SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K








(Mark
One)





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





For
the Fiscal Year Ended December 31, 2008





OR





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





From the
transition period from ___________ to ____________.





Commission File Number333-145831





SURFACE COATINGS, INC.


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





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





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


(Address
of principal executive offices)





(972)
722-7351


(Issuer's
telephone number)





N/A


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





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


Securities
registered pursuant to Section 12(g) of the Act:  Common
Stock





Indicate
by a check mark if the registrant is a well-known seasoned issuer, as defined by
Rule 405 of the Securities Act.  Yes
[   ]  No [X]





Indicate
by a check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Act.  Yes
[   ]  No [X]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (s229.405 of this chapter) is not contained herein, and will not
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-K
or any amendment to this Form 10-K. [   ]




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















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







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





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





As of
March 1, 2009, there were 5,102,100 shares of Common Stock of the issuer
outstanding.


2


PART I.





FORWARD-LOOKING
STATEMENTS





This
annual report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, which we refer
to in this annual report as the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to in this annual
report as the Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this annual
report. Factors that can cause or contribute to these differences include those
described under the headings “Risk Factors” and “Management Discussion and
Analysis and Plan of Operation.”





If one or
more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what
we projected. Any forward-looking statement you read in this annual report
reflects our current views with respect to future events and is subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the factors identified in this annual report which would
cause actual results to differ before making an investment decision. We are
under no duty to update any of the forward-looking statements after the date of
this annual report or to conform these statements to actual results.





ITEM
1.                      DESCRIPTION
OF BUSINESS





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





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





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





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





With
respect to our competitive position in the industry, it is our belief that the
surface protection industry is served by at least 30 foreign and domestic
manufacturers of films and tapes, the world-wide markets for coatings based on
annual sales of paint, coatings, adhesives, sealants and related products is
approximately $75 billion. Of this amount, the US Market accounts for
approximately $30 billion. These sales represent manufacturers and distributors.
We distribute the product and as such serve the small manufacturer and
contractor. Our competitive position in the industry is defined by our ability
to deliver timely and of a high quality coupled with price competitiveness. To
that end, fiscal year 2008 sales were 120% ahead of those of fiscal year 2007.
Consequently, we believe our business model affirms our competitive position in
the industry relative to the customers we are targeting. Historically, customers






3






primarily
purchased from local distributors. With the broad reach of the internet, low
order quantity customers, that don’t require direct assistance from a local
distributor, prospect the web for an effective product at a reasonable price.
Once a film/tape has been approved for use in production, customers are slow to
change to another product as the cost of evaluating a new product can exceed the
potential savings to be gained by changing.





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





·
            Low
      order minimum quantity


·
            Fast
      turnaround


·
            High
      quality





Due to
our growth we have not experienced any significant seasonality.  There
is some seasonality in the construction market (February and November) but the
manufacturing market is more consistent.  As we grow we continue to
market to both industries thereby decreasing the impact of
seasonality.





The company currently serves a customer base of 450 accounts,
yielding an average gross margin per sale of 43% and we do not have any
contracts or arrangements of consequence with any customer or supplier. Our
customers are primarily small manufacturers and contractors which order by phone
for direct shipment to the location they need the product. In our market
research, we have learned that many customers utilize our web site to determine
our product offerings and pricing and then pick up the phone and order the
product. Consequently, the web site allows us to not be confined to any
geographic market area and through nationwide shipping and delivery companies we
are able to service customers from coast to coast.





Business
Strategy


Objective:


Our
objective is to become a leading distributor of temporary surface protection
tapes.  We plan to achieve this objective by continuing to implement
our business strategy, which includes the primary elements we discuss
below.





Marketing
and Sales:


Our
marketing efforts target manufacturers and processors of metals, plastics and
glass.  We generate a significant amount of our revenues through web
based advertising. We continue to supplement search engine advertising with
traditional advertising and marketing channels to accelerate sales
growth.





Customers:


We rely
heavily on repeat customers. Our management is responsible for developing and
maintaining successful long-term relationships with key customers.  We
are not dependent on any one customer. Rather, we have built up a customer base
which we market to and have developed into steady repeat customers.





Government
Regulation:


At the
present time there are no federal government regulations are in effect that
would impact our business operations.





Our
Qualifications:


Our
qualifications are our reputation and experience in the surface protection
industry.





Industry
and Competitors


An
industry founder, competitor and primary manufacturer of surface protection
products is 3M Corporation, a NYSE publicly traded company.  3M
products are sold through numerous distribution channels, including directly to
users and through numerous wholesalers, retailers, jobbers, distributors and
dealers in a wide variety of trades in many countries around the world.
Management believes the confidence of wholesalers, retailers, jobbers,
distributors and dealers in 3M and its products — a confidence developed through
long association with skilled marketing and sales representatives — has
contributed significantly to 3M’s position in the marketplace and to its growth.
3M has 169 sales offices worldwide, with 10 in the United States and 159
internationally.






4





3M is not
a supplier to the Company. Our primary raw materials are adhesive-backed films
and kraft-paper cores. Our primary supplier of films is Main Tape out of
Cranbury, NJ (90%). Our primary supplier of cores is Sonoco out of Dallas, Texas
(100%). Both materials are readily available. We are significantly dependent
upon Main Tape as a supplier due to the performance characteristics of the
proprietary adhesives. We do have backup suppliers, specifically Surface Guard
in Illinois, with reasonably comparable products, however, to convert our
customer base over to a new supplier’s products would be a high effort
undertaking.





Management
has identified and believes that the surface protection industry is served by at
least 30 foreign and domestic manufacturers of films and tapes. Historically,
customers primarily purchased from local distributors. With the broad reach of
the internet, low order quantity customers, that don’t require direct assistance
from a local distributor, prospect the web for an effective product at a
reasonable price. Once a film/tape has been approved for use in production,
customers are slow to change to another product as the cost of evaluating a new
product can exceed the potential savings to be gained by changing.





Prospects
find us on the web and our method of competition is:


·
            Provide
      price quotes within the hour (industry average is 24-72
    hours)


·
            Ship
      samples within 24 hours (industry average is 7-14
  days)


·
            Ship
      orders within 48 hours (industry response ranges from several days to
      three weeks)


·
            Few
      competitors are able to respond as rapidly as we are, giving us a
      competitive edge





Future
products and services:


At the
present time, we do not have plans to develop or market additional products or
services.





Sources
and Availability of Raw Material:


Our
primary raw materials are adhesive-backed films and kraft-paper cores. Our
primary supplier of films is Main Tape out of Cranbury, NJ (90%). Our primary
supplier of cores is Sonoco out of Dallas, Texas (100%). Both materials are
readily available. We are significantly dependent upon Main Tape as a supplier
due to the performance characteristics of the proprietary adhesives. We do have
backup suppliers, Specifically Surface Guard in Illinois, with reasonably
comparable products, however, to convert our customer base over to a new
supplier’s products would be a high effort undertaking.





Dependence
on One or a Few Major Customers:


We are
not dependent on any one or a few major customers.





Costs
and Effects of Compliance with Environmental Laws:


We are
not aware of nor do we anticipate any environmental laws with which we will have
to comply.





Number
of Employees:


We have
four employees, the President, the Vice-President, one fulltime production
person and one sales/admin person. The duties of the President, who spends 100%
of his time on the company, are to solicit business by implementing the
marketing initiatives and developing customers.  The day to day duties
are performed by the President and his staff.  The duties of the Vice
–President are to oversee business strategy and financial planning.





Operations
and Technology:


We are
not subject to a dependence on technology.





Research
and Development:


The
company does not have in development a product that will require the use of a
material amount of the assets of the company.  Since inception, the
company has spent zero ($0) on company-sponsored research and
development.  As we are a distributor and converter of surface
protection tapes, we do not anticipate spending any funds on research and
development in the future.








ITEM
2.                      DESCRIPTION
OF PROPERTY





Our
corporate facilities are in a 2,000 s.f. facility of which 1,250 s.f. is
production/warehouse space.  We are currently running one shift and
utilizing almost 100% of the space.  Adding a second shift would
increase capacity but would put a strain on our warehouse space.





The
facility is not a specific purpose building and therefore we do not have a
truck-height loading dock amongst other features.  Thus the facility
is adequate but could be greatly improved upon by moving to a specific purpose
building which is in our plans if this offering is approved and as the business
grows.







5






ITEM  3.                      LEGAL
PROCEEDINGS





As of
December 31, 2008, the Company is not involved in any legal
proceedings.








ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS





On
September 30, 2008, in the annual meeting of the shareholders, the security
holders elected the following directors of the corporation:
  Richard
Pietrykowski
  John
Donahoe
























6




PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS
      MATTERS





The
common stock is not currently quoted on any electronic quotation
medium.





At
December 31, 2008, we had approximately 4 record holders of our common
stock.  This number excludes any estimate by us of the number
of  beneficial owners  of  shares  held
in  street  name,  the
accuracy  of  which  cannot  be
guaranteed.





Dividends


We have
not paid cash dividends on any class of common  equity since formation
and we do not anticipate paying any dividends on our outstanding common stock in
the foreseeable future.





Warrants


The
Company has no warrants outstanding.








ITEM
6.                      SELECTED
FINANCIAL DATA





Not
applicable for smaller reporting companies.








ITEM
7.                      MANAGEMENT
DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION




RESULTS
FOR THE FISCAL YEAR ENDING DECEMBER 31 2008





REVENUE.  Revenue
for the twelve months ended December 31, 2008 was $593,949 compared to $269,904
for the twelve months ended December 31, 2007.  The increase in
revenue for the twelve month period is attributed to the impact of marketing,
word of mouth references and establishing ourselves as a quality supplier within
the market. 2007 was our first year of business where we had a marketing plan
and a business plan in place and now two years into that plan we have
experienced year-over-year growth of 120%.





GROSS
PROFIT.  Gross profit for the twelve months ended December 31, 2008
was $256,472 compared to $111,530 for the same period in
2007.  Margins improved during the year from 41.3% to
43.2%.  The improvement is attributable to product mix, gaining new
customers at a higher average selling price and inventory
management.





OPERATING
EXPENSES. Total operating expenses for the twelve months ended December 31, 2008
were $298,600 compared to expenses for the period ended December 31, 2007 of
$179,730.  The increase is mainly attributed to an increase in
contract services of $37,000 related to investment in people (mainly production
related); professional and contract services of $16,000 related to the increased
costs of the S-1 filings; advertising ($15,000), commissions ($24,000) computer
($8,000) and general supplies ($8,000) expenses all related to the increased
volume.  The above expenses do not include depreciation which was
$2,109 and $703 for the twelve months ended December 31, 2008 and 2007,
respectively.





NET
INCOME (LOSS). Net loss for the twelve months ended December 31, 2008 was
$53,553 compared to the period ended December 31, 2007 of
$71,575.  The increase in margin of $145,000 helped offset the
increase in  aforementioned expenses resulting in an improved loss
position from the year ended December 31, 2007.






7





LIQUIDITY
AND CAPITAL RESOURCES. Surface Coatings filed on Form S-1, a registration
statement with the U.S. Securities & Exchange Commission in order to raise
funds to develop their business. The registration statement became effective in
October 14, 2008 and Surface Coatings will raise funds under that registration
statement at $0.50 per share.  As of December 31, 2008, we had raised
$33,150 by selling subscriptioins for 66,300 shares of common stock under the
registration statement.  As of March 1, 2009 we had raised $51,050 by
selling 102,100 shares and broke escrow which was $50,000.








ITEM
7A.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
required for a smaller reporting company.








ITEM
8.                       
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The financial statements of the Company, together with the independent
auditors' report thereon of The Hall Group, CPAs appear on pages F-1 through
F-13 of this report.








ITEM
9.                       
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE


None.








ITEM
9A.                     CONTROLS
AND PROCEDURES







Evaluation of Disclosure
Controls and Procedures




We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008.  This
evaluation was accomplished under the supervision and with the participation of
our chief executive officer / principal executive officer, and chief financial
officer / principal financial officer who concluded that our disclosure controls
and procedures are not effective to ensure that all material information
required to be filed in the annual report on Form 10-KSB has been made known to
them.




Disclosure,
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by in our reports
filed under the Securities Exchange Act of 1934, as amended (the "Act") is
accumulated and communicated to the issuer's management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.




Based
upon an evaluation conducted for the period ended December 31, 2008, our Chief
Executive and Chief Financial Officer as of December 31, 2008 and as of the date
of this Report, has concluded that as of the end of the periods covered by this
report, we have identified the following material weakness of our internal
controls:




·
            Reliance
      upon independent financial reporting consultants for review of critical
      accounting  areas and disclosures and material non-standard
      transaction.·
            Lack
      of sufficient accounting staff which results in a lack of segregation of
      duties necessary for a good system of internal
    control.




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




Management’s Annual Report
on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control
system was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes, in accordance with generally accepted accounting principles in the
United States of America.  Our internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on
the financial statements.






8






Because
of inherent limitations, a system of internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate due to change in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.




Our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting using the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework at December 31, 2008.   Based on its
evaluation, our management concluded that, as of December 31, 2008, our internal
control over financial reporting was not effective because of limited staff and
a need for a full-time chief financial officer.  A material weakness
is a deficiency, or a combination of control deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a
material misstatement of the Company’s annual or interim financial statements
will not be prevented or detected on a timely basis.




This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to the attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this annual
report.




Changes in Internal Controls
over Financial Reporting




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




















9


PART
III.





ITEM
10.                      DIRECTORS
AND EXECUTIVE OFFICERS OF REGISTRANT





Name
              Age
              PositionRichard
      Pietrykowski
              60
              Director,
      President, Secretary and TreasurerJohn
      Donahoe
              61
              Director,
      Vice-President





Richard
Pietrykowski:


Mr.
Pietrykowski entered the U.S. Air Force upon graduation from high school in
1966.  He served on active duty for seven years as an aircraft weapons
technician, a computer maintenance specialist, and as a
technical instructor.  After receiving an honorable discharge in
1973 he joined a daily newspaper in West Bend, Wisconsin as Systems and
Production Manager.  In 1981 Mr. Pietrykowski was recruited by a
specialty printing company in Milwaukee, Wisconsin as National Systems and
Production Manager.  In 1989 Mr. Pietrykowski was hired as the
Electric Prepress Manager for a color trade shop in Madison, Wisconsin where he
was employed for four years.  He then joined Perry Printing, a
magazine and catalog printer as the Prepress Systems Engineer.  He
remained with Perry Printing for four years and in 1997





Mr.
Pietrykowski was recruited by Serigraph, Inc in West Bend,
Wisconsin.  He was with Serifraph, Inc. for seven years. During that
time he served as Director of Graphic Services and Director of Digital
Printing for Serigraph. Additionally, he served as General Manager of
Serigraph's subsidiary company, Carvel Print, in Queretaro, Mexico for over a
year as part of a turnaround team. Following Serigraph, Mr. Pietrykowski
provided Electronic Prepress Systems and Prepress Operations Management
consulting services to Discover Color and Imperial Lithograph in Madison and
Milwaukee, Wisconsin, respectively.  In August of 2005 he founded
Surface Armor, LLC that is wholly owned by Surface Coatings, Inc., for which he
serves as President.





John
Donahoe:


On
September 30, 2007 Mr. Donahoe was appointed as Vice-President and Director of
Surface Coatings, Inc., due to his extensive contacts in the construction
industry.  He had known the President for many years and had a
relationship with Surface Coatings by virtue of the advance to Surface Armor,
from Trinity Heritage Construction Partners, LLC., a company owned by John
Donahoe.





Mr.
Donahoe graduated from Whitewater University in 1971 and moved to Chicago to
work for a regional land developer, Plaza Excavating as a Field Supervisor.
He was promoted to Director of Operations in 1975 and formed a General
Contracting firm in 1976, JM Donahoe Construction. The company established
national clients, (Southland Corporation, McDonalds, Burger King, Taco Bell,
Kentucky Fried Chicken, among others)  and was built from the ground
up.  The main business line was remodeling stores for the customers
across the Midwest. At the request of a major client, Mr. Donahoe relocated the
construction company to Dallas, Texas and continued building for existing
customers along with new customers across the country. In 1995 he moved, with
his family, to Costa Rica where he organized and operated a Teakwood
processing and distribution business, selling and shipping semi-processed
product to companies in England, Taiwan, Italy and the United States. In 1997 he
accepted the position VP of Operations for a Dallas based construction company,
Commercial Construction Group a subsidiary of Public Corporation, with an annual
gross income of approximately $30,000,000.  In June of
2000,  Mr. Donahoe formed Trinity Heritage Construction LLC and
currently serves as its President and is a Director and Vice-President of
Surface Coatings, Inc.  Mr. Donahoe spends approximately 80% of his
time managing Trinity which is a commercial general contractor and builds a wide
range of projects from small heavily detail weighted retail finish-outs to
50,000SF ground up shopping centers. Trinity focuses on repeat national
customers such as Burberry, USA and KWIK Industries. Trinity is also based
in Rockwall, Texas.














10







ITEM
11.                      EXECUTIVE
COMPENSATION





Following
is what our officers received in 2008 and 2007 as
compensation.





Name
              Capacity
      Served
              Aggregate
      RemunerationRichard
      Pietrykowski
              Director,
      President, Secretary and Treasurer
              2008:
      $41,600
                2007:
      $40,000John
      Donahoe
              Director,
      Vice-President
              2008:
      $0
                2007:
      $0





At
December 31, 2008, Mr. Pietrykowski also had accrued commissions of $24,250
which had not been paid as of March 12, 2009.








ITEM
      12.
            SECUIRTY
      OWNERSHIP OF MANANGEMENT AND BENEFICIAL
OWNERS





As of
December 31, 2008 the following persons are known to the Company to own 5% or
more of the Company's Voting Stock:





Title
      / Relationship to Issuer
              Name
      of Owner
              Number
      of Shares Owned
              Percent
      of TotalDirector,
      President, Secretary and Treasurer
              Richard
      Pietrykowski
              1,600,000
              36.0%Director,
      Vice-President
              John
      Donahoe
              2,400,000
              54.0%








ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED PARTY
TRANSACTION





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




The
Company has borrowed $54,596 from Trinity Heritage Construction, L.L.C.,
(“Trinity”) to fund operations (“Trinity Operations
Note”).    This note bears interest at a rate of 10% and is
due in full on March 1, 2010 and is classified as a long-term liability. The
Company borrowed $20,000 from Trinity in 2005 and 2006 to as start-up capital
(“Trinity Advance Note).  This note bears interest at a rate of 10%
and is due in full on March 1, 2010 and is classified as a long-term liability.
At December 31, 2008, the total owed Trinity was $74,596.





The Company’s
President:  The President has loaned the Company $33,028 since
inception and the balance was converted into a note on January 2,
2007.  This note bears interest at a rate of 10% and requires monthly
payments of $1,066 for 36 months.   The total amount owed at
December 31, 2008 was $14,969, of which $11,533 is due during the next twelve
months.  $3,436 is classified as a long-term liability








ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




(1) AUDIT
FEES




The
aggregate fees billed for professional services rendered by our auditors, for
the audit of the registrant's annual financial statements and review of the
financial statements included in the registrant's Form 10-K or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for fiscal years 2008 and 2007 was $11,858 and $12,000
respectively.




(2)
AUDIT-RELATED FEES




NONE




(3) TAX
FEES




NONE








11






(4) ALL
OTHER FEES




NONE




(5) AUDIT
COMMITTEE POLICIES AND PROCEDURES




The
Securities and Exchange Commission has adopted rules implementing
Section 407 of the Sarbanes-Oxley Act of 2002 requiring public companies to
disclose information about “audit committee financial experts.”  As of the
date of this Annual report, we do not have a standing Audit Committee.   The functions of the
Audit Committee are currently assumed by our Board of Directors. 
Additionally, we do not have a member of our Board of Directors that qualifies
as an “audit committee financial expert.”  For that reason, we do not have
an audit committee financial expert.




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




Not
applicable.














12






PART
      IV





ITEM
      15.
            EXHIBITS,
      FINANICAL STATEMENTS AND REPORTS ON FORM
8-K





(a) The
following documents are filed as part of this report:  Included in
Part II, Item 7 of this report:





Report of Independent Registered Public
Accounting Firm





Consolidated Balance Sheets as of
December 31, 2008 and 2007





Consolidated
Statements of Operations for the Years Ended December 31, 2008 and December 31,
2007





Consolidated
Statement of Changes in Stockholders’ Equity For the Years Ended December 31,
2008 and December 31, 2007





Consolidated
Statements of Cash Flows For the Years Ended December 31, 2008 and December 31,
2007





Notes to
the Consolidated Financial Statements





(b) The
company did not file any Form 8-K’s in 2008.





(c)           Exhibits


No.
              Description31.1
              Certification
      of the Company’s Principal Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200231.2
              Certification
      of the Company’s Principal Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
              Certification
      of the Company’s Principal Executive Officer and Principal Financial
      Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of
      the Sarbanes-Oxley Act of
2002.














13


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Annual Report on Form 10-K to be signed on its behalf by the
undersigned hereunto duly authorized.








SURFACE
COATINGS, INC.





By:  /s/   Richard
Pietrykowski





Richard
Pietrykowski


Chief
Executive Officer & Chief Financial Officer





Dated:
March 12, 2009





14








REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and Management of


Surface
Coatings, Inc.


Rockwall,
Texas





We have
audited the accompanying consolidated balance sheets of Surface Coatings, Inc.
as of December 31, 2008 and 2007 and the related consolidated statements of
operations, cash flows and stockholders’ equity for the years then
ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.





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





We were
not engaged to examine management’s assertion about the effectiveness of Surface
Coatings, Inc.’s internal control over financial reporting as of December 31,
2008 and 2007 and, accordingly, we do not express an opinion
thereon.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Surface Coatings, Inc. as of
December 31, 2008 and 2007 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 11 to the
consolidated financial statements, the Company has suffered significant losses
and will require additional capital to develop its business until the Company
either (1) achieves a level of revenues adequate to generate sufficient cash
flows from operations; or (2) obtains additional financing necessary to support
its working capital requirements.  These conditions raise substantial
doubt about the Company’s ability to continue as a going
concern.  Management’s plans in regard to these matters are also
described in Note 11.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





/s/  The Hall
Group, CPAs


The Hall
Group, CPAs


Dallas,
Texas





February
10, 2008


F-1







SURFACE
      COATINGS, INC.Consolidated
      Balance SheetsDecember
      31, 2008 and 20072008
                
                
                2007ASSETSCurrent
      AssetsCash
      and Cash Equivalents
                
                $
                33,123
                
                
                $
                3,646Accounts
      Receivable, Net of Allowance for Doubtful Accounts of $3,126 and
      $1,363
                
                
                48,587
                
                
                
                31,122Allowance
      for Estimated Returns
                
                
                (3,750
                )
                
                
                (2,750
                )Prepaid
      Expenses
                
                
                1,000
                
                
                
                0Inventory
                
                
                61,977
                
                
                
                33,518Total
      Current Assets
                
                
                140,937
                
                
                
                65,536Fixed
      Assets, Net of Accumulated Depreciation of $3,245 and
    $1,136
                
                
                19,631
                
                
                
                3,658TOTAL
      ASSETS
                
                $
                160,568
                
                
                $
                69,194LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesCash
      Overdraft
                
                $
                16,892
                
                
                $
                0Accounts
      Payable
                
                
                25,238
                
                
                
                14,752Accrued
      Expenses
                
                
                53,913
                
                
                
                20,749Current
      Portion of  Note Payable to Shareholder
                
                
                14,869
                
                
                
                10,703Due
      to Related Parties
                
                
                33,954
                
                
                
                26,954Subscription
      Deposits
                
                
                33,150
                
                
                
                0Line
      of Credit
                
                
                33,139
                
                
                
                21,955Total
      Current Liabilities
                
                
                211,155
                
                
                
                95,113Long
      Term LiabilitiesNote
      Payable to Shareholder
                
                
                3,436
                
                
                
                14,969Note
      Payables to Related Parties
                
                
                74,596
                
                
                
                41,961Capital
      Lease Obligation-Equipment
                
                
                7,783
                
                
                
                0Total
      Long Term Liabilities
                
                
                85,815
                
                
                
                56,930Stockholders'
      Equity (Deficit)Preferred
      Stock ($0.001 par value, 20,000,000 sharesauthorized,
      0 and 0 shares issued and outstanding)
                
                
                0
                
                
                
                0Common
      Stock ($0.001 par value, 50,000,000 sharesauthorized,
      5,000,000 and 5,000,000 shares issued and outstanding)
                
                
                5,000
                
                
                
                5,000Paid
      in Capital
                
                
                51,492
                
                
                
                51,492Retained
      Earnings (Deficit)
                
                
                (192,894
                )
                
                
                (139,341
                )Total
      Stockholders' Equity (Deficit)
                
                
                (136,402
                )
                
                
                (82,849
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                160,568
                
                
                $
                69,194




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


F-2





SURFACE
      COATINGS, INC.Consolidated
      Statements of OperationsFor
      the Years Ended December 31, 2008 and 20072008
                
                
                2007REVENUES
                
                $
                593,949
                
                
                $
                269,904COST
      OF GOODS SOLD
                
                
                337,477
                
                
                
                158,374GROSS
      PROFIT
                
                
                256,472
                
                
                
                111,530OPERATING
      EXPENSESAdvertising
      Expense
                
                
                29,905
                
                
                
                15,044Depreciation
      Expense
                
                
                2,109
                
                
                
                703General
      and Administrative
                
                
                268,695
                
                
                
                164,686TOTAL
      OPERATING EXPENSES
                
                
                300,709
                
                
                
                180,433NET
      OPERATING INCOME (LOSS)
                
                
                (44,237
                )
                
                
                (68,903
                )OTHER
      INCOME AND (EXPENSE)Interest
      Expense
                
                
                (9,316
                )
                
                
                (2,672
                )TOTAL
      OTHER INCOME (EXPENSE)
                
                
                (9,316
                )
                
                
                (2,672
                )INCOME
      TAXESProvision
      (Benefit) for Income Taxes
                
                
                0
                
                
                
                0NET
      (LOSS)
                
                
                (53,553
                )
                
                
                (71,575
                )Earnings
      Per Share, Basic and DilutedWeighted
      Average of Shares Outstanding
                
                
                5,000,000
                
                
                
                5,000,000Income
      (Loss) Attributable to Common Shareholders
                
                $
                (0.01
                )
                
                $
                (0.01
                )








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


F-3


SURFACE
COATINGS, INC.


Consolidated
Statement of Changes in Stockholders’ Equity


For
the Years Ended December 31, 2008 and 2007


Receivable
                    
                    
                    
                    
                    
                    RetainedPreferred
      Stock
                    
                    
                    Common
      Stock
                    
                    
                    from
      Stockholder
                    
                    
                    Paid
      in
                    
                    
                    EarningsShares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    for
      Common Stock
                    
                    
                    Capital
                    
                    
                    (Deficit)
                    
                    
                    TotalsStockholders'
      Equity, January 1, 2007 *
                    
                    
                    0
                    
                    
                    $
                    0
                    
                    
                    
                    5,000,000
                    
                    
                    $
                    5,000
                    
                    
                    $
                    (6,492
                    )
                    
                    $
                    51,492
                    
                    
                    $
                    (67,766
                    )
                    
                    $
                    (17,766
                    )Services
      Provided in Satisfactionof
      Stockholder Receivable
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    6,492
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    6,492Net
      (Loss)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (71,575
                    )
                    
                    
                    (71,575
                    )Stockholders'
      Equity, December 1, 2007
                    
                    
                    0
                    
                    
                    $
                    0
                    
                    
                    
                    5,000,000
                    
                    
                    $
                    5,000
                    
                    
                    $
                    0
                    
                    
                    $
                    51,492
                    
                    
                    $
                    (139,341
                    )
                    
                    $
                    (82,849
                    )Net
      (Loss)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (53,553
                    )
                    
                    
                    (53,553
                    )Stockholders'
      Equity, December 31, 2008
                    
                    
                    0
                    
                    
                    $
                    0
                    
                    
                    
                    5,000,000
                    
                    
                    $
                    5,000
                    
                    
                    $
                    0
                    
                    
                    $
                    51,492
                    
                    
                    $
                    (192,894
                    )
                    
                    $
                    (136,402
                    )* As
      discussed in Note 1, the recapitalization of Surface Armor, LLC with
      Surface Coatings, Inc. took place in February 2007 and has been
      accountedfor
      as a reverse merger. It has been reflected in the Statement of
      Stockholders' Equity as if it occurred in 2005 in order toconsistently
      reflect the capitalization of the combined entity.








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


F-4


SURFACE
      COATINGS, INC.Consolidated
      Statements of Cash FlowsFor
      the Years Ended December 31, 2008 and 20072008
                          
                          
                          2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (Loss)
                          
                          $
                          (53,553
                          )
                          
                          $
                          (71,575
                          )Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
                          
                          
                          2,109
                          
                          
                          
                          703Services
      Rendered in Satisfaction of Amounts Due from Stockholder
                          
                          
                          0
                          
                          
                          
                          6,492Increase
      in Allowance for Sales Returns
                          
                          
                          1,000
                          
                          
                          
                          2,750(Increase)
      in Accounts Receivable
                          
                          
                          (17,465
                          )
                          
                          
                          (22,032
                          )(Increase)
      in Inventory
                          
                          
                          (28,459
                          )
                          
                          
                          (6,092
                          )(Increase)
      in Other Assets
                          
                          
                          (1,000
                          )
                          
                          
                          0Increase
      (Decrease) in Overdraft
                          
                          
                          16,892
                          
                          
                          
                          (455
                          )Increase
      (Decrease) in Accounts Payable
                          
                          
                          10,486
                          
                          
                          
                          (12,215
                          )Increase
      (Decrease) in Accrued Expenses
                          
                          
                          33,164
                          
                          
                          
                          20,630Increase
      in Due to Related Parties
                          
                          
                          7,000
                          
                          
                          
                          1,429Increase
      in Line of Credit
                          
                          
                          11,184
                          
                          
                          
                          17,355Net
      Cash (Used) by Operating Activities
                          
                          
                          (18,642
                          )
                          
                          
                          (63,010
                          )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of Fixed Assets
                          
                          
                          (18,082
                          )
                          
                          
                          (1,029
                          )Net
      Cash (Used) by Investing Activities
                          
                          
                          (18,082
                          )
                          
                          
                          (1,029
                          )CASH
      FLOWS FROM FINANCING ACTIVITIESSubscription
      Deposits
                          
                          
                          33,150
                          
                          
                          
                          0Capitalized
      Lease Obligation-Equipment
                          
                          
                          11,119
                          
                          
                          
                          0Note
      Payable from Shareholder
                          
                          
                          (10,703
                          )
                          
                          
                          25,672Notes
      Payable from Related Parties
                          
                          
                          32,635
                          
                          
                          
                          41,961Net
      Cash Provided by Financing Activities
                          
                          
                          66,201
                          
                          
                          
                          67,633NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                          
                          
                          29,477
                          
                          
                          
                          3,594CASH
      AND CASH EQUIVALENTS AT BEGINNING OF YEAR
                          
                          
                          3,646
                          
                          
                          
                          52CASH
      AND CASH EQUIVALENTS AT END OF YEAR
                          
                          $
                          33,123
                          
                          
                          $
                          3,646SUPPLEMENTAL
      DISCLOSURESCash
      Paid During the Year for Interest Expense
                          
                          $
                          9,316
                          
                          
                          $
                          2,672




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


F-5


SURFACE
COATINGS, INC.


Notes
to the Consolidated Financial Statements


December
31, 2008 and 2007





NOTE 1 – NATURE OF
ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES





Nature of Activities,
History and Organization:





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





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





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





During
2008, the Company filed a Form S-1 to register the sale of their common
stock.  This registration was declared effective on October 14, 2008.
Since then the Company has filed a post effective amendment reducing their
minimum amount under the Registration Statement from $75,000 to $50,000. As of
March 25, 2009, the Company had received $53,050  in subscription
deposits which are being held in a separate non-interest bearing account. The
funds will be available to be released to the Company subject to the
effectiveness and conditions of the post effective amendment.





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








F-6






Significant Accounting
Policies:





The
Company’s management selects accounting principles generally accepted in the
United States of America and adopts methods for their
application.  The application of accounting principles requires the
estimating, matching and timing of revenue and expense.  The
accounting policies used conform to generally accepted accounting principles
which have been consistently applied in the preparation of these financial
statements.





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





Basis of
Presentation:





The
Company prepares its financial statements on the accrual basis of
accounting.  All intercompany balances and transactions are
eliminated.





Cash and Cash
Equivalents:





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





Fair Value of Financial
Instruments:





The
carrying amounts of cash, cash equivalents, accounts receivable, accounts
payable and notes payable approximate their fair values due to the short-term
maturities of these instruments.  The carrying amount of the Company’s
marketable securities and capital leases approximate fair value due to the
stated interest rates approximating market rates.





Accounts
Receivable:





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








F-7







Inventory:





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





Fixed
Assets:





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





Revenue
Recognition:





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





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





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





The
Company’s return policy allows customers to return products for up to 15 days
after shipment. Returns were $3,720 and $1,697 for the years ended December 31,
2008 and 2007.  In accordance with Statements of Financial Accounting
Standards (“SFAS”) No. 48, "Revenue Recognition when Right of
Return Exists” (“SFAS No. 48”), revenue is recorded net of a reserve to
estimate returns, markdowns, price concessions and warranty costs. Such reserve
is based on management's evaluation of historical experience and company and
industry trends.  As of December 31, 2008 and 2007, the allowance for
estimated returns was $3,750 and $2,750.  Revenue is recorded net any
of sales taxes charged to customers.





Cost of Goods
Sold:





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





Direct
      material costsPurchasing,
      receiving and inspectionIngoing
      and outgoing freight







F-8






Advertising
Costs:





The
Company incurred $29,905 and $15,044 in advertising costs for the years ended
December 31, 2008 and 2007.





Income
Taxes:





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





Reclassification:





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





Recent Accounting
Pronouncements:





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





Use of
Estimates:





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








NOTE 2 – FIXED
ASSETS





Fixed
assets at December 31, 2008 and 2007 are as follows:





2008
                
                
                2007Property
      and Equipment
                
                $
                21,470
                
                
                $
                3,388Telephone
      System
                
                
                1,406
                
                
                
                1,406Less:
      Accumulated Depreciation
                
                
                (3,245
                )
                
                
                (1,136
                )Total
      Fixed Assets
                
                $
                19,631
                
                
                $
                3,658





Depreciation
expense was $2,109 and $703 for the years ended December 31, 2008 and
2007.











F-9







NOTE 3 – DUE TO RELATED
PARTIES





The
Company had the following amounts due to related parties as of December 31, 2008
and 2007:





2008
                    
                    
                    2007Accounts
      Payable – Related Parties
                    
                    $
                    33,954
                    
                    
                    $
                    26,954Total
                    
                    $
                    33,954
                    
                    
                    $
                    26,954








These
amounts represent accounts payable to a minority shareholder. There were no
specified terms attached to the advances, and they would be repaid when the
Company has the available cash to do so.








NOTE 4 – NOTES PAYABLE TO
RELATED PARTIES





Note Payable to
Shareholder:





The
Company’s President has loaned the Company $33,028 since inception and the
balance was converted into a note on January 2, 2007.  This note bears
interest at a rate of 10% and requires monthly payments of $1,066 for 36 months.
The total amount owed at December 31, 2008 was $14,969, of which $11,533 is due
during 2009 and is classified as a current liability.





In
previous years, the amounts owed were reflected in “Due to Related
Parties”.





Notes Payable to Related
Parties:





As of
December 31, 2008 and 2007, the Company owed the following amounts under note
agreements with a related party:





2008
                
                
                2007Trinity
      Operations Note
                
                $
                54,596
                
                
                $
                21,961Trinity
      Advance Note
                
                
                20,000
                
                
                
                20,000Total
      (All Long-Term)
                
                $
                74,596
                
                
                $
                41,961





The
Company has borrowed $54,596 from Trinity Heritage Construction, L.L.C
(“Trinity”) to fund operations (“Trinity Operations Note”).  This note
bears interest at a rate of 10% and is due in full on March 1, 2010 and is
classified as a long-term liability.





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





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








F-10






NOTE 5 – NOTE PAYABLE
(CAPITAL LEASES)




In June
2008, the Company entered into a capital lease agreement for the lease of
equipment.  The lease requires monthly payments of $278 for four
years.  At the end of the lease term, the Company is entitled to
purchase the equipment for $1.  The total amount owed at December 31,
2008 was $11,119, of which $3,336 is due during 2009 and is classified as a
current liability.








NOTE 6 – LINE OF
CREDIT





The
Company has a line of credit (“LOC”) with Bank of America.  The LOC
has a $30,000 credit limit, and bears an interest rate of 12.24% per
annum.  The Company is required to make monthly payments equal to 1%
of the outstanding balance plus the interest expense for the previous
month.    As of December 31, 2008 and 2007, the amounts
outstanding under this line of credit were $33,139 and $21,955,
respectively.








NOTE 7 –
EQUITY





The
Company is authorized to issue 20,000,000 preferred shares at a par value of
$.001 per share.  There were 0 and 0 shares outstanding as of December
31, 2008 and 2007, respectively.





The
Company is authorized to issue 50,000,000 common shares at a par value of $.001
per share.  These shares have full voting rights.  There
were 5,000,000 and 5,000,000 shares issued and outstanding as of December 31,
2008 and 2007, respectively.





As of
December 31, 2008, the Company had received deposits totaling $33,150 for the
sale of 66,300 shares of common stock under the registration statement which
became effective in October, 2008, contingent upon raising additional capital
after December 31, 2008.  Therefore, this amount is carried as a
liability as of December 31, 2008.





The
Company does not have any stock option plans or stock warrants.








NOTE 8 – COMMITMENTS AND
CONTINGENCIES





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

















F-11








NOTE 9 – INCOME
TAXES





The
Company has adopted SFAS No. 109, which requires the use of the liability method
in the computation of income tax expense and the current and deferred income
taxes payable (deferred tax liability) or benefit (deferred tax
asset).   Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.





The
cumulative tax effect at the expected tax rate of 34% of significant items
comprising the Company’s net deferred tax amounts as of December 31, 2008 and
2007 are as follows:





2008
                
                
                2007Net
      Operating Loss Carryforward
                
                $
                65,584
                
                
                $
                47,376Less:
      Valuation Allowance
                
                
                (65,584
                )
                
                
                (47,376
                )Net
      Deferred Tax Asset
                
                $
                0
                
                
                $
                0





The net
deferred tax asset generated by the loss carryforward has been fully reserved.
The cumulative net operating loss carry-forward is approximately $192,894 at
December 31, 2008, and will expire in the years 2025 through 2028.





The
realization of deferred tax benefits is contingent upon future earnings and is
fully reserved at December 31, 2008.








NOTE 10 – SUBSEQUENT
EVENT





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





In 2008,
the Company filed a registration statement with the U.S. Securities &
Exchange Commission (“SEC”) in order to raise funds to expand its business and
execute its business plan.  The filing became effective in October
2008 which gave the Company the opportunity to sell up to 1,000,000 shares of
common stock at $0.50 per share.  As of March 25, 2009, the Company
had received $53,050 in subscription deposits which are being held in a separate
non-interest bearing account. The funds will be available to be released to the
Company subject to the effectiveness and conditions of the post effective
amendment.








NOTE 11 – FINANCIAL
CONDITION AND GOING CONCERN





The
Company has an accumulated deficit through December 31, 2008 totaling $192,894
and had negative working capital of $70,218.  Because of this
accumulated deficit, the Company will require additional working capital to
develop its business operations.





The
Company has experienced no loan defaults, labor stoppages, legal proceedings or
any other operating interruption in 2008 or so far in
2009.  Therefore, these items will not factor into whether the
business continues as a going concern, and accordingly, Management has not made
any plans to dispose of assets or factor receivables to assist in generating
working capital.








F-12






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





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








NOTE 12 – NEW ACCOUNTING
PRONOUCEMENTS





In June
2003, the Securities and Exchange Commission (“SEC”) adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404 (b)”), as amended by
SEC Release No. 33-8760 on December 15, 2006.  Commencing with the
Company’s Annual Report for the year ending December 31, 2008, the Company is
required to include a report of management on the Company’s internal control
over financial reporting.  The internal control report must include a
statement of management’s responsibility for establishing and maintaining
adequate internal control over financial reporting for the Company; of
management’s assessment of the effectiveness of the Company’s internal control
over financial reporting as of its year-end and of the framework used by
management to evaluate the effectiveness of the Company’s internal control over
financial reporting.





In June
2008, the SEC approved a one year extension of the compliance data for smaller
public companies to meet the Section 404 (b) auditor attestation requirement of
the Sarbanes-Oxley Act regarding the Company’s internal control over financial
reporting on whether it believes that the Company has maintained, in all
material respects, effective internal control over financial
reporting.





In 2007,
the FASB issued the following:





-
            SFAS
      No. 141: (Revised 2007), “Business
Combinations”





-
            SFAS
      No. 159:  “The Fair Value Option for Financial Assets and
      Financial Liabilities”





-
            SFAS
      No. 160:  “Noncontrolling Interest in Consolidated Financial
      Statements”





In 2008,
the FASB issued the following:





-
            SFAS
      No. 161: “Disclosures about Derivative Instruments and Hedging
      Activities”





-
            SFAS
      No. 162:  “The Hierarchy of Generally Accepted Accounting
      Principles”





-
            SFAS
      No. 163:  “Accounting for Financial Guarantee Insurance
      Contracts”





Management
has reviewed these new standards and believes that they have no material impact
on the financial statements of the Company.





F-13