants.

Note 2. Acquisition of MCC, Inc.

On June 29, 2007, nCoat, Inc., completed the acquisition of all the capital stock of MCC, Inc. ("MCCI"), doing business in the marketplace under the brand of JET-HOT® Coatings. MCCI provides high performance coatings of metal parts for industrial and personal use. In connection with the acquisition of MCCI, the Company entered into a consulting agreement with the former majority shareholder of MCCI whereby the Company is obligated to pay the former majority shareholder consulting fees of $120,000 annually, performance bonuses equal to 2.5% of net sales 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. Because of low cash flow, nCoat was unable to pay all obligations to the former majority shareholder by December 31, 2009 and thereby restructured a new agreement with him that continues until 11/01/2011.

F-6

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

Note 4. Property and Equipment

Property and Equipment

	December 31,			December 31,
	2009			2008
Property and Equipment	$	2,188,200		$	2,127,839
Computer and office equipment		118,959			118,959
Furniture and fixtures		50,205			50,205
Vehicles		155,182			155,182
Leasehold improvements		589,138			589,138
Total Property and Equipment		3,101,684			3,041,323
Less: Accumulated Depreciation		1,866,690			1,364,286
Net Property and Equipment	$	1,234,994		$	1,677,037




Intangible Assets 12/31/2009
	HPC, Inc.			MCCI, Inc.			Total
Original Balance		3,991,444			5,393,429			9,384,873
Impairment 12/31/2007		(1,841,977	)		(4,574,033	)		(6,416,010	)
Adjusted Balance 12/31/2009		2,149,467			819,396			2,968,863
Accumulated Amortization		(795,034	)		(328,112	)		(1,123,146	)
Net Book Balance 12/31/2009		1,354,433			491,284			1,845,717

Impairment of Intangible Assets – The Company is required to review the fair market carrying values of intangible assets regularly and evaluate them either through a formal evaluation undertaken by an independent third-party valuation, or by comparing the present value of the net cash flows generated by the assets over their useful life, together with any recoverable value at the end of the life. The Company has undertaken careful conservative projections of revenues expected, including the subjective likelihood of each area of revenue and has determined that there is impairment to the intangible asset carrying value of $6,416,010. We have adjusted the Gross Carrying amount, and in so doing also reset Accumulated Amortization going forward. This impairment directly affects the reported revenues of the Company for the period ending December 31, 2009 and December 31, 2008.

Note 6. Notes Payable

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 were originally convertible into common stock at $0.40 per share through May 31, 2010, when the Series A Notes were due. Accrued interest is payable quarterly. From May 31, 2007 through July 10, 2007, the Company also 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 were originally convertible into common stock at $0.40 per share through May 31, 2010, when the Series B Notes were due. Accrued interest is payable quarterly. 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 the current conversion price.

F-7

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009

(Unaudited)

The common stock into which the Series A Notes are convertible and the related warrants are subject to certain registration rights. Per the registration rights agreement, the Company is obligated obtain the effectiveness of a registration statement, 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. Failing to obtain effectiveness of the registration statement, the Company is 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. 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 had adjusted the liability to $540,000 ($132,683,572 after the effects of the redemption premium discussed below) at December 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.

Upon the occurrence of certain default or triggering events, the notes holders may demand redemption of the Series A and Series B notes. The triggering events include failure to 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. Upon the occurrence of a triggering event, the holders have the right to require the Company to redeem their notes at an amount equal to the total of unpaid accrued interest, unpaid liquidated damages and the face amount of the notes multiplied by the greater of (i) 125% during the first 12 months of the term of the note or 115% thereafter or (ii) the closing market price of the Company’s common stock on the date of the triggering event 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 triggering event.

In December 2007, the Company entered into an agreement 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 $0.25 per share and for Company agreeing to pay partial liquidated damages to the note holders for triggering events occurring on or after February 29, 2008. However, on February 29, 2008, the Company failed to obtain effectiveness of the required registration statement. On April 1, 2008, July 1, 2008 and on October 1, 2008, the Company failed to pay accrued interest to the Series A and B note holders. As a result, the Series A and B notes became due on demand at a redemption premium as described above. At December 31, 2009, the carrying value of the Series A and B notes has been adjusted to $695,169,706 for the increase in the redemption price. To date, no demand has been made by the note holders for redemption of the Series A and B Notes. At the January 1, 2010 conversion price of $0.002 per share, the Series A and B Notes are convertible into 148,531,250,000 shares of common stock. However, there are only 375,641,395 authorized, unissued shares of common stock available and, therefore, the notes payable cannot all be converted. Should debenture holders seek to convert all or substantially all of their currently outstanding debenture notes at stock prices allowed under the liquidated damages clauses in the debenture notes documentation at current stock prices, nCoat would be required to seek approval from shareholders to substantially increase the number of shares authorized to at least 150,000,000,000 shares to meet the shares required from the conversions.

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 $83,538,845 and a registration payment liability $132,683,572 at December 31, 2009.

F-8

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

Notes payable at December 31, 2009 and December 31, 2008 are summarized as follows:

	December 31,		December 31,
	2009		2008
6% $9,000,000 Series A convertible promissory notes;
due on demand	$	513,494,412	$	218,215,000
6% $3,250,000 Series B convertible promissory notes;
due on demand		181,675,294		78,812,500
Note payable, bearing interest at prime plus 1.0%
(3.25% at December 31, 2009); due March 2011		141,192		146,264
Note payable, bearing interest at prime plus 1.0%
(3,25% at December 31, 2009) payable on demand		280,364		280,364
Note payable to bank; secured by equipment;
interest at 8.75%, payments due through 2010		5,893		14,670
Notes payable to Investment Group; secured by
equipment; bearing interest at 17%,
payments $8,523 monthly		264,471
Notes payable to Consultant; secured by equipment;				-
bearing interest at 12%, payments $3,792 monthly		86,289
Notes payable to Shareholder; secured by equipment;
bearing interest at 12%, payments $6,631 monthly		195,348		235,652
Notes payable; bearing interest at 10%; unsecured;
due on demand		1,180,000		1,180,000
Total Notes Payable		697,323,263		298,884,450
Less: Current portion		696,800,082		298,734,128
Long-Term Notes Payable	$	523,181	$	150,322

Future maturities:

Years Ending December 31:
2010	$	696,800,082
2011		266,264
2012		97,459
2013		74,963
2014		47,447
Thereafter		37,048
Total	$	697,323,263

The fair value of notes payable was determined based upon current market interest rates and was $298,847,369 at December 31, 2008. Future annual maturities of notes payable, exclusive of unamortized discounts, as of December 31, 2008, were as follows:

Years Ending December 31:
2009	$	298,585,980
2010		106,434
2011		67,676
2012		56,267
2013		58,502
Thereafter		9,591
Total	$	298,884,450

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.

F-9

NCOAT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009

A summary of the status of the Company’s nonvested shares of common stock as of December 31, 2009:

				Weighted-Average
				Award-Date
Nonvested Shares of Common Stock	Shares			Fair Value
Award		13,309,090		$	0.144
Vested		(12,334,260	)	$	0.129
Forfeited		(402,000	)	$	0.129
Nonvested at December 31, 2009		572,830		$	0.139

As of December 31, 2009, there was $28,706 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 .4 years from December 31, 2009. The total fair value of the shares that vested during the year ended December 31, 2009 was $2,865.

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.

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 nine months ended September 30, 2007. The net deferred income tax liability consisted of the following at December 31, 2009 and December 31, 2008:

nCoat, Inc. and Subidiaires
Income Tax Disclosures
12/31/2009
	December 31,			December 31,
	2009			2008
Deferred Tax Liabilities
Property and equipment	$	293,344		$	293,344
Intangible assets		1,146,574			1,146,574
Total Deferred Tax Liabilities		1,439,918			1,439,918
Deferred Tax Assets
Allowance for doubtful accounts		138,555			120,008
Accrued consulting obligation		-			-
Accrued PTO		155,762			210,477
Operating loss carryforwards		6,872,708			6,640,543
Total Deferred Tax Assets		7,167,025			6,971,028
Valuation Allowance		(5,727,107	)		(5,531,110	)
Net Deferred Tax Liability	$	-		$	-

F-10

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE THE FINANCIAL STATEMENTS INCLUDED HEREIN ARE NOT AUDITED. 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.

ITEM 9A.	CONTROLS AND PROCEDURES

Management’s Report On Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

•

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

•

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

•

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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.

The Company has taken steps to address all previously noted weaknesses, and believes that internal controls are significantly improved over prior year. HOWEVER, AS NOTED ABOVE, FINANCIAL STATEMENTS FOR 2008 HAVE NOT YET BEEN AUDITED BY OUTSIDE ACCOUNTING FIRM, AND THEREFORE MUST BE VIEWED IN THAT CONTEXT.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. Directors, Executive Officers, Promoters and Control Persons

Directors and Executive Officers		Position	Served Since

Paul S. Clayson	53	CEO and Chairman of the Board of Directors.	February 2007
		Director	October 2006
Terry R. Holmes	63	President, COO Director	February 2007 October 2006
Dr. Thomas Buckley	60	Director	March 2007

Paul S. Clayson

Mr. Clayson is the founder, chairman, and chief executive officer of nCoat. He has been a business owner, global strategic planning expert, financial and investment strategist and political advisor for the past 30 years. Since 2003 he has served as President and Chief Operating Officer and equity partner of Sequoia Pacific Research, Inc., which is a diversified nanotechnology company. From 1998 to 2003 Mr. Clayson was Vice President, Corporate Strategy, Sales, Marketing and Corporate Development for Fonix Corporation, a software technology company where he developed global marketing, business, product development and finance strategies and grew the company from a no-revenue R&D company to a globally commercialized firm with customers worldwide and development contracts with many of the world's dominant computer, semiconductor, telecom and consumer electronics companies. From 1988 to 1998, Mr. Clayson managed congressional campaigns and served as Chief of Staff to two U.S. Congressmen and as a lead advance agent to two U.S. Presidents. From 1982 to 1986, Mr. Clayson served as senior management and operations officer for three prominent institutional investment advisory and research firms in Portland, Oregon, growing assets under management from $400 million to over $2 billion in under four years. Mr. Clayson has served as the Chairman of the Economic Development Committee for the campaign of Governor Jon Huntsman of Utah and was appointed by the Governor to serve as the Chairman of the Utah Nanotechnology Initiative. Mr. Clayson devotes over 60 hours per week to our business. Mr. Clayson currently serves as the Chairman of the Industrial Advisory Board to the North Carolina A&T State University Engineering Resource Center and as a member of the University of North Carolina Technology Transfer Advisory Board. He has served as Chairman of the North Carolina Advanced Manufacturing Round Table.

Terry R. Holmes

Since 2001, Mr. Holmes has served as CEO and Chairman of Sequoia Pacific Research, Inc. a nano-technology research, development and technology licensing company, which he founded. Mr. Holmes has 35 years of high level business experience as a serial entrepreneur successfully starting numerous profitable technology enterprises, primarily in the telephony, software development and interactive voice response (IVR) industries. Mr. Holmes has incubated numerous software applications and commercialized many into companies. Mr. Holmes founded the first ASP voice mail bureau in the United Stated of America and developed a total of 3 voice mail bureaus, then sold his interest to develop systems for the IVR industry. Mr. Holmes has founded and been CEO and Chairman of several telephony software companies, including; a telephony interconnect company, a telecom consulting company, an MLM ASP software development and licensing company and a health benefit eligibility and enrollment ASP software development and licensing company. Currently, he serves as CEO and Chairman of the Board of TelNetz, Inc., an ASP telephony and web based incubation company. Mr. Holmes currently serves as the Vice Chairman of the Utah Nanotechnology Imitative and as a member of the Utah Digital Health Commission. Mr. Holmes devotes over 60 hours per week to our business.

Dr. Thomas F. Buckley

Since 1996, Dr. Buckley has served on the staff of Chevron Texaco providing counsel and product management strategies to assure coordinated and timely technical outcomes consistent with regulatory compliance obligations and internal corporate policy. To this end, among other duties, he serves as lead new substance notification negotiator in most discussions with the major global Competent Authorities. Currently, he also serves as a lead lubricant industry group contributor to the ongoing debate to develop reasoned and scientifically sound draft directives and regulations, thus minimizing any potentially adverse impacts upon the chemical industry at large. For over 27 years, Dr. Buckley has enjoyed career success as a research and development chemist, staff scientist, and global chemical product compliance specialist providing market support for existing and emerging lubricant and fuel additive technologies, novel minerals applications and alternative fuel sources for both large and small corporations and affiliated university research departments. Dr. Buckley has specific expertise in synthetic organic chemistry, related commercial process and product development, the protection of Intellectual Property Rights, and associated global new chemical regulatory affairs. Dr. Buckley received both his Bachelor of Science degree in Chemistry and his Master of Science degree in Organic Chemistry from the University of New Hampshire (Durham) in the early 70s, beginning his professional career as a medicinal chemist. He later completed his Doctor of Philosophy degree in Synthetic Organic Chemistry from the University of California (Berkeley). He is the inventor of record for over 45 U.S. and International patents, has published in several research, business trade, and technical journals over his career including numerous technical conference venues to date, and has served as Chairperson of numerous lubricant additive trade associations sector groups having impact upon the uniform interpretation, reconciliation, and implementation of regional chemical regulations in a global chemicals economy.

Audit Committee Financial Expert

The Board of Directors has determined that we do not have an audit committee financial expert. We have been seeking to add an individual with these qualifications to our Board of Directors but have been unable to find a suitable individual. We continue to search for someone who meets the qualifications of an audit committee financial expert.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by regulation of the Securities and Exchange Commission to furnish us with copies of all Section 16(a) forms which they file. Based solely on its review of the copies of such forms furnished to us during the fiscal year ended December 31, 2007, we are aware of the following untimely filings:

As of the date of this report, Messrs. Clayson and Holmes had not filed Forms 5.

Code of Ethics Disclosure

Code of Ethics. The Company has not yet adopted a code of ethics. The Board of Directors anticipates that it will adopt a code of ethics during the second or third quarter of 2008, and that we will file the code of ethics as an exhibit to the quarterly report following the adoption of the code of ethics.

ITEM 11.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following is a discussion of the Company’s program for compensation of its named executive officers and directors. As of the date of this Report, the compensation committee of the Board of Directors was responsible for determining the Company’s compensation program.

Compensation Program Objectives

The Company’s compensation program is designed to encompass several factors in determining the compensation of the Company’s named executive officers. The following are the main objectives of the compensation program for the Company’s named executive officers:

	-	Retain qualified officers.
	-	Provide overall corporate direction for the officers and also to provide direction that is specific to officer’s respective areas of authority. The level of compensation amongst the officer group, in relation to one another, is also considered in order to maintain a high level of satisfaction within the leadership group. We consider the relationship that the officers maintain to be one of the most important elements of the leadership group.
	-	Provide a performance incentive for the officers.

The Company’s compensation program is designed to reward the officers in the following areas:

	-	achievement of specific goals;
	-	professional education and development;
	-	creativity in the form of innovative ideas and analysis for new programs and projects;
	-	new program implementation;
	-	attainment of company goals, budgets, and objectives;
	-	results oriented determination and organization;
	-	positive and supportive direction for company personnel; and
	-	community involvement.

As of the date of this Report, there were four principal elements of named executive officer compensation. The Board of Directors determines the portion of compensation allocated to each element for each individual named executive officer. The discussions of compensation practices and policies are of historical practices and policies. Our Compensation Board of Directors is expected to continue these policies and practices, but will reevaluate the practices and policies as it considers advisable.

The elements of the compensation program include:

- Base salary;

- Stock options and stock awards;

- Employee benefits in the form of:

- health and dental insurance;

- auto reimbursement

- Other de minimis benefits.

Base salary

Base salary is intended to provide competitive compensation for job performance and to attract and retain qualified named executive officers. The base salary level is determined by considering several factors inherent in the market place such as: the size of the company; the prevailing salary levels for the particular office or position; prevailing salary levels in a given geographic locale; and the qualifications and experience of the named executive officer.

Stock options and stock awards

Stock ownership is provided to enable named executive officers and directors to participate in the success of the Company. The direct or potential ownership of stock will also provide the incentive to expand the involvement of the named executive officer to include, and therefore be mindful of, the perspective of stockholders of the Company.

Employee benefits

Several of the employee benefits for the named executive officers are selected to provide security for the named executive officers. Most notably, health insurance coverage is intended to provide a level of protection to that will enable the named executive officers to function without having the distraction of having to manage undue risk. The health insurance also provides access to preventative medical care which will help the named executive officers function at a high energy level, to manage job related stress, and contribute to the overall well being of the named executive officers, all of which contribute to an enhanced job performance.

Other de minimis benefits

Other de minimis employee benefits such as cell phones and auto usage reimbursements are directly related to job functions but contain a personal use element which is considered to be a goodwill gesture that contributes to enhanced job performance.

As discussed above, the Board of Directors determines the portion of compensation allocated to each element for each individual named executive officer. As a general rule, base salary is competitively based while giving consideration to employee retention, qualifications, performance, and general market conditions. Typically, stock options are based on the current market value of the option and how that will contribute to the overall compensation of the named executive officer. Consideration is also given to the fact that the option has the potential for an appreciated future value. As such this future value may in fact be the most significant factor of the option, but it is also more difficult to quantify as a benefit to the named executive officer.

Accordingly, in determining the compensation program for the Company, as well as setting the compensation for each named executive officer, the Board of Directors attempts to attract the interest of the named executive officer within in the constraints of a compensation package that is fair and equitable to all parties involved.

SUMMARY COMPENSATION TABLE

The following executive compensation disclosure reflects all compensation awarded to, earned by or paid to the executive officers below. The following table summarizes all compensation projected for 2009.

Name and Principal Position	Year	Salary		Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Nonqualified Deferred Compensation Earnings	All Other Compensation	Total

Paul Clayson	2009	$	250,000	(1)						$	250,000

Terry Holmes	2009	$	250,000	(1)						$	250,000

(1) Executive management salaries are established by the Board and may include contractual agreements between executive management and nCoat. Further, current or new investors may require compensation contracts with executive management to entice them to remain with nCoat and/or incent their performance.

(1) Annual bonuses, if any, are established by the Board or its compensation committee, as applicable, which will establish potential bonus amounts, criteria and milestones in consultation with executive management. Bonuses may be based on factors such as (i) revenue growth, (ii) EBITDA, (iii) new product introduction, (iv) customer base growth, (v) customer retention, (vi) completion of target M&A activities, and (vii) successful integration of acquired companies or assets (each such area adopted by the board or Compensation Committee being a “Performance Evaluation Category”). Achievement of objectives are monitored by the Board and entitles the executives to bonus payments in cash, nCoat stock, vehicles and other considerations. Cash considerations may be awarded up to an amount as much as three hundred percent (300%) of the executive’s annual base salary.

Director Compensation

We have not paid any compensation to our directors in 2009.

Stock Option Plans

There is no stock option plan in effect as of the date of this report. This does not preclude any such plans in the future.

Board of Directors Meetings, Committees and Director Compensation

Our board of directors took action at one meeting duly noticed meeting of the board during 2009.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2009 [OR MORE RECENT IF POSSIBLE], by:

	•	each person known by us to be a beneficial owner of more than 5.0% of our outstanding common stock;
	•	each of our directors;
	•	each of our named executive officers; and
	•	all directors and executive officers as a group.

The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire beneficial ownership of within 60 days of November 19 , 2007 through the exercise of any stock option or other right. Unless otherwise indicated in the footnotes, each person has sole voting and investment power with respect to the shares shown as beneficially owned. A total of 126,710,605 shares of our common stock were issued and outstanding as of March 19, 2010.

Unless provided for otherwise, the address for each of the beneficial owners named below is the Company's business address 7237 Pace Dr. PO Box 38 Whitsett, NC 2737-9118.

Name of Beneficial Owner	Shares			Percent of Class

5% Stock Holders		16,058,600			16.7%
Mark Willes Family Trust
3561 North 100 East
Suite 300
Provo, UT 84604

Directors and Named Executive Officers

Paul Clayson		13,451,880			13.9%
Terry Holmes		13,976,880	*		13.9%


Dr. Thomas F. Buckley		-			-
		-			-
All directors and executive officers as a group. (4 persons)		27,428,760			27.8%

* Includes 525,000 shares owned by Marcine Holmes, Spouse

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Beginning October 1, 2005, we have leased telephone and computer equipment and purchased long distance telephone service from TelNetz, Inc., a Utah Company which is owned by Mr. Holmes on terms not less favorable to us than what we would have paid to any unrelated or unaffiliated party. Currently, nCoat leases Telephone Services from TelNetZ and all other affiliate transactions with Mr. Holmes have been satisfied and terminated.

Director Independence

As of the date of this Report, our common stock traded on the Pink Sheets. . The Pink Sheets does not impose on us standards relating to director independence or the makeup of committees with independent directors, or provide definitions of independence. Nevertheless, we have undertaken to appoint to our Board of Directors Dr. Thomas Buckley, who is independent under the NASDAQ Marketplace Rules and those standards applicable to companies trading on NASDAQ.

Specifically, Dr. Buckley:

-	has not been any time during the past three years, employed by us or by any parent or subsidiary of ours;

-	has not accepted or had a family member who accepted any compensation from us in excess of $60,000 during any period of twelve consecutive months within the three years preceding the determination of independence.
-	is not a family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer;

-	is not, and does not have a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which we made, or from which the company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000.
-	is not, and does not have a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of ours serve on the compensation committee of such other entity; or

-	is not, and does not have a family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1) AUDIT FEES

(2) AUDIT-RELATED FEES

(3) TAX FEES

(4) ALL OTHER FEES

(5) AUDIT COMMITTEE POLICIES AND PROCEDURES

Not applicable.

(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

Not applicable.

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-QSB.

This management’s discussion and analysis, as well as other sections of this report on Form10-QSB, may contain “forward-looking statements” that involve risksand 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.

Overview

Tylerstone Ventures Corporation (“Tylerstone”) was incorporated 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 $0.001. Tylerstone’s formation and prior operations are as described in the appropriate periodic reports filed by Tylerstone with the United State Securities and Exchange Commission (the “Commission”).

In the fall of 2006, Tylerstone’s then current management began discussions with the management of a company named nCoat, Inc. These discussions and eventual negotiations considered the possible mutual interest between the parties. Tylerstone was a registered and reporting company that had been completing requirements to be listed on the OTC Bulletin Board and nCoat was an operating company that needed additional capital. A merger was agreed upon whereby Tylerstone would buy nCoat, run that business and change Tylerstone’s name so that nCoat, Inc would be the name of the public entity. In anticipation of the merger of the parties, nCoat, Inc. changed its name to nCoat Automotive Group, Inc. (“nCoat Auto”) to allow Tylerstone to amend its articles of incorporation to change its name to nCoat, Inc. We completed the administrative steps and on February 3, 2007, Tylerstone entered into a Share Exchange Agreement (the “Agreement”) with nCoat Auto 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.

On February 14, 2007, the parties to the Agreement completed the initial steps contemplated by the Agreement. Pursuant to the terms of the Agreement, nCoat, Inc., which was formerly Tylerstone, acquired 11,554,545 shares of nCoat Auto Common Stock from all of the shareholders of nCoat Auto, which represented 100.0% of the issued and outstanding shares of nCoat Auto Common Stock, in exchange for the issuance of 50,840,000 shares of nCoat, Inc. Common Stock, par value $0.0001 per share, which represents 57% of the then issued and outstanding shares of nCoat, Inc.’s Common Stock. As an integral part of the Agreement, we then undertook the additional fund-raising financing steps as required by the terms of the Agreement.

As used in this report, the terms, “nCoat,” “the Company,” and “the Registrant” means nCoat, Inc., and its subsidiaries, taken as a whole, unless the context indicates otherwise. The historical references to nCoat or the Company prior to the February 14, 2007, closing date refers to the historical financial information of the original nCoat, Inc. (nCoat Auto). We also will use the terms “we”, “us” and “our” in order to make the text of this document as readable as possible, only referring to the companies by name to reduce the confusion of similarly named groups.

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, which includes our largest production facility. In addition, the Company maintains satellite production facilities in Tempe, Arizona; Oklahoma City, Oklahoma; 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 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 formed nTech, Inc. (“nTech”), a Delaware corporation that is a wholly owned subsidiary, designated to develop and hold proprietary intellectual property for the nCoat 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, porosity reduction, bond strength and appearance.

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

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

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.

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

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.

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

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

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 specialized engine coatings and exhaust systems, to include corporate accounts of manufacturer 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 aftermarket 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 six 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 by116 employees.

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 Fourth Quarter of 2009 Compared to Fourth Quarter of 2008

Performance Overview

The quarter to quarter revenues declined approximately $126,000 due in large part to the softness in the economy and its impact on purchases of aftermarket products and services and to a lesser degree slower orders in the truck manufacturing industry. Our direct aftermarket sales were down 40% year over year. In addition, according to industry sources, heavy-duty truck sales are down 65% over two years that began early in 2007.

Cost of Sales.

Cost of sales as a percentage of sales decreased from 78% in the fourth quarter of 2008 to 57% for the quarter ended December 31, 2009. This favorable decrease is the result of plant consolidation and lean manufacturing processes established.

General and Administrative Expenses.

General and administrative expenses for the quarter ended December 31, 2009 decreased by approximately $185,328 and decreased as a percentage of sales from 58% to 44% for the same period in 2008.

Sales and Marketing Expense.

Sales and marketing expense for the year ended December 31, 2009, decreased by approximately $55,000 and decreased to 8% of sales compared to 9% for the same period in 2008. This reduction in 2008, when compared to the same period in 2008, is attributable to reduced expenditure in print advertising, employees and promotional sponsorships. Management has shifted emphasis to internet based promotions which have proved to be cost effective in relationship to revenue production.

Interest Expense.

The increase in interest expense reflects the impact of the change in the redemption premium for the Series A and B notes described above. This change in premium is a function of stock price, which was $0.002 per share as of January 1, 2009. This resulting calculation increased the carrying value of the Series A and B notes to a total of $695,169,706.

Earnings per Share.

Weighted-Average Shares Outstanding as of 12/31/09 totaled 104,954,706 compared to 98,045,014 shares last year.

The Company incurred losses of $262,494 and $27,441,151 during the three month periods ended December 31, 2009, and December 31, 2008, respectively.

Performance in the Twelve Months of 2009 Compared to Twelve Months of 2008

Performance Overview

When compared to the twelve month period ending December 2008, the year to date decrease in revenue of approximately $4,774,000 is attributable to the acquisition of MCCI on June 29, 2007 and organic sales. Factors impacting our year to year revenue comparisons include the impact of the reduced number diesel engines being produced by our customers which was offset by the impact of increased market share represented by the MCCI acquisition, especially in the first half of the year.

Cost of Sales.

Cost of sales as a percentage of sales decreased to 57% for the year ended December 31, 2009, compared to 65% for the same period in 2008. Prior year includes costs associated with start-up operations with new facilities. Management has continued efforts to drive down unit costs through lean manufacturing and Six Sigma process improvements, automation, and logistical changes.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2009 declined by approximately $1.8 million to 50% of sales compared to 55% for the same period in 2008. The expense for 2008 reflects the grant of shares of common stock to employees during the first and third quarter and the related expense of $1,222,044.

Sales and Marketing Expense

Total expenditures for Sales and Marketing expense decreased by $38,000 of prior year cost, due to a reduction in advertising in market publications.

Interest Expense

Interest expense increased by approximately $250 million for the year ended December 31, 2009. This increase reflects the impact of the Series A and B Convertible Notes described above. The redemption premium is a function of stock price at period end.

Earnings per Share.

As a result of the share exchange transaction, issuance of employee stock, exercise of warrants and conversion of debt, the number of outstanding shares has increased to 126,710,605 and the weighted average shares have increased from 98,045,014 for the year ended December 31, 2008 to 104,954,706 as of December 31, 2009.

The Company incurred losses of $574,239,722 and $327,362,638 for the year ended December 31, 2009 and December 31, 2008, respectively. Operating Activities used a negative $128,099 of cash for 2009. Operating Activities generated a positive $286,462 in cash during 2008.

Gross Margins

Average gross margins for consolidated operations improved by approximate 60% year over year, increasing from 35% at year end 2008 to 43% at year end 2009. Increases were attributable to reduced manufacturing costs, lean manufacturing efficiencies which reduced production labor, the acquisition of MCCI which added additional high margin aftermarket customers and negotiated reductions in purchase of source materials based on volume.

EBITDA

nCoat Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) significantly improved in 2009 over 2008. Year end 2008 EBITDA was ($1,843,554) compared to year end 2009 EBITDA of ($339,991). Changes are attributable to significant expense reductions in production, sales and marketing, general and administrative, research and development and other operating areas.

Financial Statements, One-Time Charges and Capital Expenditures

As we commenced our planned growth in 2007 with the promise of funding, we experienced higher costs which were attributable to the infrastructure of a company with a larger footprint. During the second half of 2007 as we reduced costs through the transition and integration of the newly acquired MCCI, it became more apparent to management that funding commitments had been disappointing. Efforts were commenced to reduce additional costs. We have included reductions in personnel, consolidation of facilities and emphasis on lean manufacturing practices. Our resulting operational savings have been encouraging.

1. Facilities – We consolidated our operations in Mississippi into our Oklahoma and North Carolina facilities. In November we consolidated our Utah operations into Arizona and North Carolina. We are exploring further plant consolidation to increase the use capacity in existing locations. Although location consolidation provides for long-range savings, in some cases the additional one-time charges associated with such closure appear to affect earnings directly.

Our 2009 plans also call for (1) the installation in North Carolina of existing equipment transferred from the closing of the Mississippi and Utah production plants as a second OEM production line and (2) installation of a third production line dedicated solely to aftermarket production using equipment transferred from the Mississippi plant, at a total installation and build-out cost of approximately $250,000 for both new lines, predicated upon economic trends.

We also began consolidation of our Pennsylvania operations into North Carolina, Oklahoma and Arizona facilities beginning in November 2009 and culminating with the closing of the Pennsylvania plant in January 2010.

2. Personnel - The Company has reduced the workforce from over 200 employees to approximately 83 employees. This decrease comes from operating plants more efficiently and reducing management personnel which had been originally brought on to accommodate the accelerated growth projected with full funding and multiple facilities. 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.

3. Research and Development – Our expenditures for research and development have been reduced from $376,165 in the twelve months ended December 31, 2008 to $321,421 for 2009. The savings reflects consolidation of facilities and redundant personnel rather than a reduction in emphasis.

4. Financing - Expenses in 2008 and 2009 differ in nature. In 2008 we experienced expenses relating to the money-raising process, including 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. In 2008, the majority of the expense involved in the financing relates to interest expense, particularly the dramatic accounting for the redemption premium.

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 1,036,215 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.

In 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, 2009, we had accounts payable in excess of $2.0 million over 120 days past due.

At December 31, 2009 we are in technical breech of the Securities Purchase Agreement and the related Series A and B Convertible Notes and Registration Agreement (collectively the “Note Agreement”). This technical breech is due to our failure to pay partial liquidating damages and failure to pay interest nCoat is attempting to negotiate a restructure of these debenture notes to provide a work out arrangement favorable to both current debenture holders and shareholders. To accomplish this restructure, nCoat must raise in the next twelve (12) months, additional capital to satisfy negotiated demands of the current debenture holders and to pay aged accounts payables current owed by nCoat to its vendors. Capital raised to this end may (1) be accomplished in a debt instrument which will incur debt to the Company, and/or (2) be raised in an equity offering which may create significant dilution to current shareholders, or (3) not be completed at all. nCoat is seeking in the restructured a negotiated settlement of all outstanding penalties, interest, carrying charges and principal accrued under the current debenture notes. Any changes to the agreement or to accounting treatment described herein will be reflected in subsequent periods.

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 redemption premium. This premium is the greater of 25% or the product of a multiplicand whose numerator is the stock price on the day of the default trigger event divided by the weighted market price at the beginning of each month thereafter. As a result, the full face value of the Notes and redemption premium are shown on our Balance Sheet as current liabilities at December 31, 2009.

We have been active in our attempt to reduce our losses and conserve cash. We have had a reduction in work force and reduced head count by 80 employees. Following the acquisition of MCCI we consolidated our two Arizona facilities. During 2007, certain salaried employees (largely senior executives) elected to defer all or a portion of their salaries at various pay periods totaling $215000 in total deferred salary. In 2008, $84,000 of the 2007 deferred salary was repaid. During 2008, certain salaried employees (largely senior executives) elected to defer all or a portion of their salaries at various pay periods totaling $94,000 in total deferred salary. $28,000 of that 2008 deferred salary was repaid. As a subsequent event, during 2009, certain salaried senior management employees elected to defer all or a portion of their salaries at various pay periods totaling $503,035 in total deferred salary since January 1, 2009. We have limited travel and curtailed expenditures. In August, we closed our plant operations in Mississippi, sending the workflow to Oklahoma and North Carolina. As of November 2008, we moved the Utah operations into the Arizona plant.

At December 31, 2009, we had assets of $3,766,145. Total Stockholders’ Deficit is $915,415,138, resulting from the Redemption Premium associated with the Series A and B Convertible Notes of approximately $912 million. Any 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 – Controls and Procedures

Evaluation of disclosure controls and procedures. All financial information contained in this report is unaudited. The accounting firm has reviewed our quarterly filings as of 9/30/2008. nCoat has not produced enough cash flow to pay the auditors to complete the audit by the publication date of this report. Upon payment of the audit fees, the auditors will complete the audit and an amended Form 10K will be filed. All figures are presented in accordance with Generally Accepted Accounting Principles (GAAP), but have not been tested or 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’s management, including its Chief Executive Officer and Chief Financial Officer, of its disclosure controls and procedures (as defined by Rules13a — 15(e)and 15d-15(e)under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in internal controls. There has been no change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1 – Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this Report, with the exception of the case cited below, we were not aware of any such legal proceedings or claims against the Company or its subsidiaries that management believes will have a material adverse affect on business development, financial condition or operating results.

Jeffrey C. Holm et al. v. High Performance Coatings, Inc., Civil No. 080903021, Third Judicial District Court, Salt Lake County, State of Utah. On February 20, 2008, Jeffrey Holm and Thunderchief Enterprises, LLC (collectively, the “Plaintiffs”) filed a complaint against High Performance Coatings, Inc., Nanocoat, Inc., Terry R. Holmes, Paul S. Clayson (collectively, the “nCoat Defendants”), and others, in connection with a stock purchase agreement, a consulting agreement, an escrow agreement, and other agreements between certain of the parties. The Complaint brings claims for relief against the nCoat Defendants for breach of the consulting agreement, slander, tortuous interference with economic relations, breach of the stock purchase agreement, declaratory relief relating to a non-compete agreement, and conversion. The Plaintiffs seek damages from the nCoat Defendants of approximately $740,000, plus the return of certain designated personal property, together with damages to be proven at trial, punitive damages, fees, costs, and such other relief as the court deems appropriate. The nCoat Defendants filed an Answer and Counter-claim against the Plaintiffs for breach of contract, defamation, tortuous interference, violations of Utah Uniform Securities Act, common law fraud and misrepresentation, and declaratory relief and the Company continued its vigorous defense and prosecution of its claims throughout 2008.

As of January 2009, a settlement was reached whereby nCoat released the previously escrowed funds associated with the HPC purchase originally scheduled for release to Holm in August, 2008, and Jeffrey C. Holm dismissed with prejudice his civil suit against the Company and agreed to a two year non-compete agreement and the Company dismissed with prejudice its counterclaim against Holm.

Private Offering of Convertible Notes and Warrants

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

There have been no repurchases of equity securities by nCoat during the years ended December 31, 2009 or 2008.

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 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-KA report filed by the Company on August 1, 2008.

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

None.

Item 5 – Other Information

None.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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).

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).

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: March 19, 2010	/s/ Paul Clayson
	Paul Clayson
	Chief Executive Officer
	(Principal Executive Officer)


Date: March 19, 2010	/s/ Paul Clayson
	Paul Clayson
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

nCoat, Inc. - FORM 10-K - March 30, 2010

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