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

The following Management's discussion and Analysis of financial Condition and Results of Operations ("MD&A") is intended to help the reader understand nCoat, Inc., our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes thereto contained in Item 8 of this report. This overview summarizes MD&A, which includes the following sections:

· Overview - a general description of our business and the markets in which we operate; our objective; our areas of focus; and challenges and risks of our business.

· Significant Accounting Policies - a discussion of accounting policies that require critical judgments and estimates.

· Results of Operations - an analysis of our Company's consolidated results of operations for the three years presented in our consolidated financial statements. Except to the extent that differences among our operating segments are material to an understanding of our business as a whole, we present the discussion in the MD&A on a consolidated basis.

· Liquidity and Capital Resources - an analysis of cash flows; off-balance sheet arrangements and aggregate contractual obligations; the impact of foregoing exchange; an overview of financial position; and the impact of inflation and changing prices.

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affect the financial condition and results of operations of the Company as a whole. This discussion should be read in conjunction with our financial statements as of December 31, 2007, and the year then ended and the notes accompanying those financial statements.

Overview

Our principal business strategy includes the following components:

Acquisitions. We completed the acquisition of HPC and MCCI which have given us a base of operations and market presence. During the next three years, we will identify additional specific target companies for acquisition. The high performance coating industry includes a number of "sub-niche" sectors, such as piston manufacturing and protection, lubritic dry film coatings, coating for weapons and military applications, gas and oil tools, valves and pipelines, marine applications, both in engine parts and anti-fouling technologies to name just a few. The fragmentation of the industry provides us with a large number of small to medium size companies that we will investigate to determine our best additions to our first two acquisitions.

Internal Organic Growth. We have already taken the existing "book of business" of our two subsidiaries and introduced into it additional products, both as cross sales from the sister company's product lines as well as the introduction of nano-formulated coatings. Our emphasis on the after-market retail customer is one of the two major sectors of our business. In additional to the aftermarket sector, we have already developed and are presently developing additional customers in the OEM sector. One of our strongest sources for internal organic growth in the next three years is an emphasis by the manufacturers of diesel, gasoline and hybrid fueled engines to meet demanding environmental requirements imposed on their respective industries as we seek to improve emissions, fuel economy and safety.

Distributed Model Development. The "distributed" business model is our establishment of on-site coatings application as part of the assembly-line process within the manufacturing and/or assembly process of a large customer. We have already undertaken this approach with one of our OEM customers and are presently in discussion with others. The savings on handling, shipping, inventory, logistics management and other similar expenses that comes from having the on-site "plant" is the main element of interest for our larger customers. We are presently in discussion with other customers to increase the awareness of the benefits of this approach.

Licensing Intellectual Property. Within the next twelve months, we intend to enter into protective "field of use" licensing with some of the manufacturers that may be tier-one suppliers of large OEM companies or who deploy a distributed production model described above. However, unlike the distributed model where application expertise and management control are inherent elements of the model, our "field of use" license agreements supply proprietary coatings to third parties already applying coating at their plants. The license agreements will be limited to targeted applications and industries and structured as joint ventures to avoid creating competition in our own current market space.

Strengthen nTech's research and development efforts. We have entered into a series of discussions with outside research and development groups, including technology transfer offices of universities, private laboratories and other small start-up technology companies for the express purpose of continuing to strengthen and exploit our research and development capacities. We expect to formalize these discussions prior to the end of the fourth quarter of this year. All of nTech's research activities are focused on projects that can show commercialization within three to six months, rather than long term R&D projects. Many research projects are driven by direct requests from customers seeking immediate solutions to present critical problems.

Acquisitions

Management believes that there is a strategic acquisition opportunity resulting from the market dynamics of the high performance coatings markets. Acquisitions of HPC and Jet-Hot have further validated our strategic research. We expect to search for, complete due diligence on and acquire other coatings companies that
(i) have a customer base that includes enterprise level customers in a mature market, (ii) enjoy strong and stable market presence in our targeted primary markets, (iii) are profitable, (iv) have a brand presence similar to HPC, and
(v) have an existing product mix whose performance and functionality can be significantly improved by the integration of nanotechnology know-how.

Acquisition of Jet-Hot

With respect to the acquisition of Jet-Hot, we believe key synergies to our business plan include:

1. Jet-Hot has a plant in Arizona as does HPC. The plants are about 10 miles apart.
2. Jet-Hot plants are built for high through-put and packaging of individual aftermarket production. HPC plants are built for high volume of OEM parts production.
3. We have acquired sufficient market and operational experience to realize that a single coating entity has a competitive disadvantage in attempting to create high volume productions of both aftermarket parts and OEM parts. The addition of MCCI allows us to create focused plants for each of our major market sectors.
4. Competition between MCCI and HPC for stand-alone coatings sales (no applications services) will be eliminated and we will carry one "best of breed" coating from each area in which we have needs.
5. JET-HOT has more thermal barrier customers than HPC. HPC has more corrosion resistance and lubritic coatings customers than JET-HOT. Cross selling can occur to each company's customer base to raise same-customer revenue. In addition, JET-HOT does not currently sell internal engine coatings. Their product line is for coatings on external parts only. HPC internal engine coatings can now be offered to all of JET-HOT's approximate 9000 annual individual aftermarket customers.

Explanatory Note: Financial Statements ending December 31, 2007 together with the following management discussion and analysis relates to the original nCoat, Inc., the privately held company that changed its name to nCoat Automotive Group, Inc. (nCoat Auto) as part of its entry into a share exchange agreement with Tylerstone Ventures Corporation ("Tylerstone") in February 2007. Any references in the financial statements or in this section that refer to "the Company" refer to nCoat Auto for periods prior to the reorganization and to the consolidated companies there after , not to the later merged Tylerstone/nCoat, Inc.

There is limited historical financial information about us upon which to base an evaluation of our performance. nCoat Auto has been in existence since September 2004 and incorporated in early 2005. In September of 2005, it purchased High Performance Coatings, Inc. (HPC), an operational coatings company which is responsible for the majority of the nCoat-consolidated revenues. nCoat Auto also created in 2006 an intellectual property and development group, nTech, Inc. (nTech) that, at December 31, 2006, had generated minimal revenue reported in the consolidated financials. We merged with nCoat Auto in February of 2007 and adopted its fiscal year, its operations and its financial history.

Our continued existence and plans for future growth depend on our ability to obtain the capital necessary, either through the issuance of additional debt or equity instruments, to operate until the profitability occurs through the generation of revenue. We will need to raise this capital to fund both the normal operating costs and expansion efforts. If we are not able to generate sufficient revenues and cash flows or obtain the necessary funding, we will be unable to continue as a going concern. Our recurring losses and negative cash flows from operations raises substantial doubt about our ability to continue as a going concern. Our working capital deficiency as at December 31, 2007 was $5,593,301 with accumulated losses from the date of inception of $36,085,141 through December 31, 2007. We entered into a share exchange agreement in February 2007; have engaged an investment banking firm to assist in raising new capital; have increased operating activities focused on the marketing of our products and have been negotiating sales agreements all to enable us to generate sufficient cash flow for us to continue as a going concern. If we does not receive sufficient funds to settle amounts owed to creditors and pay future expenses, there is the possibility that we would be unable to continue.

At December 31, 2007, we had assets of $6,818,877 and liabilities of $20,453,705. Amounts owed to related parties have no specific terms of repayment and bear no interest.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements include operating leases for production facilities and office space.

Our Operating Results

Performance at December 31, 2007 Compared to December 31, 2006

Performance Overview

Revenues

The 2007 year increase in revenue of approximately $ 2.2 million was attributable mainly to the June 29, 2007 acquisition of MCCI. HPC revenues were less than those in the same period in 2006 and continue to be impacted by changes being implemented by our diesel engine manufacturing customers. According to industry sources, heavy-duty truck sales have fallen 42.5% for 2007. One major truck manufacture reported a 71% decrease in year to year unit sales. Beginning in January 2007, our diesel engine manufacturing customers were required to introduce new engine platforms to meet new Environmental Protection Agency (EPA) requirements to lower harmful particulates in engine emissions in order to comply with Federal clean air standards. nCoat sells and applies coatings that aide diesel emissions systems to meet these new standards. Our customers' introduction of the new engine platform created increased sales of engines manufactured in the 2006 model year prior to introduction of the new 2007 engines.

Cost of Sales.

Cost of sales as a percentage of sales decreased from 96% in 2006 to 79% for 2007. With the acquisition of MCCI, we have increased the percentage of our business related to after market products, which typically have a higher margin than our OEM products. Costs in 2006 were inflated due to the use of temporary labor, excessive overtime, high transportation costs and the associated costs related to the ramp up in production. The increase in 2007 also reflects a managerial effort to focus on labor to revenue parameters.

General and Administrative Expenses .

General and administrative expenses for the year ended December 31, 2007 increased almost $3,900,000 and increased as a percentage of sales from 83% to 108 % for the same period in 2006. The 2007 general and administrative expenses include costs related to: our first year operating as a public company and the associated costs of nCoat, which reflect the costs related to the infrastructure created to support the aggressive acquisition and growth plan for the Company, together with the completion of the acquisition of MCCI and its related costs,

Sales and Marketing Expense.

Sales and marketing expense for the year ended December 31, 2007, decreased by approximately $148,000 and decreased to 11% of sales compared to 18% for the same period in 2006. This decrease in 2007, when compared to the same period in 2006, is attributable to both a consolidation of marketing expenses with the acquisition of MCCI as well as the management efforts to reduce expenses overall.

Research and Development.

Although not set forth in our 2006 reporting as a separate line-item, our research and development costs were reduced in 2007 to 8% as compared with 2006 percentage of 12%. The percentage reflects the increase of sales rather than a decrease of costs attributable to ongoing improvement of our coatings.

Interest Expense.

The increase in interest expense reflects the impact of the write-off of all remaining debt discount and deferred loan costs related to acceleration of the maturity date for the Series A and Series B Convertible Notes. In the year ended December 31, 2007 a total of $13,225,786 was charged to interest related to this acceleration, consisting of $12,250,000 of debt discount and $975,786 of deferred loan costs.

Earnings per Share.

As a result of the share exchange transaction discussed in the filing, exercise of warrants, and conversion of debt, the number of outstanding shares have increased to 96,439,452 at December 31, 2007 and the weighted average shares outstanding have increased from 31,284,657 shares for the year ended December 31, 2006 to 81,574,257 for the year ended December 31, 2007.

The Company incurred losses of $27,699,407 and $6,718,955 during the periods ended December 31, 2007, and December 31, 2006, respectively.

Financial Statements, One-Time Charges and Capital Expenditures

We continued to feel the effects of and experience higher costs related to preparing for accelerated growth through acquisitions and organic internal growth of existing operating entities. In 2006, we added facilities, personnel, systems and processes to support business growth and acquisition activities. These expenditures we discussed in the Company's current report on Form 8K filed on May 18, 2007.

1. Facilities - We incurred additional expenses related to the opening a facility closer to our customer base in North Carolina, tooling and prototyping for new accounts, aftermarket finishing equipment, staging and cleaning equipment were added. Additionally, we transferred additional production of high volume "H Series" and "S Series" OEM accounts from the HPC Utah facility to the North Carolina facility. HPC continued to retool the Utah facility to meet production requirements for high volume "E-Series" production for new customers in the diesel engine trucking industry.

2. Headquarters Relocation - Corporate headquarters was moved from Utah to North Carolina This relocation began in 2006 and has continued through 2007. Key employees have been relocated to North Carolina and new offices were established at the North Carolina production facilities.

3. Personnel - The Company hired personnel in 2006 to ramp production, prepare for acquisition, transition and integration and to prepare for registration with the Securities and Exchange Commission. We have focused on completion of Standard Operating Procedure documentation, preparation of information systems, accounting, human resource, production, communications, mixing and blending, strategic finance and other systems to accommodate rapid growth from internal and acquisition growth..

4. Public Company Preparation - In the first quarter of 2007 one-time expenses were incurred in connection with preparation for merger with a publicly traded entity. Additional expenses were taken to close the shell acquisition transaction and affect the merger, prepare for application for public trading, meet SEC requirements, hire trading support entities and launch the public trading of the newly acquired shell. Expenses include:

i. Legal;
ii. Accounting, review and audit;
iii. Contracts with transfer agent;
iv. Printing and delivery of original stock certificates;
v. Retention and compensation of investment banking firm; and
vi. Public filings

5. Research and Development - In 2006, research and development expenses were not material. Research and development expense in 2007 was $604,149 and focused on development of new coatings, exploring the viability of exclusively licensing non-proprietary coatings, prototyping and testing new coatings for customer parts and exploring new patents for further coating development.

6. Non-recurring Marketing and Sales Costs - Marketing and sales set-up costs were realized in 2006 to establish systems and process to capture and track data and develop collateral materials and an internet presence for business development. Expenses in 2007 include development of sample materials demonstrating the efficacy of nCoat proprietary coatings, documentation supporting rapid account sign-up and terms of business and market research to target key prospects.

7. Financing - The Company realized one-time expenses in 2006 for financing the purchase of HPC. Amortization expenses and note extension fees were included in interest expenses. Expenses in 2007 include fees relating to engaging advisors to assist the Company in future financings and expenses related to creating the strategic relationships necessary to successfully execute the business plan.

Liquidity and Capital Resources

nCoat is a company with limited operating history and experience upon which to base an evaluation of its performance. In September of 2005, we acquired High Performance Coatings, Inc. ("HPC"), an operational coatings company, which was responsible for the majority of our consolidated revenues. In 2006, we formed an intellectual property and development entity, nTech, Inc. ("nTech"), and in June 2007, we acquired all of the common stock of Metallic Ceramic Coatings, Inc. ("MCCI"), a primary competitor of HPC with 26 years of coatings experience and historical revenues similar to HPC.

On April 13, 2007, we converted $2,000,000 of convertible debentures and $67,752 of accrued interest into 4,135,503 shares of our common stock at $0.50 per share. The remaining $500,000 of convertible debentures, along with accrued interest of $18,107, was converted to 1,036,215 shares of common stock at $0.50 per share on August 24, 2007.

From May 25, 2007, through July 9, 2007, we issued $9,000,000 of Series A 6% convertible promissory notes (the "Series A Notes") and warrants to purchase 22,500,000 shares of common stock, exercisable at $1.00 per share through May 31, 2007. The Series A Notes had an initial conversion price of $0.40 per share and a maturity date of May 31, 2010, when the Series A Notes are due. From May 31, 2007 through July 9, 2007, the Company issued $3,250,000 of Series B 6% convertible promissory notes (the "Series B Notes") and warrants to purchase 8,125,000 shares of common stock at $0.80 per share exercisable through May 31, 2007. The Series B Notes had an initial conversion price of $0.40 per share and a maturity date of May 31, 2010 when the Series B Notes are due. The Series A and B private placement offerings included the conversion of $800,000 of advances from investors of which $700,000 had been received prior to March 31, 2007. The Company received $10,618,916 of proceeds from the issuance of the Series A and Series B convertible notes, net of the $700,000 of advances previously recognized and net of cash offering costs of $931,064.

In the final stages of the offering, after we had closed on the purchase of MCCI, and subscribed investor did not fund its portion of offering. Our intended use of proceeds included retirement of debt and related accrued interest of $3,677,286, $5,000,000 for the acquisition of MCCI, payment of significant pre-offering liabilities and establishing a working capital reserve. The retirement of pre-offering liabilities and the working capital portion of the offering did not get raised prior to our contractual obligation to close the offering. This deficiency of the expected $3,500,000 in funding, combined with the seasonal lull in aftermarket and OEM revenues, has caused us to experience a significant liquidity crisis. A number of our vendors have turned our accounts over to collection agencies and at December 31, 2007, we had accounts payable in excess of $1.5 million over 120 days past due.

At September 30, 2007, we were in technical breach of the Securities Purchase Agreement and the related Series A and B Convertible Notes and Registration Agreement (collectively the "Note Agreement"). This technical breach was due to our failure to respond to SEC comments within 15 days following receipt, failure to have the registration of the underling shares effective within 75 days of the required filing date, failure to pay partial liquidating damages of $90,000 and issuing $200,000 of unauthorized debt.

Series A Amendment Agreement

In December 2007, the Company entered into an Amendment and Waiver of Registration Rights Agreement and 6% Series A Convertible Notes dated as of November 30, 2007 (the "Series A Amendment Agreement"), with Enable Growth Partners LP; Enable Opportunity Partners LP; Pierce Diversified Strategy Master Fund LLC, Ena; Capital Ventures International; Edward A Bugniazet; and Scott Lyman (collectively, the "Series A Noteholders") who together were the holders of 75% of the Company's Series A 6% Convertible Notes (the "Series A Notes").

Pursuant to the terms of the Series A Amendment Agreement, the Series A Noteholders agreed to waive certain "Trigger Events" as that term is defined in the Series A Notes, in exchange for certain amendments to the terms of the Series A Notes and the related registration rights agreement (the "Registration Rights Agreement") between the Company and the Series A Noteholders. The Registration Rights Agreement was amended by adding the following language to the end of Section 2(b) of the Registration Rights Agreement:

"Notwithstanding anything to the contrary in this Section 2(b), the Company shall only be obligated to pay partial liquidated damages to the Holders for Events occurring after the earlier to occur of (i) the effective date of the Registration Statement and (ii) February 29, 2008. Further, notwithstanding anything to the contrary in this Section 2(b), in the event that the Company is not permitted to include all of the Registrable Securities in the Registration Statement due solely to SEC Guidance, the Company shall not be liable for liquidated damages as to any such Registrable Securities which are not permitted to be so included if, as of February 29, 2008, such Registrable Securities may be transferred by the Holders pursuant to Rule 144."

Additionally, the Company and the Series A Noteholders agreed that the Conversion price of the Series A Notes would be adjusted from $ 0.36 to $0.25, subject to further adjustment as set forth in the Series A Notes. Moreover, the following new subsection was added to Section 4(a) of the Series A Notes:

"(xv) any quarterly reports on Form 10-Q or Form 10-QSB filed by the Company with the Commission for the three months ending on the following dates which disclose "Net Cash Used in Operating Activities" in excess of the numbers set forth next to each:

 March 31, 2008:                          $ 850,000.00
 June 30, 2008:                           $ 700,000.00
 September 30, 2008 - March 31, 2010:     $ 450,000.00

Series B Amendment Agreement

Additionally, the Company, entered into an Amendment and Waiver of 6% Series B Convertible Notes, dated as of November 30, 2007 (the "Series B Amendment Agreement"), with Avendale Equity, LLC; Knight Capital Group; and GGR II, LLC (collectively, the "Series B Noteholders"), who together are the holders of at least 75% of the Company's Series B 6% Convertible Notes (the "Series B Notes").

Pursuant to the terms of the Series B Amendment Agreement, the Series B Noteholders agreed to waive certain "Trigger Events" as that term is defined in the Series B Notes, in exchange for certain amendments to the terms of the Series B Notes.

The Company and the Series B Noteholders agreed that the Conversion price of the Series B Notes would be adjusted from $0.40 to $0.25, subject to further adjustment as set forth in the Series B Notes. Moreover, the following new subsection was added to Section 4(a) of the Series B Notes:

"(xiv) any quarterly reports on Form 10-Q or Form 10-QSB filed by the Company . . .