UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-KSB
 
 X
              ANNUAL
      REPORT UNDER SECTION13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 FOR THE
FISCAL YEAR ENDED JANUARY 31,
2008
 
 COMMISSION
FILE NUMBER 0-13635
 
 SFG FINANCIAL
CORPORATION
 (Name of
small business issuer in its charter)
 
 Delaware
                13-3208094(State
      or other jurisdiction of incorporation or organization)
                (IRS
      Employer Identification Number)P.O.
      Box 623Syosset,
      NY
                11791(Address
      of Principal executive offices)
                Zip
      Code
 
 Issuer’s
telephone number (516)
247-9104
 
 Securities
registered under Section 12 (b) of the Exchange Act: None
 Securities
registered under Section 12 (g) of the Exchange Act: Common Stock, $0.001 par
value
 
 Check
whether the Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
[  ]
 
 Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10KSB
or any amendment to this Form 10KSB.   [X]
 
 Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act).  Yes [ X ] No [ ]
 
 Issuer
had revenues of $14,536 for the fiscal year ended January 31, 2008.
 
 The
aggregate market value of the voting common stock held by non-affiliates as of
February 9, 2009 is $9,592,246.80.
 As of
February 10, 2009, the Registrant had 66,499,691 shares of common stock
outstanding.
 
 Transitional
Small Business Disclosure Format (Check one):  Yes [  ] No
[X]
 
  
 
 TABLE
OF CONTENTS
 
 
 PART
      IITEM
      1.
                                DESCRIPTION
      OF BUSINESS
                                1ITEM
      2.
                                DESCRIPTION
      OF PROPERTY
                                6ITEM
      3.
                                LEGAL
      PROCEEDINGS
                                6ITEM
      4.
                                SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS...
                                6PART
      IIITEM
      5.
                                MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                                7ITEM
      6.
                                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
                                8ITEM
      7.
                                FINANCIAL
      STATEMENTS
                                10ITEM
      8.
                                CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                                11ITEM
      8A
                                CONTROLS
      AND PROCEDURES
                                11PART
      IIIITEM
      9.
                                DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
                                12ITEM
      10.
                                EXECUTIVE
      COMPENSATION
                                13ITEM
      11.
                                SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                                14ITEM
      12.
                                CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                                14ITEM
      13.
                                EXHIBITS
                                14ITEM
      14.
                                PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                                15SIGNATURES
                                16
   
 
 PART
I
 
 Item1.
              Description of
      Business
 
 Overview
 
 SFG
Financial Corporation (the “Company”), formerly named SFG Corporation, was
incorporated in Delaware on November 9, 1983.  From January 2002 to
March 2007, we had no operations and our company was a corporate
shell.
 
 Since
early 2002, we have sought to engage in a material corporate undertaking,
including, but not limited to, selected mergers and acquisitions and continued
to seek a suitable merger partner.  Our plans since 2002, have been to
enter into a business combination with an operating company in exchange for our
securities.
 On March
6, 2007, we entered into an Agreement and Plan of Merger, as amended (the
“Merger Agreement”), pursuant to which COESfx Acquisition Corp. (“Acquisition”),
a wholly owned subsidiary of the Company merged with and into COESfx Holdings,
Inc. n/k/a XLFX, Inc. (“XLFX”). On July 18, 2007, Acquisition completed the
merger with XLFX, which made XLFX our wholly owned subsidiary. Under the terms
of the Merger Agreement, the former stockholders of XLFX hold approximately 96%
of the issued shares of the Company. As the former stockholders of XLFX control
the Company after the transaction, the merger was accounted for as a reverse
acquisition under which, for accounting purposes, XLFX is deemed to be the
acquirer and the Company, the legal acquirer, is deemed to be the acquired
entity. No goodwill was recognized as we were a “shell”
company.
 XLFX was
organized in 2005 and is the parent corporation of COESfx, Inc.
("COESfx"). COESfx was founded in 2002 to develop and provide the foreign
exchange industry with a completely integrated, real time, electronic currency
trading platform (the “ECN
Platform ”). The ECN Platform is designed to allow all foreign exchange
Participants, big or small, access to a central market capable of providing a
liquid trading market where foreign currency order flow is executed and settled
anonymously at the best bid/ask prices available. XLFX launched its current ECN
Platform in April 2004 after more than two years of development. In 2006, XLFX
began the development of a new ECN Platform (now called the “EpathFX ECN
Platform”).
 
 The Foreign Exchange
Market
 
 Prior to
the introduction of on-line foreign exchange trading platforms, the foreign
exchange market operated as a non-centralized, inter-bank marketplace where the
top Tier 1 Banks (effectively the primary dealers) made their prices available
either directly to their customers or through intermediary trading desks and
platforms to all other market participants (price takers). As such, there
was:
 
 
              No
      physical location or central exchange open to all participants;
      and
 
 
              No
      central, automated, real time, 24 hour market-priced trade execution
      platform available in the market.
  Until
on-line trading platforms were introduced to the foreign exchange market, the
only way non-top Tier market makers and traders could access the market to
transact business was either: (i) directly with the top Tier 1 banks; (ii)
through broker trading desks on a “ price request basis ” or
(iii) intermediary electronic trading platforms where the price quoted was the
bid/ask price of the broker or bank-sponsor which marked up or down (i.e.,
spreading) the pricing it received from Tier 1 banks.
 
 Existing
EpathFX ECN Platform
 
 The
EpathFX ECN Platform is designed to allow banks, institutional trading firms,
hedge funds, brokerage firms and retail day traders (the “ Platform
Customers ”) to anonymously place and execute their orders in a multitude
of foreign currency cross trading markets at the “ best bid/best asked ” posted
on the system.  The EpathFX ECN Platform is designed to give every
market participant, large or small, an opportunity to offer their own prices to
the world foreign exchange market and affords all participants equal, real time,
non-discriminatory access to the prices of others through real time streaming
prices (“STP”).
 
 Prices on
the EpathFX ECN Platform can be generated from two sources:
 
 
              Liquidity
      Providers:   Our EpathFX ECN Platform is designed to
      obtain liquidity from several foreign exchange market dealers and
      global banks who stream their foreign exchange bid/ask market pricing,
      updated as frequently as 5 times per second. The bid/ask prices supplied
      by the liquidity providers are dealable , which means
      that any trader using the system can execute its order to buy or sell
      against such posted bid/ask price in the volume that such bid/ask price is
      indicated. Competitive platforms often provide, especially in fast moving
      markets, requests for quote pricing rather than the fully executable
      prices offered by us. Because these Liquidity Provider quotes are
      refreshed at least 5 times per second, the EpathFX ECN Platform maintains
      the ability to handle customer order flow at all times in contrast to the
      request for quote platforms.
 
 
              Platform
      Customers:   Unlike the majority of other
      intermediary foreign exchange trading platforms, our business model allows
      Platform Customers to anonymously display their bid/ask prices on the
      system. In this way, all Futures Commission Merchants (FCM’s), introducing
      brokers, hedge fund managers, institutional traders and retail day traders
      who participate on the EpathFX  Platform can have their bid/ask
      prices anonymously posted on the EpathFX ECN
  Platform.
  1
 
 The
system architecture is designed to allow these two levels of EpathFX ECN
Platform participants to execute trades anonymously on the system among
themselves. In addition, EpathFX ECN Platform Customers are
permitted to access the EpathFX ECN Platform and, without posting bid/ask
quotes, view all anonymously posted quotes and buy or sell at the best bid/best
ask quoted by those posting quotes on the EpathFX ECN Platform.
 
 Revenue
Sources
 
 The
EpathFX ECN Platform is designed to function solely as an unbiased foreign
exchange trade execution intermediary.  As such, the bid/ask price
displayed on the EpathFX ECN Platform at any time for any currency pair quoted
reflects no input or modification by SFG Financial Corporation or the EpathFX
ECN Platform.
 
 We will
not generate revenue from trading profit, but, rather, from trade volume-based
fees received as a result of trades executed on the EpathFX ECN
Platform.  The Company’s Revenue Model is predicated on providing
Platform Customers with the “ best all-in ” cost per
trade.  We believe that this provides a more cost effective model for
the Platform Customers, particularly during times of fast moving markets when
the trading desk spreads can be more than $.0002.
 
 In
addition to the volume-based transaction fee paid by Platform Customers with
respect to each trade executed on the ECN Platform, we may also receive: (i)
licensing fees for the white labeling of the EpathFX ECN Platform and (ii)
various fees from FCM’s including rebates, margin interest and
swaps.
 
 Clearing
Operations
 
 In 2006,
XLFX discontinued its clearing operations, which were formerly performed by
the Company’s wholly owned subsidiaries SPOT FX Corp. (“Spot”) and COES
Clearing, Inc. (“COESfx Clearing”). SPOT and COESfx Clearing withdrew their
memberships with the National Futures Association (“NFA”) and as a result
thereof the Company no longer functions as a futures commission merchant (“FCM”)
or clearing firm.
 
 Competition
 
 A number
of companies currently offer on-line foreign exchange trading, however, we
believe that other than one new entry, we are the only electronic foreign
exchange trading platform using its technology to provide customers with a
central foreign exchange best bid/best ask function, without mark-ups or
mark-downs.  Major on-line foreign exchange trading competitors
include, among others:  Gain Capital, Hotspotfx, Forex Capital
Markets, eforeign exchange, Oanda, Global Forex Trading, Fx Solutions and Lava
Trading.  Many of these companies have been in the market for a number
of years and represent established currency exchange forums.
 
 We
believe that there is limited competition in the Straight Through Processing
(“STP”) ECN marketplace. Our new EpathFX ECN Platform will allow for a tighter
bid/ask spread than other major competing electronic trading platforms because
of its STP pricing.  Foreign exchange market participants (other than
Tier 1 dealers) either trade in what we believe to be an antiquated fashion
(without an electronic platform) or trade through intermediary trading
platforms. Those that trade through these intermediaries are trading with
platforms that mark up or mark down its pricing, spread its fees and/or have a
trading desk. Thus, we believe that the best price feature of our STP
EpathFX ECN Platform will be preferred.  We also believe that over the
past five years we have developed proprietary technology which provides a
superior Platform with superior execution.
 
 Intellectual
Property
 
 We do not
have any patents or copyrights with respect to intellectual
property.  We rely strictly on confidentiality and other agreements to
protect such rights as well as common law principles.
 
 Government
Regulation
 
 In
the United States and most countries in which we will conduct significant
operations, there is limited direct regulation of the currency markets other
than pursuant to laws applicable to businesses generally. We may be subject to
regulatory requirements which may be adopted in the future.
 
 Employees
 
 We
currently employ one  full time salaried employee, one part-time
salaried employee and one consultant.
  2
  RISK
FACTORS
  BUSINESS
AND COMPANY RISKS
 
 We
currently generate minimal revenue.  If we continue to generate only
minimal revenue, we would be forced to cease operations.
 
 We are
presently in the development stage. Our operating subsidiaries, COESfx Clearing
and SPOT have generated minimal revenues from operations since 2004.. In 2006
XLFX decided to close its clearing operations (formerly conducted through
COESfx Clearing and SPOT) and to concentrate its available capital on the
redevelopment of the EpathFX ECN Platform. There can be no assurance that the
new EpathFX ECN Platform will be fully developed and, if developed, will be
commercially viable. Moreover there can be no assurance that the newly designed
platform will result in the generation of any meaningful revenues or yield
profits. Accordingly, future operating results will depend on many factors,
including our ability to complete the new EpathFX ECN Platform, successfully
introduce such Platform into the marketplace and implement its business
plan.  In the event that we fail to successfully complete and
introduce the new ECN Platform, we may be forced to raise additional capital
and, failing that, could be forced to suspend operations and unwind business.
Due to our limited operating history, it is difficult or impossible for us to
predict future results of operations. Moreover, due to our limited operating
history, any evaluation of the business and prospects must be made in light of
the risks and uncertainties frequently encountered by companies in new and
rapidly evolving markets.
  We
are dependent on securing the services of a Futures Commission Merchant as a
clearing firm.
 
 In order
to generate revenues, trades must occur on our EpathFX ECN Platform. In order
for trading to commence on the EpathFX ECN Platform, we must enter into an
agreement with an entity to provide us with clearing services (Futures
Commission Merchant (“FCM”) as a Clearing Firm). The Clearing Firm must be an
FCM that is a member of the NFA or a foreign based clearing firm. We will
require the Clearing Firm to perform the following services: (i) clearing of all
Platform trades; (ii) collecting, maintaining and reconciling margin balances;
(iii) reporting trade data; (iv)back office compliance and regulatory record
keeping; (v) maintaining all customer account records and (vi) regulatory
compliance functions. In the event that we do not enter into an agreement with a
FCM Clearing Firm (or in the event fails to maintain such agreement after it is
entered into), we will not be able to generate revenues and will not be
able to remain in business. Moreover there can be no assurance that even if an
agreement is reached with a FCM Clearing Firm, that such agreement will be on
terms sufficient to allow us to generate profits.
 
 We
are dependent on our FCM Clearing Firm establishing Liquidity Provider
sponsorship and credit facilities
 
 In the
event we enter into an agreement with a FCM Clearing Firm and the Clearing firm
fails to establish and/or maintain adequate liquidity providers for the
provision of price quotes for our EpathFX ECN Platform, the EpathFX ECN Platform
would not operate efficiently and would be unattractive to customers. Moreover
we will be dependent on the ability of the FCM Clearing Firm to provide prime
brokerage and credit facilities to Platform customers on terms competitive to
other foreign exchange platforms. The FCM Clearing Firm’s inability to establish
and maintain such relationships and/or in its inability to provide customers
with adequate credit facilities would adversely effect our ability to generate
revenues sufficient to cover our cost of operation and/or generate
profits.
 
 We
are dependant on our FCM Clearing Firm’s computer and network systems and any
failure on the part of the FCM Clearing Firm to maintain their computers and
networks systems would be detrimental to our operations.
 
 The
computer and network systems of our FCM Clearing Firm and its liquidity
providers must continually interface with the EpathFX ECN Platform so that a
constant flow of price, order and other data information is successfully
transmitted and received.  Material problems in transmitting,
receiving, storing and/or accessing such price and data information will result
in a substantial negative effect on the EpathFX Platform. We intend to negotiate
with multiple FCM Clearing Firms in order to limit the effect that problems with
any single source would have on the Platform. There can be no assurance that
such negotiations will be successful. The failure to establish multiple FCM
Clearing Firm relationships could have a material adverse effect on our
business, financial condition and operating results.  As the
marketplace in which we operate changes and as competition intensifies in the
online currency trading market, it may become more difficult or expensive to
secure and maintain relationships with FCM Clearing Firms and liquidity
providers.
 
 We
need significant infusions of additional capital, which may result in dilution
to your ownership and voting rights in us.
 
 Based
upon our current cash reserves and forecasted operations, we believe that we
will need to obtain at least $500,000 in outside funding to implement our plan
of operation over the next twelve months. Our need for additional capital to
finance our business strategy, operations, and growth will be greater should,
among other things, revenue or expense estimates prove to be incorrect. If we
fail to arrange for sufficient capital in the future, we may be required to
reduce the scope of our business activities in the areas of marketing and
research and development until we can obtain adequate financing. We may not be
able to obtain additional financing in sufficient amounts or on acceptable terms
when needed, which could adversely affect our operating results and prospects
and force us to curtail our business operations. Debt financing must be repaid
regardless of whether or not we generate profits or cash flows from our business
activities. Equity financing may result in dilution to existing stockholders and
may involve securities that have rights, preferences, or privileges that are
senior to our common stock. If we do not receive funding at lower prices, this
will have a dilutive effect on the value of our securities issued at higher
prices. Further, the sale, or potential sale of large amounts of our securities
will, in all likelihood, have a depressive effect on the price of our securities
which will affect the value of your investment.
  3
  Our
industry is price competitive and our inability to compete with competitors who
offer similar products and services at lower costs will be a detriment to our
business.
 
 The
foreign exchange business is very competitive and, as a result, generating and
maintaining customers is very dependent on the price and quality of our service.
Unless we are able to attract significant customers to our new EpathFX ECN
Platform while at the same time, generating adequate volume-based revenue, we
will fail to generate the operating gross margin we require to cover our
overhead.
 
 Many
of our competitors are larger in size and more technologically
advanced.
 
 Many of
the companies that we compete with are larger and more capitalized, which
gives them an opportunity to compete on the basis of price more
effectively.  While we believe that our new EpathFX ECN Platform will
be technologically competitive, the risk exists that a competitor will develop a
less costly, equal or better electronic trading platform that would render our
product obsolete.  We are subject to the risk that competitors will
develop electronic trading platforms comparable to our new EpathFX ECN Platform
and employ such competing electronic trading platforms in a central foreign
exchange function similar that is currently available from us. In such an event,
we could be subject to material price competition, with the result that we may
substantially fail to achieve its revenue objectives and, in the worst case
scenario, we could fail.
 
 If
we fail to maintain a low operating overhead, we will not be
profitable
 
 Our
business model is based on the assumption that we will be able to operate our
business with an operating overhead that is low relative the level of revenues
that we project. If this assumption is incorrect, we could be far less
profitable than it currently projects. In such an event, we may substantially
fail to achieve our earnings objectives.
 
 Our
technology is subject to service disruptions which could cause us to lose
customers and therefore inhibit our ability to generate revenue.
  The
success of our business will depend on the security and stability of the EpathFX
ECN Platform and, in part, on the security and stability of the network
infrastructures of the FCM Clearing Firms and other third-party providers, over
which we will have no control. Information provided by our FCM Clearing Firms
and our respective price and data providers could be disrupted for numerous
reasons including, but not limited to, system breakdowns, system overloads,
compatibility issues and a variety of other unforeseen computer malfunctions.
The potential also exists that our systems may not be able to meet the demand of
customers trading on the EpathFX ECN Platform. Moreover, despite the
implementation of security measures, the infrastructure and the infrastructures
of the FCM Clearing Firms and other providers are vulnerable to computer viruses
or similar disruptive problems. Computer viruses or problems caused by third
parties, such as the sending of excessive volumes of unsolicited bulk e-mail or
"spam," could lead to interruptions, delays, or cessation in service
to customers. Third parties could also potentially jeopardize the security
of confidential information stored in our computer systems or its customers'
computer systems by their inappropriate use of the Internet, which could cause
losses to EpathFX Platform customers or the Company or deter persons from
trading on the EpathFX ECN Platform. Inappropriate use of the Internet includes
attempting to gain unauthorized access to information or systems, commonly known
as "cracking" or "hacking." Although we intend to continue to implement security
measures to prevent this, "hackers" have circumvented security measures in the
past, and others may be able to circumvent our security measures or the security
measures of our third-party network providers in the future.
  To
alleviate problems caused by system breakdowns and malfunctions, computer
viruses or other inappropriate uses or security breaches, we may have to
interrupt, delay, or cease service to EpathFX Platform Customers, which could
have a material adverse effect on business, financial condition, and results of
operations. Any network malfunction or security breach could cause transactions
to be delayed, not completed at all, or completed with compromised security.
EpathFX Platform Customers or others may assert claims of liability against us
as a result of any failure by us or the FCM Clearing Firms to prevent these
network malfunctions and security breaches. Until more comprehensive security
technologies are developed, the security and privacy concerns of existing and
potential customers may inhibit the growth of trading on the EpathFX
Platform.
 
 We
are subject to governmental regulations and any failure on our part not to abide
by those regulations could detrimentally affect our business.
  In
the United States and most countries in which we will conduct major operations,
there is limited direct regulation of the currency markets other than pursuant
to laws applicable to businesses generally. Adverse changes in the legal or
regulatory environment relating to the currency markets in the United States,
Europe, Japan or elsewhere could have a material adverse effect on our business,
financial condition and operating results. A number of legislative and
regulatory proposals from various international bodies and foreign and domestic
governments in the areas of currency trading are now under consideration. We are
unable at this time to predict which, if any, of such proposals may be adopted
and, if adopted, whether such proposals would have an adverse effect on its
business, financial condition and operating results.
  4
 
 Moreover,
the manner in which existing domestic and foreign laws will or may be applied to
currency transactions is uncertain, as is the effect on the Company’s business
given different possible applications. Similarly, the Company is unable to
predict the effect on the Company from the potential future application of
various domestic and foreign laws governing currency
transactions.  The Company will rely on Internet services, in part,
through data transmissions over public telephone lines. These transmissions are
governed by regulatory policies establishing charges and terms for wire line
communications.
  Certain
aspects of the foreign exchange industry are currently subject to direct
regulation by the NFA and the Commodity Futures Trading Commission (the “CFTC”).
Our FCM Clearing Firms will be subject to these regulations in the event that
they are present in the United States. The failure by any of our future FCM
Clearing Firms to meet such regulations may have an adverse effect on our
ability to operate the EpathFX ECN Platform. Future regulation by the Securities
and Exchange Commissions (the “SEC”) the Financial Industry’s Regulatory
Authority (“FINRA”) the Treasury Department or another regulatory agency may
occur.  The NFA and CFTC continually adopt new regulations and
requirements which have material effects on the manor in which we operate.
Recently the CFTC and the NFA increased the net capital requirements needed for
the Company’s clearing firms to engage in business as an FCM. The new capital
rules effective as of January 1, 2008 require clearing firms to maintain minimum
net capital of $20,000,000. These requirements may make it more difficult for
the Company to obtain relationships with FCM Clearing Firms. Additional
legislation could dampen the growth in currency trading and decrease its
acceptance as a commercial trading platform.  If enacted, any such
laws, rules or regulations could limit the market for the EpathFX
Platform.
 
 There
can be no assurance that financing would be available on acceptable terms, or at
all, especially in light of recent economic conditions.
 
 In recent
months, worldwide economic conditions have deteriorated significantly in the
United States and other countries, and may remain depressed for the foreseeable
future. These conditions make it difficult for us to accurately forecast and
plan future business activities, and could cause us to slow or reduce spending
on our research and development activities. Furthermore, during challenging
economic times, we may face issues gaining timely access to financings or
capital infusion, which could result in an impairment of our ability to continue
our business activities. We cannot predict the timing, strength or duration of
any economic slowdown or subsequent economic recovery, worldwide, in the United
States, or in our industry. These and other economic factors could have a
material adverse effect on our financial condition and operating
results.
 
 We
may experience uninsured losses, which will result in a decrease of our
potential profits.
 
 We
intend to secure comprehensive insurance, including general liability, fire and
extended coverage, which we considers adequate. However, there are certain types
of losses that may be uninsurable or not economically insurable. If such a loss
should occur, we would, to the extent that we are not covered for such loss by
insurance, suffer a loss of the capital invested in, as well as anticipated
profits and/or cash flow from, such damaged or destroyed properties. Punitive
damage awards are generally not covered by insurance; thus, any awards of
punitive damages as to which we may be liable could adversely affect our ability
to continue to conduct business, to expand operations or to acquire additional
subsidiaries. There is no assurance that any insurance coverage maintained by us
will be adequate, that we can continue to obtain and maintain such insurance at
all or that the premium costs will not rise to an extent that they adversely
affect our ability to economically obtain or maintain such
insurance.
 
 Our
independent auditors have expressed substantial doubt about our ability to
continue as a going concern, which may hinder our ability to obtain future
financing and which may force us to cease operations.
 
 In their
report dated January 31, 2009, our independent auditors stated that our
financial statements for the year ended January 31, 2008 were prepared assuming
that we would continue as a going concern. Our ability to continue as a going
concern is an issue raised as a result of substantial losses since inception and
accumulated deficit. We continue to experience net losses. Our ability to
continue as a going concern is subject to our ability to generate revenues. If
we are unable to continue as a going concern, you may lose your entire
investment.
  Our
common stock is quoted on the Pink Sheets. As a result, our common stock is
subject to trading restrictions as a “penny stock,” which could adversely affect
the liquidity and price of such stock.
  Because
our common stock is not listed on any national securities exchange, its shares
are subject to the regulations regarding trading in “penny stocks,” which are
those securities trading for less than $5.00 per share. The following is a list
of the general restrictions on the sale of penny stocks:
  5
  
              Prior
      to the sale of penny stock by a broker-dealer to a new purchaser, the
      broker-dealer must determine whether the purchaser is suitable to invest
      in penny stocks. To make that determination, a broker-dealer must obtain,
      from a prospective investor, information regarding the purchaser's
      financial condition and investment experience and objectives.
      Subsequently, the broker-dealer must deliver to the purchaser a written
      statement setting forth the basis of the suitability finding and obtain
      the purchaser’s signature on such
statement.
  
              A
      broker-dealer must obtain from the purchaser an agreement to purchase the
      securities. This agreement must be obtained for every purchase until the
      purchaser becomes an “established customer.” A broker-dealer may not
      effect a purchase of a penny stock less than two business days after a
      broker-dealer sends such agreement to the
  purchaser.
  
              The
      Exchange Act requires that prior to effecting any transaction in any penny
      stock, a broker-dealer must provide the purchaser with a “risk disclosure
      document” that contains, among other things, a description of the penny
      stock market and how it functions and the risks associated with such
      investment. These disclosure rules are applicable to both purchases and
      sales by investors.
  
              A
      dealer that sells penny stock must send to the purchaser, within ten days
      after the end of each calendar month, a written account statement
      including prescribed information relating to the
  security.
  These
requirements can severely limit the liquidity of securities in the secondary
market because few brokers or dealers are likely to be willing to undertake
these compliance activities. Because our common stock is subject to the rules
and restrictions regarding penny stock transactions, an investor’s ability to
sell to a third party and our ability to raise additional capital may be
limited.
 
 Item
      2.
              Description of
      Property
 
 The
Company is currently seeking office space in New York City, New York. The
company will obtain a lease which, when finalized, will be disclosed to the
shareholders.
 
 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.
However, we are not currently aware of any such legal proceedings or claims that
we believe will have, individually or in the aggregate, a material adverse
affect on our proposed future business, financial condition or operating
results.
 
 Item
      4.
              Submission of Matters
      to a Vote of Security
Holders
 
 The
following actions were taken pursuant to the written consent of a majority of
the holders of our voting capital stock, dated January 15, 2008, in lieu of a
special meeting of the stockholders:
 
 1. Our
Certificate of Incorporation was further amended to:
  (a)
increase our authorized shares of common stock par value $.001 from 100,000,000
shares to 125,000,000 shares; and
  (b)
create 10,000,000 shares of blank check preferred stock.
  2. To
effect a reverse stock split of our issued and outstanding shares of Common
Stock at the ratio of 7.351808 for 1; and
  3. In
addition, the holders of a majority of our voting stock adopted our 2008
Incentive Stock Plan.
  6
 
 PART  II
 
 Item
      5.
              Market for Common
      Equity and Related Stockholder
Matters
 
 Our
Common Stock trades on the Electronic Pink Sheets under the symbol
SFGF.PK.  The Pink Sheets is a centralized quotation service that
collects and publishes market maker quotes for OTC securities in real
time.
 
 The
approximate number of holders of our Common Stock on January 31, 2008 was
694.
 
 The
following table reflects the high and low prices (for our common stock on a
quarterly basis for the fiscal years ended January 31, 2008, 2007 and
2006).
 
 Fiscal  2008
                  
                  Fiscal
      2007
                  
                  Fiscal
      2006Quarter
      ended
                  
                  High
                  
                  Low
                  
                  High
                  
                  Low
                  
                  High
                  
                  LowApril
      30
                  
                  .20
                  
                  .05
                  
                  0.10
                  
                  0.10
                  
                  0.15
                  
                  0.14July
      31
                  
                  .10
                  
                  .05
                  
                  0.10
                  
                  0.06
                  
                  0.14
                  
                  0.08October
      31
                  
                  .25
                  
                  .08
                  
                  0.07
                  
                  0.06
                  
                  0.10
                  
                  0.08January
      31
                  
                  .10
                  
                  .05
                  
                  0.07
                  
                  0.05
                  
                  0.10
                  
                  0.10
 
 The
quotation shown may reflect inter-dealer prices, without mark-up, markdown or
commissions and may not necessarily represent actual transactions.
 
 We have
never declared or paid any cash dividends on our common stock nor do we intend
to do so in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will depend
upon our financial condition, operating results, capital requirements, any
applicable contractual restrictions and such other factors as our board of
directors deems relevant.
 
 CAPITAL
STOCK.
  We are
authorized to issue 125,000,000 shares of common stock $0.001 par value and
10,000,000 shares of preferred stock at $0.001 par value. As of February 10,
2009, there were 66,499,691 common shares and 0 preferred shares issued and
outstanding. All shares of common stock outstanding are validly issued, fully
paid and non-assessable.
 VOTING
RIGHTS.
 
 Each
share of common stock entitles the holder to one vote, either in person or by
proxy, at meetings of shareholders. The holders are not permitted to vote their
shares cumulatively. Accordingly, the holders of common stock holding, in the
aggregate, more than fifty percent of the total voting rights can elect all of
our directors and, in such event, the holders of the remaining minority shares
will not be able to elect any of such directors. The vote of the holders of a
majority of the issued and outstanding shares of common stock entitled to vote
thereon is sufficient to authorize, affirm, ratify or consent to such act or
action, except as otherwise provided by law.
 
 Equity Securities Sold
Without Registration
  On
November 20, 2007, we entered into subscription agreement with Gilbert White
whereby we sold to Mr. White 400,000 shares of our common stock at a purchase
price of $0.25 per share for an aggregate purchase price of
$100,000.
 On
November 7, 2007, we entered into a subscription agreement with Pasqualle
Vallone whereby we sold to Mr. Vallone 400,000 shares of our common stock at a
price of $0.25 per share for an aggregate purchase price of
$100,000.
 On
December 6, 2007, we entered into subscription agreement with John Dowdle
whereby we sold to Mr. Dowdle 714,285 shares of our common stock at a purchase
price of $0.35 per share for an aggregate purchase price of
$250,000.
 Except as
may be stated otherwise above, all of the above offerings and sales were deemed
to be exempt under Rule 506 of Regulation D and/or Section 4(2) of the
Securities Act of 1933, as amended. No advertising or general solicitation was
employed in offering the securities. The offerings and sales were made to a
limited number of persons, all of whom were accredited investors and transfer
was restricted by the Company in accordance with the requirements of the
Securities Act of 1933.
  7
 
 Item
      6.
              Management’s
      Discussion and Analysis or Plan of
  Operation
 
 This
discussion of the Company’s financial condition and results of operations
contains certain statements that are not strictly historical and are
“forward-looking” statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve a high degree of risk and uncertainty.
Actual results may differ materially from those projected in the forward-looking
statements due to other risks and uncertainties that exist in the Company’s
operations, development efforts and business environment, the other risks and
uncertainties described in the section entitled “Risk Factors” in this Form
10-KSB  and the other risks and uncertainties described elsewhere in
this joint proxy statement/prospectus. All forward-looking statements herein are
based on information available to us as of the date hereof, and we assume no
obligation to update any such forward-looking statement.
  OVERVIEW
  On March
6, 2007, we entered into an Agreement and Plan of Merger, as amended (the
“Merger Agreement”), pursuant to which COESfx Acquisition Corp. (“Acquisition”),
our wholly owned subsidiary merged with and into XLFX. On July 18, 2007,
Acquisition completed the merger with XLFX, which made XLFX our wholly owned
subsidiary. Under the terms of the Merger Agreement, the former stockholders of
XLFX hold approximately 96% of our issued shares. As the former stockholders of
XLFX control the Company after the transaction, the merger was accounted for as
a reverse acquisition under which, for accounting purposes, XLFX is deemed to be
the acquirer and the Company, the legal acquirer, is deemed to be the acquired
entity. No goodwill was recognized as we were a “shell”
company.
 COESfx
Holdings, Inc. n/k/a XLFX, Inc. (“XLFX”), which derives its name from an acronym
standing for Currency Order Execution System, was organized in 2005 and is the
parent corporation of COESfx, Inc. ("COESfx"). COESfx, Inc. was founded in
2002 to develop and provide the foreign exchange industry with a completely
integrated, real time, electronic currency trading platform (the “ECN
Platform”). The ECN Platform is designed to allow all foreign exchange
Participants, big or small, access to a central market capable of providing a
liquid trading market where foreign currency order flow is executed and settled
anonymously at the best bid/ask prices available. XLFX launched its current ECN
Platform in April 2004 after more than two years of development. In 2006, XLFX
began the development of a new EpathFX ECN Platform.
 
 FORWARD-LOOKING STATEMENTS
  The
information in this annual report contains forward-looking statements. All
statements other than statements of historical fact made in this report are
forward looking. In particular, the statements herein regarding industry
prospects and future results of operations or financial position are
forward-looking statements. Forward-looking statements reflect management's
current expectations and are inherently uncertain. Our actual results may differ
significantly from management's expectations.
  This
discussion should not be construed to imply that the results discussed herein
will necessarily continue into the future, or that any conclusion reached herein
will necessarily be indicative of actual operating results in the future. Such
discussion represents only the best present assessment of our management.
  LIQUIDITY
AND CAPITAL RESOURCES
  Our cash
balance at January 31, 2008 has decreased compared to the cash balance at
January 31, 2007.  As of January 31, 2008, our cash balance was
$28,946 as compared to $39,075 at January 31, 2007. The decrease in cash was
mainly due to general and administrative expenses.
  In the
first half of calendar year 2007, the Company's primary focus was to complete
its new technology for the EpathFX ECN Platform. To ensure that the Company had
sufficient resources to complete the technology rewrite, it raised $700,000 in a
preferred stock placement, $500,000 in a common stock placement and $152,500 of
loans which become due at the time of the completion of the merger. The company
also had a loan on its books at January 31, 2008 of $80,000.
  There are
no other lines of credit available to us to refinance our short-term loans.
Additionally, we currently do not have any other sources of financing available
to us for refinancing our short-term loans.
  PLAN
OF OPERATIONS
  We
currently do not have any material commitments for capital expenditures and we
expect our capital requirements to increase over the next several years as we
continue to develop and test our platform, increase marketing and administration
infrastructure, and continue to develop in-house business capabilities and
facilities. Our future liquidity and capital funding requirements will depend on
numerous factors, including, but not limited to, the levels and costs of our
research and development initiatives, the cost of hiring and training additional
sales and marketing personnel to promote our products and the cost and timing of
the expansion of our marketing efforts.
 
 Based on
our current business plan, we anticipate that our existing cash balances and
cash generated from future sales may not be sufficient to permit us to conduct
our operations and to carry out our contemplated business plans for the next
twelve months. As a result, we will need additional financing and may seek to
raise funds from investors through securities offerings to expand our
operations, using new capital to develop new technology and respond to
competitive pressures while continuing to develop the product research and
development of the EpathFX ECN Platform. There can be no assurance that we
will be able to obtain additional financing and therefore continue our
operations or that financing will be available to us on acceptable
terms.  We do not expect any significant purchases of plant and
equipment and we do not expect a significant increase in our number of
employees, especially in light of current worldwide economic
conditions.
  8
 
 RESULTS
OF OPERATIONS
  FISCAL
YEAR ENDED JANUARY 31, 2008 COMPARED TO FISCAL YEAR ENDED JANUARY 31,
2007
  For the
fiscal year ended December  31, 2006 we had total losses of $
1,856,124 and revenue of $2,379,042, compared to net loss of
$15,385,370 and revenue of $14,536 for the fiscal year ended January 31,
2008.  The decrease in revenue is due to the Company’s decision to
focus on the development of the Epath FX ECN trading platform.  The
transition from the old COES FX trading platform to the new EPath FX ECN
platform resulted in the reduction of sales and revenues of the old COES FX
Platform.
  OFF-BALANCE
SHEET ARRANGEMENTS
  We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
 
 Critical
Accounting Policies
 
 Merger
 On March
6, 2007, we entered into an Agreement and Plan of Merger, as amended (the
“Merger Agreement”), pursuant to which COESfx Acquisition Corp. (“Acquisition”),
our wholly owned subsidiary merged with and into XLFX, Inc., formerly COESfx
Holdings, Inc. (“XLFX”).  On July 18, 2007, Acquisition completed the
merger with XLFX which made XLFX our wholly owned subsidiary of
SFG.    Under the terms of the Merger Agreement, the former
stockholders of XLFX hold approximately 96% of the issued shares of
SFG.  As the former stockholders of XLFX control the Company after the
transaction, the merger was accounted for as a reverse acquisition under which,
for accounting purposes, XLFX is deemed to be the acquirer and SFG, the legal
acquirer, is deemed to be the acquired entity.  No goodwill was
recognized as we were a “shell” company.
  Revenue
Recognition
  In
general, the Company records revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably
assured.
  The
Company earned its revenue in various ways. It received a transaction fees for
each transaction executed using its trading Platform, the clearing companies
earned additional revenue from interest earned on client’s funds as well as
interest differential on swaps and  roll-overs. The Company earned
commissions and rebates from licensed users of the Trading Platform.
Commissions, rebates and related expenses are recorded on a trade date and
transaction basis.
 Cash
and Cash Equivalents
 
 The
Company considers all highly liquid debt instruments purchased with maturity of
three months or less to be cash equivalents.
 
 Use
of Estimates
  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the
period.  Actual results could differ from these
estimates.
 
 Earnings
per Share
 
 Earnings
per share are based on the weighted-average number of shares of common stock
outstanding in each year.  The Company maintains a capital structure
which consist of capital stock and includes no potential dilution via
conversions, exercise of options or other arrangements that would increase the
number of shares outstanding.
 
 Income
Taxes
 
 Income
taxes are accounted for by the asset/liability approach in accordance with
FAS-109 (Accounting for Income Taxes).  The provisions for income
taxes represents the total income taxes paid or payable for the current
year.  As of January 31, 2008, the Company did not
have  deferred tax asset or liability.
 
 Recent
Accounting Pronouncements
  On
February 15, 2007, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (SFAS No. 159). SFAS No. 159 permits entities to choose
to measure many financial instruments and other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently, without having to apply complex
hedge accounting procedures. SFAS No. 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The Statement is expected to expand the use of fair value
measurements, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments. SFAS No. 159 will be
effective for the Company’s 2009 fiscal year and was required to be adopted by
the Company effective February 1, 2009. Management at this time has not
evaluated the impact, if any, of adopting SFAS No. 159 on its financial
statements.
 9
  In
December 2007, the FASB issued SFAS No. 160 “Non-controlling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51.” SFAS 160
establishes accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary. The guidance will
become effective as of the beginning of our fiscal year beginning after December
15, 2008. Management believes the adoption of this pronouncement will not have a
material impact on our consolidated financial statements.
  In
December 2007, the FASB issued SFAS No. 141R “Business Combinations
(revised 2007).” This statement replaces SFAS 141, Business Combinations. The
statement provides guidance for how the acquirer recognizes and measures the
identifiable assets acquired, liabilities assumed and any non-controlling
interest in the acquiree. SFAS 141R provides for how the acquirer recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase. The statement determines what information to disclose to
enable users to be able to evaluate the nature and financial effects of the
business combination. The provisions of SFAS 141R will be effective for our
fiscal year beginning February 1, 2009, and do not allow early adoption.
Management is currently evaluating the impact of adopting this
statement.
  In
February 2008, FASB Staff Position (FSP) No. 157-2, “Effective Date of
FASB Statement No. 157” was issued. FSP No. 157-2 defers the effective
date of SFAS No. 157 to fiscal years beginning after December 15,
2008, and interim periods within those fiscal years, or all non-financial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). Examples of
items within the scope of FSP No. 157-2 are non-financial assets and
non-financial liabilities initially measured at fair value in a business
combination (but not measured at fair value in subsequent periods), and
long-lived assets, such as property, plant and equipment and intangible assets
measured at fair value for an impairment assessment under SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” The partial
adoption of SFAS 157 on February 1, 2008, with respect to financial assets and
financial liabilities recognized or disclosed at fair value in the financial
statements on a recurring basis, is not expected to have a material effect on
the Company’s consolidated financial statements. The Company is currently
assessing the impact, if any, of SFAS No. 157 relating to its planned
February 1, 2009, adoption of the remainder of the standard.
  In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities-an Amendment of FASB Statement
No. 133”, which became effective on November 15, 2008. This standard
changed the disclosure requirements for derivative instruments and hedging
activities.  Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations, and (c) how derivative instruments and
related hedging items affect an entity’s financial position, financial
performance, and cash flows. Management is currently evaluating the impact of
the adopting this statement.
  In
April 2008, the FASB issued FASB Staff Position (FSP) FSP 142-3,
“Determination of the Useful Life of Intangible Assets.” This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets.” The intent of
this FSP if to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows to
measure the fair value of the asset under FASB Statement No. 141 (Revised
2007), “Business Combinations,” and other U.S. generally accepted accounting
principles (GAAP). This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is prohibited. The Company does not expect
the adoption of FAS 142-3 to have a material effect on its results of operations
and financial condition.
  In
May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1
“Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)”. FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008, on a
retroactive basis and will be adopted by the Company in the first quarter of
fiscal 2009. The Company does not expect the adoption of FSP APB 14-1 to have a
material effect on its results of operations and financial
condition.
  In
May 2008, the FASB issued SFAB No. 162, “The Hierarchy of Generally
Accepted Accounting Principles,” which becomes effective upon approval by the
SEC. the standard sets forth the sources of accounting principles and provides
entities with a framework for selecting the principles used in the preparation
of financial statements that are presented in conformity with GAAP. It is not
expected to change any of our current accounting principles or practices and
therefore, is not expected to have a material impact on our financial
statements.
 Item
      7.
              Financial
      Statements
 
 Financial
statements appear at the end of this Report.
  10
 
 Item
      8.
              Changes In And
      Disagreements with Accountants On Accounting And Financial
      Disclosure.
 
 On June
11, 2008, the Company dismissed its independent registered public accounting
firm, Thomas Bauman, C.P.A. (“Mr. Bauman”).  The Company’s decision to
dismiss Mr .Bauman was approved by its Board of Directors on June 3,
2008.
 
 Mr.
Bauman’s report on the Company's financial statements for the fiscal years ended
January 31, 2007 and 2006, and contained an explanatory paragraph indicating
that there was substantial doubt as to the Company's  ability to
continue as a going  concern.  Other than such
statement,  no report of Mr. Bauman on the financial statements of the
Company for either of the past two years  contained an adverse
opinion  or  disclaimer  of  opinion,   or  was  qualified  or  modified  as  to
uncertainty, audit scope or accounting principles.
 
 During
the Company's  two most recent fiscal years ended  January
31, 2008 and  2007 and the subsequent  interim period
through  June 11, 2008  , there  have been no
disagreements  with Mr. Bauman on any matter of
accounting  principles or practices,  financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Mr. Bauman, would have caused it to make reference to the
subject matter of the  disagreement  in connection with
its  reports.
 
 On June
3, 2008, the Board of Directors approved the Company’s engagement of Stark
Winter Schenkein & Co., LLP (“SWS”)  as independent registered
public accounting firm for the Company.  The Company engaged SWS on
June 16, 2008.
 
 During
the Company's two most recent fiscal years ended  January 31, 2008 and
2007 and the subsequent  interim period through  June 16,
2008, neither the Company nor anyone on its behalf  consulted with
SWS  regarding (i) the application  of
accounting  principles to a specified proposed
or  contemplated transaction,  (ii) the type
of  audit  opinion  that  might
be  rendered  on the
Company's  financial  statements,  (iii) or
oral  advice  that was an  important factor
considered by us in reaching our decision as to any
accounting,  auditing
or  financial  reporting  issue or (iv)
any  matter  that was
the  subject  of  a disagreement or event
identified in response to Item 304(a)(1)(iv) of Regulation S-K (there being
none).
 
 Item
      8A.
              Controls and
      Procedures
  Evaluation
of Disclosure Controls and Procedures:
 We
maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act that are designed to insure that information
required to be disclosed in the reports we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the periods specified in
the Securities and Exchange Commission’s rules and forms and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer (CEO) and Chief Financial Officer (CFO), or the persons
performing similar functions, to allow timely decisions regarding required
disclosure.
  Under the
supervision and with the participation of our CEO and CFO, or the persons
performing similar functions, our management has evaluated the effectiveness of
our disclosure controls and procedures as of the end of the period covered by
this annual report. Based on that evaluation, our CEO and CFO, or the persons
performing similar functions, concluded that our disclosure controls and
procedures were ineffective as of January 31, 2008.
  The
Company has taken initial steps, outlined below, and will continue to take more
steps to strengthen our disclosure controls, to evaluate and to remedy
deficiencies and to test these procedures and controls on an ongoing
basis.
  The
Company is seeking to hire a Chief Financial Officer (CFO), or an employee who
will perform the functions of a CFO, who will strengthen the disclosure controls
and procedures by implementing procedures that enhance recording, processing,
summarizing and reporting within the time periods specified in the Commission’s
rules and forms, simplifying certain accounting procedures, increasing training
for accounting personnel, increasing documentation of accounting transactions
and the related reviews, improving the timeliness and quality of financial
reports to management, and improving the communications between the
accounting/finance department and other areas of the Company. In addition, the
Company will make increased use of its outside advisors to improve its quality
of disclosure.
  Management’s
Annual Report on Internal Control over Financial Reporting:
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting
is the process designed by and under the supervision of our CEO and CFO, or the
persons performing similar functions, to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of our financial
statements for external reporting in accordance with accounting principles
generally accepted in the United States of America. Management has evaluated the
effectiveness of our internal control over financial reporting using the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) inInternal Control over Financial Reporting – Guidance for Smaller Public
Companies .
 
 Under the
supervision and with the participation of our CEO and CFO, or the persons
performing similar functions, our management has assessed the effectiveness of
our internal control over financial reporting as of January 31, 2008 and
concluded that it is effective.
 
 This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this annual report.
  11
 
 Evaluation
of Changes in Internal Control over Financial Reporting:
 Under the
supervision and with the participation of our CEO and CFO, or those persons
performing similar functions, our management has evaluated changes in our
internal controls over financial reporting that occurred during the fourth
quarter of 2007. Based on that evaluation, our CEO and CFO, or those persons
performing similar functions, did not identify any change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
  Important
Considerations:
  The
effectiveness of our disclosure controls and procedures and our internal control
over financial reporting is subject to various inherent limitations, including
cost limitations, judgments used in decision making, assumptions about the
likelihood of future events, the soundness of our systems, the possibility of
human error, and the risk of fraud. Moreover, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions and the risk that the degree of
compliance with policies or procedures may deteriorate over time. Because of
these limitations, there can be no assurance that any system of disclosure
controls and procedures or internal control over financial reporting will be
successful in preventing all errors or fraud or in making all material
information known in a timely manner to the appropriate levels of
management.
 Changes
in Internal Control over Financial Reporting
 
 None.
 
 Item
      8B
              Other
      Information.
 
 None.
 
 PART III
 
 
 Item
      9.
              Directors, Executive
      Officers, Promoters and Control Persons; Compliance with 16(a) of the Exchange
      Act .
 
 The
following table sets forth the names and ages of all directors and executive
officers of the Company and the positions in the Company held by
them.
 
 Name
                              
                              Age
                              
                              PositionRalph
      Balzano
                              
                              70
                              
                              Interim
      Chief Executive Officer (Resigned December 1, 2008), Chairman of Board,
      DirectorMichael
      Caska
                              
                              50
                              
                              President,
      Chief Executive Officer, Director (Appointed December 1,
    2008)Kenneth
      A. Lauricella
                              
                              43
                              
                              DirectorPaul
      B. Kravitz
                              
                              77
                              
                              Director
 
 Ralph
Balzano, age 70, was Commissioner of Information Technology and
Telecommunications for the City of New York from 1993 to 1999.  Mr.
Balzano was chief information officer, South Manhattan Network of the New York
City Health & Hospital Corporation from 1999 to 2001. Previously he was CEO
of LCS Associates, an information technology and telecommunications company. Mr.
Balzano is the recipient of a number of awards including the 1997 Ellis Island
Medal of Honor for Public Service and the 1997 Bronze Medal for Technology from
the Smithsonian Institute Awards Program.
 
 Michael
C. Caska, age 50,has over 25 years
experience at the Executive Level in the Investment Banking, Asset Management
and Securities Brokerage Industry. He is a Founder of 551 FX IB Associates LLC
and prior to starting 551 FX he was a Consultant to the Chairman of the Board of
Ladenburg Thalmann a NYSE Member firm. Mr. Caska was the President/ Chief
Operating Officer of Sands Brothers & Co, a NYSE Member. He was a Managing
Director/Chief Financial Officer for Nathan & Lewis Securities Inc. a retail
brokerage firm and Insurance general agency which was sold to Met Life. Mr.
Caska holds a BBA in Finance and Investments from Baruch College and is
Registered as a Series 7, 24, 27, 63 & 65.
 
 Kenneth
A. Lauricella, age 43, has been engaged as a private investor, for himself and
through his role as trustee and financial advisor for a trust fund, for more
than the past five years. In 1993 and 1994, Mr. Lauricella worked for Morgan
Stanley & Company in Equity Research, analyzing telecommunications
companies, writing research reports, developing financial forecasts and
valuation models and communicating with clients. In a prior position, in 1990
and 1991, he worked for Arthur Andersen & Company in information technology.
Mr. Lauricella earned a B.S. in Finance in 1987 from Pennsylvania State
University. In 1993, he earned an MBA with distinction in Finance from the
Babcock Graduate School of Management at Wake Forest
University.
  12
 
 Paul B. Kravitz, age 77, is Chairman, a
member of the Board of Directors and Chief Executive Officer of Med Gen Inc., a
publicly traded company, since 1996. Prior to founding Med Gen, Mr.
Kravitz was the President and CEO of AppleTree Companies, Inc., a
public company.  Mr. Kravitz retired from AppleTree in 1996. From
1986 until 1992, Mr. Kravitz was the CEO and principal shareholder of The
Landon Group, a financial services company. In 1992/1993, Mr. Kravitz was
appointed Chairman of the Southeast Bank's Leasing Division, an appointment
made by the Federal Deposit Insurance Corporation which was in the process
of liquidating that bank. From 1960 until the mid-1980's, Mr. Kravitz was the
CEO of several furniture companies (American Furniture Company, Inc.,
and Furniture Resources International, Inc. Mr. Kravitz served as a 1/Lt. USAF
on active duty during the Korean War. He was Honorably Discharged from active
duty in 1955 and awarded the Korean Service Medal. He served in the USAFR until
he retired in 1973.Mr. Kravitz is a graduate of
Boston University with a BS Degree.
 
 
 Significant
      Employees
                NoneFamily
      Relationships
                NoneInvolvement in certain
      legal proceedings
                NoneAudit committee
      financial expert
                None
 
 
 The
Company has not yet adopted a code of business conduct and ethics that applies
to all directors, officers and employees.  The Company intends to
adopt a plan in the near future.
 
 Compliance with section
16(a) of the Exchange Act
 
 Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who beneficially own more than ten percent of a
registered class of our equity securities to file with the SEC initial reports
of ownership and reports of change in ownership of common stock and other equity
securities of our company. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Ralph Balzano, Ronald Balzano and Leonard Neuhaus
each filed a Form 3 during the fiscal year ended January 31, 2008 and Ralph
Balzano filed a Form 4.  None of the forms were filed in a timely
manner.
 
 
 Item
      10.
              Executive
      Compensation
 
 SUMMARY
COMPENSATION TABLE
 
 The
following table sets forth all compensation paid in respect of our Chief
Executive Officer and those individuals who received compensation in excess of
$100,000 per year (collectively, the "Named Executive Officers") for our last
two completed fiscal years.
 
 Name
      and principal position
                Year
                Salary
                Bonus
                Stock
      Awards
                Option
      Awards
                Non-Equity
      Incentive Plan
                Non-qualified
      Deferred Compensation Earnings
                All
      other compensation
                Total($)
                ($)
                ($)
                ($)
                ($)
                ($)
                ($)
                ($)Michael
      Frey(1)
                2007
                  2006
                138,750
                -
                3,200
                -
                -
                -
                -
                -Ronald
      Balzano(2)
                2006
                127,500
                -
                3,200
                -
                -
                -
                -
                -Michael
      Weiner(3)
                2006
                138,750
                -
                -
                -
                -
                -
                -
                -
 
 (1)
              Michael
      Frey was CEO from May 2002-July
2007
 (2)
              Ronald
      Balzano was President from August 2004-July
2007
 (3)
              Michael
      Weiner was Managing Partner from May 2002-July
  2007
 
 Outstanding Equity Awards at
Fiscal Year-End Table.
  No
options were granted to our executive officers during the fiscal year ended
January 31, 2008.
 
 
 Stock
      Option Plans
  No stock
options were granted to the executive officers during the fiscal year ended
January 31, 2008 or 2007. No stock options were exercised during the fiscal year
ended January 31, 2008.
  13
 
 Compensation
      of Directors
  Ralph
Balzano, one of our directors, received $5,000 in 2007 as compensation for his
service on the Board of Directors.
 
 
 Item
      11.
              Security Ownership of
      Certain Beneficial Owners and Management and Related Stockholder
      Matters
 
 The
following table contains information as of February 9, 2009 as to the beneficial
ownership of the Company’s Common Stock by each person or entity who was
the beneficial owner of more than 5% of the outstanding shares of that class,
each person who is a director or officer of the Company and all persons as a
group who are officers and directors of the Company and as to the percentage of
outstanding shares held by them at February 9, 2009.
 
 Name
      and Address of
                                        
                                        Shares
                                        
                                        
                                        Percentage
      of
                                          Ownership
      (1)Michael
      Caska
                                        
                                        
                                        0
                                        
                                        
                                        
                                        *Ralph
      Balzano  (2)
                                        
                                        
                                        538,692
                                        
                                        
                                        
                                        *Kenneth
      A. Lauricella (3)
                                        
                                        
                                        1,050,000
                                        
                                        
                                        
                                        1.6Paul
      B. Kravitz
                                        
                                        
                                        150,000
                                        
                                        
                                        
                                        *Ronald
      Balzano
                                        
                                        
                                        6,040,057
                                        
                                        
                                        
                                        9.1Michael
      Frey, LLC
                                        
                                        
                                        16,895,730
                                        
                                        
                                        
                                        25.4Red
      River Resources, Inc. (4)
                                        
                                        
                                        5,923,417
                                        
                                        
                                        
                                        8.9Centurion
      Financial Group, LLC (5)
                                        
                                        
                                        4,800,000
                                        
                                        
                                        
                                        7.2Greg
      Mazzeio
                                        
                                        
                                        5,295,437
                                        
                                        
                                        
                                        8.0All
      Directors and Officers as a Group (4 persons)
                                        
                                        
                                        1,738,692
                                        
                                        
                                        
                                        2.6
 
 *Denotes
less than 1%
 
 (1)
                            Based
      upon 66,499,691 shares issued and outstanding as of February 9,
      2009(2)
                            Includes
      388,692 shares held jointly with Julia Balzano(3)
                            Includes
      300,000 shares held through the John A. Lauricella Testamentary Trust, of
      which Kenneth Lauricella is sole trustee and one of three
      beneficiaries.(4)
                            Michael
      Weiner holds investment and dispositive power of the shares held by Red
      River Resources, Inc.(5)
                            Shannon
      Sorbara holds investment and dispositive power of the shares held by
      Centurion Financial Group,
LLC.







Item
      12.
            Certain Relationships
      and Related Transactions, and Director
  Independence




As of
January 31, 2008, the company was not involved in any transaction, in which the
amount involved exceeded the lesser of $120,000 or one percent of the average of
the company’s total assets at year-end for the last three completed fiscal
years.







Item 13.
            Exhibits





Number
                        
                        Description3.1
                        
                        Articles
      of Incorporation (Incorporated by reference to our annual report on Form
      10-KSB for the year ended January 31, 2007 filed on July 20,
      2007)3.2
                        
                        Bylaws  (Incorporated
      by reference to our annual report on Form 10-KSB for the year ended
      January 31, 2007 filed on July 20, 2007)3.3
                        
                        Amended
      and Restated Bylaws (Incorporated by reference to our current report on
      Form 8-K filed on August 17, 2007).4.1
                        
                        Form
      of Warrant (Incorporated by reference to our current report on Form 8-K
      filed on November 16, 2007)10.1
                        
                        Agreement
      and Plan of Merger, dated as of March 6, 2007, by and among COESfx
      Holdings, Inc., COESfx Acquisition Corp. and SFG Financial Corporation
      (Incorporated by reference to the current report on Form 8-K filed on
      April 5, 2007).10.2
                        
                        Amendment
      No. 1 to Agreement and Plan of Merger, dated as of March 30, 2007, by and
      among COESfx Holdings, Inc., COESfx Acquisition Corp. and SFG Financial
      Corporation (Incorporated by reference to the current report on Form 8-K
      filed on April 5, 2007).10.3
                        
                        Employment
      Agreement between SFG Financial Corporation and Leonard Neuhaus, dated as
      of October 4, 2007 (Incorporated by reference to our current report on
      Form 8-K, as filed on October 9, 2007)16.1
                        
                        Dismissal
      letter from Thomas Bauman, C.P.A. (Incorporated by reference to our
      current report on Form 8-K, filed on July 1, 2008)31.1
                        
                        Certification
      by Chief Executive Officer and Principal Accounting Officer, required by
      Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act*32.1
                        
                        Certification
      by Chief Executive Officer and Principal Accounting Officer, required by
      Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of
      Chapter 63 of Title 18 of the United States
  Code*





*Filed
herewith





14





Item
      14.
            Principal Accountant
      Fees and Services





The
aggregate fees billed for professional services rendered by our independent
registered public accounting firm for the audit of our financial statements
included in our annual report on Form 10-KSB and for the reviews of the
financial statements included in our quarterly reports on Form 10-QSB were
$60,500 and $35,045 for the years ended January 31, 2008 and January 31, 2007,
respectively.





AUDIT-RELATED
FEES





We
incurred fees of $0 and $0 for the years ended January 31, 2008 and January 31,
2007, respectively, for professional services rendered by our independent
registered public accounting firm that are reasonably related to the performance
of the audit or review of our financial statements and not included in "Audit
Fees", such fees were principally related to registration
statements.




TAX
FEES





Tax fees
billed by our independent registered public accounting firm during the year
ended January 31, 2008, were $0, related to tax research. No tax fees were
billed for the fiscal year ended January 31, 2008.





ALL
OTHER FEES





We did
not incur any fees for other professional services rendered by our
independent registered public accounting firm during the years ended January 31,
2008 and January 31, 2007.








15





SIGNATURES








In
accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.





SFG
      FINANCIAL CORPORATIONDate:
      February 13, 2009
              By: 
      /s/
      _Michael Caska_______________Michael
      Caska
                Chief
      Executive Officer, President and Director (Principal Executive Officer and
      Principal Accounting Officer)





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Name
                Title
                Date/s/ _Michael
      Caska______
                  Michael
      Caska
                Chief
      Executive Officer, President and Director (Principal Executive Officer and
      Principal Accounting Officer)
                February
      13, 2009/s/Kenneth
      A. Lauricella_
                  Kenneth
      A. Lauricella
                Director
                February
      13, 2009/s/ _Paul
      B. Kravitz_
                  Paul
      B. Kravitz
                Director
                February
      13, 2009/s/ __Ralph
      Balzano______
                  Ralph
      Balzano
                Chairman
      of Board, Director
                February
      13, 2009











16








SFG
FINANCIAL CORPORATION
 
 COMPARATIVE
FINANCIAL STATEMENTS
 
 FOR
THE YEAR ENDING JANUARY 31, 2008 and 2007
     
 F-1




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Stockholders
and Board of Directors


SFG
Financial Corporation








We have
audited the accompanying consolidated balance sheet of SFG Financial Corporation
as of January 31, 2008, and the related consolidated statements of operations,
stockholders’ (deficit) and cash flows for the year ended January 31, 2008, and
the one month ended January 31, 2007. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of SFG Financial Corporation as of
January 31, 2008, and the results of operations for the year ended January 31,
2008, and the one month ended January 31, 2007, in conformity with accounting
principles generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company has incurred significant losses from
operations and has a working capital deficit and no significant revenue
generating operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to this
matter are also discussed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





Stark
Winter Schenkein & Co., LLP





/s/Stark
Winter Schenkein & Co., LLP








Denver,
Colorado


January
31, 2009




F-2




SFG
      FINANCIAL CORPORATIONCONSOLIDATED
      BALANCE SHEETJANUARY
      31, 2008ASSETSCurrent
      AssetsCash
                                                                      
                                                                      $
                                                                      28,946Total
      Current Assets
                                                                      
                                                                      
                                                                      28,946Fixed
      AssetsProperty
      and equipment (net of accumulated depreciation)
                                                                      
                                                                      
                                                                      6,785Trading
      platform (net of accumulated amortization)
                                                                      
                                                                      
                                                                      53,805Total
      Fixed Assets
                                                                      
                                                                      
                                                                      60,590Other
      AssetsLease
      security deposit
                                                                      
                                                                      
                                                                      14,426Total
      Other Assets
                                                                      
                                                                      
                                                                      14,426Total
      Assets
                                                                      
                                                                      $
                                                                      103,962LIABILITIES AND
      STOCKHOLDERS' (DEFICIENCY)Accounts
      payable and accrued expenses
                                                                      
                                                                      $
                                                                      917,551Loans
      payable
                                                                      
                                                                      
                                                                      236,328Total
      Current Liabilities
                                                                      
                                                                      
                                                                      1,153,879STOCKHOLDERS'
      (DEFICIENCY)Preferred
      Stock; $.001 par value 10,000,000 shares authorizedno
      shares issued and outstanding
                                                                      
                                                                      
                                                                      -Common
      stock; $.001 par value 125,000,000 shares authorized63,645,033
      shares issued and outstanding
                                                                      
                                                                      
                                                                      63,646Additional
      paid in capital
                                                                      
                                                                      
                                                                      17,962,050Subscription
      receivable
                                                                      
                                                                      
                                                                      (325,000
                                                                      )Accumulated
      (deficit)
                                                                      
                                                                      
                                                                      (18,750,613
                                                                      )Total
      Stockholders' (Deficiency)
                                                                      
                                                                      
                                                                      (1,049,917
                                                                      )Total
      Liabilities and Stockholders' (Deficiency)
                                                                      
                                                                      $
                                                                      103,962
 See the
accompanying notes to the consolidated financial statements.
 F-3


SFG
      FINANCIAL CORPORATIONCONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDED JANUARY 31, 2008 AND DECEMBER 31, 2006,AND
      THE ONE MONTH ENDED JANUARY 31, 20072008
                                                                                              
                                                                                              
                                                                                              2006
                                                                                              
                                                                                              
                                                                                              2007Revenue:Clearing
      and related transaction fees
                                                                                              
                                                                                              $
                                                                                              -
                                                                                              
                                                                                              
                                                                                              $
                                                                                              1,828,043
                                                                                              
                                                                                              
                                                                                              $
                                                                                              -Commission
      income
                                                                                              
                                                                                              
                                                                                              5,562
                                                                                              
                                                                                              
                                                                                              
                                                                                              417,343
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Other
      income
                                                                                              
                                                                                              
                                                                                              8,974
                                                                                              
                                                                                              
                                                                                              
                                                                                              133,656
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Total
      revenue
                                                                                              
                                                                                              
                                                                                              14,536
                                                                                              
                                                                                              
                                                                                              
                                                                                              2,379,042
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Expenses:Selling,
      general and administrative expenses
                                                                                              
                                                                                              
                                                                                              14,008,412
                                                                                              
                                                                                              
                                                                                              
                                                                                              3,067,114
                                                                                              
                                                                                              
                                                                                              
                                                                                              153,603Technology
      and infrastructure expenses
                                                                                              
                                                                                              
                                                                                              316,935
                                                                                              
                                                                                              
                                                                                              
                                                                                              354,166
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Introducing
      broker commissions
                                                                                              
                                                                                              
                                                                                              -
                                                                                              
                                                                                              
                                                                                              
                                                                                              460,238
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Impairment
      of trading platform
                                                                                              
                                                                                              
                                                                                              737,838
                                                                                              
                                                                                              
                                                                                              
                                                                                              -
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Depreciation
      and amortization expenses
                                                                                              
                                                                                              
                                                                                              336,721
                                                                                              
                                                                                              
                                                                                              
                                                                                              353,648
                                                                                              
                                                                                              
                                                                                              
                                                                                              895Total
      expenses
                                                                                              
                                                                                              
                                                                                              15,399,906
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,235,166
                                                                                              
                                                                                              
                                                                                              
                                                                                              154,498Net
      (loss)
                                                                                              
                                                                                              $
                                                                                              (15,385,370
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (1,856,124
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (154,498
                                                                                              )Per
      share information - basic and diluted(Loss) per
    share
                                                                                              
                                                                                              $
                                                                                              (0.29
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (0.05
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (0.00
                                                                                              )Weighted
      Average of Number of Common
      Shares Outstanding
                                                                                              
                                                                                              
                                                                                              53,068,889
                                                                                              
                                                                                              
                                                                                              
                                                                                              39,468,553
                                                                                              
                                                                                              
                                                                                              
                                                                                              44,298,274









F-4




SFG
      FINANCIAL CORPORATIONConsolidated
      Statement of Stockholders' Equity (Deficiency)January
      1, 2006 to January 31, 2008ADDITIONALCOMMON
      STOCK
                                                                                                                    
                                                                                                                    
                                                                                                                    PAID-IN
                                                                                                                    
                                                                                                                    
                                                                                                                    ACCUMULATED
                                                                                                                    
                                                                                                                    
                                                                                                                    SUBSCRIPTIONSHARES
                                                                                                                    
                                                                                                                    
                                                                                                                    AMOUNT
                                                                                                                    
                                                                                                                    
                                                                                                                    CAPITAL
                                                                                                                    
                                                                                                                    
                                                                                                                    (DEFICIT)
                                                                                                                    
                                                                                                                    
                                                                                                                    RECEIVABLE
                                                                                                                    
                                                                                                                    
                                                                                                                    TOTALBalance
      at January 1, 2006
                                                                                                                    
                                                                                                                    
                                                                                                                    34,585,151
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    3,459
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    3,564,384
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (1,354,621
                                                                                                                    )
                                                                                                                    
                                                                                                                    $
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    2,213,222Shares
      issued during the year ended December 31, 2006
                                                                                                                    
                                                                                                                    
                                                                                                                    9,377,473
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    938
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    938Shares
      sold during the year ended December 31, 2006
                                                                                                                    
                                                                                                                    
                                                                                                                    336,250
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    34
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    325,523
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    325,557Net
      (loss)
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (1,856,124
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (1,856,124
                                                                                                                    )Balance
      at December 31, 2006
                                                                                                                    
                                                                                                                    
                                                                                                                    44,298,874
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,431
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    3,889,907
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (3,210,745
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    683,593Net
      (loss)
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (154,498
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (154,498
                                                                                                                    )Balance
      at January 31, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    44,298,874
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,431
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    3,889,907
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (3,365,243
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    529,095Common
      shares issued for services
                                                                                                                    
                                                                                                                    
                                                                                                                    14,210,739
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    6,264
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    11,718,486
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    11,724,750Restructure
      of COES stock due to merger
                                                                                                                    
                                                                                                                    
                                                                                                                    (4,628,874
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    43,187
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (43,187
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -Sale
      of preferred shares in subsidiary
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    700,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    700,000Sale
      of common shares
                                                                                                                    
                                                                                                                    
                                                                                                                    9,014,285
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    9,014
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    815,986
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (325,000
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    500,000Issuances
      of warrants for compensation
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,038,588
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,038,588Recapitalization
      adjustments
                                                                                                                    
                                                                                                                    
                                                                                                                    750,009
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    750
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (157,730
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (156,980
                                                                                                                    )Net
      (loss)
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (15,385,370
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (15,385,370
                                                                                                                    )Balance
      at January 31, 2008
                                                                                                                    
                                                                                                                    
                                                                                                                    63,645,033
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    63,646
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    17,962,050
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (18,750,613
                                                                                                                    )
                                                                                                                    
                                                                                                                    $
                                                                                                                    (325,000
                                                                                                                    )
                                                                                                                    
                                                                                                                    $
                                                                                                                    (1,049,917
                                                                                                                    )









F-5




SFG
      FINANCIAL CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED JANUARY 31, 2008 AND DECEMBER 31, 2006 AND THE ONE MONTH
      ENDED JANUARY 31, 20072008
                                                                        
                                                                        
                                                                        2006
                                                                        
                                                                        
                                                                        2007Cash
      flow from operating activities:Net
      (loss)
                                                                        
                                                                        $
                                                                        (15,385,370
                                                                        )
                                                                        
                                                                        $
                                                                        (1,856,124
                                                                        )
                                                                        
                                                                        $
                                                                        (154,498
                                                                        )Adjustments
      to reconcile net( loss) to net cash provided by
      (used in) operating activities:Depreciation
      and amortization
                                                                        
                                                                        
                                                                        336,721
                                                                        
                                                                        
                                                                        
                                                                        353,648
                                                                        
                                                                        
                                                                        
                                                                        895Stock
      based compensation
                                                                        
                                                                        
                                                                        12,763,338
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Impairment
      of trading platform
                                                                        
                                                                        
                                                                        737,838
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Recapitalization
      adjustment
                                                                        
                                                                        
                                                                        157,730
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Receivable
      for common stock
                                                                        
                                                                        
                                                                        (325,000
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Changes
      in assets and liabilities:(Increase)
      decrease in other receivables
                                                                        
                                                                        
                                                                        9,200
                                                                        
                                                                        
                                                                        
                                                                        (3,670
                                                                        )
                                                                        
                                                                        
                                                                        (5,530
                                                                        )Decrease
      in prepaid expenses
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        47,487
                                                                        
                                                                        
                                                                        
                                                                        -Decrease
      in non current receivable
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        61,866
                                                                        
                                                                        
                                                                        
                                                                        -Decrease
      in security deposit receivable
                                                                        
                                                                        
                                                                        8,259
                                                                        
                                                                        
                                                                        
                                                                        100
                                                                        
                                                                        
                                                                        
                                                                        124Increase
      (decrease) in accounts payable
                                                                        
                                                                        
                                                                        422,439
                                                                        
                                                                        
                                                                        
                                                                        (278,123
                                                                        )
                                                                        
                                                                        
                                                                        226,668(Decrease)
      in client funds payable
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (3,834,542
                                                                        )
                                                                        
                                                                        
                                                                        -Net
      cash provided by (used in) operating activities
                                                                        
                                                                        
                                                                        (1,274,845
                                                                        )
                                                                        
                                                                        
                                                                        (5,509,358
                                                                        )
                                                                        
                                                                        
                                                                        67,659Cash
      flow from investing activities:Purchase
      of  fixed assets
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (262,400
                                                                        )
                                                                        
                                                                        
                                                                        (231,836
                                                                        )Capitalization
      of trading platform
                                                                        
                                                                        
                                                                        (87,784
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Cash
      (used in) investing activities
                                                                        
                                                                        
                                                                        (87,784
                                                                        )
                                                                        
                                                                        
                                                                        (262,400
                                                                        )
                                                                        
                                                                        
                                                                        (231,836
                                                                        )\Cash
      flow from financing activities:Proceeds
      from sale of subsidiary's preferred stock
                                                                        
                                                                        
                                                                        700,000
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Proceeds
      from sale of common stock
                                                                        
                                                                        
                                                                        500,000
                                                                        
                                                                        
                                                                        
                                                                        326,495
                                                                        
                                                                        
                                                                        
                                                                        -Increase
      in loans payable
                                                                        
                                                                        
                                                                        152,500
                                                                        
                                                                        
                                                                        
                                                                        80,000
                                                                        
                                                                        
                                                                        
                                                                        -Cash
      flow provided by financing activities
                                                                        
                                                                        
                                                                        1,352,500
                                                                        
                                                                        
                                                                        
                                                                        406,495
                                                                        
                                                                        
                                                                        
                                                                        -Net
      (decrease) in cash and cash equivalent
                                                                        
                                                                        
                                                                        (10,129
                                                                        )
                                                                        
                                                                        
                                                                        (5,365,263
                                                                        )
                                                                        
                                                                        
                                                                        (164,177
                                                                        )Cash
      and cash equivalents at beginning of the period
                                                                        
                                                                        
                                                                        39,075
                                                                        
                                                                        
                                                                        
                                                                        5,568,515
                                                                        
                                                                        
                                                                        
                                                                        203,252Cash
      and cash equivalents at end of the period
                                                                        
                                                                        $
                                                                        28,946
                                                                        
                                                                        
                                                                        $
                                                                        203,252
                                                                        
                                                                        
                                                                        $
                                                                        39,075Cash
      paid for:Interest
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -Income
      taxes
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        600
                                                                        
                                                                        
                                                                        $
                                                                        -Non
      cash investing and financing activities:Common
      stock receivable
                                                                        
                                                                        $
                                                                        325,000
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -









F-6




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008


Note 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization





SFG
Financial Corporation (the “Company”) was incorporated on November 9, 1983 under
the laws of the State of Delaware.  From January 2002 to March 2007,
the Company had no operations and as such was considered a shell company. During
March 2007 the Company entered into a reorganization agreement with XLFX, Inc.
(formerly COESfx HOLDINGS, INC.) (See Note 3). The Company intends to operate in
the business of providing online foreign currency trading platforms. The Company
has chosen January 31 as its year end.





Reclassifications





Certain
items presented in the previous year’s financial statements have been
reclassified to conform to current year presentation.





Cash and
Cash Equivalents





The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.





Property
and Equipment





Property
and equipment is recorded at cost. Expenditures for major improvements and
additions are added to the property and equipment accounts while replacements,
maintenance and repairs, which do not extend the life of the assets, are
expensed.





Depreciation
and Amortization





Depreciation
and amortization are computed by using the straight-line method over the
estimated useful lives of the assets. The estimated useful lives are summarized
as follows:





Furniture
      and fixtures
                  10
      yearsOffice
      and computer equipment
                  5
      yearsComputer
      software
                  3
      yearsLeasehold
      improvements
                  5
      yearsTrading
      platform
                  5
      years





Trading
Platform





The
Company capitalizes costs, internal and external, direct and incremental,
related to the Trading Platform development in accordance with AICPA Statement
of Position 98-1, Accounting for Costs of Computer Software Developed or
Obtained for Internal Use.  Development costs incurred during the
preliminary or maintenance project stage are expensed as incurred, while costs
incurred during the application development stage are capitalized and are
amortized using the straight-line method over their useful life, not to exceed
five years. Amortization of the capitalized costs begins only when the software
becomes ready for its intended use. General and administrative costs related to
developing or obtaining such software is expensed as incurred.





F-7




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008


Revenue
Recognition





In
general, the Company records revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably
assured.





The
Company earned its revenue in various ways. It received a transaction fees for
each transaction executed using its trading Platform, the clearing companies
earned additional revenue from interest earned on client’s funds as well as
interest differential on swaps and  roll-overs. The Company earned
commissions and rebates from licensed users of the Trading Platform.
Commissions, rebates and related expenses are recorded on a trade date and
transaction basis.





Financial
Instruments





Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of January 31, 2008. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
accounts receivable, accounts payable and accrued expenses. Fair values were
assumed to approximate carrying values for these financial instruments because
they are short term in nature and their carrying amounts approximate fair
values. The carrying value of the Company’s loans payable approximated its fair
value based on the current market conditions for similar debt
instruments.





Long
Lived Assets





The
carrying value of long-lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. During the year
ended January 31, 2008, the Company recognized an impairment charge of $737,838
related to the obsolescence of technology related to its trading
platform.  An impairment is measured as the amount that the carrying
value of the impaired assets exceed the undiscounted cash flows expected to
result from the use and eventual disposal of the from the impaired
assets.





Net
Income (Loss) Per Common Share





The
Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods in which the Company incurs losses, common stock
equivalents, if any, are not considered, as their effect would be anti
dilutive.





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.





F-8




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





Income
Taxes





The
Company follows SFAS 109 "Accounting for Income Taxes" for recording the
provision for income taxes. Deferred tax assets and liabilities are computed
based upon the difference between the financial statement and income tax basis
of assets and liabilities using the enacted marginal tax rate applicable when
the related asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the asset or
liability each period. If available evidence suggests that it is more likely
than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income taxes in
the period of change.





Stock-Based
Compensation





The
Company follows SFAS 123R "Share-Based Payment". This Statement requires that
the cost resulting from all share-based transactions be recorded in the
financial statements. The Statement establishes fair value as the measurement
objective in accounting for share-based payment arrangements and requires all
entities to apply a fair-value-based measurement in accounting for share-based
payment transactions with employees. The Statement also establishes fair value
as the measurement objective for transactions in which an entity acquires goods
or services from non-employees in share-based payment transactions. The
Statement replaces SFAS 123 "Accounting for Stock-Based Compensation" and
supersedes APB Opinion No. 25 "Accounting for Stock Issued to
Employees".





Recent
Pronouncements





On
February 15, 2007, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (SFAS No. 159). SFAS No. 159 permits entities to choose
to measure many financial instruments and other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently, without having to apply complex
hedge accounting procedures. SFAS No. 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The Statement is expected to expand the use of fair value
measurements, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments. SFAS No. 159 will be
effective for the Company’s 2009 fiscal year and was required to be adopted by
the Company effective February1, 2009.
Management at this time has not evaluated the impact, if any, of adopting SFAS
No. 159 on its financial statements.




In
December 2007, the FASB issued SFAS No. 160 “Non-controlling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51.” SFAS 160
establishes accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary. The guidance will
become effective as of the beginning of our fiscal year beginning after December
15, 2008. Management believes the adoption of this pronouncement will not have a
material impact on our consolidated financial statements.




In
December 2007, the FASB issued SFAS No. 141R “Business Combinations
(revised 2007).” This statement replaces SFAS 141, Business Combinations. The
statement provides guidance for how the acquirer recognizes and measures the
identifiable assets acquired, liabilities assumed and any non-controlling
interest in the acquiree. SFAS 141R provides for how the acquirer recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase. The statement determines what information to disclose to
enable users to be able to evaluate the nature and financial effects of the
business combination. The provisions of SFAS 141R will be effective for our
fiscal year beginning February1, 2009, and
do not allow early adoption. Management is currently evaluating the impact of
adopting this statement.





F-9




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





In
February 2008, FASB Staff Position (FSP) No. 157-2, “Effective Date of
FASB Statement No. 157” was issued. FSP No. 157-2 defers the effective
date of SFAS No. 157 to fiscal years beginning after December 15,
2008, and interim periods within those fiscal years, or all non-financial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). Examples of
items within the scope of FSP No. 157-2 are non-financial assets and
non-financial liabilities initially measured at fair value in a business
combination (but not measured at fair value in subsequent periods), and
long-lived assets, such as property, plant and equipment and intangible assets
measured at fair value for an impairment assessment under SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” The partial
adoption of SFAS 157 on February 1, 2008, with respect to financial assets and
financial liabilities recognized or disclosed at fair value in the financial
statements on a recurring basis, is not expected to have a material effect on
the Company’s consolidated financial statements. The Company is currently
assessing the impact, if any, of SFAS No. 157 relating to its planned
February1, 2009,
adoption of the remainder of the standard.




In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities-an Amendment of FASB Statement
No. 133”, which became effective on November 15, 2008. This standard
changed the disclosure requirements for derivative instruments and hedging
activities.  Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations, and (c) how derivative instruments and
related hedging items affect an entity’s financial position, financial
performance, and cash flows. Management is currently evaluating the impact of
the adopting this statement.




In
April 2008, the FASB issued FASB Staff Position (FSP) FSP 142-3,
“Determination of the Useful Life of Intangible Assets.” This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets.” The intent of
this FSP if to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows to
measure the fair value of the asset under FASB Statement No. 141 (Revised
2007), “Business Combinations,” and other U.S. generally accepted accounting
principles (GAAP). This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is prohibited. The Company does not expect
the adoption of FAS 142-3 to have a material effect on its results of operations
and financial condition.




In
May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1
“Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)”. FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008, on a
retroactive basis and will be adopted by the Company in the first quarter of
fiscal 2009. The Company does not expect the adoption of FSP APB 14-1 to have a
material effect on its results of operations and financial
condition.





F-10




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





In
May 2008, the FASB issued SFAB No. 162, “The Hierarchy of Generally
Accepted Accounting Principles,” which becomes effective upon approval by the
SEC. the standard sets forth the sources of accounting principles and provides
entities with a framework for selecting the principles used in the preparation
of financial statements that are presented in conformity with GAAP. It is not
expected to change any of our current accounting principles or practices and
therefore, is not expected to have a material impact on our financial
statements.





NOTE
3.  RECAPITALIZATION





On March 6, 2007, SFG Financial
Corporation (“SFG”) entered into an Agreement and Plan of Merger, as amended
(the “Merger Agreement”), pursuant to which COESfx Acquisition Corp.
(“Acquisition”), a wholly owned subsidiary of SFG merged with and into XLFX,
Inc. (formerly COESfx Holdings, Inc.) (“XLFX”). On July 18, 2007 Acquisition
completed the merger with XLFX, which made XLFX a wholly owned subsidiary of
SFG. Under the terms of the Merger Agreement, the former stockholders of XLFX
hold approximately 96% of the issued shares of SFG. As the former stockholders
of XLFX control SFG after the transaction, the merger was accounted for as a
reverse acquisition under which, for accounting purposes, XLFX is deemed to be
the acquirer and SFG, the legal acquirer, is deemed to be the acquired entity.
No goodwill was recognized as SFG was a “shell” company. The former shareholders
of SFG retained an aggregate of 750,009 shares of common stock and the excess of
the liabilities assumed over the assets received at the acquisition date of
$157,730 has been reclassified to paid in capital.





NOTE 4.
BASIS OF REPORTING





The
Company’s financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.





The
Company has experienced a significant loss from operations.  For the
year ended January 31, 2008, the Company incurred a net loss of $15,385,370 and
has working capital and stockholders’ deficits of $1,124,933 and $1,049,917 at
January 31, 2008.





The
Company’s ability to continue as a going concern is contingent upon its ability
to secure additional financing, increase ownership equity, and attain profitable
operations. In addition, the Company’s ability to continue as a going concern
must be considered in light of the problems, expenses and complications
frequently encountered in established markets and the competitive environment in
which the Company operates.





The
Company is pursuing financing for its operations and seeking additional
investments. In addition, the Company is seeking to expand its revenue base by
adding new customers and increasing its advertising. Failure to secure such
financing or to raise additional equity capital and to expand its revenue base
may result in the Company depleting its available funds and not being able pay
its obligations.





The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.





F-11




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





NOTE 5.
PROPERTY AND EQUIPMENT








Property
and equipment at January 31, 2008, consisted of the following:





Computer
      equipment and software
                      
                      $
                      221,078Furniture
      and office equipment
                      
                      
                      29,912Leasehold
      improvements
                      
                      
                      18,500269,490Accumulated
      depreciation and amortization
                      
                      
                      (262,705
                      )$
                      6,785





Trading
Platform at January 31, 2008, consisted of the following:





Trading
      platform
                    
                    $
                    59,784Accumulated
      amortization
                    
                    
                    (5,979
                    )$
                    53,805





Depreciation
and amortization expense for the years ended January 31, 2008, December 31,
2006, and the one month ended January 31, 2007, was $336,721, $353,648 and
$895.





NOTE 6.
NOTES PAYABLE





In
September 2006, the Company borrowed $80,000 in exchange for a promissory
note.  This unsecured note bears interest at a rate of 5% per annum
and was due and payable on July 18, 2007. Since this note was not paid off on
July 18, 2007, the interest rate increased to 15% per annum.  Accrued
interest under this note as of January 31, 2008, is $5,334. The note is due on
demand.





In
February 2007, the Company borrowed $25,000 in exchange for a promissory
note.  This unsecured note bears interest at a rate of 9% per annum
and was due and payable on the earlier of (i) March 31, 2007 or (ii) the closing
of the Reverse Merger which occurred on July 18, 2007 (see Note
3).  Since this note was not paid off on March 31, 2007, the interest
rate increased to 15% per annum.  The Company made a principal payment
of $12,500 on April 21, 2007 which reduced the balance owed under the note to
$12,500.  Accrued interest under this note as of January 31, 2008, is
$1,994. The note is due on demand.





In March
2007, the Company borrowed an aggregate sum of $120,000 in exchange for two (2)
separate promissory notes.  These notes are unsecured and bear
interest at a rate of 9% per annum and were due and payable on the earlier of
(i) May 15, 2007 or (ii) the closing of the Reverse Merger which occurred on
July 18, 2007, (see Note 3).  Since these notes were not paid off on
May 15, 2007, the interest rate increased to 15% per annum.  Accrued
interest under these notes as of January 31, 2008 is $9,000. The note is due on
demand.





In March
2007 the Company borrowed $7,500 in exchange for a promissory
note.  This unsecured note is interest free and was due on July 31,
2007.  As of January 31, 2008, this promissory note remains unpaid and
is due on demand.





In total,
at January 31, 2008, the Company owes an aggregate of $236,328 under the five
(5) separate promissory notes described above.  The aggregate
principal balance owed under these promissory notes is $220,000.  The
remaining balance of $16,328 owed under these notes represents accrued
interest.





F-12




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





NOTE 7.
INCOME TAXES





The
Company accounts for income taxes under SFAS 109 “Accounting for Income Taxes”,
which requires use of the liability method. SFAS 109 provides that deferred tax
assets and liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences. Deferred tax assets
and liabilities at the end of each period are determined using the currently
enacted tax rates applied to taxable income in the periods in which the deferred
tax assets and liabilities are expected to be settled or realized.





The
provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences are as follows:





Income
      tax provision at the federal statutory rate
                      
                      
                      34
                      %Effect
      of operating losses
                      
                      
                      (34
                      )%-





As of
January 31, 2008, the Company has a net operating loss carryforward of
approximately $6,000,000. This loss may be available to offset future taxable
income. If not used, this carryforward will expire through 2028. The deferred
tax asset of approximately $2,000,000 relating to the operating loss
carryforward has been fully reserved at January 31, 2008. The increase in the
valuation allowance related to the deferred tax asset was approximately
$1,000,000 during 2008. The principal difference between the accumulated deficit
for income tax purposes and for financial reporting purposes results from
non-cash stock compensation being charged to operations for financial reporting
purposes. The Company may be limited in its use of this operating loss
carryforward due to changes in control as described in Note 3.





NOTE 8.
STOCKHOLDERS’ (DEFICIT)





During
the periods covered by these financial statements the Company issued shares of
common stock and subordinated debentures without registration under the
Securities Act of 1933. Although the Company believes that the sales did not
involve a public offering of its securities and that the Company did comply with
the “safe harbor” exemptions from registration, if such exemptions were found
not to apply, this could have a material impact on the Company’s financial
position and results of operations.





Pursuant
to an amendment to its articles of incorporation filed on March 4, 2008, the
Company is authorized to issue 125,000,000 shares of common stock with a par
value of $.001 and 10,000,000 shares of preferred stock with a par value of
$.001. The Company currently has no issued or outstanding shares of preferred
stock.





On March
4, 2008, the Company affected a one for 7.351808 reverse stock split. All share
and per share amounts have been restated to reflect the split.





Common shares issued in
exchange for compensation





During
the year ended January 31, 2008, the Company issued an aggregate of 14,210,739
shares of common stock as for which compensation charges are applicable. These
shares were valued at $11,724,750 which represents the fair value of the shares
on the dates at which the issuances were agreed to. Included in these shares
were 8,830,000 shares of common stock valued at $8,830,000 issued to certain
shareholders pursuant to certain anti-dilution provisions contained in
agreements between the holders and the Company. Such shares were issued to the
holders to help maintain their percentage of ownership interest in the Company
and the value of the shares will not be deducted by the Company for tax
purposes, although they are accounted for as a compensation expense (see Note
7).





F-13




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





Common shares issued in
exchange for cash





During
the year ended January 31, 2008, the Company issued 9,014,285 shares of common
stock for cash aggregating $500,000 and a receivable of $325,000.





Common stock -
Other





Pursuant
to the recapitalization discussed in Note 3, 4,628,874 shares of common stock
were returned to the Company and cancelled and $43,187 was reclassified to
common stock from additional paid in capital to adjust common stock to par
value.





Preferred
Stock





During
June 2007 the Company issued 770 shares of preferred stock of XLFX, Inc.
(formerly COESfx Holdings, Inc.) for cash aggregating $700,000. These shares
were sold pursuant to a private placement of 2,000 shares of convertible
preferred stock.





Terms of
the Preferred Stock:





Base
      Dividend:
            When
      and if declared by the Board of Directors of the Corporation, payable
      semi-annually in arrears at the rate of $45.00 per Share. Base Dividends
      will not be accrued unless declared by the Board of Directors. No
      dividends on common stock or any lower ranking class of securities may be
      paid unless and until Base Dividends on the Preferred
      Stock  applicable to all prior semi-annual periods, whether or
      not declared by the Board of Directors, have been paid in full on a
      cumulative basis. There can be no assurance that the Company’s Board will,
      in fact, declare Base Dividends on the Preferred Stock, as payment of Base
      Dividends will be restricted to funds legally available for the payment of
      dividends.





Income
      Participation:
            When
      and if declared by the Board of Directors of the Corporation, holders of
      the Preferred Stock will also be entitled to receive a participation in
      the Corporation’s net operating profits equal, on a per Share basis, to
      0.000025 times the positive amount, if any, remaining after the amount
      paid as Base Dividends in the applicable semi-annual period is subtracted
      from net operating profits for such period, subject to a maximum payment
      of $80.00 per Share per semi-annual period.  This Income
      Participation is non-cumulative and will not be paid if it would cause the
      Corporation to be in violation of any law, regulation or contract to which
      it is a party.





F-14




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





Maturity:
            None.





Amortization:
            None.





Redemption:
            At
      the Corporation’s option at any time after April 1, 2010, the Preferred
      Stock may be redeemed, upon 30 days’ prior written notice, at a per share
      price equal to $1,000 plus the amount of any accrued and unpaid Base
      Dividends.





Conversion:
            At
      the option of any holder, at any time or from time to time after the date
      on which SFG increases its authorized number of shares of Parent Common
      Stock to a number of at least 500,000,000 shares, the Preferred Stock may
      be converted into common stock of SFG at a rate such that the number of
      shares of common stock receivable upon the conversion of each share of
      Preferred Stock shall equal 0.0061856% (12.37% on an aggregate basis) of
      the “fully diluted” (as defined in the Certificate of Amendment) shares of
      common stock of SFG outstanding on the date of issuance of the Preferred
      Stock so converted, subject to adjustment as provided below under the
      caption  “Anti-Dilution”. The sale of the 770 preferred shares
      would convert into 4.76% on an aggregate
basis.





Anti-Dilution:
            As
      more fully described in the Certification of Amendment, the conversion
      rate will be adjusted for stock splits, stock dividends and certain other
      transactions occurring after the issuance date of the Preferred Stock
      which involve the issuance of common stock or securities entitling the
      holder thereof to acquire common stock at a price that is below the market
      price prevailing on the issue date of such common stock or other security
      granting the holder the right to acquire common stock. No adjustments to
      the conversion rate will be made for the issuance of SFG securities (i) to
      any existing COESfx warrant, option and/or rights holder; and/or (ii)
      pursuant to and/or as described in the Merger
  Agreement.





Liquidation
      Preference:
            In
      the event of liquidation of the Corporation, holders of the Preferred
      Stock then outstanding will be entitled to receive the Liquidation
      Preference Amount before holders of the Corporation’s common stock are
      entitled to receive any portion of the consideration available from such
      liquidation. For the purposes hereof, the Liquidation Preference Amount
      shall be equal to the sum of: (i) the principal amount ($1,000.00) of any
      then outstanding Preferred Stock plus (ii) all cumulatively unpaid Base
      Dividends relating thereto, calculated for such purpose as if such Base
      Dividends had been declared by the
Board.





F-15




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





Purchaser
      Rights:
            Voting:  One
      vote for each share of Preferred Stock, provided, however, that if Base
      Dividends have not been paid for more than three (3) consecutive
      semi-annual periods, then holders of the Preferred Stock, as a group,
      shall be entitled to elect one-third of the members of the Corporation’s
      Board of Directors at any regularly scheduled election of Directors
      occurring after the date of the fourth, or any subsequent, consecutive
      omitted Base Dividend.  Such special voting rights shall no
      longer be applicable if payments by the Corporation to holders of the
      Preferred Stock cause the amount of accrued and unpaid Base Dividends to
      fall below that amount which is equal to four (4) times the stated
      semi-annual Base Dividend payment rate (i.e.,
      $180).   Notwithstanding the foregoing, consent of the
      holders of a majority in interest of the Series A Preferred Stock shall be
      required for any of the following: (i) any amendment to the Articles of
      Incorporation or Bylaws of the Corporation that alters, changes or amends
      the preferences, rights or privileges of the Series A Preferred Stock;
      (ii) the creation of any class or series of stock that is on a parity with
      or has preference over the Series A Preferred Stock; (iii) any declaration
      or payment of dividends or the repurchase or redemption of any stock,
      except as provided in the Amended and Restated Articles of Incorporation
      or repurchases of unvested shares of stock from employees, consultants or
      non-employee directors upon the termination of their service to the
      Corporation; and (iv) any other matters that by law are subject to a
      separate class vote.




Registration
      Rights:
            The
      Preferred Stock shall have certain demand and piggy-back registration
      rights.








Common stock
warrants





During
the year ended January 31, 2008, the Company granted warrants for services or
amended the terms of existing warrants. The expenses charge to operations within
stock compensation expense during the year ended January 31, 2008 was
$1,038,588.





The terms
of the warrants granted or amended during the year were:


Exercise period - 6 months to 10
years


Exercise price - $0.001 to
$10.00


Dividend yield - None


Stock volatility - 92.464%


Risk free rate of interest - 4.29% to
4.76%


Stock price - $0.05 to
$0.20





Warrants
      Outstanding , January 1, 2006
                  
                  
                  4,620,710Granted
                  
                  
                  26,106Exercised/Expired
                  
                  
                  -Warrants
      Outstanding, December 31, 2006
                  
                  
                  4,646,816Granted
                  
                  
                  -Exercised/Expired
                  
                  
                  -Warrants
      Outstanding, January 31, 2007
                  
                  
                  4,646,816Granted
                  
                  
                  7,500,000Exercised/Expired
                  
                  
                  (3,500,000
                  )Warrants
      Outstanding, January 31, 2008
                  
                  
                  8,646,816





F-16




SFG
Financial Corporation and Subsidiaries
 Notes
to Financial Statements
 January
31, 2008





The
following table summarizes information about fixed-price stock options at
January 31, 2008:





Outstanding
                
                
                ExercisableWeighted
                
                
                Weighted
                
                
                Weighted-Average
                
                
                Average
                
                
                AverageExercise
                
                
                Number
                
                
                Contractual
                
                
                Exercise
                
                
                Number
                
                
                ExercisePrices
                
                
                Outstanding
                
                
                Life
                
                
                Price
                
                
                Exercisable
                
                
                Price$
                0.001
                
                
                
                1,505,000
                
                
                
                4.67
                
                
                $
                0.001
                
                
                
                1,505,000
                
                
                $
                0.001$
                0.010
                
                
                
                2,100,000
                
                
                
                4.00
                
                
                $
                0.010
                
                
                
                2,100,000
                
                
                $
                0.010$
                0.100
                
                
                
                975,000
                
                
                
                3.33
                
                
                $
                0.100
                
                
                
                975,000
                
                
                $
                0.100$
                0.200
                
                
                
                725,000
                
                
                
                2.50
                
                
                $
                0.200
                
                
                
                725,000
                
                
                $
                0.200$
                0.500
                
                
                
                21,106
                
                
                
                2.00
                
                
                $
                0.500
                
                
                
                21,106
                
                
                $
                0.500$
                10.00
                
                
                
                3,320,710
                
                
                
                1.00
                
                
                $
                10.00
                
                
                
                3,320,710
                
                
                $
                10.008,646,816
                
                
                
                
                
                
                
                
                
                
                
                8,646,816





NOTE 9.
COMMITMENTS AND CONTINGENCIES





Rent
expense for the year ended January 31, 2008, and the one month ended January 31,
2007, was approximately $165,500 and $13,750.





Future
minimum lease payments under all non-cancelable operating leases for years
ending subsequent to January 31, 2008 are as follows:





2009       
  $ 42,858





NOTE 10.
RELATED PARTY TRANSACTIONS





At
January 31, 2008, the Company is indebted to related parties in the amount of
$39,555 which is included in accounts payable.





During
the year ended January 31, 2008, the Company issued shares to officers,
directors and other related parties as follows:





Stock
issued to officers and directors for services during the year ended January 31,
2008, totaled 5,250,000 shares valued at $2,790,000.





Warrants
granted to officers and directors orservices
during the year ended January 31, 2008, totaled 5,500,000 warrants valued at
$661,743.





NOTE 11.
SUBSEQUENT EVENTS





Subsequent
to January 31, 2008, the Company issued 1,014,659 shares of its commons stock
for cash proceeds of $160,000.





Subsequent
to January 31, 2008, the Company issued 1,239,999 shares of its common stock for
services valued at $676,166.





On
September 25, 2008, an employee exercised 600,000 warrants at $0.001 per share
($600) for 600,000 shares of the Company's common stock.




F-17