**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-KSB**




(Mark
      one)




x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      fiscal year ended December 31, 2006




OR


o
              TRANSITION
                    REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                    OF
                    1934




For
      the
      transition period from __________ to __________




Commission
      File No. 333-139034




**SURFECT
      HOLDINGS, INC.**




(Name
      of
      Small Business Issuer in Its Charter)




**Delaware**
              (State
                or Other Jurisdiction of Incorporation or Organization)
            **88-0513176**
              (I.R.S.
                Employer Identification No.)**12000-G
                Candelaria NE,**
              **Albuquerque,
                New Mexico**
              (Address
                of Principal Executive Offices)
            **87112**
              (Zip
                Code)




**(505)
      294-6354**


(Issuer’s
      Telephone Number, Including Area Code)




Securities
      registered under Section 12(b) of the Exchange Act:


**None**




Securities
      registered under Section 12(g) of the Exchange Act:


**Common
      Stock,** **par
      value $0.0001 per share**


(Title
      of
      Class)




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




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
o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B 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 10-KSB or any
      amendment to this Form 10-KSB.  x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes o No
x




The
      registrant’s revenues for the fiscal year ended December 31, 2006 were
      $220,939.




The
      aggregate market value of the common stock held by non-affiliates of the
      registrant as of March 28, 2007 (based upon the last sales price as reported
      on
      the OTC Bulletin Board) was $7,321,722.




As
      of
      March 28, 2007, 14,201,667 shares of common stock of the registrant were
      outstanding.




Transitional
      Small Business Disclosure Format:  Yes o No
x









**TABLE
      OF CONTENTS**




PagePART
                  I
              
              
              
              
              
              1Item
                  1.
              
              
              Description
                  of Business.
              
              
              1Item
                  2.
              
              
              Description
                  of Property.
              
              
              21Item
                  3.
              
              
              Legal
                  Proceedings.
              
              
              22Item
                  4.
              
              
              Submission
                  of Matters to a Vote of Securities Holders.
              
              
              22PART
                  II
              
              
              
              
              
              22Item
                  5.
              
              
              Market
                  For Common Equity, Related Stockholder Matters and Small Business
                  Issuer
                  Purchases of Equity Securities.
              
              
              22Item
                  6.
              
              
              Management’s
                  Discussion and Analysis or Plan of Operation.
              
              
              23Item
                  7.
              
              
              Financial
                  Statements.
              
              
              25Item
                  8.
              
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure.
              
              
              26Item
                  8A.
              
              
              Controls
                  and Procedures
              
              
              26Item
                  8B.
              
              
              Other
                  Information
              
              
              26PART
                  III
              
              
              
              
              
              26Item
                  9.
              
              
              Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance With Section 16(a) of the Exchange Act.
              
              
              26Item
                  10.
              
              
              Executive
                  Compensation.
              
              
              30Item
                  11.
              
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters.
              
              
              32Item
                  12.
              
              
              Certain
                  Relationships and Related Transactions, and Director
                  Independence.
              
              
              33Item
                  13.
              
              
              Exhibits.
              
              
              34Item
                  14.
              
              
              Principal
                  Accountant Fees and Services.
              
              
              35





i




FORWARD-LOOKING
      STATEMENTS




This
      annual report contains forward-looking statements. To the extent that any
      statements made in this annual report contain information that is not
      historical, these statements are forward-looking. Forward-looking statements
      can
      be identified by the use of words such as “expects,” “plans”, “will”, “may”,
“anticipates”, “believes”, “should”, “intends”, “estimates”, “projects” and
      other words of similar meaning. These statements are subject to risks and
      uncertainties that cannot be predicted or quantified and consequently, actual
      results may differ materially from historical results or those expressed or
      implied by such forward-looking statements. Such risks and uncertainties
      include, without limitation, our ability to raise capital to finance the
      development of our products, the effectiveness, profitability and the
      marketability of those products, our ability to protect our proprietary
      information, economic conditions affecting the semiconductor industry, general
      economic and business conditions, the impact of technological developments
      and
      competition, our expectations and estimates concerning future financial
      performance and financing plans, adverse results of any legal proceedings,
      our
      dependence on certain customers, our ability to retain and attract customers,
      difficulties associated with integrating acquired businesses and customers
      into
      our operations, **** the
      adverse effect of legislation and other matters affecting the industry,
      government regulation, our ability to develop manufacturing capabilities or
      the
      inability to enter into acceptable relationships with one or more contract
      manufacturers for our products and key components and the ability of such
      contract manufacturers to manufacture products or components of an acceptable
      quality on a cost-effective basis, the volatility of our operating results
      and
      financial condition, our ability to attract or retain qualified personnel,
      and
      other risks detailed from time to time in our filings with the SEC.




Information
      regarding market and industry statistics contained in this annual report is
      included based on information available to us that we believe is accurate.
      It is
      generally based on academic and other publications that are not produced for
      purposes of securities offerings or economic analysis. We have not reviewed
      or
      included data from all sources, and cannot assure investors of the accuracy
      or
      completeness of the data included in this prospectus. Forecasts and other
      forward-looking information obtained from these sources are subject to the
      same
      qualifications and the additional uncertainties accompanying any estimates
      of
      future market size, revenue and market acceptance of products and services.




These
      forward-looking statements speak only as of the date of this annual report.
      We
      undertake no obligation to publicly update or revise any forward-looking
      statements, whether as a result of new information, future events or otherwise.
      As a result, you should not place undue reliance on these forward-looking
      statements.




**PART
      I**




**Item
      1.** **Description
      of Business.**




**Our
      history**




We
      were
      originally incorporated on November 8, 2001 as a Nevada corporation under the
      name Windy Creek Developments, Inc. (“Windy Creek”), and subsequently
      reincorporated in Delaware on September 14, 2006. Surfect Technologies, Inc.
      (“Surfect Technologies”) was incorporated on December 26, 2000, as a New Mexico
      corporation, and subsequently reincorporated in Delaware on April 4, 2006.
      On
      September 27, 2006, Surfect Technologies merged with our wholly-owned
      subsidiary, resulting in Surfect Technologies being 100% owned by us (the
“Merger”) and our changing our name to Surfect Holding, Inc. and succeeding to
      Surfect Technologies, line of business as our sole line of business. We did
      not
      have any operations prior to the Merger.




1




The
      information in this annual report is presented as if Surfect Technologies had
      been the registrant for all periods presented. The section “Management’s
      Discussion and Analysis or Plan of Operation” and the audited financial
      statements presented in this annual report are exclusive of any assets or
      results of operations or business attributable to Windy Creek. As used in this
      annual report unless otherwise indicated, the terms “we,” “us,” “our” and “the
      Company” refer to Surfect Holdings, Inc. and its subsidiaries.




**Overview**




We
      are an
      early stage developer of automated electroplating tools for the semiconductor
      assembly industry. Our tools are designed to deposit conductive metals on wafers
      through a proprietary electroplating process.




Surfect
      Technologies was formed in December 26, 2000 to develop and commercialize
      patented automated electroplating deposition tools which apply proprietary
      combinatorial deposits on wafers through a unique process.




Electroplating
      involves the coating of an electrically conductive object with a layer of metal
      using electrical current. Usually, the process is used to deposit an adherent
      surface layer of a metal having a desired property (generally conductivity
      in
      the semiconductor industry) onto a substrate lacking that property.




Wire
      bonding is the most common way to make the electrical interconnections between
      a
      microchip and the component it serves. Its operation resembles that of a sewing
      machine combined with a soldering iron. A capillary (“needle”) feeds a wire
      which is melted at the tip. When the metal solidifies it forms a ball at the
      end
      of the needle. The needle attaches this ball to the microchip. A length of
      wire
      is fed through the needle to create a connection (an “interconnect”) between the
      microchip and the location it needs to be wired to (the “substrate”). A second
      ball is then created which holds the wire in place on the substrate. This
      process repeats several times per second. Wire bonding, although cost effective,
      is limited due to the bond having to occur along the edge of the microchip
      to
      avoid wire overlap and potential electrical shorting.




Electroplating
      technology is one of the primary methods used to apply solder “bumps” to
      semiconductor wafers which are designed to extend interconnection capabilities
      beyond existing wire-bonding technology. In addition to electroplating and
      wire
      bonding, solder bumps may be formed or placed on wafers through evaporation,
      printing, and pre-formed solder sphere placement. In the electroplating process,
      a layer of photoresist, a chemical that hardens when exposed to light (generally
      ultraviolet) is applied to the wafer. A photomask is then applied to selectively
      choose which part of the wafer is exposed to the light. Once “developed” the
      unhardened photoresist can be stripped from the surface of the wafer using
      chemicals. The hardened photoresist leaves patterns (trenches or dips) that
      can
      then be filled with conductive metals. Once the electroplating process is
      complete, the remaining photoresist is chemically stripped so that only the
      metal deposition remains (the “bumps”).




Electroplating
      and evaporation are generally used to form copper and other hard metal bumps
      with low defect levels. As opposed to wire-bonding, electroplating and similar
      methods allow the entire surface of a chip (the “die”) to be populated with
      bumps that are subsequently interconnected to a substrate for the highest
      possible input/output (I/O) counts (conductivity) in order to meet the demand
      for electrical functionality in integrated circuit (IC) technology. Although
      traditional gold and aluminum wire bond continues to dominate IC interconnects
      in terms of absolute numbers, “flip chip” technology (which consists of the
      face-down soldering of IC devices to chip carriers) is gaining wider acceptance
      due primarily to the improvements afforded by such technology in electrical
      performance, functionality and reliability, particularly for consumer
      electronics. For example, in a standard personal computer a processor chip
      constantly feeds data back and forth to a monolithic memory chip located
      somewhere on the motherboard. By connecting the memory chip directly to the
      processor in a “flip chip” arrangement, the distance the data has to travel is
      dramatically reduced increasing performance and reducing degradation of the
      data.




2




We
      have
      focused our product development efforts towards a compact single-cell
      multi-metal plating tool which we believe offers the following advantages over
      large multi-cell systems currently on the market.




·
            our
                compact plating computer enables multi-metal deposition in a continuous
                and repeatable manner;


·
            replaces
                the cell-to-cell and tank-to-tank wafer transfer reducing opportunity
                for
                contamination and damage;


·
            enables
                improved metrology (analysis of the metal deposition process) and
                plating
                operation through real-time monitoring and process control facilitated
                by
                the single process chamber;


·
            reduces
                the need for robotic handling; and


·
            our
                “plating computer” approach allows us to embed our knowledge of chemistry
                and plating process within the software itself, thereby reducing
                the need
                for “plating experts” on the customer’s production line.




By
      integrating process knowledge into the underlying tool software, product
      recipes, and incorporating ‘plug and plate’ sealed chemistry tanks, we reduce
      the potential difficulty of introducing and supporting flip chip bumping
      technology in production.




Utilizing
      a single wafer, closed process cell design, eliminates the need to move the
      wafer through various plating chemistries which reduces the need for robotics
      and thereby lowers machine cost and space required on the production floor.
      This
      single cell approach reduces the likelihood of damage by minimizing wafer
      handling and enables a wide range of various composition of leaded and lead-free
      solders to be applied and/or developed.




We
      believe that our ability to embed metrology and chemistry management as well
      as
      provide upgradeable process recipes will help establish a means of continual
      customer development activity and revenue through both tool sales and process
      upgrades.




**Industry
      overview and background**




We
      believe that current demands in the electronics component fabrication and
      semiconductor assembly industry for alternative materials and application
      processes are driven by major initiatives, including:




·
            European
                Union and Japanese mandates requiring lead-free
                manufacturing;





·
            Industry
                conversion from wire bonding to “flip chip” bumping technology for all
                packaging interconnect.




“Flip
      chip” refers to an electronic component or semiconductor device that can be
      mounted directly onto a substrate, board, or carrier in a “face-down” manner.
      Electrical connection is achieved through conductive bumps built on the surface
      of the chips, which is why the mounting process is “face-down” in nature. During
      mounting, the chip is flipped on the substrate, board, or carrier, (hence the
      name “flip-chip”), with the bumps being precisely positioned on their target
      locations. Because flip chips do not require wirebonds, their size is much
      smaller than their conventional counterparts.




3




·
            Transition
                to wafer-scale manufacturing (packaging an IC directly at wafer level,
                instead of the traditional process of assembling the package of each
                individual unit after wafer dicing), chip-scale packaging (CSP) and
                multi-chip or 3-D packaging strategies (a specialized electronic
                package
                where multiple ICs, semiconductor dies or other modules are stacked
                to
                facilitate their use as a single integrated
                IC).




CSP
      is a
      type of integrated circuit chip carrier that has no pins or wires but uses
      contact pads instead. To be considered a CSP, a package must have an area no
      greater than 1.2 times that of the die packaged. The die may be mounted on
      an
      interposer upon which pads or balls are formed, as in ball grid array (BGA)
      packaging and flip chip BGA packaging, or the pads may be etched or printed
      directly onto the silicon wafer, resulting in a package very close to the size
      of the silicon die. Such a package is called a wafer level chip scale package
      or
      a wafer level package.




We
      believe that the industry adoption of electroplating for placing bumps on wafers
      and wafer level CSP packaging will increase significantly over the next five
      to
      ten years. We believe this expansion is created as a result of semiconductor
      companies facing increasing demands for miniaturization and improved thermal
      and
      electrical performance in semiconductor devices.




Because
      our technology is developed around two key hardware platforms that are highly
      scalable and built using large volume industry outsourcing partners, we believe
      that we can accommodate large-scale volume ramp ups with only modest additional
      capital expenditures and marketing costs. We currently have two hardware
      platforms which will serve three market segments - IC wafer bumping, flip chip
      substrate manufacturing, and solar cell plating.




**Sales
      and Marketing**




Our
      target markets are international and domestic semiconductor manufacturers,
      product development groups, fabless companies, and merchange interconnect and
      packaging suppliers. We intend to use domestic and international-based trade
      groups such as Semi, industry trade publications (semiconductor, equipment,
      packaging), select technology publications, international semiconductor
      associations (ECS, IEEE, IMAPS, ASME, Meptec) and local trade shows to target
      these markets.




We
      believe that top-tier producers and manufacturers of electronics and
      communications devices will be the first to adopt next generation wafer-scale
      packaging and assembly processes, and will ultimately set the standards for
      such
      processes. Our targeted strategy may include:




·
            Attracting
                top-tier producers and manufacturers as initial joint development
                and Beta
                tool partners as first adopters of our technology
                suite;


·
            Partnering
                with well established, multi-national chemical manufacturers and
                suppliers
                to provide primary distribution and immediate market presence and
                global-service credibility;


·
            Partnering
                with a well-established Asian sales representative with high level
                management contacts and reputation for strong support and compatible
                supporting technology;


·
            Partnering
                with national laboratories and universities to tap emerging technology
                and
                expert process evaluation assistance;
                and


·
            Partnering
                with well established, multi-national photo-resist suppliers to jointly
                test industry leading flip chip material capability in our
                tools.




4




Our
      target market for electrodeposition tools and materials is made up of the
      following four segments:




·
            Flip
                Chip wafer bumping


·
            Wafer
                Scale CSP Packaging


·
            High
                Density Laminate Flip Chip
                Substrates


·
            Solar
                Cell plating and thru-wafer via
                interconnections




In
      November 2006, we concluded our first sale of an electro-LESS “Rio” tool to C.
      Uyemura & Co., Ltd in Japan at a price of $220,000, pursuant to a purchase
      order. In connection with the sale, we will provide a warranty for parts and
      labor and telephone support for one year.




**Products
      and Services**




Our
      technology seeks to provide the resolution and lower cost typically associated
      with conventional electroplating while providing a high degree of process
      control and eliminating the barrier to lead-free binary and ternary alloys
      associated with plating. By combining our specialized plating tools,
      combinatorial material compounds and process technologies, we seek to provide
      metal combinations and deposition rates close to solder stencil printing without
      pitch and density limitations.




While
      the
      trend toward miniaturization and advanced packaging continues, we believe our
      tools, materials and wafer-scale processes will enable device engineers to
      breakthrough performance limits set by current packaging techniques. Our
      technologies are compatible with most existing fabrication processes and
      procedures, easing adoption of such technologies.




We
      believe our plating tools will provide an improvement in uptime and utilization
      facilitated by a simpler design and rapid chemistry change for multi-metal
      systems with less opportunity for product handling damage or contamination
      and a
      reduction in chemistry cost as a result of layered alloy creation technology
      rather than the more traditional pre-mixed alloy chemistries.




**The
      Tools, Process, and Materials**









We
      have
      developed two hardware-plating technologies and subsequent tool platforms to
      support specific device and wafer-scale fabrication and assembly in a ‘Back End
      Of Line’ (BEOL) environment. Each tool provides users with a controlled
      production platform.




Our
      electrolytic plating tools utilize our proprietary WaveCell technology as
      discussed below:




5




**Name**
            **Description**
            **Notes**Ascent
            Independent
                Device Manufacturers (IDM)Bump Engine for focused applications and R&D tool that allows IDMs to
                test new chemistries.
            Prospects
                have called the tool the “Desktop Plater”Leapfrog
            300/200mm
                fully automated production tool
            Comparable
                in functionality to traditional 6 cell dipping tools while eliminating
                robotics and aimed at decreasing likelihood of contaminationFuture
                ProductsSunrise
            300/200/150/100mm
                Bump Engine tailored to produce a cost effective solar cell interconnect
                on backside
            New
                product development aimed at rapidly growing solar concentrators
                and
                wafers for alternative power industryPromise
            300/200/150mm
                Bump Engine for silicon fuel cell applications
            New
                product development for silicon fuel cell plating and interconnect
                targeted at Toshiba/others





The **WAVeCELL
      Technology** is a
      patented wafer-level plating technology with a number of unique technical
      features fundamentally distinguishing it from traditional wafer-level plating
      technologies. Unlike other commercial wafer-level plating tools, the **WAVeCELL
      Technology** utilizes
      a single wafer closed cell with a primarily horizontal plating operation. This
      enables progressive multiple metal deposition and allows gases produced at
      the
      wafer surface during plating to be continually swept away rather than be
      retained on the wafer surface as they are with other cup style or flood plater
      cells. Gasses forming at the wafer surface can interfere with the deposition
      of
      metal during the plating process . In the **WAVeCELL
      Technology** ,
      the
      plating electrolyte flows across the wafer surface in a laminar flow improving
      agitation which increases diffusion layer ion exchange and plating rates. The
      combination of continual gas deposit removal, tight electrolyte volume control
      and close wafer-to-anode tolerance control permits a significant degree of
      control over the plating deposit.




The **WAVeCELL
      Technology** enables
      the deposition of finer grained plating layers than can be achieved by
      traditional wafer printing tools. Finer metal grains in the plating deposit
      enable higher plating pattern resolution on wafers and help ensure that the
      proper homogeneous plating alloy stoichiometry is present on even the smallest
      wafer features. The **WAVeCELL
      Technology** is
      capable of depositing layered compositions and alloys with tight composition
      control and consistency as well as increased uniformity over the newer large
      300mm wafers due to improved zones of agitation that are adjustable, in an
      effort to ensure reliable and complete reflow temperature for all wafer solder
      deposit features.




Our
      Electro-LESS Plating Tool utilizes our proprietary PaveCell
      technology:




**Name**
            **Description**
            **Notes**Rio
            Tool
                specialized for electroless nickel immersion gold (ENiG)
                process
            Developed
                for major chemical companies who are seeking new applications for
                ENiG
                process




6




The **PaveCell
      Technology** is a
      dedicated single-substrate processing cell designed for high precision high
      tolerance autocatalytic (electroless) metal plating deposition. Utilization
      of
      electroless processing of wafers in the **PaveCell
      Technology** allows
      the deposition of features without requiring that they be electrically bussed
      together (joined together into an electrical circuit). Utilizing cell
      pressurization and anodic protection to control electroless plating rate in
      the **PaveCell
      Technology** allows
      deposition rate, deposit uniformity and deposit finish to be optimized,
      concurrently.




Because
      electroless plating results from chemical reaction rather than electrical
      bussing, conventional electroless process chemistries are indiscriminate in
      depositing plating, not only onto the desired substrate areas, but also onto
      the
      walls of the plating hoses, plating tank and anywhere else the electroless
      plating solution contacts. Plating chemistry manufacturers presently attempt
      to
      manage this difficulty by incorporating organic inhibitors into the plating
      bath
      which retard the activity of the chemistry sufficiently so that the deposition
      can be largely, but not completely, limited to those areas intended for plating.
      This chemical inhibition may cause the plating bath to be less than optimally
      efficient, and the organic additives to co-deposit alongside the plating metal
      which may impair the quality of the plating deposit. The **PaveCell
      Technology** is
      constructed in such a manner as to allow it to be maintained at any desired
      electrical potential relative to the cell body, thus allowing for highly
      accurate and targeted plating. By pressurizing the plating solution, gas bubble
      formation on the wafer surface is suppressed during the plating cycle, which
      has
      a significant slowing effect on the activity of the plating chemistry, and
      allows the electroless plating rate kinetics to be regulated directly without
      requiring the incorporation of organic rate inhibitors.




**Process
      Technologies**




In
      addition to the enhancement in process efficiencies which may be realized by
      the
      use of the **WAVeCELL** and **PaveCell
      Technology** for
      conventional electrolytic and electroless plating processes, the full value
      of
      the **WAVeCELL** technology may be realized when used as a component of the **StrataPlate** or **AggrePlate** process.




The **StrataPlate** process
      involves layering of various multi-solder alloys by sequential electrochemical
      deposition of the individual alloy constituent elements, including Pb-free
      combinatorial metals in a single oxide-free cell and reduces excess wafer
      handling and the need for multiple deposition tools and steps.. The metals
      comprising the finished plating lamination stack are deposited with a high
      degree of individual mass control. The thickness and sequence of the constituent
      metal plating layers are chosen so as to create the desired solder alloy upon
      thermal cycling of the plating layer lamination stack.









·
            The
                AggrePlate process is a developmental multi-element co-deposition
                process
                that provides the same composition of the StratoPlate Process in
                a
                single-deposit step using the same WaveCell Electroplating
                technology




7




The
      AggrePlate process involves co-depositing nano, micro metal or other particles
      along with standard metal plating. This process enables the creation of higher
      conductivity (thermal and electrical) and controlled stand-off compositions.
      Copper bumps and interconnect is rapidly gaining favor for high performance
      applications due to its improved performance over tin/lead bumps. The AggrePlate
      process enables deposition of low stress and high performance copper
      interconnect using coated particles that reduce electro-migration issues and
      increase conductivity.




**Proprietary
      Materials:**




·
            Surflo:
                micro or nano-encapsulated powders that are coated providing enhanced
                characteristics and are targets for use with our deposition tools
                for
                competitive process advantages. We believe this nascent technology
                provides a higher value path to cost reduction and process control
                for
                both electroplating and solder stencil printing of metal features
                at all
                levels of electronic assembly. Surflo-micro-encapsulation allows
                all of
                the combined elements required for solders to be co-deposited on
                the
                surface of a carrier particle for one-step delivery to the substrate
                surface when used in the AggrePlate
                process.




**Research
      and Product Development**




Our
      product development team is located in Albuquerque, New Mexico and consists
      of
      industry veterans and technical experts who work closely with our prospect’s
      representatives and industry research groups to create internal development
      roadmaps. Our team focuses on technology required for initial tool and process
      and technology developments required to be competitive and to ensure that our
      products will meet emerging requirements. Our close proximity to national
      laboratories such as Sandia National and Los Alamos National Laboratories
      enables interaction with some of the leading chemical and nano-material
      technology experts and testing facilities.




Our
      initial research and development efforts are based on modifying or improving
      the
      properties of currently available solder powder metals and positioning our
      materials as drop-in replacements for existing materials or assembly processes.
      We believe this will allow for a rapid development curve based on a solid
      engineering approach. Our technical staff will directly engage with a
      prospective customer’s engineers to determine the most viable and cost-effective
      plan to supplant an existing qualified process. We currently plan to use minimal
      resources for development of micro-composition materials, which is largely
      driven by customer applications. Our initial research efforts will be to develop
      Surflo low temperature solder materials for use in level-one assembly material
      and wafer bumping applications. We also may investigate copper based metal
      features such as microvia and blind via for expedient process technologies.
      We
      believe that our relationship with outsourcing companies provide us the ability
      to rapidly prototype machine and device concepts.




We
      believe this expansion is created as a result of semiconductor companies facing
      increasing demands for miniaturization and improved thermal and electrical
      performance in semiconductor devices.




We
      have
      certain working relationships with national research laboratories as well as
      universities under contracted service arrangements. We are working to include
      novel high conductivity nano-particles in our proprietary materials product
      line
      and are exploring possible licensing arrangements with leading research
      laboratories in this area. To date, no formal licensing agreements have been
      consummated, however, Louisiana Tech is conducting testing for us on a time
      and
      materials basis, and Sandia National Laboratory has provided us limited
      characterization and optical testing services in exchange for plating services.
      Income received by us for such plating services and payments made to such
      institutions for testing services have been minimal. There can be no assurance
      that any of our working relationships will ever develop into formal licensing,
      development or other agreements.




8




**Competition**




Based
      upon our market analysis, we believe that our competitors comprise the following
      categories:




·
            Robotic
                Ball Placement


·
            Paste
                and Stencil Plating


·
            Traditional
                Electroplating Tool Suppliers


·
            Serially
                placed wire bond stud bumping tools


·
            Substitutes
                and new technologies such as jetting
                technology




Competitive
      semiconductor electroplating tool suppliers are shown in the table
      below.




Company
            Tool
                OfferingsSemiTool,
                Inc.
            Wet
                processing tools, Cup Bump plating tools, ECD copper
                toolElectroplating
                Engineers of Japan, Ltd.
            Cup
                electroplaters for alloy bumps and copper damasceneC.
                Uyemura & Co., Ltd.
            Conventional
                rack process and wafer-boat for ElectrolessEBARA
                Corporation
            Cup
                electroplaters for alloy bumps and copper damasceneTechnics,
                Inc.
            Cup
                and bench with rack electroplatersHitachi
                Engineering & Services, Co., Inc.
            Vertical
                paddle electroplaterNEXX
                Systems, Inc.
            Vertical
                batch electroplating cell





Older
      bumping technologies that utilize both robotic ball placement and stenciling
      technologies can compete with typical electroplating technologies more cost
      effectively given the higher cost of competitive electroplating in lower end
      applications.




For
      most
      higher value processors or application specific integrated circuit die and
      analog die, electrochemical deposition (ECD) technologies are an effective
      method to meet the lower defect levels while maintaining cost
      effectiveness.




ECD
      is a
      technique used to deposit thin films of various materials onto various surfaces
      (e.g., semiconductor wafers) by an electromechanical means. Variants of ECD
      include:




·
            ECD
                Damascene


·
            Multi-cell
                (traditional) electroplating;


·
            Single-cell
                electroplating - including Electroless (or chemical reactive)
                plating.




ECD
      technologies (including electroplating) may better address newer devices with
      bump pitches less than 200um. Older processes may not be capable of the quality
      and low defect levels required for high performance devices and may not be
      capable of the repeatability required by newer technologies.




9




**Intellectual
      Property**




We
      have
      sought U.S. and international patent protection of key technologies used in
      our
      business as follows:




Patent
                Description
            
            Issued
            
            Status“Sub-micron
                & Nano Size Particle Encapsulation by Electrochemical Process and
                Apparatus”
            
            2005
            
            Patent
                6,942,765“Electrodeposition
                Apparatus and Method using Magnetic Assistance and Rotary Cathode
                for
                Ferrous and Magnetic Particles”
            
            2005
            
            Patent
                6,890,412“Metal
                Hydride Composite Materials”
            
            2004
            
            Patent
                6,824,667“Coated
                and Magnetic Particles and Applications Thereof”
            
            Filed
                2003
            
            Patent
                Pending“Apparatus
                and Method for Highly Controlled Electrodeposition”
            
            Filed
                2004
            
            Patent
                Pending“Plating
                Apparatus and Method”
            
            Filed
                2005
            
            Patent
                Pending“Method
                and Apparatus for Aligning MEMS and Photonics Devices”
            
            Filed
                2005
            
            Patent
                Pending“Composite
                Magnetic Particles and Foils”
            
            Filed
                2005
            
            Patent
                Pending“Dynamic
                Profile Anode”
            
            Filed
                2005
            
            Patent
                Pending





To
      protect our trade secrets, we plan to provide certain of our controlled process
      intellectual property as part of a tool transaction while continuing to develop
      additional process applications to exploit the tool intellectual
      property.




We
      have
      registered the domain name www.surfect.com, as well as acquired trademark
      registration for Surfect®:




Our
      employees are parties to nondisclosure of proprietary information, innovation,
      confidentiality and non-compete agreements.




We
      may in
      the future pursue the licensing of certain technologies from laboratories,
      such
      as Sandia and Los Alamos National Laboratories, or other
      institution.




**Customer
      Relationship Management**




We
      currently anticipate that each sales region will require its own local technical
      support. We anticipate utilizing local manufacturers and support representatives
      to help sell and support our equipment and processes. Customer support in the
      Albuquerque, New Mexico corporate office will support customers in the United
      States and provide a platform for the management and facilitation of
      international customer support teams. Support will be available primarily
      through our internal sales team during the early product development and
      roll-out phase of our development which will be supplemented with internal
      technical product support as well as local support in Taiwan, Singapore, and
      China through a sales representative network. Our online support includes web
      access, including Frequently Asked Questions (FAQ’s) on a custom portal, on-line
      help in each product, email support requests posted on the customer portal,
      and
      by telephone. We use sales force CM software via web interface to provide high
      quality yet low cost customer development management. Engineers in the United
      States create on-line training materials and tutorials, and work with
      international contacts to translate those materials.




10




Our
      focus
      is to respond to customers’ needs for technology which we believe will enable us
      to implement cost effective rapid flip chip capacity growth and to introduce
      lead-free flip chip bumps as quickly as possible. Our strategy and technology
      approach are focused on providing market penetration with large customers
      experienced in flip chip technology and willing to share reliability data.
      Our
      initial prospects will act as Beta customers providing critical feedback on
      process and tool operation as well as incorporating their specific requirements
      and metrology inputs. Our process team will provide process demonstration wafers
      which are characterized by the customer’s process, and reliability engineers
      followed by additional wafers run on a beta tool installed in the customer’s
      facility. We believe that customer characterizations will result in valuable
      feedback and references. Currently our marketing activities are focused on
      securing orders from Texas Instruments and Freescale (leading US independent
      device manufacturers (IDM)) and ASE and SPIL (merchant outsourcing providers
      supporting key foundries such as TSMC and other IDMs and OEMs.) Bumped wafers
      demonstrating process capability have been provided to these initial prospects
      and beta orders are currently anticipated in the second quarter of
      2007.




**Employees**




As
      of
      March 28, 2007, we had twelve full-time employees, three in research and process
      engineering, four in product development and production, one in sales and
      marketing and four in management, finance and administration. Our employees
      are
      not represented by a union or collective bargaining entity and our management
      considers relations with employees to be good.




In
      addition to Steven Anderson, our Chief Executive Officer and a 20-year packaging
      industry veteran, during the past twelve months we have retained Miles Prim,
      a
      29-year packaging veteran first as Vice President of Product Development and
      currently as our Chief Operating Officer; Yixiang Xie, PhD, with more than
      12
      years of semiconductor development experience, as our Chief Technology Officer
      and James Turk, a 14-year veteran with public and private manufacturing
      concerns, as our Chief Financial Officer.




We
      currently anticipate hiring an additional 3-5 employees in the areas of
      production and process engineering during 2007.




**Regulation**




We
      are
      subject to regulation by numerous federal, state and local regulatory agencies,
      including the United States Department of Transportation, which regulates
      shipments of chemicals and the importation of hazardous materials, and the
      United States Department of Commerce which regulates the import and export
      of
      technological products, and similar state and local agencies. Compliance with
      these laws has not had and is not anticipated to have a material effect on
      our
      business.




**RISK
      FACTORS**




There
      are
      numerous and varied risks, known and unknown, that may prevent us from achieving
      our goals. You should carefully consider the risks described below and the
      other
      information included in this prospectus, including our financial statements
      and
      related notes. Our business, financial condition and results of operations
      could
      be harmed by any of the following risks. If any of the events or circumstances
      described below were to occur, our business, financial condition and results
      of
      operations could be materially adversely affected. As a result, the trading
      price of our common stock could decline, and investors could lose part or all
      of
      their investment.




11




**Risks
      Related to Our Company and Business**




**Our
      products are highly specialized and it is difficult to estimate the size of
      the
      available market for our products.**




Our
      products are highly specialized and primarily have applications in
      high-performance semiconductor wafer bumping and packaging applications. It
      is
      difficult to estimate with certainty the total market size for our products
      and
      there can be no assurances that our products will achieve market acceptance
      or
      generate significant revenues.




**We
      are in an early stage of development and have a limited operating history,
      which
      makes evaluating our business more difficult and therefore investors have
      limited information upon which to rely. We have accumulated deficits in the
      research and development of our technology and there is no guarantee that we
      will generate significant revenue or become profitable.**




We
      are in
      the early stage of development, have had limited revenue related to our core
      operations and have only a limited operating history on which to base an
      evaluation of our business and prospects. From inception through December 31,
      2006, we have generated limited revenue from the provision of miscellaneous
      consulting and plating services which we have recorded in our financial
      statements as other income. On November 28, 2006, we recorded our first revenue
      from tool sales of approximately $221,000. For the fiscal year ended December
      31, 2006, we experienced losses of approximately $3 million on a consolidated
      basis. As of December 31, 2006, our accumulated deficit amounted to
      approximately $7.7 million. In addition, we expect to continue incurring
      operating losses for the foreseeable future. Our ability to generate significant
      revenues and achieve profitability depends on our ability to complete the
      development of and manufacture, market and sell our technology. We may not
      succeed given the technological, marketing, strategic and competitive challenges
      we will face. The likelihood of our success must be considered in light of
      the
      expenses, difficulties, complications, problems, delays and inherent risks
      frequently encountered in connection with the growth of a new business, the
      continuing development of new technology, and the competitive environment in
      which we operate. Such risks include acceptance by users in an evolving and
      unpredictable business environment, the lack of a well developed brand identity
      and the difficulty of bringing our product to market on a timely basis.




**We
      may not be able to continue as a going concern** **.**




Our
      auditors have included an “uncertainty paragraph” in their audit report on our
      financial statements for the period ended December 31, 2006 regarding our
      ability to continue as a going concern. Our ability to continue as a going
      concern is subject to our ability to realize a profit and/or obtain funding
      from
      outside sources. Our plan to address our ability to continue as a going concern,
      include obtaining additional funding from the sale of securities and
      establishing revenues from commercializing one or more products. Although we
      believe that we will be able to obtain the necessary funding to allow us to
      remain a going concern through these methods, there can be no assurances that
      such methods will prove successful.




**Our
      revenue is highly dependent on the semiconductor industry which is subject
      to
      fluctuations.**




We
      anticipate that most of our revenue will be derived from semiconductor companies
      and outsourcing merchant providers and other suppliers in the semiconductor
      industry. We may decide to expand beyond the semiconductor market to high
      density PCB substrate and solar cell markets if and when such markets grow
      but
      we are currently exclusively dependent in the short term on semiconductor
      industry fluctuations. Our revenue, if any, may increase and decrease with
      the
      level of equipment purchases and wafer bump conversion activity and is therefore
      subject to declines in or disruptions to purchasing or qualification buy-offs
      in
      the semiconductor industry. Our revenue may be adversely affected as product
      demand and customer volume requirements vary in the semiconductor industry
      as a
      result of:




12




·
            Economic
                downturns and recessions;


·
            Global
                security issues, political instability, acts of terrorism, hostilities
                and
                war;


·
            Seasonal
                customer assembly fluctuations that may be aimed at building inventory
                to
                supportthe
                increased demand during the Christmas season or for major new product
                launches;


·
            Increased
                customer competitiveness reducing the number of customers and capacity
                requirements;


·
            Inclement
                weather and earthquakes, such as the recent tsunami which devastated
                parts
                of Southeast Asia and could prevent access to customer locations
                and
                factories;


·
            Shifts
                in product design that could disrupt current technology conversion
                paths;


·
            Economic
                and political issues in the Asia, European, Latin America and emerging
                markets; and


·
            The
                financial condition of merchant providers and smaller semiconductor
                customers.




The
      possibility of further supply disruptions, availability of key material sources,
      Integrated Circuit (IC) demand, product design changes, and financial
      instability in emerging markets may continue to adversely affect the
      semiconductor equipment market. Companies may reduce their planned capacity
      requirements, making fewer unit sales available to us. The financial instability
      of smaller semiconductor companies or a prolonged substantial decrease in
      semiconductor booking volumes could have an adverse impact on our business
      and
      operations.




**Initially
      we expect to depend on a relatively small number of
      customers.**




We
      expect
      our sales to be concentrated among relatively few customers. The loss of any
      significant customer or any reduction in orders by a significant customer may
      have a material adverse effect on our revenues.




**We
      encounter risks and difficulties frequently experienced in rapidly evolving
      industries such as the semiconductor industry.**




We
      may
      face risks related to our ability to:




·
            Attract
                and retain customers on a cost-effective basis;


·
            Expand
                and enhance our product offerings;


·
            Operate,
                support, expand and develop our operations, our websites, our software
                and
                our communications and other
                systems;


·
            Diversify
                our sources of revenue, including by entering into agreements that
                may
                reflect changes to our business
                model;


·
            Maintain
                and develop our existing brands and distribution channels, as well
                as to
                make cost-effective expenditures in connection with these
                initiatives;


·
            Manage
                our relationships with important semiconductor manufacturers and
                other
                industry participants; and


·
            Respond
                to competitive market conditions.




13




If
      we are
      unsuccessful in addressing these risks or in executing our business strategy,
      we
      may not be profitable.




**We
      face competition from established and emerging semiconductor capital equipment
      manufacturers, which could divert prospective customers to our
      competitors.**




We
      currently compete in wafer bumping tools and packaging. Some equipment companies
      not traditionally serving our market could enter our market, causing reduced
      revenues and sales opportunities. We
      expect
      existing competitors and new entrants to the wafer bumping business to increase
      and to constantly revise and improve their business models. Many of these
      entities have significantly greater research and development capabilities and
      budgets than we do, as well as substantially more marketing, manufacturing,
      financial and managerial resources. These entities represent significant
      competition for us. Acquisitions of, or investments in, competing companies
      by
      large corporations could increase potential competitors’ resources. Since our
      resources are limited, we may not be able to compete with these larger
      competitors.




**We
      are dependent on the continued operation of qualified manufacturing outsourcing
      capacities.**




We
      currently intend to outsource all of our manufacturing activities to facilities
      located in the United States and Asia. While we have not as yet identified
      such
      manufacturing facilities, we believe there are sufficient manufacturing
      facilities available to us for the foreseeable future. If and when we find
      qualified manufacturers we may not be able to continue to find qualified
      manufacturers on acceptable terms and, if we do there can be no assurance that
      product quality will continue to be acceptable. These facilities may be subject
      to disruption for a variety of reasons, including work stoppages, fire, energy
      shortages, flooding or other natural disasters. We cannot ensure that
      alternative production capacity would be available if a major disruption were
      to
      occur or that, if it were available, it could be obtained on favorable terms.
      Such a disruption could negatively impact our ability to operate our business.




**Consolidation
      in the semiconductor capital equipment industry and increased competition may
      result in increased expenses, lost bookings and reduced revenue.**




We
      compete to attract and retain the largest most advanced flip chip companies
      as
      prospective customers. Consolidation of customers may result in decreased
      equipment demand and increased competition. In order to compete effectively,
      we
      may need to increase incentives, pre-pay incentives, increase spending on
      marketing or product development, or make significant investments to purchase
      strategic assets. In addition, consolidation among process equipment
      manufacturers, such as mergers and alliances, may increase competition from
      their distribution channels or give them additional leverage to negotiate lower
      booking charges.




**Our
      success depends on maintaining the integrity and upgrading the quality of our
      systems and infrastructure.**




If
      our
      operations grow in both size and scope, we will continuously need to improve
      and
      upgrade our systems and infrastructure to offer an increasing number of
      customers enhanced products, services, features and functionality, while
      maintaining the reliability and integrity of our systems and infrastructure.
      The
      expansion of our systems and infrastructure will require us to commit
      substantial financial, operational and technical resources before the volume
      of
      business increases, with no assurance that the volume of business will increase.
      Fabless companies, merchant providers and large IC manufacturers will not
      tolerate a service hampered by slow equipment delivery and lead times,
      unreliable service levels and production outages due to installation delays,
      or
      insufficient technical support and process capability, any of which could
      negatively affect our business.




14




**If
      we do not contin** **ue
      to innovate and provide products and services that are useful to users, we
      may
      not remain competitiv** **e,
      and our revenue and operating results could suffer.**




Our
      future success depends on providing products and services that are accepted
      by
      semiconductor manufacturers. Our competitors are constantly developing
      innovations. If
      wafer
      bumping industry participants introduce changes or developments that we cannot
      meet in a timely or cost-effective manner, our business may be adversely
      affected. As
      a
      result, we must continue to invest significant resources in research and
      development in order to enhance our technology and existing products and
      services. Additionally, we will have to consistently introduce new high-quality
      products and services that semiconductor industry participants can easily and
      effectively use. If we are unable to provide prospective customers with high
      quality and technologically efficient products, then such customers may become
      dissatisfied and move to competitors’ products. Moreover, if we are unable to
      predict user preferences or industry changes, or if we are unable to modify
      our
      products and services on a timely basis, we may lose users.




**Our
      ability to compete effectively will depend, in part, on our ability to maintain
      the proprietary nature of our technology.**




Although
      we seek to protect our technology through, among other avenues, U.S. and foreign
      patent protection, there can be no assurance that the patents which may be
      obtained and the patent applications filed by us are sufficient to protect
      our
      technology or that any patent will not be held invalid, circumvented, or
      infringed by others. In addition, we rely to a significant extent on proprietary
      know-how. We cannot ensure that others will not independently develop superior
      know-how to that which we now consider proprietary.




We
      have
      received three patents and filed six additional patent applications with the
      U.S. Patent and Trademark Office and have filed patent applications in Europe,
      Japan, Taiwan, Malaysia, and the World Intellectual Property Organization.
      In
      addition, we have registered our trademark SURFECT® and will apply to register
      new trademarks as they arise. Litigation may be necessary to enforce patents
      issued to us, to protect trade secrets or know-how owned by us, or to determine
      the enforceability, scope, and validity of the proprietary rights of others.
      Enforcing or defending our rights is expensive, could cause diversion of our
      resources, and may not prove successful. Any failure to enforce or protect
      our
      rights could cause us to lose the ability to exclude others from using our
      technology to develop or sell competing products.




**We
      may face litigation from third parties that claim our products infringe on
      the** **ir
      intellectual property rights.**




We
      may be
      exposed to future litigation by third parties based on claims that our
      technologies, products, or activities infringe the intellectual property rights
      of others or that we have the trade secrets of others. Any litigation or claims
      against us, whether or not valid, could result in substantial costs, could
      place
      a significant strain on our financial and managerial resources, and could harm
      our reputation. Most of our license agreements would likely require that we
      pay
      the costs associated with defending this type of litigation. In addition,
      intellectual property litigation or claims could force us to cease selling,
      incorporating or using any of our technologies and/or products that incorporate
      the challenged intellectual property, which would adversely affect our future
      revenue; obtain a license from the holder of the infringed intellectual property
      right, which license may be costly or may not be available on reasonable terms,
      if at all; or redesign our products, which would be costly and time consuming.
      We have not engaged in discussions, received any communications, nor do we
      currently have any reason to believe that any third party is challenging or
      has
      the proper legal authority to challenge our intellectual property rights.




15




**Doing
      business internationally poses special risks.**




We
      intend
      to conduct a large portion of our business internationally which requires
      management attention and special resources. We currently are focused on initial
      customer penetration in the Taiwan market which represents the largest market
      for our tools and processes outside of the United States. We currently plan
      to
      focus future Asian activities in Singapore, Korea, Japan, and China. We will
      face a number of risks associated with international operations, including:




·
            currency
                fluctuations;


·
            challenges
                caused by distance, language and cultural
                differences;


·
            longer
                payment cycles in some countries;


·
            credit
                risk and higher levels of payment
                fraud;


·
            legal
                and regulatory restrictions;


·
            foreign
                exchange controls that might prevent us from repatriating cash earned
                in
                countries outside the United
                States;


·
            political
                and economic instability and export
                restrictions;


·
            potentially
                adverse tax consequences; and


·
            higher
                costs associated with doing business
                internationally.




In
      addition, agreements may be difficult to enforce and receivables difficult
      to
      collect through a foreign country’s legal system. These and other risks could
      harm our international business efforts, which would adversely affect our
      business prospects and operating results. If we are unable to manage
      successfully the risks inherent in international activities, our international
      business operations could suffer.




**We
      depend upon key personnel who may terminate their employment with us at any
      time, and we will need to hire additional qualified personnel who may be
      unavailable due to the necessity of unique skills and
      resources.**




Our
      success will depend to a significant degree upon the continued services of
      key
      management, including Steven Anderson, our Chief Executive Officer. We intend
      to
      purchase “key man” life insurance for Mr. Anderson in the amount of $3,000,000.
      This insurance may not adequately compensate for the loss of Mr. Anderson’s
      services. Management and other employees may voluntarily terminate their
      employment at any time, since we do not have employment agreements with anyone.
      Our success will also depend on the ability to attract and retain highly skilled
      personnel. Competition for qualified personnel is intense, and the process
      of
      hiring and integrating such qualified personnel is often lengthy. We may be
      unable to recruit such personnel on a timely basis, if at all. The loss of
      the
      services of key personnel, or the inability to attract and retain additional
      highly qualified personnel, could adversely affect our business and damage
      our
      business prospects.




**We
      will require significant additional funding which we may have difficulty raising
      because of our limited operating history and business risks associated with
      our
      company.**




We
      currently do not generate significant revenues. We do not know when, or if,
      this
      will change. We have expended substantial funds in research and development
      as
      well as administrative efforts and will continue to expend substantial funds
      in
      manufacturing, research and development and for general operations. We will
      require substantial additional funds to gear up operations if and when our
      products are accepted into the market, and to provide for the marketing and
      distribution of our products. Additional funds may not be available on
      acceptable terms, if at all. If adequate funds are unavailable or are not
      available on terms deemed acceptable by management, we may have to delay, reduce
      the scope of or eliminate one or more of our research or development programs
      or
      product or marketing efforts. Our long term capital requirements are expected
      to
      depend on many factors, including:




16




·
            the
                number of potential products and technologies in
                development;


·
            continued
                progress and cost of our research and development
                programs;


·
            costs
                involved in preparing, filing, prosecuting, maintaining and enforcing
                patent claims;


·
            costs
                of developing sales, marketing and distribution channels and our
                ability
                to sell our products;


·
            competing
                technological and market
                developments;


·
            market
                acceptance of our products; and


·
            costs
                for recruiting and retaining management, employees, and
                consultants.




We
      may
      consume available resources more rapidly than currently anticipated, resulting
      in the need for additional funding. We may seek to raise additional funds
      through the exercise of warrants, equity or debt financings, collaborative
      arrangements with corporate partners, or other sources. Any equity financing
      may
      be dilutive to existing stockholders and debt financing, if available, may
      involve restrictive covenants that would limit how we conduct our business
      or
      finance our operations, or otherwise have a material effect on our current
      or
      future business prospects. In addition, in the event that additional funds
      are
      obtained through arrangements with collaborative partners or other sources,
      we
      may have to relinquish economic and/or proprietary rights to some of our
      technologies or products under development that we would otherwise seek to
      develop or commercialize by ourselves. If adequate funds are not available,
      we
      may be required to significantly reduce, refocus, or delay our development
      efforts with our technology and products.




**Since
      we may be dependent on collaborative arrangements for the development of our
      technologies and business, we may be exposed to the risk of reliance on the
      viability of third parties.**




In
      conducting our research and development activities, we may in the future rely
      upon collaborative arrangements with universities, laboratories and corporate
      partners. The loss of or failure to perform under any of these arrangements,
      by
      any of these entities, may substantially disrupt or delay our research and
      development activities.




**Due
      to our limited marketing, sales, and distribution experience, we may be
      unsuccessful in our efforts to sell our products, enter into relationships
      with
      third parties, or develop sales organization.**




We
      have
      yet to establish any marketing, sales, or distribution capabilities for our
      proposed products. At the appropriate time, we intend to enter into agreements
      with third parties to sell our products or we may develop our own sales and
      marketing force. We may be unable to establish or maintain third party
      relationships on a commercially reasonable basis, if at all. In addition, these
      third parties may have similar or more established relationships with our
      competitors.




If
      we do
      not enter into relationships with third parties for the sales and marketing
      of
      our products, we will need to develop our own sales and marketing capabilities.
      We have limited experience in developing, training, or managing a sales force.
      If we choose to establish a direct sales force, we may incur substantial
      additional expenses in developing, training, and managing such an organization.
      We may be unable to build a sales force on a cost effective basis or at all.
      Any
      such direct marketing and sales efforts may prove to be unsuccessful. In
      addition, we will compete with many other companies that currently have
      extensive marketing and sales operations. Our marketing and sales efforts may
      be
      unable to compete against these other companies. We may be unable to establish
      a
      sufficient sales and marketing organization on a timely basis, if at all, and
      may be unable to engage qualified distributors. Even if engaged, these
      distributors may:




17




·
            fail
                to satisfy financial or contractual obligations to
                us;


·
            fail
                to adequately market our products;


·
            cease
                operations with little or no notice;
                or


·
            offer,
                design, manufacture, or promote competing
                products.




If
      we
      fail to develop sales, marketing, and distribution channels, we would experience
      delays in product sales and incur increased costs, which would harm our
      financial results.




**We
      are exposed to product liability risks, which could place a substantial
      financial burden upon us should we be sued, because we currently have limited
      product liability insurance above and beyond our general insurance
      coverage.**




Our
      business exposes us to potential product liability and other liability risks
      that are inherent in the testing, manufacturing and marketing of our products.
      We cannot assure that such potential claims will not be asserted against us.
      A
      successful liability claim or series of claims brought against us could consume
      our resources and harm our reputation and business.




We
      currently have limited product liability insurance, and do not have other
      liability insurance relating to any products that could cover all of the
      liability or damage that could occur as a result of our activities. We cannot
      assure that we will be able to maintain adequate product liability insurance
      on
      acceptable terms, if at all, or that such insurance will provide adequate
      coverage against our potential liabilities. Furthermore, our current and
      potential partners with whom we may collaborative or our future licensees may
      not be willing to indemnify us against liabilities and may not themselves be
      sufficiently insured or have a net worth sufficient to satisfy any product
      liability claims. Claims or losses in excess of our product liability insurance
      coverage could have a material adverse effect on our business.




**Our
      suppliers may encounter financial hardships unrelated to our demand for
      components, which could inhibit their ability to fulfill our orders and meet** **their
      requirements.**




Any
      interruption or delay in the supply of components or materials, or our inability
      to obtain components or materials from alternate sources at acceptable prices
      in
      a timely manner, could impair our ability to meet the demand of our customers
      and cause them to cancel orders or switch to competitive
      procedures.




To
      mitigate the risk of supply interruptions from a sole-source supplier, we may
      determine to maintain excess inventory of the products or components they
      supply. Managing our inventory levels is important to our cash position and
      results of operations. An excessive amount of inventory reduces our cash
      available for operations and may result in excess or obsolete materials.
      Inadequate inventory levels may make it difficult for us to meet customer
      product demand, resulting in decreased revenues. An inability to forecast future
      revenues or estimated life cycles of products may result in inventory-related
      charges that would negatively affect our gross margins and results of
      operations.




**Our
      business may incur substantial expense to comply with environmental laws and
      regulations.**




We
      may
      incur substantial costs to comply with environmental laws and regulations.
      In
      addition, we may discover currently unknown environmental problems or
      conditions. We are subject to extensive federal, state, provincial and local
      environmental laws and regulations which govern the discharge, emission,
      storage, handling and disposal of a variety of substances that may be used
      in,
      or result from, our operations. Environmental laws or regulations (or their
      interpretation) may become more stringent in the future.




18




**Instability
      in emerging markets may adversely affect the semiconductor equipment
      market.**




Supply
      disruptions, availability of key material sources, IC demand, product design
      changes and financial instability in emerging markets may adversely affect
      the
      semiconductor equipment market. Companies may reduce their planned capacity
      requirements, making fewer unit sales available to us. The financial instability
      of smaller semiconductor companies or a prolonged substantial decrease in
      semiconductor booking volumes could have an adverse impact on our financial
      performance, operations, liquidity and capital resources.




**Risks
      Relating to Our Common Stock**




**Our
      stock price may be volatile** **and a decrease in the market price could result in substantial losses for
      investors.**




The
      market price of our common stock is likely to be highly volatile and could
      fluctuate widely in price in response to various factors, many of which are
      beyond our control, including the following:




·
            technological
                innovations or new products and services by us or our
                competitors;


·
            intellectual
                property disputes;


·
            additions
                or departures of key personnel;


·
            our
                ability to execute our business
                plan;


·
            operating
                results that fall below
                expectations;


·
            loss
                of any strategic relationship;


·
            industry
                developments;


·
            economic
                and other external factors; and


·
            period-to-period
                fluctuations in our financial
                results.




In
      addition, the securities markets have from time to time experienced significant
      price and volume fluctuations that are unrelated to the operating performance
      of
      particular companies. These market fluctuations may also materially and
      adversely affect the market price of our common stock.




**We
      have no current plan to pay dividends on our common stock. Any return on
      investment may be limited to the value of our common
      stock.**




We
      do not
      intend to pay cash dividends on our common stock in the foreseeable future.
      The
      payment of dividends on our common stock will depend on earnings, financial
      condition and other business and economic factors affecting us. If we do not
      pay
      dividends, our common stock may be less valuable because a return on investment
      will only occur if our stock price appreciates.




**Our
      principal stockholder, executive officers and directors together beneficially
      own a substantial number of shares of common stock, which gives them substantial
      control over certain major decisions on which our stockholders may vote and
      which may discourage an acquisition of our company.**




Our
      executive officers, directors and principal stockholders beneficially own,
      in
      the aggregate, 51.5% of our outstanding common stock. Accordingly, such persons
      will have the ability to determine the direction and decisions of our company.
      Additionally, the executive officers and directors may have even greater control
      in the event that they exercise any of the options which have been or may be
      granted to them under our employee incentive plan or if they otherwise acquire
      additional shares of our common stock.




19




The
      interests of our current executive officers and directors may differ from the
      interests of other stockholders. As a result, these current executive officers,
      directors and principal stockholder will have significant influence over all
      corporate actions requiring stockholder approval, irrespective of how our other
      stockholders may vote, including in connection with the following
      actions:




·
            the
                election of directors;


·
            the
                amendment of charter documents;


·
            the
                issuance of blank check preferred or convertible stock, notes or
                instruments of indebtedness, which may have conversion, liquidation
                and
                similar features and other financing arrangements;
                or


·
            the
                approval of certain mergers and other significant corporate transactions,
                including a sale of substantially all of our
                assets.




**There** **may
      be a limited market for our securities and we may fail to qualify for a Nasdaq
      or other listing.**




Our
      common stock is currently approved for quotation on the OTC Bulletin Board.
      We
      anticipate applying for listing of our common stock on either The NASDAQ Capital
      Market or the American Stock Exchange or a national or other securities exchange
      as soon as is practicable, assuming that the Company can satisfy the initial
      listing standards for such exchange. We currently do not satisfy the initial
      listing standards, and cannot ensure that we will be able to satisfy such
      listing standards or that our common stock will be accepted for listing on
      any
      such exchange. Should the Company fail to satisfy the initial listing standards
      of such exchanges, or our common stock be otherwise rejected for listing and
      remain on the OTC Bulletin Board or be suspended from the OTC Bulletin Board,
      the trading price of our common stock could suffer, the trading market for
      our
      common stock may be less liquid and our common stock price may be subject to
      increased volatility.




**Our** **common
      stock may be considered “a penny stock”, which would make it more difficult for
      our investors to sell their shares.**




The
      SEC
      has adopted regulations that generally define “penny stock” to be an equity
      security that has a market price of less than $5.00 per share, subject to
      specific exemptions. The market price of the Company’s common stock is currently
      less than $5.00 per share and therefore may be a “penny stock” according to SEC
      rules. This designation requires any broker or dealer selling these securities
      to disclose certain information concerning the transaction, obtain a written
      agreement from the purchaser and determine that the purchaser is reasonably
      suitable to purchase the securities. These rules may restrict the ability of
      brokers or dealers to sell common stock and may affect the ability of investors
      to sell their shares. In addition, since our common stock is traded on the
      OTC
      Bulletin Board, investors may find it difficult to obtain accurate quotations
      of
      the stock and may experience a lack of buyers to purchase such stock or a lack
      of market makers to support the stock price.




**Our
      certificate of incorporation authorizes our board to create new series of
      preferred stock without further approval by our stockholders, which could
      adversely affect the rights of the holders of our common stock.**




Our
      board
      of directors has the authority to fix and determine the relative rights and
      preferences of preferred stock. Our board of directors also has the authority
      to
      issue preferred stock without further stockholder approval. As a result, our
      board of directors could authorize the issuance of a series of preferred stock
      that, among other things, would grant to holders the preferred right to our
      assets upon liquidation, the right to receive dividend payments before dividends
      are distributed to the holders of common stock and the right to the redemption
      of the shares, together with a premium, prior to the redemption of our common
      stock. In addition our board of directors could authorize the issuance of a
      series of preferred stock that has greater voting power than our common stock
      or
      that is convertible into our common stock, which could decrease the relative
      voting power of our common stock or result in dilution to our existing
      stockholders.




20




**Delaware
      law and our charter contain provisions that could discourage or prevent a
      potential takeover, even if such transaction would be beneficial to our
      stockholders.**




Provisions
      of Delaware law and our certificate of incorporation and bylaws could make
      more
      difficult the acquisition of us or for our stockholders to remove existing
      management, and may discourage a third party from offering to acquire us, even
      if a change in control or in management would be beneficial to our
      stockholders.




**We
      are subject to the reporting requirements of federal securities laws, which
      can
      be expensive and public company compliance may make it more difficult to attract
      and retain officers and directors.**




We
      are a
      public reporting company and, accordingly, subject to the information and
      reporting requirements of the Exchange Act and other federal securities laws,
      including compliance with the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley
      Act
      and new rules subsequently implemented by the SEC have required changes in
      corporate governance practices of public companies. As a public company, we
      expect these new rules and regulations to increase our compliance costs and
      to
      make certain activities more time consuming and costly. Some members of our
      management have limited or no experience operating a company whose securities
      are traded or listed on an exchange, or with SEC rules, requirements and
      practices applicable to a publicly traded company. We may need to recruit,
      hire,
      train and retain additional financial reporting, internal controls and other
      personnel in order to develop and implement appropriate internal controls and
      reporting procedures. If we are unable to comply with the internal controls
      requirements of the Sarbanes-Oxley Act, when applicable, we may not be able
      to
      obtain the independent accountant certifications required by the Sarbanes-Oxley
      Act. As a public company, we also expect that these new rules and regulations
      may make it more difficult and expensive for us to obtain director and officer
      liability insurance in the future and we may be required to accept reduced
      policy limits and coverage or incur substantially higher costs to obtain the
      same or similar coverage. As a result, it may be more difficult for us to
      attract and retain qualified persons to serve on our board of directors or
      as
      executive officers.




**Item
      2.** **Description
      of Property** **.**




Our
      executive offices are located in 4,800 square feet of mixed use office and
      clean-room space located in Albuquerque, New Mexico. This lease expired on
      December 31, 2006 and is continuing on a month-to-month basis at a rate of
      $3,300 per month. This facility houses our executive offices as well as certain
      administrative operations. Management believes that comparable space is readily
      available in Albuquerque should our current lease terminate.




Our
      sales
      and production offices are located in 5,250 square feet of mixed use office
      and
      clean-room space located at in Tempe, Arizona. We entered into a two-year lease,
      effective April 1, 2007, which provides for monthly rental payments of $5,250
      for this space. This facility houses engineering as well as certain product
      development operations. Management believes that our present facilities are
      adequate to meet our immediate current needs and that comparable facilities
      are
      readily available in the markets in which we desire to operate.




21




**Item
      3.** **** **Legal
      Proceedings.**




There
      are
      no pending, and we are not aware of any threatened, legal proceedings against
      us.




**Item
      4.** **Submission
      of Matters to a Vote of Securities Holders.**




No
      matters were submitted to a vote of our stockholders during the fourth quarter
      of 2006.




**PART
      II**




**Item
      5.** **Market
      For Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities.**




Our
      common stock has been quoted on the OTC Bulletin Board since October 6, 2006
      under the symbol "SUFH.OB”. Prior to that date, there was no active market for
      our common stock. As of March 28, 2007, there were approximately 56 holders
      of
      record of our common stock.




The
      following table sets forth the high and low bid prices for our common stock
      for
      the periods indicated as reported by the OTC Bulletin Board. These quotations
      reflect inter-dealer prices, without retail mark-up, mark-down, or commission
      and may not represent actual transactions.




High
            
            LowFiscal
                2006Fourth
                Quarter
            
            $
            2.50
            
            $
            1.81Fiscal
                2007First
                Quarter (through March 28, 2007)
            
            $
            2.32
            
            $
            1.00





**Dividends**




We
      have
      not declared or paid any cash dividends on our common stock and do not
      anticipate declaring or paying any cash dividends in the foreseeable future.
      We
      currently expect to retain future earnings, if any, for the development of
      our
      business. Dividends may be paid on our common stock only if and when declared
      by
      our board of directors.




**Equity
      Compensation Plan Information**




The
      following table provides information as of December 31, 2006 with respect to
      the
      shares of common stock that may be issued under our existing equity compensation
      plans:




Plan
                Category
            
            Number
                of securities to
              be
                issued upon
              exercise
                of outstanding
              options,
                warrants and rights
            
            Weighted-average
              exercise
                price of
              outstanding
                options, warrants and rights
            
            Number
                of securities remaining available for future issuanceEquity
                compensationplans
                approved bysecurity
                holders (1)
            
            
            661,730
            
            $
            0.43
            
            
            874,607Equity
                compensationplans
                not approved bysecurity
                holders(2)
            
            
            1,998,334
            
            $
            0.43
            
            
            -







(1)
            Represents
                the 2006 Stock Plan.


(2)
            Represents
                options held by certain of our management resulting from the conversion
                of
                previously held options to purchase shares of common stock of Surfect
                Technologies in connection with the Merger. (See “Other Options” and Note
                13 to our December 31, 2006 financial
                statements.)





22




**Recent
      Sales of Unregistered Securities**




During
      the period covered by this annual report, we have not issued any unregistered
      securities which have not been previously reported.




**Item
      6.** **Management** **’** **s
      Discussion and Analysis or Plan of Operation** **.**




The
      following discussion of our plan of operation should be read in conjunction
      with
      our financial statements and notes thereto appearing elsewhere in this annual
      report on Form 10-KSB for our fiscal year ended December 31, 2006.




**Overview**




We
      are an
      early stage developer of automated electroplating tools for the semiconductor
      assembly industry. Our tools are designed to deposit conductive metals on wafers
      through a proprietary electroplating process.




We
      were
      originally incorporated on November 8, 2001 as a Nevada corporation under the
      name Windy Creek Developments, Inc., and subsequently reincorporated in Delaware
      on September 14, 2006. Surfect Technologies was incorporated on December 26,
      2000 in New Mexico and subsequently reincorporated in Delaware on April 4,
      2006.
      As a result of the Merger on September 27, 2006, Surfect Technologies became
      our
      wholly-owned subsidiary. We did not have any operations before the Merger.
      After
      the Merger we changed our name to Surfect Holdings, Inc. and succeeded to the
      business of Surfect Technologies as our sole line of business.




**Liquidity,
      Capital Resources and Cash Requirements**




We
      have
      funded our operations to date through sales of equity and debt securities.
      Through a series of private placement offerings between July 1, 2004 and
      December 31, 2005, we raised an aggregate of approximately $4.1 million, net
      of
      offering expenses, to continue our research and development efforts, to build
      our initial electroless prototype(s) and to recruit a management team with
      strong semiconductor industry background to run our company.




Between
      January 2006 and May 2006, we received funding of $2,500,000 from ITU Ventures
      West I, L.P., a venture capital firm (“ITU Ventures”) through the issuance of
      series A-1 convertible, cumulative preferred stock, which preferred stock has
      since been fully converted into 6,072,316 shares of our common
      stock.




In
      September 2006, we completed a private placement offering to accredited
      investors of units, each unit consisting of 25,000 shares of common stock and
      a
      four-year warrant to purchase 12,500 shares of common stock at an exercise
      price
      of $2.00 per share, at a purchase price of $25,000 per unit (“Private
      Placement”). We raised $2.8 million in the Private Placement. Concurrently with
      the Private Placement, ITU Ventures converted an outstanding promissory note
      in
      the principal amount of $500,000, for 500,000 shares of common stock and
      warrants to purchase 250,000 shares of common stock at an exercised price of
      $2.00 per share to ITU Ventures. We intend to use the proceeds from these
      offerings for, among other things, the commercialization of our Leapfrog and
      Ascent products.




23




As
      of
      December 31, 2006, we had working capital of $1.89 million compared to working
      deficit at December 31, 2005 of $902 thousand. As of December 31, 2006, we
      had
      $1.98 million in cash and cash equivalents compared to $150 in cash and cash
      equivalents at December 31, 2005.




We
      currently anticipate beginning delivery of beta units of our Leapfrog and Ascent
      products during the second quarter of 2007. Our future capital requirements
      may
      differ materially from those currently anticipated and will depend on many
      factors, including, but not limited to, market acceptance of our products,
      volume pricing concessions, capital improvements, demand for our products,
      technological advances and our relationships with suppliers and prospective
      customers. Based on current and projected levels of cash flow from operations,
      we believe that we have sufficient liquidity to meet our short-term cash
      requirements. However, if our products do not gain market acceptance in the
      quantities and/or at the prices anticipated, operating cash flows may be
      insufficient to meet our needs. If existing resources and cash from operations
      are not sufficient to meet our future requirements or if we perceive conditions
      to be favorable, we may seek additional debt or equity financing, additional
      credit facilities, or obtain asset-based financing.




We
      may
      determine it necessary to offer additional securities in the future to secure
      adequate capital to meet our long term cash needs. We cannot offer any assurance
      that any additional equity or debt financing will not be dilutive to holders
      of
      our common stock or that we will be successful at raising capital through
      additional equity or debt financing, if required, or will be able to do so
      on
      favorable terms, if at all.




**Cash
      Flows from Operating Activities**




We
      have
      been in the development stage since our inception on December 26, 2000. As
      such,
      we have had limited operating revenue to date. Operating activities for fiscal
      2006 used cash of $3.0 million, compared to $2.3 million used for fiscal 2005.
      This increase in cash used by operating activities was primarily the result
      of
      increases in payroll and employee, research and development, and general and
      administrative expenditures.




Operating
      activities in fiscal 2005 used cash of $2.3 million, compared to $1 million
      used
      in fiscal 2004. This increase in cash used by operating activities was primarily
      the result of increases in payroll and employee, research and development,
      and
      general and administrative expenditures.




**Cash
      Flows from Investing Activities**




Net
      cash
      used in investing activities through fiscal 2006 was approximately $50 thousand
      compared to net cash used of approximately $235 thousand for fiscal 2005. This
      decrease in net cash used was primarily attributable to a reduction in asset
      purchases and patent filing costs incurred during fiscal 2006.




Net
      cash
      used in investing activities in 2005 was approximately $235 thousand compared
      to
      $137 thousand in 2004. This increase in cash used was primarily attributable
      to
      additional purchases of property, plant and equipment during 2005. We currently
      anticipate significant equipment expenditures during 2007 which we intend to
      acquire through capital leasing arrangements.




24




**Cash
      Flows from Financing Activities**




Net
      cash
      provided by financing activities through fiscal 2006 was $5.1 million, compared
      to cash provided of $397 thousand for the fiscal year ended 2005. This increase
      was attributable to the issuance of $2.5 million of preferred stock in exchange
      for approximately $2 million in cash and debt retirement of $500,000 in January
      and May 2006, $2.5 million from the private placements of our common stock
      and
      warrants in September 2006, and $500,000 from the conversion of a $500,000
      promissory note into common stock and warrants in September 2006.




Net
      cash
      provided by financing activities for the year ended December 31, 2005 was $397
      thousand, compared to cash provided of $3.1 million for the year ended December
      31, 2004, due to the issuance of the $2.9 million of preferred stock in July
      and
      December 2004.




**Income
      tax expense**




At
      December 31, 2006, we had outstanding net operating loss carry forwards (NOLs)
      for federal and state domestic tax purposes of approximately $6 million, which
      will expire in years 2023-2025. The utilization of any net operating loss may
      have been impaired by the Merger.




**Off-Balance
      Sheet Arrangements**




We
      do not
      have transactions or relationships with “special purpose” entities, and we do
      not have any off-balance sheet financing other than normal operating
      leases.




**Item
      7.** **Financial
      Statements.**




See
      our
      financial statements beginning on page F-1.




25




Report
        of
        Independent Registered Public Accounting Firm
 Board
            of
            Directors and Stockholders
 Surfect
            Holdings, Inc.
  We
            have
            audited the accompanying consolidated balance sheets of Surfect Holdings,
            Inc.
            and subsidiary (Surfect) (a development stage company) as of December
            31, 2006
            and 2005 and the related consolidated statements of operations, stockholders’
equity and cash flows for the years ended December 31, 2006, 2005 and
            2004 and
            for the period from inception (December 26, 2000) through December 31,
            2006. These financial statements are the responsibility of Surfect’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. Surfect is not
            required
            to have, nor were we engaged to perform, an audit of its internal control
            over
            financial reporting. Our audits included consideration of internal control
            over
            financial reporting as a basis for designing audit procedures that are
            appropriate in the circumstances, but not for the purpose of expressing
            an
            opinion on the effectiveness of Surfect’s internal control over financial
            reporting. Accordingly, we express no such opinion. An audit also includes
            examining, on a test basis, evidence supporting the amounts and disclosures
            in
            the financial statements, assessing the accounting principles used and
            significant estimates made by management, as well as evaluating the overall
            financial statement presentation. We believe our audits provide a reasonable
            basis for our opinion.
  In
            our
            opinion, the consolidated financial statements referred to above present
            fairly,
            in all material respects, the financial position of Surfect Holdings,
            Inc. and
            subsidiary as of December 31, 2006 and 2005 and the results of their
            operations and their cash flows for the years ended December 31, 2006, 2005
            and 2004 and for the period from inception through December 31, 2006, in
            conformity with accounting principles generally accepted in the United
            State of
            America.
  The
            accompanying financial statements have been prepared assuming that Surfect
            will
            continue as a going concern. As discussed in Note 11, in the accompanying
            financial statements, Surfect has incurred net losses since its inception
            and
            net losses have continued to the date of these financial statements.
            During
            2006, Surfect received equity funding to meet its short-term working
            capital
            needs; however, Surfect remains in the development stage and its ability
            to
            continue as a going concern is initially dependent on its ability
            to raise adequate capital to fund necessary market entry activities and
            subsequently on sufficient inflow of operating revenue derived from sale
            of its
            products at sufficient profit margin to cover operating expenses. The
            financial
            statements do not include any adjustments that might result from the
            outcome of
            this uncertainty.
  /S/
            REDW
            LLC
  March
            23,
            2007
  F-1
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated
          Balance Sheets**
 **December 31,**
  **2006**
                  
                  **2005****Assets****Current
                      assets:**Cash
                      and cash equivalents
                  
                  $
                  1,983,325
                  
                  $
                  150Inventory
                  
                  
                  359,984
                  
                  
                  -Prepaid
                      expenses and other assets
                  
                  
                  130,296
                  
                  
                  15,435**Total
                      current assets**
                  
                  
                  2,473,605
                  
                  
                  15,585**Fixed
                      Assets:**Furniture
                      and machinery
                  
                  
                  256,479
                  
                  
                  278,213Office
                      and computer equipment
                  
                  
                  111,829
                  
                  
                  102,777Leasehold
                      improvements
                  
                  
                  69,339
                  
                  
                  69,339437,647
                  
                  
                  450,329Less
                      accumulated depreciation and amortization
                  
                  
                  (216,230
                  )
                  
                  (141,613
                  )**Total
                      fixed assets**
                  
                  
                  221,417
                  
                  
                  308,716**Patents:**Pending
                      patents
                  
                  
                  107,721
                  
                  
                  72,059Issued
                      patents, net of accumulated amortization of $3,223 and $989
                      as
                      ofDecember
                      31, 2006 and 2005, respectively
                  
                  
                  42,590
                  
                  
                  42,973**Total
                      patents**
                  
                  
                  150,311
                  
                  
                  115,032**Total
                      assets**
                  
                  $
                  2,845,333
                  
                  $
                  439,333
   **The
            accompanying notes are an integral part of these financial
            statements.**
 F-2
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated
          Balance Sheets - continued**
  **December 31,**
 **2006**
                  
                  **2005****Liabilities
                      and Stockholders' Equity****Current
                      liabilities:**Accounts
                      payable
                  
                  $
                  305,725
                  
                  $
                  195,281Bank
                      overdraft
                  
                  
                  -
                  
                  
                  114,136Deposits
                      payable
                  
                  
                  -
                  
                  
                  261,750Notes
                      payable
                  
                  
                  45,868
                  
                  
                  300,000Current
                      portion of capital lease
                  
                  
                  2,125
                  
                  
                  2,125Warranty
                      reserve
                  
                  
                  44,189
                  
                  
                  -Other
                      accrued liabilities
                  
                  
                  189,299
                  
                  
                  44,071**Total
                      current liabilities**
                  
                  
                  587,206
                  
                  
                  917,363**Long
                      term liabilities, less current portion:**Capital
                      lease
                  
                  
                  5,095
                  
                  
                  7,066**Total
                      long term liabilities**
                  
                  
                  5,095
                  
                  
                  7,066**Total
                      liabilities**
                  
                  
                  592,301
                  
                  
                  924,429**Stockholders'
                      (deficit) equity:**Series
                      A convertible cumulative preferred shares; no par;
                      cumulativedividends
                      payable at 7%; convertible into 29,216,235 common shares
                  
                  
                  -
                  
                  
                  4,113,879Common
                      stock, $0.0001 par value (2006); no par value (2005)
                  
                  
                  1,420
                  
                  
                  100,400Additional
                      paid-in-capital
                  
                  
                  9,921,019
                  
                  
                  19,918Deficit
                      accumulated during development stage
                  
                  
                  (7,669,407
                  )
                  
                  (4,719,293
                  )**Total
                      stockholders' (deficit) equity**
                  
                  
                  2,253,032
                  
                  
                  (485,096
                  )**Total
                      liabilities and stockholders' equity**
                  
                  $
                  2,845,333
                  
                  $
                  439,333
 **The
            accompanying notes are an integral part of these financial
            statements.**
 F-3
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated** **Statements
          of Operations**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 **For
                      the Period from****December
                      26, 2000****Years
                      ended December 31,**
                  
                  **(Inception)
                      to****2006**
                  
                  **2005**
                  
                  **2004**
                  
                  **December
                      31, 2006****Sales
                      revenue**
                  
                  $
                  220,939
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  220,939**Cost
                      of sales**
                  
                  
                  **66,545**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **66,545**Gross
                      profit
                  
                  
                  154,394
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  154,394**Expenses:**Payroll
                      and employee benefits
                  
                  
                  1,373,254
                  
                  
                  944,415
                  
                  
                  605,046
                  
                  
                  3,253,937Research
                      and development
                  
                  
                  599,547
                  
                  
                  727,321
                  
                  
                  381,994
                  
                  
                  1,761,424Warranty
                  
                  
                  44,189
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  44,189General
                      and administrative
                  
                  
                  852,480
                  
                  
                  649,872
                  
                  
                  384,191
                  
                  
                  2,155,598Sales
                      and marketing
                  
                  
                  134,169
                  
                  
                  113,743
                  
                  
                  49,221
                  
                  
                  335,790Depreciation
                      and amortization
                  
                  
                  97,784
                  
                  
                  71,815
                  
                  
                  27,055
                  
                  
                  244,335Interest
                  
                  
                  10,772
                  
                  
                  4,578
                  
                  
                  46,841
                  
                  
                  154,366**Total
                      expenses**
                  
                  
                  3,112,195
                  
                  
                  2,511,744
                  
                  
                  1,494,348
                  
                  
                  7,949,639**Other
                      income**
                  
                  
                  7,687
                  
                  
                  14,725
                  
                  
                  49,790
                  
                  
                  125,838**Net
                      loss**
                  
                  $
                  2,950,114
                  
                  $
                  2,497,019
                  
                  $
                  1,444,558
                  
                  $
                  7,669,407Net
                      loss per share attributable to commonstockholders,
                      basic and diluted
                  
                  $
                  0.40
                  
                  $
                  0.50
                  
                  $
                  0.29
                  
                  $
                  1.41Shares
                      used in computing basic and diluted net lossper
                      share attributable to common stockholders
                  
                  
                  7,434,904
                  
                  
                  5,020,000
                  
                  
                  5,020,000
                  
                  
                  5,421,202
 
 The
          accompanying notes are an integral part of
          these financial statements.
  F-4
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated** **Statements
          of Stockholders’ (Deficit) Equity**
 **Inception
          (December 26, 2000) through December 31, 2006**
  **Additional**
                  
                  **Deficit**
                    **Accumulated**
                    **During**
                  
                  **Total****Common
                      Stock**
                  
                  **Preferred
                      Stock**
                  
                  **Paid-In**
                  
                  **Development**
                  
                  **Stockholders'****Shares**
                  
                  **Amount**
                  
                  **Shares**
                  
                  **Amount**
                  
                  **Capital**
                  
                  **Stage**
                  
                  **Equity**December
                      26, 2000 - initial issuance of $5,020,000shares
                      at $0.02 per share
                  
                  
                  5,020,000
                  
                  $
                  100,400
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  918
                  
                  $
                  -
                  
                  $
                  101,318Net
                      loss from inception to December 31, 2003
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (777,717
                  )
                  
                  (777,717
                  )Balance
                      at December 31, 2003
                  
                  
                  5,020,000
                  
                  
                  100,400
                  
                  
                  -
                  
                  
                  -
                  
                  
                  918
                  
                  
                  (777,717
                  )
                  
                  (676,399
                  )Issuance
                      of Series A preferred stock for $2,954,832cash
                      consideration, conversion of convertible notesand
                      accrued interest
                  
                  
                  -
                  
                  
                  -
                  
                  
                  12,549,568
                  
                  
                  4,113,879
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,113,879Net
                      loss for year ended December 31, 2004
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,444,557
                  )
                  
                  (1,444,557
                  )Balance
                      at December 31, 2004
                  
                  
                  5,020,000
                  
                  
                  100,400
                  
                  
                  12,549,568
                  
                  
                  4,113,879
                  
                  
                  918
                  
                  
                  (2,222,274
                  )
                  
                  1,992,923Share-based
                      compensation - employee
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  14,000
                  
                  
                  -
                  
                  
                  14,000Share-based
                      compensation - non-employee
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5,000
                  
                  
                  -
                  
                  
                  5,000Net
                      loss for year ended December 31, 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (2,497,019
                  )
                  
                  (2,497,019
                  )Balance
                      at December 31, 2005
                  
                  
                  5,020,000
                  
                  
                  100,400
                  
                  
                  12,549,568
                  
                  
                  4,113,879
                  
                  
                  19,918
                  
                  
                  (4,719,293
                  )
                  
                  (485,096
                  )Issuance
                      of Series A-1 preferred stock for $1,993,453cash
                      consideration, conversion of convertible notesand
                      accrued interest in January and May 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  16,666,667
                  
                  
                  2,500,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,500,000Issuance
                      of Common Stock at $0.02 upon exercise ofoptions
                  
                  
                  302,679
                  
                  
                  6,054
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (248
                  )
                  
                  -
                  
                  
                  5,806Grant
                      date fair value of stock options granted toemployees
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  52,267
                  
                  
                  -
                  
                  
                  52,267Grant
                      date fair value of stock options granted to non-employees
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5,096
                  
                  
                  -
                  
                  
                  5,096Compensation
                      resulting from management exercise ofoption
                      bonus
                  
                  
                  4,599,626
                  
                  
                  197,785
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (52,267
                  )
                  
                  -
                  
                  
                  145,518Balance
                      prior to September 27, 2006 recapitalization
                  
                  
                  9,922,305
                  
                  
                  304,239
                  
                  
                  29,216,235
                  
                  
                  6,613,879
                  
                  
                  24,766
                  
                  
                  (4,719,293
                  )
                  
                  2,223,591
 **The
            accompanying notes are an integral part of these financial
            statements.**
 F-5
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated** **Statements
          of Stockholders’ (Deficit) Equity - continued**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 **Deficit****Additional**
                  
                  **Accumulated
                      During**
                  
                  **Total****Common
                      Stock**
                  
                  **Preferred
                      Stock**
                  
                  **Paid-In**
                  
                  **Development**
                  
                  **Stockholders'****Shares**
                  
                  **Amount**
                  
                  **Shares**
                  
                  **Amount**
                  
                  **Capital**
                  
                  **Stage**
                  
                  **Equity**Balance
                      prior to September 27, 2006 recapitalization
                  
                  
                  9,922,305
                  
                  
                  304,239
                  
                  
                  29,216,235
                  
                  
                  6,613,879
                  
                  
                  24,766
                  
                  
                  (4,719,293
                  )
                  
                  2,223,591Effect
                      of merger and recapitalization:Conversion
                      of preferred shares to common
                  
                  
                  45,948,992
                  
                  
                  6,613,879
                  
                  
                  (29,216,235
                  )
                  
                  (6,613,879
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Cancellation
                      of STI Common Stock
                  
                  
                  (55,548,618
                  )
                  
                  (6,904,243
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  6,904,243
                  
                  
                  -
                  
                  
                  -Conversion
                      of Windy Creek DevelopmentsCommon
                      Stock upon merger with Windy Creek-DE
                  
                  
                  2,500,001
                  
                  
                  250
                  
                  
                  -
                  
                  
                  -
                  
                  
                  41,750
                  
                  
                  -
                  
                  
                  42,000Purchase
                      and cancellation of STI non-qualifiedinvestor
                      common shares
                  
                  
                  (322,679
                  )
                  
                  (13,875
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (13,875
                  )Issuance
                      of SHI Common Stock to STI Holders
                  
                  
                  8,001,666
                  
                  
                  800
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  800Issuance
                      of 3,700,000 stock for net proceeds of$2,950,630
                      cash, including conversion of a $500,000demand
                      note payable to a principal shareholder
                  
                  
                  3,700,000
                  
                  
                  370
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,950,260
                  
                  
                  -
                  
                  
                  2,950,630Net
                      loss for the year ended December 31, 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (2,950,114
                  )
                  
                  (2,950,114
                  )Balance
                      at December 31, 2006
                  
                  
                  14,201,667
                  
                  $
                  1,420
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  9,921,019
                  
                  $
                  (7,669,407
                  )
                  $
                  2,253,032
  **The
            accompanying notes are an integral part of these financial
            statements.**
 F-6
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated** **Statements
          of Cash Flows**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 **For
                      the Period****from
                      December 26,****Years
                      ended December 31,**
                  
                  **2000
                      (Inception) to****2006**
                  
                  **2005**
                  
                  **2004**
                  
                  **December
                      31, 2006****Operating
                      activities**Net
                      loss
                  
                  $
                  (2,950,114
                  )
                  $
                  (2,497,019
                  )
                  $
                  (1,444,558
                  )
                  $
                  (7,669,407
                  )Adjustments
                      to reconcile net loss to net cashused
                      in operating activities:Depreciation
                      and amortization
                  
                  
                  97,784
                  
                  
                  71,814
                  
                  
                  27,055
                  
                  
                  244,335Loss
                      on disposal of assets
                  
                  
                  8,010
                  
                  
                  10,006
                  
                  
                  -
                  
                  
                  26,873Stock
                      based compensation
                  
                  
                  202,881
                  
                  
                  19,000
                  
                  
                  -
                  
                  
                  221,881Accrued
                      withholding gross up on stock based compensation
                  
                  
                  34,731
                  
                  
                  -
                  
                  
                  -
                  
                  
                  34,731Interest
                      accrued converted to preferred stock
                  
                  
                  6,547
                  
                  
                  -
                  
                  
                  113,879
                  
                  
                  120,426Expenses
                      payable converted to preferred stock
                  
                  
                  -
                  
                  
                  -
                  
                  
                  45,168
                  
                  
                  45,168Changes
                      in operating assets and liabilities:Inventory
                  
                  
                  (359,984
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (359,984
                  )Prepaid
                      expenses and other current assets
                  
                  
                  (114,861
                  )
                  
                  16,399
                  
                  
                  (7,880
                  )
                  
                  (130,296
                  )Accounts
                      payable
                  
                  
                  110,444
                  
                  
                  158,762
                  
                  
                  22,784
                  
                  
                  305,725Deposits
                      payable
                  
                  
                  (261,750
                  )
                  
                  (25,000
                  )
                  
                  286,750
                  
                  
                  -Accrued
                      liabilities
                  
                  
                  189,417
                  
                  
                  (36,136
                  )
                  
                  (21,928
                  )
                  
                  233,488Net
                      cash used in operating activities
                  
                  
                  (3,036,895
                  )
                  
                  (2,282,174
                  )
                  
                  (978,730
                  )
                  
                  (6,927,060
                  )**Investing
                      activities**Patent
                      investment
                  
                  
                  (37,513
                  )
                  
                  (46,592
                  )
                  
                  (24,984
                  )
                  
                  (153,534
                  )Investment
                      in fixed assets
                  
                  
                  (16,261
                  )
                  
                  (188,615
                  )
                  
                  (111,758
                  )
                  
                  (431,550
                  )Net
                      cash used in investing activities
                  
                  
                  (53,774
                  )
                  
                  (235,207
                  )
                  
                  (136,742
                  )
                  
                  (585,084
                  )**Financing
                      activities**Bank
                      Overdraft
                  
                  
                  (114,136
                  )
                  
                  114,136
                  
                  
                  -
                  
                  
                  -Proceeds
                      from notes payable
                  
                  
                  1,135,338
                  
                  
                  300,000
                  
                  
                  250,000
                  
                  
                  2,435,338Repayments
                      on notes payable
                  
                  
                  (389,470
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (389,470
                  )Proceeds
                      from loans from officers
                  
                  
                  -
                  
                  
                  -
                  
                  
                  23,012
                  
                  
                  86,769Repayments
                      on loans from officers
                  
                  
                  -
                  
                  
                  (457
                  )
                  
                  (83,212
                  )
                  
                  (86,769
                  )Net
                      proceeds from issuance of common stock
                  
                  
                  2,450,630
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,551,948Proceeds
                      from issuance of preferred stock
                  
                  
                  1,993,453
                  
                  
                  
                  
                  
                  2,954,832
                  
                  
                  4,948,285Net
                      payments against capital lease
                  
                  
                  (1,971
                  )
                  
                  (2,057
                  )
                  
                  (443
                  )
                  
                  (4,471
                  )Repayments
                      on leasehold improvement notes
                  
                  
                  -
                  
                  
                  (14,428
                  )
                  
                  (9,759
                  )
                  
                  (46,161
                  )Net
                      cash provided by financing activities
                  
                  
                  5,073,844
                  
                  
                  397,194
                  
                  
                  3,134,430
                  
                  
                  9,495,469Net
                      increase (decrease) in cash and cash equivalents
                  
                  
                  1,983,175
                  
                  
                  (2,120,187
                  )
                  
                  2,018,958
                  
                  
                  1,983,325Cash
                      and cash equivalents at beginning of period
                  
                  
                  150
                  
                  
                  2,120,337
                  
                  
                  101,379
                  
                  
                  -Cash
                      and cash equivalents at end of period
                  
                  $
                  1,983,325
                  
                  $
                  150
                  
                  $
                  2,120,337
                  
                  $
                  1,983,325
  **The
            accompanying notes are an integral part of these financial
            statements.**
 F-7
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Consolidated** **Statements
          of Cash Flows - continued**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 **For
                      the Period****from**
                    **December
                      **26,
                      2000******Years
                      ended December 31,**
                  
                  **(Inception)
                      to****2006**
                  
                  **2005**
                  
                  **2004**
                  
                  **December
                      31, 2006**Interest
                      paid
                  
                  $
                  13,509
                  
                  $
                  1,841
                  
                  $
                  2,049
                  
                  $
                  29,198**Supplemental
                      Schedule of Noncash Investing and Financing
                      Activities**Copier
                      acquired under capital lease
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  11,691
                  
                  $
                  11,691Leasehold
                      improvements acquired via notes payable
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  46,161Series
                      A preferred stock issued for $1,000,000 indemand
                      notes payable, $113,879 of accrued interestand
                      $45,168 related accounts payable
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  1,159,047
                  
                  $
                  1,159,047Series
                      A-1 preferred stock issued for $1,993,453 incash
                      consideration, convertible demand notespayable
                      of $500,000 and accrued interest
                  
                  $
                  500,000
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  500,000Conversion
                      of $500,000 demand note for 500,000shares
                      of common stock and warrants to purchase250,000
                      shares (See Note 12 below)$
                  500,000
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  500,000Issuance
                      of 400,000 shares of Common Stock toinvestor
                      relations consultants as part ofrecapitalization
                  
                  $
                  400,000
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  400,000
  **The
            accompanying notes are an integral part of these financial
            statements.**
  F-8
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  **1)** **Description
          of Operations and Development Stage Status**
 
 Surfect
          Holdings, Inc. together with its subsidiary Surfect
          Technologies, Inc. (“Surfect” or the “Company”) is a development stage company
          based in Albuquerque, New Mexico, Surfect Technologies, Inc. was incorporated
          on
          December 26, 2000 (See Recapitalization at Note 12). The Company was formed
          to
          develop and commercialize certain intellectual property and research in
          connection with the use of electro deposition technologies to enable 3-D
          stacked
          die packaging innovations to increase semiconductor performance. Since
          inception
          through 2006, the Company’s activities have been substantially limited to
          research and development of technologies for commercialization. In November,
          2006, the Company concluded its first tool sale, however as the majority
          of the
          Company’s efforts remained dedicated to establishment of vendor relationships,
          supply chain and market entry, these financials are prepared as a development
          stage company as defined by Statement of Financial Accounting Standards
          (SFAS)
          No. 7.
 
 The
          consolidated statement of operations for the year ended December 31, 2006
          includes the historical financial statements of Surfect Technologies, Inc.
          and
          gives effect to the September 27, 2006 recapitalization transaction described
          in
          Note 12 below. Since the date of recapitalization, all material intercompany
          transactions and balances have been eliminated in consolidation.
  **2)** **Summary
          of Significant Accounting Policies**
  Concentration
          of Risk
 Credit
          Concentration - Financial instruments potentially subjecting the Company
          to
          concentrations of credit risk consist primarily of deposits of cash and
          cash
          equivalents in excess of FDIC limits. The Company’s deposits are placed with
          major financial institutions, and management believes that it is not exposed
          to
          undue credit risk for any deposits that may, from time to time, exceed
          the
          federally insured limits.
  Financing
          Concentration - The Company remains in the development (preoperational)
          stage
          and the majority of its debt and equity financing has come from its principal
          investor.
  Supplier
          Concentration - The Company is heavily reliant on outsourcing firms to
          manufacture its products. The Company is attempting to develop a broader
          base of
          relationships to diversify its risk concentration.
  Cash
          and Cash Equivalents
 For
          purposes of the statement of cash flows, the Company considers all short-term
          debt securities purchased with a maturity of three months or less to be
          cash
          equivalents.
  F-9
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  2) Summary
          of Significant Accounting Policies — continued
  Inventories
 Inventories
          are carried at the lower of first-in, first-out (FIFO) cost or market.
          The
          Company periodically reviews its inventories to identify excess and obsolete
          inventories and to record such inventories at net realizable values. It
          is
          reasonably possible that the Company’s estimates of net realizable values could
          be revised in the near term due to technological and other changes.
  Fixed
          Assets,Depreciation
          and Amortization
 Fixed
          assets are carried at cost. Costs are reviewed regularly for idle and obsolete
          items. No assets are considered impaired in value at any balance sheet
          date
          reported herein.
 
 Depreciation
          and amortization has been provided by the Company in order to reduce the
          net
          value of fixed assets over estimated useful lives. The Company uses the
          straight-line method for financial reporting purposes for all classes of
          assets.
          Office and computer equipment, including computer software, are depreciated
          and
          amortized over five and three year lives, respectively. Furniture and machinery
          are depreciated over seven year lives. Leasehold improvements are amortized
          over
          the original life of the lease, plus known options to extend the lease,
          or the
          remaining life of the lease whichever is shorter.
 
 Research
          and Development Costs
 Research
          and Development (R&D) expense consists of project materials, laboratory
          costs, consulting fees and other costs associated with product development
          efforts. Research and development costs are expensed as incurred. Research
          and
          development expense amounts reported include nonpayroll amounts. Payroll
          costs
          of research and development are reported as payroll.
  Estimates
 The
          preparation of financial statements in conformity with generally accepted
          accounting principles requires the Company to make estimates and assumptions
          affecting the reported amounts of assets, liabilities, revenues and expenses,
          and the disclosure of contingent assets and liabilities. Estimated amounts
          could
          differ from actual results.
 
  Stockholders’
          Equity
 The
          Company is
          authorized to issue 40,000,000 shares of Common Stock, and 10,000,000 shares
          of
          preferred stock, par value $0.0001 per share. As of December 31, 2006,
          there
          were 14,201,667 shares of Common Stock issued and outstanding and no shares
          of
          preferred stock issued and outstanding.
   
  F-10
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  2) Summary
          of Significant Accounting Policies — continued
  Loss
          per Common Share
 Loss
          per
          share has been calculated in accordance with SFAS 128 “Earnings Per Share,”
which provides for the calculation of “Basic” and “Diluted” earnings per share.
          Basic loss per share includes no dilution and is computed by dividing (loss)
          to
          common shareholders by the weighted average number of common shares outstanding
          during the period. Diluted loss per share excludes from the diluted loss
          per
          share calculation, common shares potentially issuable as a result of possible
          preferred share conversions, cumulative dividends on preferred shares,
          and the
          possible exercise of warrants and stock options, since their impact would
          be
          antidilutive. (See further discussion at Note 16).
  Income
          Taxes
 Income
          taxes are recognized using enacted tax rates, and are composed of taxes
          on
          financial accounting income that is adjusted for the requirement of current
          tax
          law and deferred taxes. Deferred taxes are the expected future tax consequences
          of temporary differences between the financial statement carrying amounts
          and
          tax bases of existing assets and liabilities. The Company does not expect
          to
          have current income taxes payable or deferred tax balances not offset by
          valuation allowances for the foreseeable future. Accordingly, no income
          tax
          provisions have been reported.
  Other
          Comprehensive Income
 From
          inception through December 31, 2006, the Company had no changes in equity
          which constitute components of other comprehensive income.
  Stock
          Option Plan
 *Option
          grants to employees*
 Prior
          to
          January 1, 2006, the Company accounted for employee options under the
          recognition and measurement provisions of Accounting Principles Board Opinion
          No. 25 ("APB 25"). Accordingly, the Company recognized compensation expense
          only
          to the extent that it granted options with a discounted exercise price.
          Any
          resulting compensation expense was recognized ratably over the associated
          service period.
 
 Effective
          January 1, 2006, the Company adopted the fair value recognition provisions
          of
          SFAS No. 123(R), Share-Based Compensation, using the modified prospective
          transition method and therefore has not restated prior periods' results.
          Under
          this transition method, employee stock-based compensation expense for the
          year
          ended December 31, 2006 included compensation expense for all stock-based
          compensation awards granted, but not yet fully exercisable, prior to January
          1,
          2006.  The fair value of the options granted was determined at the original
          grant dates in accordance with the provisions of SFAS 123(R).
  F-11
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  2) Summary
          of Significant Accounting Policies — continued
 
  Stock
          Option Plan -
          continued
 *Option
          grants to employees - continued*
 Stock-based
          compensation expense for all employee share-based payment awards granted
          after
          December 31, 2005 are based on the grant-date fair value estimated in accordance
          with the provisions of SFAS 123(R). The Company recognizes these compensation
          costs over the requisite service period of the award, which is generally
          the
          vesting term of the options associated with the underlying employment agreement,
          where applicable. (See further discussion at Note 13 below.)
 
 *Option
          grants to non-employees*
 The
          Company accounts for equity instruments issued to non-employees in accordance
          with the provisions of SFAS 123 and the Emerging Issues Task Force (“EITF”)
          Issue No.  96-18,  “Accounting  for  Equity 
Instruments  That Are Issued to Other Than  Employees  for 
Acquiring,  or In  Conjunction  with Selling,  Goods or
          Services” (EITF 96-18) which require that such equity instruments are recorded
          at their fair value on the measurement date, which date is typically upon
          the inception of the services that will be performed (see further discussion
          at
          Note 13).
  Fair
          Value of Financial Instruments
 The
          fair
          value of the Company’s financial instruments, principally cash, payables and
          debt, approximates their carrying value.
 
 Revenue
          Recognition
 In
          December 1999, the staff of the Securities and Exchange Commission (SEC)
          issued
          Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial
          Statements,” which has been subsequently updated by Staff Accounting Bulletin
          No. 104 (SAB 104), “Revenue Recognition.” Under this method, revenue is
          recognized only when the following persuasive evidence of an arrangement
          exists:
 ·
                delivery
                    has occurred or services have been rendered;
 ·
                the
                    seller’s price is fixed or determinable
                    and;
 ·
                collectibility
                    is reasonably assured.
 
 As
          of
          December 31, 2006, the Company has not entered into any ongoing material
          revenue
          arrangements.
   F-12
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  2) Summary
          of Significant Accounting Policies — continued
 
 Revenue
          Recognition - continued
 The
          Company anticipates that:
 ·
                any
                    spare parts sales will be recognized upon shipment when title
                    and risk of
                    loss pass to the customer;
 ·
                the
                    Company’s product sales will generally contain formal customer acceptance
                    provisions. Sales of products are not and will not be recognized
                    until
                    customer acceptance. Any deposit(s) received at the time of acceptance
                    of
                    order or upon delivery are and will be carried as a liability
                    until formal
                    customer acceptance and sign off has occurred;
 ·
                once
                    a formal customer acceptance has occurred, no further rights
                    of return
                    will exist except as provided for defective components under
                    warranty (see
                    Warranty Obligations below);
 ·
                revenue
                    related to services are recognized upon completion of performance
                    of the
                    service or ratably as the work is performed over the life of
                    the related
                    service contract;
 
 Sales
          with multiple elements will be treated as such in accordance with EITF
          No.
          00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” The
          amount of revenue recognized in multiple element arrangements will be the
          lesser
          of the fair value of the equipment or the contracted amount that was due
          or
          payable upon title transfer. The revenue for elements other than equipment
          will
          be recorded in deferred profit and would then be recognized as the balance
          of
          goods is delivered and/or services are performed.
 
 Warranty
                    Obligations
 The
          Company anticipates that obligations for warranty expense will be accrued
          concurrently with the revenue recognized on the related equipment. As the
          Company has limited sales history, the Company will make provisions for
          its
          warranty obligations based upon management’s judgment. Due to the significant
          uncertainties and judgments involved in estimating the Company’s warranty
          obligations, including changing product designs and specifications, the
          ultimate
          amount incurred for warranty costs could change in the near term from the
          Company’s current estimate.
 
 The
          Company’s warranty provision provides for general operational support and
          replacement of components which may fail for a period of one year from
          the date
          of acceptance of the product.
  Recently
          Issued Accounting Pronouncements
 Management
          has considered the impact of recently issued accounting pronouncements
          and is
          aware of no matters that will have a material prospective affect on these
          financial statements when they become effective.
  F-13
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  **3)** **Inventories**
 
 The
          Company outsources all of its manufacturing services and as such generally
          carries only finished goods inventory. At December 31, 2006 the Company’s
          inventory consisted of two beta tools (expected to be sold to customers)
          and
          certain associated replacement parts which are all categorized as finished
          goods
          inventory.
  **4)** **Patents**
 
 Patents
          at December 31, 2006 and 2005 include capitalized costs of $42,590 and
          $42,973, net of accumulated amortization of $3,223 and $989, respectively.
          These
          balances consist of filing fees and executory costs related to acquiring
          U.S.
          and international patents. Costs incurred to acquire pending patents with
          related costs of $107,721 and $72,059, respectively have not commenced
          amortization pending receipt of the related patents. None of these costs
          are
          considered impaired at any balance sheet date reported herein.
  Filing
          fees and executory costs associated with patent applications are capitalized
          at
          the time incurred. Upon acceptance of a patent filing, the Company amortizes
          the
          costs over the associated life of the patent. In the event of denial or
          in the
          event a capitalized patent is deemed to be without worth, the unamortized
          balance is expensed.
  **5)** **Deposits
          Payable**
  The
          Company received customer deposits totaling $261,750 in 2004 toward purchases
          of
          equipment from the Company. $85,000 was refunded during 2006. The remaining
          balance was earned during 2006 and was recognized as revenue.
  **6)** **Income
          Taxes**
  The
          Company has no taxable income and no income tax liability during the periods
          reported.
  Through
          June 30, 2004, the Company was an S corporation and its taxable income and
          losses flowed through to its shareholders. Effective July 1, 2004, as a
          result of venture capital investment, the Company was required to file
          its tax
          returns as a C corporation whereby the Company became responsible for paying
          its
          income tax liabilities. For the period from July 1, 2004 through
          December 31, 2006, the Company incurred taxable losses totaling
          approximately $6,055,000 which are available to offset future taxable income
          through 2025, subject to ownership change limitations.
  F-14
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  **7** **)** **Related
          Party Transactions and Contingencies**
  During
          the period from inception through December 31, 2005, the Company had substantial
          transactions with Griego Electrochemical Technologies, Inc. (GET), a company
          majority owned and operated by the founder and former president of Surfect.
          Transactions by reporting period are summarized as follows (in
          thousands):
 2005
                
                2004
                
                2003
                
                Since
                  InceptionLoan
                    advances from GET
                
                $
                -
                
                $
                -
                
                $
                (17
                )
                $
                (91
                )Loan
                    repayments to GET
                
                
                -
                
                
                -
                
                
                32
                
                
                91Loan
                    advances to GET
                
                
                -
                
                
                -
                
                
                -
                
                
                230Loan
                    repayments from GET
                
                
                -
                
                
                -
                
                
                -
                
                
                (230
                )Fixed
                    asset purchases from GET
                
                
                -
                
                
                -
                
                
                -
                
                
                45Receivable
                    (payable) balance atend
                    of each period
                
                
                -
                
                
                (51
                )
                
                3
                
                
                -Cash
                    disbursed by Surfect to GET related to operational
                    reimbursements:Charged
                    to:General
                    and administrative expenses:Rent
                
                
                -
                
                
                12
                
                
                36
                
                
                85Utilities,
                    insurance, etc.
                
                
                1
                
                
                28
                
                
                -
                
                
                38Payroll
                    and related expenses
                
                
                -
                
                
                -
                
                
                121
                
                
                210Research
                    and development expenses
                
                
                49
                
                
                19
                
                
                -
                
                
                142Total
                    expenses per period
                
                $
                50
                
                $
                59
                
                $
                157
                
                $
                475
  During
          2006, the Company had no further dealings with GET. Management is not aware
          of
          any claims or contingent liabilities that apply to the Company related
          to
          GET.
  F-15
   **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  **8** **)** **Debt**
  The
          Company has the following short-term debt at December 31,  2006
                  
                  20059%
                      demand note payable to principal stockholder.Interest
                      is accrued using simple interest.
                  
                  $
                  -
                  
                  $
                  300,000Note
                      to insurance carrier, 8.5% interest
                  
                  
                  45,868
                  
                  
                  -$
                  45,868
                  
                  $
                  300,000
  **9)** **Leases**
  At
          December 31, 2006, the Company had the following capital lease obligation.
  Year
                      Ending December 31,2007
                  
                  $
                  3,0622008
                  
                  
                  3,0622009
                  
                  
                  2,139Net
                      minimum lease payments
                  
                  
                  8,263Less
                      amount representing interest
                  
                  
                  (1,043
                  )Present
                      value of minimum lease payments
                  
                  
                  7,220Less
                      current maturities
                  
                  
                  (2,125
                  )$
                  5,095
  The
          cost
          of equipment under capital lease is $11,691 with accumulated amortization
          of
          $5,066 and $2,728 at December 31, 2006 and 2005, respectively.
  The
          Company has an operating lease for its facilities that expired in December
          2006.
          The lease is being continued on a month-to-month basis. The monthly rental
          payment is $3,300. Rent expense for the operating lease for the facility
          for
          2006, 2005 and 2004 was approximately $39,600, $24,000 and $26,000,
          respectively.
  F-16
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  **10** **)** **Employee
          Benefit Plan**
  During
          2004, the Company adopted a qualified voluntary Safe Harbor 401(k) Plan
          that
          covers all employees meeting certain age and length of service requirements.
          The
          Plan provides for voluntary employee contributions as well as providing
          a
          matching contribution from the Company. The Company matches participant
          contributions at 100% of the first 3% and 50% of the next 2% of each
          participant’s compensation.
  Employer
          contributions vest on a stepped basis over six years of service. The Company
          made matching contributions totaling $14,007, $13,160, and $7,615 during
          the
          years ended December 31, 2006, 2005 and 2004, respectively.
  **11)** **Going
          Concern Uncertainty**
  The
          accompanying financial statements have been prepared assuming that Surfect
          will
          continue as a going concern. As shown in the accompanying financial statements,
          Surfect has incurred net losses since its inception and net losses have
          continued to the date of these financial statements. As described in Note
          12,
          during 2006, Surfect received equity funding to meet its short-term working
          capital needs, however, Surfect remains in the development stage and its
          ability
          to continue as a going concern is initially dependent on its ability to
          raise
          adequate capital to fund necessary market entry activities and subsequently
          on
          sufficient inflow of operating revenue derived from sale of its products
          at
          sufficient profit margin to cover operating expenses. The financial statements
          do not include any adjustments that might result from the outcome of this
          uncertainty.
  Endeavoring
          to secure the Company’s ability to continue as a going concern, management is
          taking action on several fronts. The Company is pursuing other means of
          securing
          additional working capital to fund operations until the Company has reached
          a
          point where its cash requirements can be met by the continued operations
          of the
          Company. No assurances can be made that the Company will be successful
          in
          obtaining such additional working capital.
  F-17
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
   12. **Recapitalization**
  **(a)**  **Recapitalization**
  On
          September 27, 2006, Surfect Technologies merged with Surfect Holdings,
          Inc’s,
          wholly owned subsidiary, Surfect Acquisition Corp., resulting in Surfect
          Technologies being 100% owned by Surfect Holdings. This transaction was
          accounted for as a recapitalization.
  Surfect
          Technologies has been treated as the acquirer for accounting purposes.
          Accordingly, the historical assets, liabilities and operations of Surfect
          Holdings before the recapitalization are those of Surfect Technologies,
          Inc.
          Subsequent to the recapitalization, the consolidated financial statements
          include the assets and liabilities of Surfect Technologies and Surfect
          Holdings,
          Inc., formerly Windy Creek Developments, Inc., and the historical operations
          of
          Surfect Technologies, Inc. and the operations of Surfect Holdings,
          Inc.
 
 Immediately
          prior to the recapitalization, Surfect Technologies had a total of 55,871,297
          shares of common stock issued and outstanding.   In connection with
          the recapitalization, Surfect Holdings issued 8,001,666 shares of
          its common stock to Surfect Technologies’ stockholders who qualified as
          accredited investors in exchange for 55,548,618 shares of Surfect Technologies’
common stock.   The remaining 322,679 shares of Surfect Technologies’
common stock held by non-accredited investors were redeemed for a purchase
          price
          of $0.043 per share.
  Also
          in
          connection with the recapitalization, (i) options to purchase a total of
          13,872,696 shares of Surfect Technologies’ common stock held by certain members
          of Surfect Technologies’  management team were converted into options to
          purchase 1,998,334 shares of Surfect Holdings’ common stock at the same exercise
          price and on the terms set forth in the original option grants and (ii)
          options
          to purchase a total of  4,069,000 shares of Surfect Technologies common
          stock were converted into options to purchase 586,131 shares of Surfect
          Holdings
          common stock under the 2006 Stock Option Plan at the same exercise price
          and on
          the terms set forth in the original grants.
 
 Such
          issuances of common stock and options in connection with the recapitalization
          were made pursuant to an exemption from registration under Section 4(2)
          of the
          Securities Act of 1933.
  **(b)**  **Issuance
          of new securities**
  In
          connection with the recapitalization, the Company completed the closing
          of a
          private placement of its common stock on September 27, 2006, in which the
          Company sold an aggregate of 112 units to 37
          accredited investors. Each unit consisted of 25,000 shares of Common Stock
          and a
          four-year warrant to purchase 12,500 shares of
          Common
          Stock at $2.00
  F-18
  
 **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 
 12. Recapitalization
            - continued
  per
            share, at a purchase price of $25,000 per unit. In
            addition, on September 27, 2006, concurrently with the private placement,
            the
            Company issued (i) 500,000
            shares of Common Stock upon conversion of a 9% promissory note in the
            principal
            amount of $500,000, dated August 10, 2006, and (ii) a four-year warrant
            to
            purchase 250,000 shares of Common Stock at an exercise price of $2.00
            to ITU
            Ventures, our principal stockholder. The
            Company also issued 400,000 shares of Common Stock to investor relations
            consultants as part of the transaction.
 
 The
          common stock issued and the warrants issuable in the private placement
          are
          subject to registration rights whereby liquidated damages may accrue and
          are
          payable in common stock at the rate of 1% (up to a maximum of 10%) of the
          aggregate amount of common shares received by the investors in the private
          placement per
          one-week period if (i) a registration statement is not filed within 60
          days of October
          21, **** 2006;
          (ii) such registration statement is not declared effective within 180 days
          of
          October 21, 2006; and (iii) such registration statement is not kept effective
          for the earlier of (a) 24 months or (b) the date when all registerable
          securities have been sold. Notwithstanding
          the foregoing, upon notification by the Company of the occurrence of a
          potential
          material event (as such term is defined in the subscription agreements
          for the
          private placement) an investor’s right to offer, sell or otherwise engage in a
          transaction involving shares covered by the registration statement may
          be
          suspended for up to 60 days.
 
 The
          table
          below shows the effect on equity of the recapitalization
          transaction:
 
 **Recapitalization:**
                  
                  
                  
                  **Common
                      Shares**
                  
                  **Preferred
                      Shares****Additional
                      Paid****Date:**
                  
                  **Shares**
                  
                  **$**
                  
                  **Shares**
                  
                  **$**
                  
                  **in
                      Capital**Equity
                      balances of Surfect Technologies,Inc.
                      (STI) immediately prior torecapitalization
                  
                  
                  9/1/2006
                  
                  
                  9,922,305
                  
                  $
                  304,239
                  
                  
                  29,216,235
                  
                  $
                  6,613,879
                  
                  $
                  24,766Conversion
                      of preferred shares to commonstock
                  
                  
                  9/26/2006
                  
                  
                  45,948,992
                  
                  
                  6,613,879
                  
                  
                  (29,216,235
                  )
                  
                  (6,613,879
                  )
                  
                  -(1)
                      Cancellation of STI common stock
                  
                  
                  9/27/2006
                  
                  
                  (55,548,618
                  )
                  
                  (6,904,243
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  6,904,243(2)
                      Purchase and cancellation of STI non-qualified
                      investor common shares
                  
                  
                  9/27/2006
                  
                  
                  (322,679
                  )
                  
                  (13,875
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Conversion
                      of Windy Creek DevelopmentsCommon
                      Stock upon merger with WindyCreek-DE
                  
                  
                  9/27/2006
                  
                  
                  2,500,001
                  
                  
                  250
                  
                  
                  -
                  
                  
                  -
                  
                  
                  41,750Issuance
                      of common shares to STI Holders
                  
                  
                  9/27/2006
                  
                  
                  8,001,666
                  
                  
                  800
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Issuance
                      of Common Stock for netproceeds
                      of $2,950,630 cash, includingconversion
                      of a $500,000 demand notepayable
                      to a principal shareholder
                  
                  
                  9/27/2006
                  
                  
                  3,300,000
                  
                  
                  330
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,550,300Issuance
                      of common shares to investorrelation
                      consultants
                  
                  
                  9/27/2006
                  
                  
                  400,000
                  
                  
                  40
                  
                  
                  -
                  
                  
                  -
                  
                  
                  399,96014,201,667
                  
                  $
                  1,420
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  9,921,019
  F-19
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 
 
 12. Recapitalization
          - continued
 
 An
          aggregate of 400,000
          shares of common stock were issued under non-refundable agreements with
          certain
          consultants for investor relations services provided in connection with
          the
          recapitalization and private placement offering by the Company. These agreements
          provide that each of two consulting firms would receive 200,000 post
          recapitalization shares as a “Commencement Bonus”. The “Commencement Bonus”
being defined as a nonrefundable, nonapportionable, and nonratable retainer
          and
          not a prepayment for future services. Such “Commencement Bonus” is considered a
          specific incremental cost directly attributable to and within 90 days of
          the
          September private placement in accordance with SAB Topic 5A. The value
          of the
          shares issued were determined to be $1.00 per share to be consistent with
          the
          amount being paid for units in the private placement (no value was associated
          with the warrants (see warrant discussion below). The resulting financial
          transaction is recorded as $400,000 of additional proceeds offset by an
          equal
          $400,000 associated cost of closing.
 
 The
          agreements further provide for cash compensation for ongoing consulting
          services
          at an aggregate rate of $8,000 per month through August 2007, subject to
          termination at any time without refund or further financial obligation.
          The
          continuing consulting service is recorded as period expenses as
          incurred.
 
 The
          Company additionally issued 108,250 freestanding warrants (in addition
          to the
          warrants included in the units sold as described above) to its placement
          agents
          in the private placement. In accordance with EITF 00-19 ‘Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock, these issuances have been treated as permanent equity
          transactions. As the exercise price of the warrants significantly exceeded
          the
          fair value of the stock on the date of issuance, the fair value of the
          warrant
          is immaterial.
  **13)**Stock
            Options****
 
 On
          December 31, 2006, the Company had two share-based compensation plans which
          are
          described below. The compensation cost that has been charged to operations
          for
          those plans was approximately $52,000 for the fiscal year ended December
          31,
          2006, $19,000 for the fiscal year ended December 31, 2005 and $71,000 for
          the
          period since inception (December 26, 2000). Except as discussed in Note
          14
‘Management Exercise’, no tax or other benefit has been recognized within the
          statement of operations of any period presented.
  F-20
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 
 
 13)Stock
            Options - continued
 
 **2006
          Stock Plan and Other Options**
 
 The
          Company’s 2006 Stock Plan was adopted by the directors and stockholders on
          September 25, **** 2006.
          An
          aggregate of 1,500,000 shares of Common Stock have been reserved for issuance
          under the Plan. The purpose of the Plan is to provide an incentive to retain
          directors, officers, consultants and employees of the Company and its affiliates
          whose services are considered valuable. Under the Plan, the Company is
          authorized to issue incentive stock options intended to qualify under Section
          422 of the Internal Revenue Code, non-qualified stock options and restricted
          stock. The Plan is administered by the Company’s board of directors. Option
          awards are granted at an exercise price equal to the average closing price
          of
          the Company’s Common Stock for the ten trading days immediately prior to the
          grant; those options generally vest based upon a 1 to 3 year period of
          continuous service and have a 10 year term. As of December 31, 2006, no
          shares
          of Common Stock had been issued under the Plan, options to purchase 661,730
          shares of Common Stock were outstanding and 838,270 shares of Common Stock
          remain available for issuance under the Plan.
 
 In
          September 2006, options to purchase an aggregate of 13,872,696 shares of
          Surfect
          Technologies’ common stock held by certain of its management were converted into
          options to purchase an aggregate of 1,998,334 shares of the Company’s Common
          Stock in accordance with their terms in connection with the recapitalization.
          These options have terms consistent with the 2006 Stock Plan discussed
          above but
          are accounted for separately from the 2006 Stock Plan as a reserve against
          authorized but unissued Common Stock.
 
 A
          summary
          of the Company’s stock options outstanding and exercisable at December 31, 2006
          is presented in the table below:
 
 Option
                    exercise price$
                    0.14
                
                $
                    0.30
                
                $1.58
                
                $2.27
                
                Total
                
                Intrinsic
                    ValueOutstanding
                
                
                393,825
                
                
                2,046,592
                
                
                50,000
                
                
                169,647
                
                
                2,660,064
                
                $
                98,372Weighted
                    average remaining contractual life of options outstanding (in
                    years)
                
                
                8.62
                
                
                9.49
                
                
                9.81
                
                
                9.92
                
                
                9.40Exercisable
                
                
                247,113
                
                
                174,406
                
                
                -
                
                
                -
                
                
                421,519
                
                $
                55,996
 
  F-21
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
  13)Stock
          Options - continued
  Accounting
          for option grants to employees
  Prior
          to
          January 1, 2006, the Company accounted for employee options under the
          recognition and measurement provisions of Accounting Principles Board Opinion
          No. 25 ("APB 25"). Accordingly, the Company recognized compensation expense
          only
          to the extent that it granted options with a discounted exercise price.
          Any
          resulting compensation expense was recognized ratably over the associated
          service period. The Company’s management determined, based upon information
          provided to the Board which included an analysis of (1) the market prices
          of
          stock of corporations engaged in the same or similar line of business having
          their stock actively traded in a free and open market, (2) the nature of
          the
          business and the history of the enterprise from its inception, (3) the
          economic
          outlook in general and the condition of the specific industry in particular,
          (4)
          the book value of the stock and the financial condition of the business,
          (5) and
          the Company’s earning and dividend-paying capacities, the fair value of the
          options in excess of exercise prices granted to employees that vested and
          remained unforfeited during 2005 and 2004 to be approximately $14,000,
          which was
          recorded as compensation expense in 2005.
  Prior
          to
          July 1, 2004, the Company was unfunded, except for modest founder funding.
          For
          stock options granted from inception through June 30, 2004, management
          determined the fair market value to be the cash value being contributed
          by
          founders for their stock holdings. Options granted during this period resulted
          in no compensation expense upon vesting.
 
 Effective
          January 1, 2006, the Company adopted the fair value recognition provisions
          of
          SFAS 123(R), using the modified prospective transition method and therefore
          has
          not restated prior periods' results. Under this transition method, employee
          stock-based compensation expense for the year ended December 31, 2006 included
          compensation expense for all stock-based compensation awards granted, but
          not
          yet vested, prior to January 1, 2006.  The fair value of the options
          granted was determined at the original grant dates in accordance with the
          provisions of SFAS 123(R).  Stock-based compensation expense for all
          share-based payment awards granted after December 31, 2005 is based on
          the
          grant-date fair value estimated in accordance with the provisions of SFAS
          123(R). The Company recognizes these compensation costs over the requisite
          service period of the award, which is generally the vesting term of the
          options
          associated with the underlying employment agreement, where
          applicable.
 
 As
          a
          result of adopting SFAS 123(R), 2006 compensation expense of $52,000 was
          recorded which was approximately $11,000 less than if the Company had continued
          to account for stock-based compensation under APB 25. The impact of the
          adoption
          of SFAS 123(R) on both basic and diluted loss per share for the year ended
          December 31, 2006 was immaterial and as such no adjustment to the records
          of the
          Company was made. At December 31, 2006, the unamortized value of employee
          stock
          options under SFAS 123(R) was approximately $79,000. The unamortized portion
          will be expensed over a weighted average period of approximately three
          years.
  F-22
  
 **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 
 13)Stock
          Options - continued
  Accounting
          for option grants to employees - continued
 
 The
          fair
          value of each option award is estimated on the date of grant using the
          Black-Sholes option valuation model that uses the assumptions noted in
          the
          following table. Because option valuation models incorporate ranges of
          assumptions for inputs, those ranges are disclosed. As the Company was
          privately
          held prior to the recapitalization, its volatility has been based upon
          the
          historical volatility of the Goldman Sachs Technology Industry Semiconductor
          Index which the Company believes to be comparable with the Company. In
          accordance with SFAS 123 (R), when selecting an index to utilize for evaluation
          of its historic volatility, the Company looked for stocks or an index of
          stocks
          which represented its industry and contained a representative sample of
          its
          competitors. Due to the fact that most public and newly public companies
          are
          revenue generating and post-development stage, or have unreliable volatilities
          themselves due to the trading limitations on their stock, limited entities
          or
          indexes were available for comparison.
 
 As
          option
          valuation models require the input of highly subjective assumptions including
          the expected life of the option, and because the Company's stock options
          have
          characteristics significantly different from those of traded options, and
          changes in the subjective input assumptions can materially affect the fair
          value
          estimate, in management's opinion, the existing models do not necessarily
          provide a reliable single measure of the fair value of its stock options.
  The
          Company uses historical data to estimate option exercise and employee
          termination within the valuation model; separate groups of employees that
          have
          similar exercise and/or termination behavior (such as management vs.
          non-management labor) are treated separately for valuation purposes. The
          risk
          free rate for the periods within the contractual life of the option are
          based
          upon the US Treasury yield curve at the time of the grant.
 
 The
          fair
          value of each option grant during the year ended December 31, 2006 was
          estimated
          on the date of grant using the Black-Scholes option pricing model with
          the
          following weighted average assumptions used:
  For
                    the year ended
                  December
                    31, 2006Dividend
                    yield
                
                
                0%Weighted
                    Average volatility
                
                
                30.96%Risk-free
                    interest rate (average)
                
                
                4.61%Expected
                    lives
                
                
                5
                    -
                    10 years
  The
          weighted average fair value of the options on the respective dates of grant,
          using the fair value based methodology for the year ended December 31,
          2006, was
          $0.43.
 
  F-23
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 
 13)Stock
          Options - continued
  A
          summary
          of the status of the outstanding options and the changes during the year
          ended
          December 31, 2006 is presented in the table below:
 
 Number
                    of Options
                
                
                
                Weighted
                    Average
                  Exercise
                    PriceEmployee
                
                Non-
                    Employee **
                
                TotalBalance,
                    January 1, 2006
                
                
                3,350,000
                
                
                364,000
                
                
                3,714,000
                
                
                *
                
                
                .02
                
                
                *Granted
                
                
                20,236,970
                
                
                830,000
                
                
                21,066,970
                
                
                *
                
                
                0.45
                
                
                *Exercised
                
                
                (4,902,305
                )
                
                **-**
                
                
                (4,902,305
                )
                
                *
                
                
                0.04
                
                
                *Forfeited
                
                
                (1,861,370
                )
                
                **-**
                
                
                (1,861,370
                )
                
                *
                
                
                .02
                
                
                *Recapitalization
                    adjustment
                
                
                (14,356,623
                )
                
                (1,000,608
                )
                
                (15,357,231
                )
                
                
                
                
                n/a
                
                
                *Balance,
                    December 31, 2006
                
                
                2,466,672
                
                
                193,392
                
                
                2,660,064
                
                
                
                
                
                0.43
  **Number
                    of Options Vested**Employee
                
                Non-
                    Employee **
                
                TotalVested
                    at January 1, 2006
                
                
                1,488,333
                
                
                268,167
                
                
                1,756,500Vested
                    during period
                
                
                7,030,837
                
                
                263,224
                
                
                7,294,061Exercised
                    during period
                
                
                (4,902,305
                )
                
                **-**
                
                
                (4,902,305
                )Forfeited
                    during period
                
                
                (1,668,310
                )
                
                **-**
                
                
                (1,668,310
                )Recapitalization
                    adjustment
                
                
                (1,607,292
                )
                
                (451,135
                )
                
                (2,058,427
                )Vested
                    at December 31, 2006
                
                
                341,263
                
                
                80,256
                
                
                421,519
 
 *
                Reflects
                    options held in Surfect Technologies, Inc. prior to the recapitalization
                    on September 27, 2006 which were converted at a rate of approximately
                    1 to
                    0.144048
 ** See
          ‘Option grants to non-employees’ below
 
 Compensation
          expense of approximately $52,267 was recognized in relation to share based
          compensation earned under the provisions of SFAS 123(R) in relation to
          options
          granted to management employees during the year ended December 31, 2006
          (See
          Management Exercise of Vested Stock Options at Note 14).
 
 The
          Company has determined that shares of Common Stock for future exercises
          shall be
          from authorized but unissued shares of stock.
 
 For
          the
          year ended December 31, 2005, under APB 25, approximately $14,000 of stock-based
          employee compensation expense relating to the Company’s stock options was
          reflected in net loss, for options granted under its plan that had an exercise
          price less than the market value of the underlying Common Stock on their
          respective dates of grant.
  F-24
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 
 13)Stock
            Options - continued
 For
          the
          Company’s pro forma information for the  year ended December 31, 2005, the
          fair value of each option grant was estimated on the respective date of
          grant
          using the Black-Scholes option pricing model described above with the following
          assumptions used:
 
 For
                    the
                  Year
                    Ended
                  December
                    31, 2005Dividend
                    yield
                
                
                0%Expected
                    volatility
                
                
                16.98%Risk-free
                    interest rate
                
                
                4.05%Expected
                    lives
                
                
                5-10
                    years
 
 The
          weighted average fair value of the options on the respective dates of grant,
          using the fair value based method, for the year ended December 31, 2005 was
          $0.02.
 
 The
          following table illustrates the effect on net loss and net loss per
          share if the Company had applied the fair value recognition method under
          the
          provisions of SFAS 123.
 
 (All
                    numbers in 000’s except per share data)
                
                For
                    the year ended
                  December
                    31, 2005Net
                    loss applicable to common stockholders, as reported
                
                $
                (2,497
                )Net
                    effect of difference between total stock-based employee compensation
                    expense determined under APB 25 method for all awards, net of
                    related tax
                    effects
                
                
                (3
                )Pro-forma
                    net loss
                
                $
                (2,500
                )Net
                    loss per share applicable to common stockholders - basic and
                    diluted:As
                    reported
                
                $
                (0.50
                )Pro
                    forma
                
                $
                (0.50
                )
 
  Option
          grants to non-employees
 
 The
          Company accounts for equity instruments issued to non-employees in accordance
          with the provisions of SFAS 123(R) and the Emerging Issues Task Force (“EITF”)
          Issue No.  96-18,  “Accounting  for  Equity 
Instruments  That Are Issued to Other Than  Employees  for 
Acquiring,  or In  Conjunction  with Selling,  Goods or
          Services” (EITF 96-18) which require that such equity instruments are recorded
          at their fair value on the measurement date, which date is typically upon
          the inception of the services that will be performed.
  F-25
  
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 13)Stock
            Options - continued
 
 For
          the
          year ended December 31, 2006, stock based compensation expense of $5,096
          was
          recorded for non-employees related to the grant of stock options to purchase
          140,959 shares of the Common Stock issued in connection with on going consulting
          services begun at various dates between June 1 and November 30, 2006 and
          have
          been accounted for under EITF 96-18.
 
 For
          the
          year ended December 31, 2005, stock based compensation expense of approximately
          $5,000 (approximately $1,500 of which was earned during 2004) was recorded
          for
          non-employees related to the grant of stock options to purchase 364,000
          shares
          of the Common Stock issued in connection with on going consulting services
          begun
          at various dates between July 1, 2004 and July 10, 2005. Such compensation
          was
          accounted for under the provisions of EITF 96-18.
 
 **14)**Management
            Exercise of Vested Stock Options****
  Between
          N ovember
          15, 2004 and September 21, 2006, the Company issued options to purchase
          an
          aggregate of 11,403,322 shares of Common Stock of Surfect Technologies,
          Inc. to
          its executive management. The options were granted in the periods and at
          the
          amounts shown below. On September 26, 2007, the Company allowed its executive
          management to exercise their vested options and provided them a bonus to
          offset
          the exercise cash requirement. This transaction resulted in direct compensation
          as reflected in the table below. Additionally, the Company made associated
          federal and state tax deposits on behalf of its executive management of
          approximately $90,000.
  
 Date
                
                Number
                    of Options Granted
                
                Number
                    of Options Vested and Exercised
                
                Grant
                    Date FMV and original Exercise Price
                
                Exercise
                    Price
                
                Stock
                    Option Compensation at Grant Date
                
                Compensation
                    at Exercise/Bonus Date
                
                Total
                  CompensationNov-04
                
                
                1,600,000
                
                
                586,667
                
                $
                0.02
                
                $
                0.043*
                
                $
                -
                
                $
                25,227
                
                $
                25,227Mar-06
                
                
                3,550,000
                
                
                1,733,333
                
                $
                0.02
                
                
                0.043*
                
                
                2,661
                
                
                71,872
                
                $
                74,533Jun-06
                
                
                2,480,000
                
                
                998,889
                
                $
                0.02
                
                
                0.043*
                
                
                3,814
                
                
                39,138
                
                $
                42,952Jul-06
                
                
                620,000
                
                
                229,630
                
                $
                0.02
                
                
                0.043*
                
                
                593
                
                
                9,281
                
                $
                9,874Sep-06
                
                
                3,153,322
                
                
                1,051,107
                
                $
                0.04
                
                
                0.043
                
                
                45,199
                
                
                -
                
                $
                45,199Total
                
                
                11,403,322
                
                
                4,599,626
                
                
                
                
                $
                0.043
                
                $
                52,267
                
                $
                145,518
                
                $
                197,785
  *
          The exercise price of options granted prior to September 22, 2006 was
          amended ,
          by
          mutual agreement between the Company and the employee, to the September
          22, 2006
          fair market value prior to management’s exercise. In accordance with the
          provisions of SFAS 123(R), the modifications were treated as an exchange
          for a
          new reward as of September 26, 2006 and the full amount of the fair value
          of all
          vested shares were recorded as compensation expense commensurate with the
          exercise of 4,599,626 options to purchase common shares of Surfect Technologies,
          Inc. Compensation expense related to the unvested options remaining will
          be
          recognized over their requisite service periods.
  F-26
  **Surfect
          Holdings, Inc. and Subsidiary**
 **(a
          development stage company)**
 **Notes
          to Financial Statements**
 **Inception
          (December 26, 2000) through December 31, 2006**
 
 **15) **Warrants****
  As
          of December 31, 2006, there were warrants to purchase an aggregate of 1,758,250
          shares of Common Stock, at an exercise price of $2.00 per share, outstanding.
          The warrants expire in September, 2010.
 
 **16) **Loss
            per share****
  The
          Company has incurred losses in all periods since inception.
  The
          effect of additional common stock issuable as a result of potential preferred
          share conversions, cumulative dividends on preferred shares, and exercise
          of
          warrants or stock options, net of treasury share repurchases from warrant
          and
          stock option proceeds, has not been included in the diluted loss per share
          calculation since their impact would be antidilutive. Such additional
          potentially issuable shares totaled 4,418,313, 3,714,000, and 6,474,000
          at
          December 31, 2006, 2005 and 2004, respectively.
  F-27




**Item
      8.** **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**




Information
      for this Item was previously filed with the SEC on October 3, 2006 in our
      Current Report on Form 8-K, dated September 27, 2006.




**Item
      8A.** **Controls
      and Procedures**




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Exchange Act. Disclosure controls and procedures include, without limitation,
      controls and procedures designed to ensure that information required to be
      disclosed by an issuer in the reports that it files or submits under the
      Exchange 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 our evaluation, our Chief Executive Officer
      and
      Chief Financial Officer concluded that our disclosure controls and procedures
      are effective, as of the end of the period covered by this report (December
      31,
      2006), in ensuring that material information that we are required to disclose
      in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the SEC rules
      and
      forms. There were no changes in our internal control over financial reporting
      during our most recent fiscal quarter that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




**Item
      8B.** **Other
      Information** ****




None.




**PART
      III**




**Item
      9.** **Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange  
Act.**




**Directors
      And Executive Officers**




The
      following sets forth the names, ages and positions of our current directors
      and
      executive officers. All directors hold office for one-year terms until the
      election and qualification of their successors. All of our officers and
      directors were appointed in September 2006. Officers are elected annually by
      the
      board of directors and serve at the discretion of the board.




Name
            
            Age
            
            PositionSteven
                Anderson
            
            52
            
            President,
                Chief Executive Officer, Secretary, Treasurer and
                DirectorJames
                Turk
            
            42
            
            Chief
                Financial OfficerYixiang
                Xie
            
            48
            
            Chief
                Technology OfficerMiles
                A. Prim
            
            49
            
            Chief
                Operating OfficerMark
                W. Eichhorn
            
            49
            
            Vice
                President Sales and MarketingLaurence
                P. Wagner
            
            46
            
            DirectorChad
                Brownstein
            
            33
            
            DirectorJonah
                Schnel
            
            33
            
            Director




26




*Steven
      Anderson* has
      served as our President, Chief Executive Officer, Secretary and Treasurer and
      a
      director since September 2006. Mr. Anderson has also served as president, chief
      executive officer and as a director of our subsidiary, Surfect Technologies
      since July 2005 and as its Vice President of Business Development from December
      2004 to July 2005. Mr. Anderson has 28 years packaging industry experience
      including marketing and technical development activities focused on electronics
      manufacturing and bringing new innovative interconnect technology to the
      semiconductor industry. Prior to joining Surfect Technologies, from 2002 through
      2004, Mr. Anderson founded and served as president of Altgen, LLC, a solar
      fuel
      cell development company. From 2000 until 2002, Mr. Anderson served as the
      chief
      executive officer of Silicon Bandwidth, an optical interconnect development
      company, and from 1988 to 2000, as senior vice president of corporate marketing
      and business development at Amkor Technologies, a semiconductor industry
      assembly outsourcing company. Mr. Anderson holds a BSEE degree in Engineering
      from the University of North Dakota.




*James
      B. Turk* has
      served as our Chief Financial Officer since September of 2006. Prior thereto,
      from 2004 to 2006, Mr. Turk was the chief financial officer of Westland
      Development, Co., Inc., a public real estate development company. From 2000
      to
      2004, Mr. Turk was the president and chief executive officer of Jamikal Data
      Technologies, Inc., a financial and technology consulting firm, and from 1996
      to
      2006, Mr. Turk was the chief financial officer of Roses Southwest Papers, Inc.,
      a paper products manufacturing company. Mr. Turk was an accountant with Grant
      Thornton from 1989 until 1992. Mr. Turk holds a BSBA degree in Accounting from
      Adams State University.




*Yixiang
      Xie* , *PhD* has
      served as our Chief Technology Officer since September of 2006. Dr. Xie has
      also
      served as chief technology officer of Surfect Technologies since March 2006
      and
      as senior engineering manager from August 2005 through February 2006. Prior
      to
      joining Surfect Technologies, Dr. Xie served as senior technical staff and
      program manager at Intel Corporation from 2001 to 2005. Dr. Xie has over 12
      years experience in semiconductor development, 12 years prior science experience
      and hands-on C-4 wafer bumping development and production ramp-up at Intel.
      Dr.
      Xie holds a PhD in chemistry from the University of Missouri-Rolla.




*Miles
      A. Prim* has
      served as our Chief Operating Officer since March 22, 2007 and as Vice President
      of Product Development since September 2006. Mr. Prim has also served a vice
      president of product development of Surfect Technologies since September 2006.
      Prior thereto, from 2005 through 2006, Mr. Prim served as vice president and
      general manager of Kulicke & Soffa Industries, Inc., a supplier of
      semiconductor assembly equipment, tools and materials (“K&S”), where he was
      responsible for its vertical test business’ multinational operations, marketing,
      research and development and product strategy. From 2004 to 2005, Mr. Prim
      worked as an independent consultant for companies in the technology industry.
      From 2001 through 2004, Mr. Prim was the founding senior executive and served
      as
      president and chief executive officer of ITEST, Ltd. (“ITEST”) in Seoul, Korea,
      a semiconductor test company. During his tenure at ITEST, Mr. Prim qualified
      17
      fabless or IDM customers, including the top three Korean high tech companies,
      and ITEST achieved ISO9001 and QS900 quality certifications.




*Mark
      W. Eichhorn* has
      served as Vice President of Sales and Marketing since September 2006. Mr.
      Eichorn has also served as vice president of sales and marketing of Surfect
      Technologies since August 2006. Mr. Eichhorn has 28 years of equipment
      experience at K&S where from January 2003 through March 2006 Mr. Eichorn
      served as vice president of test products customer operations and, from 1996
      though January 2003, as director of its business development division. During
      his tenure at K&S, Mr. Eichhorn was responsible for developing its wire
      bonder equipment market and helping make K&S an industry leader. Mr.
      Eichhorn also served an instrumental role in business development at IDM and
      OEM
      accounts. Mr. Eichhorn holds a BSBA in Economics from SUNY-Empire State
      College.




27




*Laurence
      P. Wagner* has
      served as a director since September 2006. Mr. Wagner has also served as a
      director of Surfect Technologies since 2004. Mr. Wagner has 22 years experience
      in the semiconductor industry and has since August 2004, served as vice
      president of strategic business development at KLA-Tencor Corp. From 2001
      through 2004, Mr. Wagner was a principal with the Excellerate Group, a
      management consulting firm. Mr. Wagner worked at FSI International, Inc., a
      tooling manufacturer (“FSI”), from May 2001 through June 2003, where he served
      as both senior vice president of FSI and president of its microlithography
      division and was involved with, among other things, business development,
      Asia-Pacific and European customer relationships, process re-engineering and
      product development. Mr. Wagner’s prior experience also included positions as
      group president and corporate senior vice president at K&S with
      responsibility for their core wire bond business, and at Rohm and Haas Company,
      a leading producer of specialty materials. Mr. Wagner holds a Masters degree
      in
      Chemical Engineering Practice and a Bachelors Degree in Chemical Engineering,
      both from the Massachusetts Institute of Technology.




*Chad
      Brownstein* has
      served as a director since September 2006. Mr. Wagner has also served as a
      director of Surfect Technologies since March 2006. Mr. Brownstein co-founded
      ITU
      Ventures in 2000, and, as managing partner, shares responsibility for directing
      overall investment strategy and oversees day-to-day activities. Prior to
      founding ITU Ventures, Mr. Brownstein was a member of Merchant Banking Division
      of Donaldson, Lufkin and Jenrette, Inc. (“DLJ”). Previously, he was employed in
      the DLJ’s investment banking division, where he participated in public and
      private investment banking activities including equity, debt and merger/advisory
      transactions. Mr. Brownstein received a B.A. from Tulane and attended Columbia
      Business School.




*Jonah
      Schnel* has
      served as a director since September 2006. Mr. Schnel has also served as a
      director of Surfect Technologies since June 2006. Mr. Schnel co-founded ITU
      Ventures in 2000, and, as managing partner, shares responsibility for directing
      overall investment strategy and oversees day-to-day activities. Prior to
      founding ITU Ventures, Mr. Schnel was a manager at SunAmerica, Inc., where
      he
      participated in the origination and management of $1.5 billion in corporate
      and
      real estate portfolio assets. Mr. Schnel received a B.A. summa cum laude from
      Tulane University, is a member of the steering committee for Caltech's
      Partnership for Innovation Entrepreneurial Fellows Program sponsored by the
      National Science Foundation and is a member of the Technology Transfer Advisory
      Board at the Colorado School of Mines. Mr. Schnel is a UCLA Anderson School
      of
      Management Certified Public Company Director.




There
      are
      no family relationships between any of our directors and executive
      officers.




**Committees
      of the board of directors**




*Audit
      Committee*




The
      audit
      committee’s duties are to recommend to our board of directors the engagement of
      independent auditors to audit our financial statements and to review our
      accounting and auditing principles. The audit committee reviews the scope,
      timing and fees for the annual audit and the results of audit examinations
      performed by us and our independent registered public accounting firm, including
      their recommendations to improve the system of accounting and internal controls.
      The audit committee will at all times be composed exclusively of directors
      who
      are, in the opinion of our board of directors, free from any relationship which
      would interfere with the exercise of independent judgment as a committee member
      and who possess an understanding of financial statements and generally accepted
      accounting principles. The audit committee currently consists of one director,
      Jonah Schnel.




28




*Compensation
      Committee*




The
      compensation committee reviews and approves our salary and benefits policies,
      including compensation of executive officers. The compensation committee also
      administers our stock option plan and recommends and approves grants of stock
      and options under such plan. The compensation committee currently consists
      of
      one director, Chad Brownstein.




**Director
      compensation**




The
      following table sets forth director compensation as of December 31,
      2006.




Name
            
            Option
                Awards(1)
            
            All
                Other Compensation
            
            TotalLawrence
                Wagner
            
            $
            1,269(2
            )
            
            -
            
            $
            1,269$
            14,336(3
            )
            
            -
            
            $
            14,336Thomas
                P. Griego (4)
            
            $
            2,161(5
            )
            $
            6,260(6
            )
            $
            8,421







(1)
            Based
                  upon the aggregate grant date fair value calculated in accordance
                with FAS
                123(R),*Share
                Based Payments*.
                Our policy and assumptions made in the valuation of share based payments
                are contained in Note 13 to our December 31, 2006 financial
                statements.


(2)
            On
                September 24, 2004, Mr. Wagner was granted a ten-year option to purchase
                an aggregate of 150,000 shares of common stock at an exercise price
                of
                $0.02 per share, which option vests as to one-third of such shares
                on the
                date of grant and in equal monthly installments as to the balance
                of such
                shares, commencing on December 1, 2004. On September 27, 2006, in
                connection with the Merger, each share of common stock subject to
                the
                option was converted into 0.144048 shares of common stock resulting
                in an
                outstanding option to purchase 21,607 shares of common stock as of
                December 31, 2006.


(3)
            On
                June 19, 2006, Mr. Wagner was granted a ten-year option to purchase
                an
                aggregate of 470,000 shares of common stock at an exercise price
                of $0.02
                per share, which option vests as to one-third of such shares on the
                date
                of grant and in equal monthly installments as to the balance of such
                shares, commencing on July 1, 2006. On September 27, 2006, in connection
                with the Merger, each share of common stock subject to the option
                was
                converted into 0.144048 shares of common stock resulting in an outstanding
                option to purchase 67,703 shares of common stock as of December 31,
                2006.


(4)
            Mr.
                Griego resigned as a director in December
                2006.


(5)
            On
                July 1, 2004, Mr. Griego was granted a five-year option to purchase
                an
                aggregate of 750,000 shares of common stock at an exercise price
                of $0.02
                per share, which option vests monthly over thirty six months commencing
                on
                August 1, 2006. On September 27, 2006, in connection with the Merger,
                each
                share of common stock subject to the option was converted into 0.144048
                shares of common stock resulting in an outstanding option to purchase
                108,036 shares of common stock as of December 31,
                2006.


(6)
            Represents
                COBRA payments made on behalf of Mr. Griego in
                2006.




Other
      than as set forth above, we have not paid, and currently do not intend to pay
      our directors fees for their services. We reimburse the members of our board
      of
      directors for reasonable expenses incurred in connection with their attendance
      at board and committee meetings.




29




**Section
      16(a) Beneficial Ownership Reporting Compliance**




None
      of
      our directors, officers or 10% stockholders were subject to the filing
      requirements of Section 16(a) of the Exchange Act during our most recent
      fiscal year or prior fiscal years.




**Code
      of Conduct**




We
      intend
      to adopt a code of ethics that applies to our officers, directors and employees,
      including our Chief Executive Officer and Chief Financial Officer, but have
      not
      done so to date due to our relatively small size.




**Item
              10.**
            ******Executive
                Compensation.**




The
      following table sets forth certain information about compensation paid, earned
      or accrued for services by (i) our Chief Executive Officer and (ii) all other
      executive officers who earned in excess of $100,000 in the fiscal year ended
      December 31, 2006 (“Named Executive Officers”).




Summary
      Compensation Table




Name
                and Principal Position
            
            Years
            
            Salary
            
            Option
              Awards
                (1)
            
            All
                Other
              Compensation
            
            TotalSteven
                Anderson
              Chief
                Executive Officer,
              President
                and director
            
            
            2006
            
            $
            173,654
            
            $
            9,156
            
            $
            137,783(2
            )
            $
            320,593Yixiang
                Xie
              Chief
                Technology Officer
            
            
            2006
            
            $
            98,654
            
            $
            2,005
            
            $
            27,337(2
            )
            $
            127,996







(1)
            Based
                upon the aggregate grant date fair value calculated in accordance
                with the
                Financial Accounting Standards Board (“FASB”) Statement of Financial
                Accounting Standard (“FAS”) No. 123R,*Share
                Based Payment.*Our
                policy and assumptions made in valuation of share based payments
                are
                contained in Note 13 to our December 31, 2006 financial statements. (2)
            Represents
                (i) the exercise of 2,503,333 shares and 496,667 shares of common
                stock
                held by Mr. Anderson and Dr. Xie, respectively, paid by us and (ii)
                a
                “gross up” amount of $49,042 and $9,730 reimbursed by us for the payment
                of taxes incurred in connection with such exercises for Mr. Anderson
                and
                Dr. Xie, respectively.




On
      each
      of March 31, 2006, June 19, 2006 and September 22, 2006, we granted Mr. Anderson
      a ten-year option to purchase 2,800,000, 1,240,000 and 3,496,276 shares of
      common stock at $0.02 per share, which options vest as to one-third of such
      shares on the date of grant and in equal monthly installments as to the balance
      of the shares subject to the option commencing with the first day of the month
      immediately following the date of grant. Based upon a third party appraisal,
      the
      exercise price of these options was adjusted to $0.043 per share on September
      22, 2006 to more accurately reflect the fair market value of such shares on
      the
      grant dates.




On
      each
      of March 29, 2006, September 21, 2006 and September 22, 2006, we granted Dr.
      Xie
      a ten-year option to purchase 750,000, 490,000 and 768,685 shares of common
      stock at $0.02 per share, which options vest as to one-third of such shares
      on
      the date of grant and in equal monthly installments as to the balance of the
      shares subject to the option commencing with the first day of the month
      immediately following the date of grant. Based upon a third party appraisal,
      the
      exercise price of these options was adjusted to $0.043 per share on September
      22, 2006 to more accurately reflect the fair market value of such shares on
      the
      grant dates.




30




Outstanding
      Equity Awards at Fiscal Year-End




The
      following table sets forth certain information concerning outstanding stock
      options held by the Named Executive Officers as of December 31,
      2006.




Option
                AwardsName
            
            Number
                of
              Securities
                Underlying
              OptionsExercisable
            
            Number
                of
              Securities
                Underlying
              OptionsUnexercisable
            
            Option
              Exercise
              Price
            
            Option
              Expiration
              DateSteven
                Anderson
            
            
            11,524
            
            
            134,445
            
            $
            0.30
            
            
            9/15/1420,167
            
            
            181,500
            
            $
            0.30
            
            
            3/31/1614,885
            
            
            89,310
            
            $
            0.30
            
            
            6/19/16-
            
            
            503,631
            
            $
            0.30
            
            
            9/22/16Yixiang
                Xie
            
            
            6,002
            
            
            54,018
            
            $
            0.30
            
            
            3/29/16-
            
            
            47,056
            
            $
            0.30
            
            
            9/21/16-
            
            
            110,727
            
            $
            0.30
            
            
            9/22/16







(1)
            On
                each of November 15, 2004, March 31, 2006, June 19, 2006 and September
                22,
                2006, we granted Mr. Anderson a ten-year option to purchase 1,600,000
                2,800,000, 1,240,000 and 3,496,276 shares of common stock at $0.02
                per
                share, which options vest as to one-third of such shares on the date
                of
                grant and in equal monthly installments as to the balance of the
                shares
                subject to the option commencing with the first day of the month
                immediately following the date of grant. The exercise price of these
                options were adjusted to $0.043 per share on September 22, 2006 to
                reflect
                the fair market value of the common stock on the grant dates.
                Concurrently, Mr. Anderson exercised his options to purchase 586,667,
                1,400,000, 516,667 and 0 shares of common stock, respectively, and
                each
                share of common stock subject to the options which had not vested
                on such
                date (6,632,942 shares in the aggregate) was converted into 0.144048
                shares of common stock, in connection with the
                Merger.


(2)
            On
                each of March 29, 2006, September 21, 2006 and September 22, 2006,
                we
                granted Dr. Xie a ten-year option to purchase 750,000, 490,000 and
                768,685
                shares of common stock at $0.02 per share, which options vest as
                to
                one-third of such shares on the date of grant and in equal monthly
                installments as to the balance of the shares subject to the option
                commencing with the first day of the month immediately following
                the date
                of grant. The exercise price of these options were adjusted to $0.043
                per
                share on September 22, 2006 to reflect the fair market value of the
                common
                stock on the grant dates. Concurrently, Dr. Xie exercised his options
                to
                purchase 333,333, 163,333 and 0 shares of common stock, respectively,
                and
                each share of common stock subject to the options which had not vested
                on
                such date (1,512,018 shares in the aggregate) was converted into
                0.144048
                shares of common stock, in connection with the
                Merger.




31




**2006
      Stock Plan**




Our
      2006
      Stock Plan was adopted by our directors and stockholders on September 25, 2006.
      An aggregate of 1,500,000 shares of common stock have been reserved for issuance
      under the Plan. The purpose of the Plan is to provide an incentive to retain
      directors, officers, consultants and employees of our company and our affiliates
      whose services are considered valuable. Under the Plan, we are authorized to
      issue incentive stock options intended to qualify under Section 422 of the
      Internal Revenue Code, non-qualified stock options and restricted stock. The
      Plan is administered by our board of directors or the Compensation Committee,
      which Compensation Committee presently consists of Chad Brownstein. As of March
      28, 2007, no shares of common stock have been issued under the Plan, options
      to
      purchase 625,393 shares of common stock were outstanding and 874,607 shares
      of
      common stock remain available for issuance under the Plan.




**Other
      Options**




In
      September 2006, options to purchase an aggregate of 13,872,696 shares of Surfect
      Technologies’ common stock held by certain of its management were converted into
      options to purchase an aggregate of 1,998,334 shares of our common stock in
      accordance with their terms in connection with the Merger. As of March 28,
      2007,
      options to purchase an aggregate of 1,785,407 shares remain outstanding as
      a
      result of the expiration of options to purchase 212,927 shares without having
      been exercised.




**Employment
      Agreements**




We
      currently do not have employment agreements with any of our executive
      officers.




**Item
      11.** **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters.**




The
      following table sets forth information as of March 28, 2007 regarding the number
      of shares of common stock beneficially owned by: (i) each person or entity
      known
      to us to be the beneficial owner of more than 5% of our common stock, (ii)
      each
      Named Executive Officer, (iii) each director, and (iv) all of our directors
      and
      executive officers as a group. Except as otherwise indicated, each of the
      stockholders named below has sole voting and disposition power with respect
      to
      such shares of common stock.




Except
      as
      otherwise indicated, the address of each of the stockholders listed below is:
      c/o Surfect Holdings, Inc., 12000-G Candelaria NE, Albuquerque, New Mexico
      87112.




Beneficial
      ownership is determined in accordance with the rules of the SEC. In computing
      the number of shares beneficially owned by a stockholder and the percentage
      ownership of that stockholder, shares of common stock issuable upon the exercise
      of stock options or warrants or the conversion of other securities held by
      that
      stockholder that are currently exercisable or convertible, or are exercisable
      or
      convertible within 60 days, are deemed to be issued and outstanding. These
      shares, however, are not deemed outstanding for the purposes of computing
      percentage ownership of each other stockholder.




32




Name
                and Address of Beneficial Owner
            
            Number
                of Shares
              Beneficially
                Owned
            
            Percentage
                Beneficially OwnedITU
                Ventures
              1900
                Avenue of the Stars
              Suite
                2701
              Los
                Angeles, California 90067
            
            
            6,822,316(1
            )
            
            47.2
            %Thomas
                P. Griego
              P.O.
                Box 69147
              Los
                Angeles, California 90069
            
            
            822,274(2
            )
            
            5.8
            %Steven
                Anderson
            
            
            484,801(3
            )
            
            3.4
            %Yixiang
                Xie
            
            
            87,549(4
            )
            
            *Laurence
                Wagner
            
            
            58,177(5
            )
            
            *Chad
                Brownstein
            
            
            6,822,316(6
            )
            
            47.2
            %Jonah
                Schnel
            
            
            6,822,316(6
            )
            
            47.2
            %All
                directors and executive officers as a group (eight
                persons)
            
            
            8,100,232(7
            )
            
            51.5
            %







*
      Less
      than 1%




(1)
            Includes
                250,000 shares issuable upon exercise of warrants.


(2)
            Includes
                102,034 shares issuable upon exercise of stock
                options.


(3)
            Includes
                124,201 shares issuable upon exercise of stock
                options.


(4)
            Includes
                16,005 shares issuable upon exercise of stock
                options.


(5)
            Includes
                58,177 shares issuable upon exercise of stock
                options.


(6)
            Includes
                (i) 6,572,316 shares owned by ITU Ventures, which is managed by ITU
                Ventures West Capital Management, L.P., of which Messrs. Brownstein
                and
                Schnel are managing partners and (ii) 250,000 shares issuable pursuant
                to
                warrants held by ITU Ventures.


(7)
            Includes
                326,055 shares issuable upon exercise of stock
                options.




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




Chad
      Brownstein and Jonah Schnel, directors of our company and of Surfect
      Technologies, are each managing partners of ITU Ventures, our principal
      stockholder.




All
      of
      our officers and directors and 5% stockholders received 0.144048 shares of
      common stock in the Merger for each share of common stock held by them prior
      to
      the Merger, which represented the same conversion ratio as our other
      stockholders received, except for ITU Ventures which paid additional
      compensation of $500,000 for its shares. We issued a total of 7,455,123 shares
      of common stock in the Merger to such officers and directors.




On
      September 27, 2006, concurrently with the Private Placement, we issued (i)
      500,000 shares of common stock upon conversion of a 9% promissory note in the
      principal amount of $500,000, dated August 10, 2006, and (ii) a four-year
      warrant to purchase 250,000 shares of common stock at an exercise price of
      $2.00
      to ITU Ventures.




None
      of
      the persons who serve as directors of our company, or who served as a director
      during 2006 are independent under the independence standards of the Nasdaq,
      except for Lawrence Wagner.




33




**Item
      13.** **Exhibits.**




ExhibitNumber
            
            Description2.1
            
            Agreement
                of Merger and Plan of Reorganization among Windy Creek Developments,
                Inc.,
                Surfect Acquisition Corp. and Surfect Technologies, Inc., dated September
                27, 2006 (incorporated herein by reference to Exhibit 2.1 to our
                Current
                Report on Form 8-K, filed on October 3, 2006 (“October 3, 2006
                8-K”))3.1
            
            Certificate
                of Incorporation, dated September 11, 2006 (incorporated by reference
                to
                Exhibit 3.1 to our Current Report on Form 8-K filed on September
                18, 2006
                (“September 18, 2006 8-K”))3.2
            
            Certificate
                of Amendment, dated September 28, 2006 (incorporated herein by reference
                to Exhibit 3.1 to the October 3, 2006 8-K)3.3
            
            Bylaws
                (incorporated by reference to Exhibit 3.2 to the September 18, 2006
                8-K)4.1
            
            Form
                of Warrant issued under Common Stock Subscription Agreement (incorporated
                herein by reference to Exhibit 4.1 to the October 3, 2006
                8-K)4.2
            
            Form
                of Placement Agent and Finders Warrant (incorporated herein by reference
                to Exhibit 4.2 to our Registration Statement on Form SB-2, dated
                November
                30, 2006 (“Form SB-2”))4.3
            
            Placement
                Agent Letter Agreement between Granite Financial Group, LLC and Surfect
                Technologies, Inc. (incorporated herein by reference to Exhibit 4.2
                to the
                October 3, 2006 8-K)4.4
            
            Placement
                Agent Letter Agreement between WFG Investments, Inc. and Surfect
                Technologies, Inc. (incorporated herein by reference to Exhibit 4.3
                to the
                October 3, 2006 8-K)4.5
            
            Letter
                Agreement between Westminster Securities Corporation and Surfect
                Technologies, Inc. (incorporated herein by reference to Exhibit 4.4
                to the
                October 3, 2006 8-K)10.1
            
            Form
                of Unit Subscription Agreement among Surfect Holdings, Inc.and
                the investors listed on the Schedule of Buyers attached thereto(incorporated
                herein by reference to Exhibit 10.1 to the October 3, 2006
                8-K)10.2
            
            Surfect
                Holdings 2006 Option Plan (incorporated herein by reference to Exhibit
                10.2 to the October 3, 2006 8-K)10.3
            
            Surfect
                Holdings Form of Option Agreement (incorporated herein by reference
                to
                Exhibit 10.3 to the October 3, 2006 8-K)10.4
            
            Consulting
                Agreement between Vision Advisors, Inc. and Surfect Technologies,
                Inc.,
                dated August 1, 2006, (incorporated herein by reference to Exhibit
                10.4 to
                the October 3, 2006 8-K)10.5
            
            Consulting
                Agreement, dated August 1, 2006, between The Smyth Consulting Group
                and
                Surfect Technologies, Inc. (incorporated herein by reference to Exhibit
                10.4 to the Form SB-2)10.6
            
            Separation
                Agreement between Surfect Technologies and Thomas Griego (incorporated
                herein by reference to Exhibit 10.6 to the October 3, 2006
                8-K)




34




16.1
            
            Letter
                fromMoore
                & Associates, Chartered(incorporated
                herein by reference to Exhibit 16.1 to the October 3, 2006
                8-K)21
            
            List
                of subsidiaries of Surfect Holdings, Inc.(incorporated herein by
                reference
                to Exhibit 21.1 to the Form SB-2)31.1*
            
            Section
                302 Certification of Principal Executive Officer31.2*
            
            Section
                302 Certification of Principal Financial Officer32.1*
            
            Section
                906 Certification of Principal Executive Officer32.2*
            
            Section
                906 Certification of Principal Financial
                Officer







*filed
      herewith





**Item
      14.** **Principal
      Accountant Fees and Services.**




REDW,
      LLC
      (“REDW”) has served as our independent registered public accounting firm since
      October 23, 2006 and as Surfect Technologies’ independent registered public
      accounting firm since July 18, 2006. The following table sets forth the
      aggregate fees billed to us for the fiscal years ended December 31, 2006 and
      December 31, 2005 by REDW.




2006
            
            
            2005(4)Audit
                Fees(1)
            
            $
            42,126
            
            
            $
            85,560Audit-Related
                Fees(2)
            
            $
            15,846
            
            
            $
            0Tax
                Fees(3)
            
            $
            3,059
            
            
            $
            3,230All
                Other Fees
            
            $
            0
            
            
            $
            0







(1)
            Comprised
                of fees for the audit of our annual financial statements and review
                of our
                quarterly report on Form 10-QSB.


(2)
            Includes
                fees related to the review of our Current Reports on Form 8-K and
                Registration Statements on Form SB-2 and amendments thereto.


(3)
            Comprised
                of services for tax compliance and tax
                research.


(4)
            Fees
                for 2005 include fees for the audit of the period from Surfect
                Technologies’ inception (December 26, 2000) through December 31,
                2005.




On
      September 27, 2006, we dismissed Moore & Associates, Chartered (“Moore”) as
      our independent registered public accounting firm as disclosed in our Current
      Report on Form 8-K, dated September 27, 2006. The following table sets forth
      the
      aggregate fees billed to us for the fiscal year ended December 31, 2006 by
      Moore.




2006Audit
                Fees(1)
            
            $
            2,750Audit-Related
                Fees
            
            $
            0Tax
                Fees
            
            $
            0All
                Other Fees
            
            $
            0







(1)
            Comprised
                of the audit of our annual financial statements and reviews of our
                quarterly reports on Form 10-QSB.





35


**SIGNATURES**




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




SURFECT
              HOLDINGS,
              INC.By:
            /s/ Steven
              AndersonSteven Anderson
              Chief Executive Officer,
              President and
                Director




Pursuant
      to the requirements of the Exchange Act, this report has been signed by the
      following persons on behalf of the registrant and in the capacities
      indicated.




March
              29,
              2007
            
            /s/
              Steve AndersonSteve
              Anderson
              Chief
                Executive Officer, President and Director
              (Principal
                Executive Officer)


March
                29,
                2007
              
              /s/ James TurkJames
                  Turk
                Chief
                  Financial Officer
                (Principal
                  Financial Officer and Principal Accounting
                  Officer)
 March
                    29,
                    2007
                  
                  /s/ Chad BrownsteinChad
                      Brownstein
                    Director
 March
                          29,
                          2007
                        
                        /s/ Jonah SchnelJonah
                              Schnel
                            Director
  36


Exhibit
      Index





ExhibitNumber
            
            Description2.1
            
            Agreement
                of Merger and Plan of Reorganization among Windy Creek Developments,
                Inc.,
                Surfect Acquisition Corp. and Surfect Technologies, Inc., dated September
                27, 2006 (incorporated herein by reference to Exhibit 2.1 to our
                Current
                Report on Form 8-K, filed on October 3, 2006 (“October 3, 2006
                8-K”))3.1
            
            Certificate
                of Incorporation, dated September 11, 2006 (incorporated by reference
                to
                Exhibit 3.1 to our Current Report on Form 8-K filed on September
                18, 2006
                (“September 18, 2006 8-K”))3.2
            
            Certificate
                of Amendment, dated September 28, 2006 (incorporated herein by reference
                to Exhibit 3.1 to the October 3, 2006 8-K)3.3
            
            Bylaws
                (incorporated by reference to Exhibit 3.2 to the September 18, 2006
                8-K)4.1
            
            Form
                of Warrant issued under Common Stock Subscription Agreement (incorporated
                herein by reference to Exhibit 4.1 to the October 3, 2006
                8-K)4.2
            
            Form
                of Placement Agent and Finders Warrant (incorporated herein by reference
                to Exhibit 4.2 to our Registration Statement on Form SB-2, dated
                November
                30, 2006 (“Form SB-2”))4.3
            
            Placement
                Agent Letter Agreement between Granite Financial Group, LLC and Surfect
                Technologies, Inc. (incorporated herein by reference to Exhibit 4.2
                to the
                October 3, 2006 8-K)4.4
            
            Placement
                Agent Letter Agreement between WFG Investments, Inc. and Surfect
                Technologies, Inc. (incorporated herein by reference to Exhibit 4.3
                to the
                October 3, 2006 8-K)4.5
            
            Letter
                Agreement between Westminster Securities Corporation and Surfect
                Technologies, Inc. (incorporated herein by reference to Exhibit 4.4
                to the
                October 3, 2006 8-K)10.1
            
            Form
                of Unit Subscription Agreement among Surfect Holdings, Inc.and
                the investors listed on the Schedule of Buyers attached thereto(incorporated
                herein by reference to Exhibit 10.1 to the October 3, 2006
                8-K)10.2
            
            Surfect
                Holdings 2006 Option Plan (incorporated herein by reference to Exhibit
                10.2 to the October 3, 2006 8-K)10.3
            
            Surfect
                Holdings Form of Option Agreement (incorporated herein by reference
                to
                Exhibit 10.3 to the October 3, 2006 8-K)10.4
            
            Consulting
                Agreement between Vision Advisors, Inc. and Surfect Technologies,
                Inc.,
                dated August 1, 2006, (incorporated herein by reference to Exhibit
                10.4 to
                the October 3, 2006 8-K)10.5
            
            Consulting
                Agreement, dated August 1, 2006, between The Smyth Consulting Group
                and
                Surfect Technologies, Inc. (incorporated herein by reference to Exhibit
                10.4 to the Form SB-2)10.6
            
            Separation
                Agreement between Surfect Technologies and Thomas Griego (incorporated
                herein by reference to Exhibit 10.6 to the October 3, 2006
                8-K)









16.1
            
            Letter
                fromMoore
                & Associates, Chartered(incorporated
                herein by reference to Exhibit 16.1 to the October 3, 2006
                8-K)21
            
            List
                of subsidiaries of Surfect Holdings, Inc.(incorporated herein by
                reference
                to Exhibit 21.1 to the Form SB-2)31.1*
            
            Section
                302 Certification of Principal Executive Officer31.2*
            
            Section
                302 Certification of Principal Financial Officer32.1*
            
            Section
                906 Certification of Principal Executive Officer32.2*
            
            Section
                906 Certification of Principal Financial
                Officer





*filed
      herewith