SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q








(Mark
One)





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





For
the quarterly period ended September 30, 2008





OR





[  ]
              TRANSITION
      REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF
    1934





From the
transition period from ___________ to ____________.





Commission File Number333-145831





SURFACE COATINGS,
INC.


(Exact
name of small business issuer as specified in its charter)





Nevada
                  
                  20-8611799(State
      or other jurisdiction of incorporation or organization)
                  
                  (IRS
      Employer Identification No.)


2010
Industrial Blvd., Suite 605, Rockwall, Texas 75087


(Address
of principal executive offices)





(972)
722-7351


(Issuer's
telephone number)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (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
[     ].





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




Large
      Accelerated Filer
            [  ]
            
            Accelerated
      Filer
            [  ]Non-Accelerated
      Filer
            [  ]
            
            Smaller
      Reporting Company
            [X]








Indicate
by a check mark whether the company is a shell company (as defined by Rule 12b-2
of the Exchange Act:  Yes
[    ]   No [ X ].





As of
January 22, 2008, there were 5,100,100 shares of Common Stock of the issuer
outstanding.














TABLE OF
CONTENTS








PART I
FINANCIAL STATEMENTS





Item
      1.
              Financial
      Statements
              
              3Item
      2.
              Management's
      Discussion and Analysis or Plan of Operation
              
              17





PART II
OTHER INFORMATION





Item
      1.
              Legal
      Proceedings
              
              21Item
      2.
              Changes
      in Securities
              
              21Item
      3.
              Default
      upon Senior Securities
              
              21Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              
              21Item
      5.
              Other
      Information
              
              21Item
      6.
              Exhibits
      and Reports on Form 8-
              
              21











2


SURFACE
COATINGS, INC.


Consolidated
Balance Sheets


As
of September 30, 2008 and December 31, 2007





As
      of
                            September
      30, 2008
                            (Unaudited)
                          
                          
                          As
      of
                            December
      31, 2007
                            (Audited)AssetsCurrent
      AssetsCash
      and Cash Equivalents
                          
                          $
                          10,964
                          
                          
                          $
                          3,646Accounts
      Receivable (Net of Allowance for Doubtful
                            Accounts
      of  $1,850 and $1,363)
                          
                          
                          40,851
                          
                          
                          
                          31,122Allowances
      for Estimated Returns
                          
                          
                          (2,750
                          )
                          
                          
                          (2,750
                          )Inventory
                          
                          
                          64,168
                          
                          
                          
                          33,518Total
      Current Assets
                          
                          
                          113,233
                          
                          
                          
                          65,536Fixed
      Assets:Machinery
      and Equipment
                          
                          
                          12,163
                          
                          
                          
                          3,388Leasehold
      Improvements
                          
                          
                          1,406
                          
                          
                          
                          1,406Less:
      Accumulated Depreciation
                          
                          
                          (2,441
                          )
                          
                          
                          (1,136
                          )Total
      Fixed Assets
                          
                          
                          11,128
                          
                          
                          
                          3,658Other
      Assets:Capitalized
      Interest
                          
                          
                          4,092
                          
                          
                          
                          0Total
      Assets
                          
                          $
                          128,453
                          
                          
                          $
                          69,194Liabilities
      and Stockholders’ Equity/(Deficit)Current
      LiabilitiesAccounts
      Payable
                          
                          $
                          39,278
                          
                          
                          $
                          14,752Accrued
      Expenses
                          
                          
                          46,079
                          
                          
                          
                          20,749Due
      to Related Parties
                          
                          
                          35,265
                          
                          
                          
                          26,954Line-of-Credit
                          
                          
                          26,827
                          
                          
                          
                          21,955Current
      Portion of Long-Term Debt
                          
                          
                          14,869
                          
                          
                          
                          10,703Total
      Current Liabilities
                          
                          
                          162,318
                          
                          
                          
                          95,113Long-Term
      LiabilitiesNote
      Payable To Shareholder
                          
                          
                          17,745
                          
                          
                          
                          14,969Note
      Payable – Equipment
                          
                          
                          11,953
                          
                          
                          
                          0Notes
      Payable to Related Parties
                          
                          
                          75,723
                          
                          
                          
                          52,664Less:
      Current Portion of Long Term Liabilities
                          
                          
                          (14,869
                          )
                          
                          
                          (10,703
                          )Total
      Long-Term Liabilities
                          
                          
                          90,552
                          
                          
                          
                          56,930Total
      Liabilities
                          
                          
                          252,870
                          
                          
                          
                          152,043Stockholders’
      Equity/(Deficit):Preferred
      stock, $.001 par value, 20,000,000 shares
                            authorized,
      -0- shares issued and outstanding
                          
                          
                          0
                          
                          
                          
                          0Common
      stock, $.001 par value, 50,000,000 shares
                            authorized,
      5,000,000 and 5,000,000 shares issued
                            and
      outstanding respectively
                          
                          
                          5,000
                          
                          
                          
                          5,000Additional
      Paid In Capital
                          
                          
                          51,492
                          
                          
                          
                          51,492Accumulated
      Deficit
                          
                          
                          (180,908
                          )
                          
                          
                          (139,341
                          )Total
      Stockholders’ Equity/(Deficit)
                          
                          
                          (124,416
                          )
                          
                          
                          (82,849
                          )Total
      Liabilities and Stockholder’ Equity/(Deficit)
                          
                          $
                          128,453
                          
                          
                          $
                          69,194





See
accompanying summary of accounting policies and notes to financial
statements.








3


SURFACE
COATINGS, INC.


Consolidated
Statement of Operations


For
the Three and Nine Months Ended September 30, 2008 and 2007


(Unaudited)








Three
      Months Ended
                    
                    
                    Nine
      Months EndedSeptember
      30, 2008
                    
                    
                    September
      30, 2007
                    
                    
                    September
      30, 2008
                    
                    
                    September
      30, 2007RevenueRevenue
                    
                    $
                    155,506
                    
                    
                    $
                    76,251
                    
                    
                    $
                    444,551
                    
                    
                    $
                    177,266Cost
      of Sales
                    
                    
                    87,464
                    
                    
                    
                    52,344
                    
                    
                    
                    258,190
                    
                    
                    
                    107,872Gross
      Profit
                    
                    
                    68,042
                    
                    
                    
                    23,907
                    
                    
                    
                    186,361
                    
                    
                    
                    69,394Operating
      Expenses:Depreciation
      Expense
                    
                    
                    630
                    
                    
                    
                    258
                    
                    
                    
                    1,305
                    
                    
                    
                    464Advertising
      Expense
                    
                    
                    7,276
                    
                    
                    
                    4,609
                    
                    
                    
                    22,430
                    
                    
                    
                    8,842General
      and Administrative
                    
                    
                    64,276
                    
                    
                    
                    32,420
                    
                    
                    
                    197,399
                    
                    
                    
                    107,138Total
      Operating Expenses
                    
                    
                    72,182
                    
                    
                    
                    37,287
                    
                    
                    
                    221,134
                    
                    
                    
                    116,444Net
      Operating Income
                    
                    
                    (4,140
                    )
                    
                    
                    (13,380
                    )
                    
                    
                    (34,773
                    )
                    
                    
                    (47,050
                    )Other
      Income (Expense)Interest
      Income
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Interest
      Expense
                    
                    
                    (2,720
                    )
                    
                    
                    0
                    
                    
                    
                    (6,795
                    )
                    
                    
                    0Total
      Other Income (Expense)
                    
                    
                    (2,720
                    )
                    
                    
                    0
                    
                    
                    
                    (6,795
                    )
                    
                    
                    0Net
      Loss
                    
                    $
                    (6,860
                    )
                    
                    $
                    (13,380
                    )
                    
                    $
                    (41,568
                    )
                    
                    $
                    (47,050
                    )Basic
      and Diluted Earnings (Loss) per share
                    
                    $
                    0.00
                    
                    
                    $
                    0.00
                    
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )Weighted
      Average Shares Outstanding:Basic
      and Diluted
                    
                    
                    5,000,000
                    
                    
                    
                    5,000,000
                    
                    
                    
                    5,000,000
                    
                    
                    
                    5,000,000








See
accompanying summary of accounting policies and notes to financial
statements.





4






SURFACE
COATINGS, INC.
 Consolidated
Statement of Stockholders' Equity
 For
the  Nine Months Ended September 30, 2008  (Unaudited) and
 the Year Ended
December 31, 2007 (Audited)


Common
                              SharesPar Value
                            
                            Additional
                              Paid-in
                              Capital
                            
                            
                            Receivable
      from
                              Stockholder
                            
                            
                            Accumulated

                                Deficit
                            
                            
                            TotalsJanuary
      1, 2007
                            
                            
                            5,000,000
                            
                            
                            $
                            5,000
                            
                            
                            $
                            51,492
                            
                            
                            $
                            (6,492
                            )
                            
                            $
                            (67,766
                            )
                            
                            $
                            (17,766
                            )Services
      Provided by Stockholder
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            6,492
                            
                            
                            
                            
                            
                            
                            
                            6,492Net
      loss
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (71,575
                            )
                            
                            
                            (71,575
                            )December
      31, 2007
                            
                            
                            5,000,000
                            
                            
                            $
                            5,000
                            
                            
                            $
                            51,492
                            
                            
                            $
                            0
                            
                            
                            $
                            (139,341
                            )
                            
                            $
                            (82,849
                            )Net
      Loss
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (41,568
                            )
                            
                            
                            (41,568
                            )September
      30, 2008
                            
                            
                            5,000,000
                            
                            
                            $
                            5,000
                            
                            
                            $
                            51,492
                            
                            
                            $
                            0
                            
                            
                            $
                            (180,909
                            )
                            
                            $
                            (124,417
                            )





See
accompanying summary of accounting policies and notes to financial
statements.





5


SURFACE
COATINGS, INC.


Consolidated
Statements of Cash Flows


(Unaudited)








Nine
      Months Ended September 30, 2008
                    
                    
                    Nine
      Months Ended September 30, 2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                    
                    $
                    (41,568
                    )
                    
                    $
                    (47,050
                    )Adjustments
      to reconcile net deficit to cash used
                      by
      operating activities:Depreciation
                    
                    
                    1,305
                    
                    
                    
                    464Change
      in assets and liabilities:Decrease
      in Due from Shareholder
                    
                    
                    0
                    
                    
                    
                    6,492(Increase)  in
      Accounts Receivable
                    
                    
                    (9,729
                    )
                    
                    
                    (13,502
                    )(Increase)  in
      Inventory
                    
                    
                    (30,650
                    )
                    
                    
                    (9,461
                    )(Increase)  in
      Other Assets
                    
                    
                    (4,092
                    )
                    
                    
                    0Increase  in
      Accounts Payable
                    
                    
                    24,526
                    
                    
                    
                    12,259Increase  in
      Accrued Expenses
                    
                    
                    25,330
                    
                    
                    
                    3,031(Decrease)
      in Other Liabilities
                    
                    
                    0
                    
                    
                    
                    (1,030
                    )Increase
      in Line-of-Credit
                    
                    
                    4,872
                    
                    
                    
                    17,067CASH
      FLOWS FROM (USED) IN OPERATING ACTIVITIES
                    
                    
                    (30,006
                    )
                    
                    
                    (31,730
                    )CASH
      FLOWS USED IN INVESTING ACTIVITIESPurchase
      of fixed assets
                    
                    
                    (8,775
                    )
                    
                    
                    0CASH
      FLOWS USED IN INVESTING ACTIVITIES
                    
                    
                    (8,775
                    )
                    
                    
                    0CASH
      FLOWS FROM FINANCING ACTIVITIESPayments
      on Shareholder Note
                    
                    
                    (7,927
                    )
                    
                    
                    33,480Capitalized
      Lease Obligation
                    
                    
                    11,953
                    
                    
                    
                    0Note
      from Related Party
                    
                    
                    42,073
                    
                    
                    
                    0CASH
      FLOWS PROVIDED BY FINANCING ACTIVITIES
                    
                    
                    46,099
                    
                    
                    
                    33,480NET
      INCREASE IN CASH
                    
                    
                    7,318
                    
                    
                    
                    1,750Cash,
      beginning of period
                    
                    
                    3,646
                    
                    
                    
                    52Cash,
      end of period
                    
                    $
                    10,964
                    
                    
                    $
                    1,802SUPPLEMENTAL
      CASH FLOW INFORMATIONInterest
      paid
                    
                    $
                    6,795
                    
                    
                    $
                    0Income
      taxes paid
                    
                    $
                    0
                    
                    
                    $
                    0








See
accompanying summary of accounting policies and notes to financial
statements.


6










SURFACE
COATINGS, INC.


Notes
to the Consolidated Financial Statements


September
30, 2008


(Unaudited)





NOTE
1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES





Nature of Activities,
History and Organization:





Surface
Coatings, Inc. (“Surface Coatings”, the “Company”) is the parent company of
Surface Armor, LLC, (“Surface Armor”) a company incorporated under the laws of
the State of Texas on July 19, 2005.  The Company operates as a
converter and distributor of temporary surface protection tapes, mainly to the
construction industry and for the past two years has been developing its
business. The Company is located in Texas and sells its product locally as a
distributor and throughout the U.S. over the internet.





Surface
Coatings is a private holding company established under the laws of Nevada on
February 12, 2007, was formed in order to acquire 100% of the outstanding
membership interests of Surface Armor.  On February 15, 2007, Surface
Coatings issued 5,000,000 shares of common stock in exchange for a 100% equity
interest in Surface Armor.  As a result of the share exchange, Surface
Armor became the wholly owned subsidiary of Surface Coatings.  As a
result, the members of Surface Armor owned a majority of the voting stock of
Surface Coatings.  The transaction was accounted for as a reverse
merger whereby Surface Armor was considered to be the accounting acquirer as its
members retained control of Surface Coatings after the exchange, although
Surface Coatings is the legal parent company.  The share exchange was
treated as a recapitalization of Surface Coatings.  As such, Surface
Armor, (and its historical financial statements) is the continuing entity for
financial reporting purposes. The financial statements have been prepared as if
Surface Coatings had always been the reporting company and then on the share
exchange date, had changed its name and reorganized its capital
stock.  The share exchange transaction was effected to change the
state of incorporation to allow the opportunity for a reduction of franchise
taxes under the new Texas franchise tax calculations and to facilitate the
initial public offering.  At the time of the exchange transaction,
Surface Coatings had no assets or liabilities and Surface Armor had assets of
approximately $57,000 with equity of approximately $19,500.





The
capital structure of Surface Coatings is presented as a consolidated entity as
if the transaction had been effected in 2005 to consistently reflect the number
of shares outstanding. However, the capital structure as presented is different
that the capital structure that appears in the historical statements of Surface
Armor, LLC in earlier periods due to the recapitalization
accounting.





The
Company operates on a calendar year-end.    Due to the
nature of their operations, the Company operates in only one business
segment.





Unaudited Interim Financial
Statements:





The
accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
and applicable Securities and Exchange Commission (“SEC”) regulations for
interim financial information. These financial statements are unaudited and, in
the opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary to present fairly the balance sheets, statements
of operations and statements of cash flows for the periods presented in
accordance with accounting principles generally accepted in the United States.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to SEC rules and
regulations. It is presumed that users of this interim financial information
have read or have access to the audited financial statements and footnote
disclosure for the preceding fiscal year contained in the on Form S-1/A that was
effective on October 14, 2008.   Operating results for the
interim periods presented are not necessarily indicative of the results that may
be expected for the year ending December 31, 2008.








7






Significant Accounting
Policies:





The
Company’s management selects accounting principles generally accepted in the
United States of America and adopts methods for their
application.  The application of accounting principles requires the
estimating, matching and timing of revenue and expense.





The
financial statements and notes are representations of the Company’s management
which is responsible for their integrity and objectivity. Management further
acknowledges that it is solely responsible for adopting sound accounting
practices, establishing and maintaining a system of internal accounting control
and preventing and detecting fraud.  The Company's system of
internal  accounting control is designed to assure, among other items,
that  1) recorded  transactions  are
valid;  2) valid  transactions  are
recorded;  and  3)
transactions  are  recorded in the proper  period
in a timely  manner to produce financial  statements which
present fairly the financial  condition,  results of
operations  and cash  flows of
the  Company  for
the  respective  periods  being
presented.





Basis of
Presentation:





The
Company prepares its financial statements on the accrual basis of
accounting.  All intercompany balances and transactions are
eliminated.  Investments in subsidiaries are reported using the equity
method.





Use of
Estimates:





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.  Accordingly, actual
results could differ from those estimates.





Reclassification:





Certain
prior year amounts have been reclassified in the consolidated balance sheets,
consolidated statements of operations and consolidated statements of cash flows
to conform to current period presentation.  These reclassifications
were not material to the consolidated financial statements and had no effect on
net earnings reported for any period.










8





Recently Issued Accounting
Pronouncements:





The
Company  does not
expect  the  adoption  of  recently  issued  accounting
pronouncements  to have a significant  impact on the
Company’s  results of  operations, financial position or
cash flow.  See Note 9 for a discussion of new accounting
pronouncements.





Cash and Cash
Equivalents:





Cash and
cash equivalents includes cash in banks with original maturities of three months
or less and are stated at cost which approximates market value, which in the
opinion of management, are subject to an insignificant risk of loss in
value.





Accounts
      Receivable:





Accounts
receivable are carried at their face amount, less an allowance for doubtful
accounts.  On a periodic basis, the Company evaluates accounts
receivable and establishes the allowance for doubtful accounts based on a
combination of specific customer circumstances and credit conditions, based on a
history of write offs and collections. The Company’s policy is generally not to
charge interest on trade receivables after the invoice becomes past
due.  A receivable is considered past due if payments have not been
received within agreed upon invoice terms.   Write-offs are
recorded at a time when a customer receivable is deemed
uncollectible.  The Company has a large number of customers in various
industries and geographies and establishes reasonable credit lines to limit
credit risk.





Inventory
Valuation:





Inventory
is comprised of goods purchased for resale; therefore the Company has no raw
materials or work in process.  The Company uses the specific
identification and FIFO (“First In, First Out”) methods for inventory tracking
and valuation.    Inventory is stated at the lower of cost
or market value.





Fixed
Assets:





Fixed
assets are stated at cost less accumulated depreciation. Major renewals and
improvements are capitalized; minor replacements, maintenance and repairs are
charged to current operations.  Depreciation is calculated on a
straight-line basis over five to seven years.





Revenue
Recognition:





The
Company recognizes revenue from the sale of products in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 104 ("SAB
104"), "Revenue Recognition in Financial Statements." Revenue will be recognized
only when all of the following criteria have been met:





·Persuasive
      evidence of an arrangement exists;·Ownership
      and all risks of loss have been transferred to buyer, which is
      generally upon shipment;·The
      price is fixed and determinable; and·Collectability
      is reasonably assured






9






All
inventory is shipped to customers FOB shipping point.  The risk of
loss transfers to the customer at the time of shipment.  Currently all
revenue is generated from the sale of products and no revenue is earned from
services rendered.





The
Company’s return policy allows customers to return products for up to 15 days
after shipment.  Customer returns were $0 for the quarter ended
September 30, 2008 and $8,280 for the nine months ended September 30,
2008.  In accordance with Statement of Financial Accounting Standards
("SFAS") No. 48, "Revenue
Recognition when Right of Return Exists," revenue is recorded net of a
reserve to estimate returns, markdowns, price concessions and warranty costs.
Such reserve is based on management's evaluation of historical experience and
company and industry trends.  As of September 30, 2008, the allowance
for estimated returns was $ 2,750.




Revenue
is recorded net of any sales taxes charged to customers.





Cost of Goods
Sold:





The types
of costs included in Cost of Goods Sold are:





·Direct
      material costs·Purchasing,
      receiving and inspection·Ingoing
      and outgoing freight





Income
Taxes:





Income
from the corporation is taxed at regular corporate rates per the Internal
Revenue Code.  There are no provisions for current taxes due to net
available operating losses.





Comprehensive
Income:





SFAS No.
130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements.  For the three and nine month periods ended September 30,
2008, the Company had no items of other comprehensive income. Therefore, the net
loss equals comprehensive loss for the years then ended.








NOTE 2 – FIXED
ASSETS





Fixed
Assets at September 30, 2008 and December 31, 2007 are as follows:





2008
                
                
                2007Property
      & Equipment
                
                $
                3,388
                
                
                $
                3,388Telephone
      System
                
                
                1,406
                
                
                
                1,406Machinery
                
                
                8,775
                
                
                
                0Less:  Accumulated
      Depreciation
                
                
                (2,441
                )
                
                
                (1,136
                )Total
      Fixed Assets
                
                $
                11,128
                
                
                $
                3,658







10






The
Company’s fixed assets are depreciated on a straight-line basis over the asset’s
useful lives, ranging from five to seven years.   Depreciation
expense was $630 and $258 for the three months ended September 30, 2008 and 2007
respectively, and $1,305 and $464 for the nine months ended September 30, 2008
and 2007 respectively.





At
September 30, 2008, there was a $8,775 capitalized lease asset included in fixed
assets with a total capitalized lease obligation of $11,953.  At
September 30, 2008, capitalized interest associated with the lease was
$4,092.








NOTE 3 – DUE TO RELATED
PARTIES





As of
September 30, 2008, the Company owes $35,265 in accounts payable to a minority
shareholder.   There were no specified terms attached to the
advances, and would be repaid when the Company has the available cash to do
so.





NOTE 4 – NOTES PAYABLE TO
RELATED PARTIES








Note Payable to
Shareholder:





As of
September 30, 2008, the Company owed the following amounts under a note
agreement with the Company’s president, who is also a shareholder:








2008Current
      Portion
                
                $
                11,553Long-Term
      Debt
                
                
                6,192Total
                
                $
                17,745





The
Company’s President has loaned the Company $33,028 since inception and the
balance was converted into a note on January 2, 2007.  In previous
years, the amounts owed were reflected in “Due to Related
Parties”.   This note bears interest at a rate of 10% and
requires monthly payments of $1,066 for 36 months.   The total
amount owed at September 30, 2008 was $17,745, of which $11,553 is due during
the next twelve months.  $6,192 is classified as a long-term
liability.





Notes Payable to Related
Parties:





As of
September 30, 2008, the Company owed the following amounts under note agreements
with related parties:





2008Trinity
      Operations Note
                
                $
                55,723Trinity
      Advance Note
                
                
                20,000Total
      – All Long Term
                
                $
                75,723








11





The
Company has borrowed $55,723 from Trinity Heritage Construction, L.L.C.,
(“Trinity”) to fund operations (“Trinity Operations
Note”).    This note bears interest at a rate of 10% and is
due in full on March 1, 2010 and is classified as a long-term
liability.





The
Company borrowed $20,000 from Trinity in 2005 and 2006 to as start-up capital
(“Trinity Advance Note).  This note bears interest at a rate of 10%
and is due in full on March 1, 2010 and is classified as a long-term
liability.





The
Company’s Vice-President, who is a shareholder of the company, is also an
officer and shareholder in Trinity.








NOTE 5 – LINE OF
CREDIT





The
Company has a line of credit (“LOC”) with Bank of America.  This LOC
has a $30,000 credit limit, and bears an interest rate of 12.24% per
annum.  The Company is required to make monthly payments equal to 1%
of the outstanding balance plus the interest expense for the previous
month.  As of September 30, 2008, the amount outstanding under this
line of credit was $26,827.








NOTE 6 – INCOME
TAXES





During
the year ended December 31, 2007, the Company adopted Financial Accounting
Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (FIN 48), which supplements SFAS No. 109, “Accounting for Income
Taxes”, by defining the confidence level that a tax position must meet in order
to be recognized in the financial statements.   The
Interpretation requires that the tax effects of a position be recognized only it
if is “more-likely-than-not” to be sustained based solely on its technical
merits as of the reporting date.  The more-likely-than-not threshold
represents a positive assertion by management that a company is entitled to the
economic benefits of a tax position.    If a tax position is
not considered more-likely-than-not to be sustained based solely on its
technical merits, no benefits of the tax position are to be
recognized.  Moreover, the more-likely-than-not threshold must
continue to be met in each reporting period to support continued recognition of
a benefit.  With the adoption of FIN 48, companies are required to
adjust their financial statements to reflect only those tax positions that are
more-likely-than-not to be sustained.  Any necessary adjustment would
be recorded directly to retained earnings and reported as a change in accounting
principle.





The
Company did not provide any current or deferred U.S. federal income tax
provision or benefit for any of the periods presented, as the Company has
experienced operating losses since reentering the development
stage.   The Company provided a full valuation allowance on the
net deferred tax asset, consisting of net operating loss carry forwards, because
management has determined that it is more-likely-than-not that the Company will
not earn income sufficient to realize the deferred tax assets during the carry
forward period.















12






The
components of the Company’s deferred tax asset as of September 30, 2008 are as
follows:





September 30,
      2008Net
      operating loss carry forward
                
                $
                61,509Valuation
      allowance
                
                
                (61,509
                )Net
      deferred tax asset
                
                $
                0





A
reconciliation of the statutory income tax rates and the effective rate is as
follows:


.


September 30,
      2008Tax
      at statutory rate
                
                
                34
                %Valuation
      allowance
                
                
                (34
                %)Effective
      rate
                
                
                -








Upon
adoption of FIN 48, the Company had no gross unrecognized tax benefits that, if
recognized, would favorably affect the effective income tax rate in future
periods.  The Company has not accrued any additional interest or
penalties as a result of the adoption of FIN 48.








NOTE 7 – COMMITMENTS AND
CONTINGENCIES





The
Company leases office and warehouse space in Rockwall, Texas at a rate of $1,380
per month.  The payments are made up by a $1,000 per month lease which
expires in July 2011, and a $380 month-to-month rent
agreement.  Future lease obligations are $12,000 in 2009, $12,000 in
2010 and $7,000 thereafter.





NOTE 8 – SUBSEQUENT
EVENT





The
Company is authorized to issue 50,000,000 common shares at a par value of $.001
per share.  These shares have full voting rights.





In 2008,
the Company  filed a registration statement with the U.S. Securities
& Exchange Commission in order to raise funds to expand our business and
execute our business plan. The filing became effective in October 2008 which
gave us the opportunity to sell up to 1,000,000 shares of common stock at $0.50
per share. As of December 31, 2008, we had raised $33,150 by selling 33,150
shares of common stock under that registration statement.  As of
January 7, 2008 we had raised $50,050 by selling 100,100 shares and broke escrow
which was $50,000.












13








NOTE 9 – FINANCIAL CONDITION
AND GOING CONCERN





The
Company has an accumulated deficit through September 30, 2008 totaling $180,909
and had negative working capital of $49,085.  Because of this
accumulated deficit, the Company will require additional working capital to
develop its business operations.





The
Company has experienced no loan defaults, labor stoppages, legal proceedings or
any other operating interruption in 2008.  Therefore, these items will
not factor into whether the business continues as a going concern, and
accordingly, Management has not made any plans to dispose of assets or factor
receivables to assist in generating working capital.





The
Company intends to raise additional working capital either through private
placements, public offerings and/or bank financing, or additional loans from
Management if there is need for liquidity.   Management may also
consider reducing administrative costs and suspending all bonus and incentive
programs.  There are no assurances that the Company will be able to
either (1) achieve a level of revenues adequate to generate sufficient cash flow
from operations; or (2) obtain additional financing through either private
placement, public offerings and/or bank financing necessary to support the
Company’s working capital requirements.  To the extent that funds
generated from private placements, public offerings and/or bank financing are
insufficient, the Company will have to raise additional working
capital.   No assurance can be given that additional financing
will be available, or if available, will be on terms acceptable to the
Company.  If adequate working capital is not generated from
operations, financing is not available, or the Management cannot loan sufficient
funds, the Company may not be able to continue its operations.





Management
believes that the efforts it has made to promote its operation will continue for
the foreseeable future.  These conditions raise substantial doubt
about the Company’s ability to continue as a going concern.  The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.








NOTE 10 - RECENTLY ADOPTED
ACCOUNTING PROUNCEMENTS





June
2006, the FASB issued  Interpretation  No. 48 ("FIN No.
48"),  Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement
109, which
clarifies  the  accounting  for  uncertainty  in
income taxes  recognized  in an
enterprise's  financial  statements in accordance with SFAS
No. 109,  Accounting
for Income
Taxes.  The  Interpretation  provides
a  recognition  threshold  and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.  Under FIN No.
48, the Company may recognize the tax benefit from an uncertain tax position
only if it is more likely than  not  that  the
tax  position  will be sustained  on
examination  by the taxing  authorities,  based on
the  technical  merits of the position.  The tax
benefits recognized in the financial statements from such a position should
be  measured  based on the largest benefit  that
has a greater likelihood of being realized upon ultimate
settlement.  FIN No. 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN No. 48 was effective for us beginning July 1,
2007. The implementation of FIN No. 48 did not have a material impact on our
financial statements.










14





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Standards (“SFAS”) No. 157, Fair Value Measurements
(“SFAS No. 157”), which defines fair value, establishes a framework for
consistently measuring fair value under GAAP and expands disclosures about fair
value measurements. SFAS No. 157 became effective for the Company on
January 1, 2008. SFAS No. 157 establishes a hierarchy in order to segregate fair
value measurements using quoted prices in active markets for identical assets or
liabilities, significant other observable inputs and significant unobservable
inputs. For assets and liabilities that are measured at fair value on a
recurring basis, SFAS No. 157 requires disclosure of information that enables
users of financial statements to assess the inputs used to determine fair value
based on the aforementioned hierarchy. See Note 11 for further information
regarding our assets and liabilities that are measured at fair value on a
recurring basis.





In
February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2 “Partial
Deferral of the Effective Date of Statement 157”. FSP 157-2 delays the
effective date of SFAS No. 157 to fiscal years beginning after
November 15, 2008 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The Company has adopted
SFAS No. 157 as of January 1, 2008 related to financial assets
and financial liabilities. Refer to Note 11 for additional discussion on
fair value measurements. The Company is currently evaluating the impact of
SFAS No. 157 related to nonfinancial assets and nonfinancial
liabilities on the Company’s financial position, results of operations and cash
flows.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement
No. 115(“SFAS No. 159”). SFAS No. 159 permits entities to
choose to measure eligible items at fair value at specified election dates and
report unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date.
SFAS No. 159 was effective for the Company on January 1, 2008.
However, the Company has not elected to apply the provisions of SFAS No. 159 to
any of our financial assets and financial liabilities, as permitted by the
Statement.








NOTE 11 –ACCOUNTING PRONOUNCEMENTS
NOT YET ADOPTED





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS
No. 141(R)”) which replaces SFAS No. 141, Business Combinations, and
requires the acquirer of a business to recognize and measure the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree at fair value. SFAS No. 141(R) also requires transaction costs
related to the business combination to be expensed as incurred. SFAS No. 141(R)
is effective for business combinations for which the acquisition date is on or
after fiscal years beginning after December 15, 2008. Management does not
believe that adoption of this statement will have a material impact on the
Company’s consolidated financial position or results of operations.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements (“SFAS No. 160”). This Statement amends
ARB No. 51, Consolidated
Financial Statements, to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning after December
15, 2008. We are currently evaluating the effect that the adoption of SFAS No.
160 will have on our consolidated financial position, results of operations and
cash flows.








15





In March
2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities.The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management is
currently evaluating the effect of this pronouncement on financial
statements.





In June
2008, the Securities and Exchange Commission announced that it has approved a
one-year extension of the compliance data for smaller public companies to meet
the section 404(b) auditor attestation requirement of the Sarbanes-Oxley
Act.  With the extension, small companies will now be required to
provide the attestation reports in their annual reports for the fiscal years
ending on or after December 15, 2009.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”(SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting principles to be used in
the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. This statement shall be effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board’s amendments to AU
section 411, The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The Company is currently evaluating the impact of SFAS
162, but does not expect the adoption of this pronouncement will have a material
impact on its financial position, results of operations or cash
flows.








NOTE 12 – FAIR VALUE OF FINANCIAL
      INSTRUMENTS




In
September 2006, the FASB issued SFAS 157, Fair Value Measurement. SFAS
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS 157 was effective for our financial assets and
liabilities on January 1, 2008. The FASB delayed the effective date of SFAS
157 for all non-financial assets and non-financial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually) to fiscal years beginning after
November 15, 2008.




SFAS
157’s valuation techniques are based on observable and unobservable inputs.
Observable inputs reflect readily obtainable data from independent sources,
while unobservable inputs reflect our market assumptions. The Standard
classifies these inputs into the following hierarchy:




Level 1 Inputs – Quoted
prices for identical instruments in active markets.


Level 2 Inputs – Quoted
prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations
whose inputs are observable or whose significant value drivers are
observable.


Level 3 Inputs – Instruments
with primarily unobservable value drivers.





As of
September 30, 2008, the Company had no instruments with Level 1 or Level
2 inputs.





The
Company had notes payable to shareholders and related parties totaling $93,468
at September 30, 2008.   Due to the short maturity of these
obligations (all less than two years), the carrying value of these notes
approximates the fair value in all material respects.





As of
September 30, 2008, the Company did not have any other financial
instruments.







16





Item
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS





This
report contains forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company’s actual results could differ
materially from those set forth on the forward looking statements as a result of
the risks set forth in the Company’s filings with the Securities and Exchange
Commission, general economic conditions, and changes in the assumptions used in
making such forward looking statements.





General





Surface
Armor, LLC was formed in 2005 and our stated goal is to serve the ever-expanding
market of protecting expensive finishes and all types of surfaces from damage
during manufacturing processes, shipping, handling and
installation.   In February 2007 Surface Coatings, Inc. was
created with the express purpose to acquire Surface Armor, LLC.  The
shareholders are the same as Surface Armor, LLC and therefore there was no cash
consideration in the transaction.  Consequently the Surface Armor, LLC
operations became Surface Coatings, Inc.





The
company offers the most progressive and complete solutions to our customer’s
temporary surface protection needs.  Our business model is set-up to
serve The Americas from our facility in Rockwall, Texas where we inventory and
convert all our materials and products.  Our warehouse is climate
controlled ensuring consistent quality in the Texas heat in the summer and the
freeze/thaw weather pattern in the winter.





We
inventory a wide assortment of self-adhering, bulk films and convert them into
rolls at customer-specified widths, lengths, and quantities. We specialize in
providing custom products, in reasonable quantities, at standard prices, and at
off-the-shelf turnaround times.  This model has enabled us to gain
traction in the market place while we grow our business.  Providing
the converted product is just one part of our product offering – the other,
service.  We have a customer focused, server-based relationship model
that assists our customers in finding solutions to their surfacing needs as well
as any out-of-the-ordinary problems.





As is the
case in many industries, efficiency is critical, and the construction business
is no different.  Contractors are under increasing pressure to
complete projects and therefore are more aware of damage done to already
completed work.  Our products are solutions to real needs that
companies experience every day.





With
respect to our competitive position in the industry, it is our belief that the
surface protection industry is served by at least 30 foreign and domestic
manufacturers of films and tapes, the world-wide markets for coatings based on
annual sales of paint, coatings, adhesives, sealants and related products is
approximately $75 billion. Of this amount, the US Market accounts for
approximately $30 billion. These sales represent manufacturers and distributors.
We distribute the product and as such serve the small manufacturer and
contractor. Our competitive position in the industry is defined by our ability
to deliver timely and of a high quality coupled with price competitiveness. To
that end, on an annually pro forma basis, fiscal year 2008 sales are 186% ahead
of those of fiscal year 2007 (through six months). Consequently, we believe our
business model affirms our competitive position in the industry relative to the
customers we are targeting. Historically, customers primarily purchased from
local distributors. With the broad reach of the internet, low order quantity
customers, that don’t require direct assistance from a local distributor,
prospect the web for an effective product at a reasonable price. Once a
film/tape has been approved for use in production, customers are slow to change
to another product as the cost of evaluating a new product can exceed the
potential savings to be gained by changing.








17







Because
we do not have field sales people knocking on high-volume prospects’ doors, we
don’t really compete on a head to head basis. Our competitive position is based
on servicing the customer needs:





·
            Low
      order minimum quantity


·
            Fast
      turnaround


·
            High
      quality











RESULTS
FOR THE QUARTER ENDED September 30, 2008





Our
quarter ended on September 30, 2008.  Any reference to the end of the
fiscal quarter refers to the end of the first quarter for the period discussed
herein.





REVENUE.  Revenue
for the three months ended September 30, 2008, was $155,506 compared to $76,251
for the period ended September 30, 2007.  Revenue for the nine months
ended September 30, 2008 was $444,551 compared to $177,266 for the nine months
ended September 30, 2007.  The increase in revenue for both the three
and nine month periods is attributed to the impact of marketing, word of mouth
references and establishing ourselves as a quality supplier within the
market.





GROSS
PROFIT.  Gross profit for the three months ended September 30, 2008
was $68,042 compared to $23,907 for the three month period ended September 30,
2007.  Margins improved in the quarter ended September 30, 2008 versus
the same period in 2007 from 43.8% to 31.4%.  The improvement is
attributable to product mix.,  Gross profit for the nine months ended
September 30, 2008 was $186,361 compared to $69,394 for the nine months ended
September 30, 2007.  Margins increased  (up 2.8% points to
41.9%) in the nine month period compared to last year due favorable product mix
and improved inventory management





OPERATING
EXPENSES. Total  operating expenses for the three months ended
September 30, 2008, were $71,552 compared to expenses for the period ended
September 30, 2007 of $37,029.  The increase is mainly attributed to
an increase in contract services of $13,000 related to investment in people
(mainly production related); professional and contract services of $6,000
related to the increased costs of the S-1 filings; advertising ($4,000,),
commissions ($4,000) computer ($3,000) and general supplies ($2,000) expenses
all related to the increased volume.  The above expenses do not
include depreciation which was $630 and $258 for the three months ended
September 30, 2008 and 2007, respectively.  Total operating expenses
for the nine months ended September 30, 2008 were $219,829 compared to expenses
for the period ended September 30, 2007 of $115,980.  The increase is
mainly attributed to an increase in contract services of $37,000 related to
investment in people (mainly production related); professional and contract
services of $15,000 related to the increased costs of the S-1 filings;
advertising ($13,000,), commissions ($20,000) computer ($8,000) and general
supplies ($6,000) expenses all related to the increased volume.  The
above expenses do not include depreciation which was $1,305 and $464 for the
nine months ended September 30, 2008 and 2007, respectively.










18





NET
INCOME (LOSS). Net loss for the three months ended September 30, 2008 was $6,860
compared to the period ended September 30, 2007 of $13,380.   Net
loss for the nine months ended September 30, 2008 was $41,568 compared to the
period ended September 30, 2007 of $47,050.  The aforementioned
increass in expenses are the reasons for the losses.





LIQUIDITY
AND CAPITAL RESOURCES. Surface Coatings filed on Form S-1, a registration
statement with the U.S. Securities & Exchange Commission in order to raise
funds to develop their business. The registration statement became effective in
October 14, 2008 and Surface Coatings will rasie funds under that registration
statement at $0.50 per share..





Employees





At
September 30, 2008, the Company had four employees.








Item 3:
Quantitative and
Qualitative Disclosures About Market Risk







Not
applicable.





Item 4.
Controls and
Procedures







Evaluation of Disclosure
Controls and Procedures




We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of September 30, 2008.  This
evaluation was accomplished under the supervision and with the participation of
our chief executive officer / principal executive officer, and chief financial
officer / principal financial officer who concluded that our disclosure controls
and procedures are not effective to ensure that all material information
required to be filed in the quarterly Form 10-Q has been made known to
them.




For
purposes of this section, the term disclosure controls and procedures means
controls and other procedures of an issuer that are designed to ensure that
information required to be disclosed by the issuer in the reports that it files
or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms.  Disclosure, controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by in our reports filed under the Securities Exchange Act of
1934, as amended (the "Act") is accumulated and communicated to the issuer's
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.




Based
upon an evaluation conducted for the period ended September 30, 2008, our Chief
Executive and Chief Financial Officer as of September 30, 2008 and as of the
date of this Report, has concluded that as of the end of the periods covered by
this report, we have identified the following material weakness of our internal
controls:




·
            Reliance
      upon independent financial reporting consultants for review of critical
      accounting areas and disclosures and material non-standard
      transaction.






19






·
            Lack
      of sufficient accounting staff which results in a lack of segregation of
      duties necessary for a good system of internal
  control.









In order
to remedy our existing internal control deficiencies, as our finances allow, we
will hire additional accounting staff.






Changes in Internal Controls
over Financial Reporting




We have
not yet made any changes in our internal controls over financial reporting that
occurred during the period covered by this report on Form 10-Q that has
materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.











20


PART
II





Items No.
1, 2, 3, 4, 5 - Not Applicable.








Item No.
6 - Exhibits and Reports on Form 8-K





(a)  None





(b)   Exhibits





Exhibit
Number                                                      Name
of Exhibit





31.1      Certification
of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as
enacted by Section 302 of the Sarbanes-Oxley Act of 2002.





31.2      Certification
of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as
enacted by Section 302 of the Sarbanes-Oxley Act of 2002.





32.1      Certification
of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United
States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of
2002.











SIGNATURES





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





Surface
Coatings, Inc.





By /s/ Rick
Pietrykowski





Rick
Pietrykowski, President, CFO





Date:
January 30, 2009





21