UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-KSB





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





For
the Fiscal Year ended September 30, 2008





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





Commission
file number 0-13111





Axion
International Holdings Inc.


(Exact
name of registrant as specified in its charter)





Colorado
            84-0846389(State
      or other jurisdiction of
              incorporation
      or organization)
            (IRS
      Employer
              Identification
      Number)





665
Martinsville Road Basking Ridge NJ 07060


(Address
of principal executive offices)





(908)
542-0888


(Registrant’s
telephone number, including area code)





Securities
registered under Section 12(b) of the Exchange
Act:   none


Securities
registered under Section 12(g) of the Exchange Act: Common Stock, without par
value





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





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.


Yes  x    No   ̈.





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  ̈





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





State
issuer’s revenues for its most recent fiscal year, September 30, 2008:
$6,472





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant was $6,775,273 based on the average bid and
asked price of the Common Stock on January 12, 2009





The
number of shares outstanding of the registrant’s Common Stock, as of December
29, 2008, was 14,000,637





Documents
incorporated by reference:    See Exhibit Index





Transition
Small Business Disclosure Format (check one):  Yes  ̈   No
x













TABLE
OF CONTENTS





PagePART I.Item 1.
                      Description
      of Business
                      
                      1Item 2.
                      Description
      of Property
                      
                      7Item 3.
                      Legal
      Proceedings
                      
                      7Item 4.
                      Submission
      of Matters to a Vote of Security Holders
                      
                      8PART II.Item 5.
                      Market
      for Common Equity and Related Stockholder Matters and Small Business
      Issuer
                        Purchases
      of Equity SecuritiesItem 6.
                      Management’s
      Discussion and Analysis or Plan of Operations
                      
                      9Item 7.
                      Financial
      Statements
                      
                      10Item 8.
                      Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                      
                      16Item 8A.
                      Controls
      and Procedures
                      
                      16Item 8B.
                      Other
      Information
                      
                      16PART III.Item 9.
                      Directors,
      Executive Officers, Promoters and Control Person; Compliance
      with
                        Section
      16(a) of the Exchange Act
                      
                      17Item 10.
                      Executive
      Compensation
                      
                      18Item 11.
                      Security
      Ownership of Beneficial Owners and Management and Related Stockholder
      Matters
                      
                      21Item 12.
                      Certain
      Relationships and Related Transactions
                      
                      24Item 13.
                      Exhibits
                      
                      26Item 14.
                      Principal
      Accountant Fees and Services
                      
                      27Signatures
      and Certifications
                      
                      28













PART
I





Note:  Effective
as of August 4, 2008, Axion International Holdings, Inc. (“Holdings”)
effectuated a 1-for-4 reverse stock split of its outstanding Common
Stock.  All references to the number of Holdings’ Common Stock
contained in this Annual Report on Form 10-KSB are on a post-reverse split
basis, unless otherwise indicated.





Item
1.  Description of Business





Overview





Axion
International Holdings, Inc. (“Holdings”), formerly Analytical Surveys, Inc.,
was formed in 1981 to provide data conversion and digital mapping services to
users of customized geographic information systems.  However, Holdings
experienced a steady decrease in the demand for its services. In fiscal 2006,
Holdings acted upon its belief that it would not be able to sustain the
operations of its historical business.  Holdings focused on completing
its long-term contracts that would generate cash and sold its Wisconsin-based
operations and assigned its long-term contracts that required new or additional
working capital to complete.  Holdings transitioned its principal
business into that of an independent oil and gas enterprise focused on
leveraging non-operating participation in drilling and production prospects for
the development of U.S. on-shore oil and natural gas reserves.





Holdings’
success as an oil and gas company was contingent upon our ability to raise
additional funds in order to build a portfolio of investments that generate cash
flow sufficient to meet its operating expenses and capital
requirements.  Additionally, Holdings was dependent on outside sources
of financing to fund its operations and meet its future obligations.  The
oil and gas activities did not result in positive operating results and efforts
to secure additional funds were unsuccessful, which severely restricts Holdings’
ability to engage in any additional activities.  In May 2007, Holdings
terminated its oil and gas executives and took steps to reduce expenses and
commitments in oil and gas investments.





As a
result, in November 2007, Holdings entered into an Agreement and Plan of Merger,
among Holdings, Axion Acquisition Corp., a Delaware corporation and a newly
created direct wholly-owned subsidiary of Holdings (the “Merger Sub”), and Axion
International, Inc., a Delaware corporation which incorporated on August 6, 2006
with operations commencing in November 2007 (“Axion”).  On March 20,
2008 (the “Effective Date”), Holdings consummated the merger (the “Merger”) of
Merger Sub into Axion, with Axion continuing as the surviving corporation and a
wholly-owned subsidiary of Holdings.  Each issued and outstanding
share of Axion became 47,630 shares of Holdings’ common stock (“Common Stock”),
or 9,190,630 shares in the aggregate constituting approximately 90.7% of
Holdings’ issued and outstanding Common Stock as of the Effective Date of the
Merger.  The Merger resulted in a change of control, and as such,
Axion (“we”, “our” or the “Company”) is the surviving entity.





Business





Axion is
the exclusive licensee of patented and patent pending technologies developed for
the production of structural plastic products such as railroad crossties, bridge
infrastructure, marine pilings and bulk heading. We believe these technologies,
which were developed by scientists at Rutgers University (“Rutgers”), can
transform recycled consumer and industrial plastics that would otherwise be
discarded into landfills into structural products which are more durable, have a
substantially greater useful life and offer more flexible design features than
traditional products made from wood, steel and concrete.  In addition,
we believe our recycled composite products will result in substantial reduction
in greenhouse gases because they not only sequester carbon, but also reduce the
number of trees needing to be harvested. Furthermore, our products do not
contain creosote (a carcinogen used to coat conventional wood
crossties).





We are
currently marketing and selling our structural products and fire retardants to
both the U.S. domestic and international railroad industry, the U.S. military,
and industrial engineering and contracting firms. We anticipate that our initial
products will consist of: (1) structural composite railroad crossties, (2) fire
retardant composite railroad crossties, (3) structural composite I-beams along
with tongue and groove planking and (4) two fire retardants.  In July
and September 2008 we received orders from the US Army for the fabrication and
installation of two thermoplastic composite I-Beam tank bridge at Fort Bragg,
North Carolina which are required to support loads of approximately 140,000
pounds.





- 1
-


Products





The
crosstie is similar to products previously sold by Polywood, Inc., a company
founded by James Kerstein, one of Axion’s founders and our Chief Executive
Officer.  The fire retardant composite railroad crosstie will be a new
generation of that crosstie.  We anticipate the sales of crossties to
be made to both freight and transit line railroads whose cost benefit analysis
evaluated the utility of installing plastic crossties in high stress, overhead
and moisture-laden areas.  Our fire retardant crosstie addresses not
only moisture decay and leaching of creosote but also fire
vulnerability.





The
structural composite I-beams (patent pending) and tongue and groove planking
(patent pending) are innovative products that will revolutionize the structural
material marketplace. These products were successfully installed for a vehicular
bridge over the Mullica River in the New Jersey Pine Barrens in
2003.  The design features that made this installation unique were the
use of less material and ease of interoperability of the construction
parts.  In addition, an earlier bridge construction was successfully
completed at Ft. Leonard Wood, Missouri in 1998.  Based on a 2007
analysis conducted by the U.S. Corps of Army Engineers, we believe that these
bridges are as durable today as they were when first installed and have required
minimal maintenance. We anticipate supplying product for the construction of
additional bridges and selling these products as a solution for waterfront
bulkhead projects.





The two
fire retardants consist of: (1) a thermoplastic fire retardant that will be
applied to the plastic crosstie and (2) a multi-surface fire retardant that can
be applied to a variety of surfaces (wood, metal, and plastic). We intend to
continue to develop new supplemental technologies that will serve to not only
expand our market capabilities but also serve as barriers to entry by
others.








Sales
and Marketing





We have
actively commenced sales efforts to the railroads. Since railroad sales are
important to our early success, initial sales are being handled by our
management team whose members, through their prior activities, have a background
in and connections with this industry.  The Company’s initial
objectives are to secure sales orders for composite crossties (including ones
that are treated with a fire retardant) from railroads and transit line
railroads, vehicular bridges from both the US Army, and civilian
contracts.  Our initial sales and marketing efforts have been
positively received in the marketplace and our initial success with the US Army
is an indication of the acceptance of our products in the market.





With
adequate funding, we intend to establish market facing business units, each team
will function as a fully accountable, entrepreneurial unit, graded against its
own performance metrics. These business units will be an extended part of the
corporate strategic planning initiatives and will be supported by corporate
branding, polymer engineering research, production capabilities and in-house
customer service.





Manufacturing





Axion
does not plan on manufacturing the aforementioned products. We believe that our
outsourcing model will give us the business flexibility to maximize utilization
of manufacturing capacity available in the market, respond to the geographic
diversity of our customers, and minimize our capital requirements. We contacted
and discussed the production of our products with multiple outsourced
manufacturers who have the skills and capabilities to produce our
products.  Our objective is to transfer the necessary intellectual
property to these extrusion specialists so that they may manufacture products to
the specifications required by our designs and with our direct
supervision.





We expect
that the outsourcing manufacturers will be responsible for the implementation of
our quality control program, and Axion will be responsible for the sourcing of
the raw materials and monitoring all phases of production.





Exclusive
License Agreement from Rutgers University





Pursuant
to a License Agreement (the “License Agreement”) with Rutgers, Axion has
acquired an exclusive royalty-bearing license in specific but broad global
territories to make, have made, use, sell, offer for sale, modify, develop,
import and export products made using patent and patent pending applications
owned by Rutgers.  As a result of the License Agreement, Axion was granted
the right to grant sublicenses. We plan to use these patented technologies in
the production of structural plastic products such as railroad crossties, bridge
infrastructure, utility poles, marine pilings and bulk heading.





Axion is obligated to pay 1.5-3.0%
royalties on various product sales to Rutgers, subject to a minimum of $10,000
in calendar year 2008, and to reimburse Rutgers for certain patent defense
costs.  We also pay annual membership dues to AIMPP, a department of
Rutgers, as well as consulting fees for research and development
processes.





The License Agreement runs until the
expiration of the last to expire issued patent within the Rutgers’ technologies
licensed under the License Agreement, unless terminated earlier.





The
Market





We are
focused on infrastructure solutions and we have identified four major U.S.
vertical markets:





·
            Transportation–railroad
      ties, bridge timbers and switch ties; fire
  retardants


·
            Marine-pilings;
      bulkheads


·
            General
      industrial-cell towers and wind turbine poles; sound barriers; boardwalk
      super structure; fire retardants


·
            Military-fire
      retardants, pallet delivery system for airlift
  cargo





Within
each of these vertical markets, products have been previously manufactured
utilizing Rutgers’ technology; some of which has been tested, sold and
installed; while others are in development.





- 2
-


Transportation




·
            In
      recent years, between 18,000,000 to 20,000,000 crossties have been
      purchased annually.




·
            Of
      the estimated 20 million ties purchased in 2007, the Company believes
      15-30% were installed in areas considered most conducive to alternative,
      non-wooden, ties. The Company therefore believes that the alternative tie
      market is approximately 3,000,000 ties per year (i.e. 20,000,000 x 15%),
      or approximately a $300 million per year market for the Class I
      railroads.




·
            Additional
      opportunities in the rail market include rail bridges; switch sets
      (turnouts), rail crossings, and the addition of fire retardant materials
      as a safety feature.




·
            The
      Transportation vertical could also be expanded to include highway guard
      rails and posts, sign posts, and other products for state and federal
      departments of transportation.




Marine




·
            According
      to the General Accounting Office’s Report on Marine Transportation (2002),
      “During fiscal years 1999 through 2001, federal agencies expended an
      average of $3.9 billion each year on the marine transportation
      system.”




·
            Public
      and private boat docks and marinas; piers and bulk heading along any
      seaboard, river, or estuary.




General
Industrial




·
            Federal
      Highway Administration Estimate - $83.4 billion each year over the next 20
      years to repair highways and
bridges.




·
            According
      to the US Department of Transportation and the Federal Highway
      Administration, “The nation spends at least $5 billion per year for
      highway bridge design, construction, replacement, and
      rehabilitation.”




·
            Bridges,
      cell towers and wind turbine poles, sound barriers, boardwalk and
      residential decking super
structure.




Military/Government
Contracts




·
            The
      Department of Defense Budget (2007) includes military construction in the
      amount of $12.6 billion and research and development of $73.2
      billion.




·
            Infrastructure,
      fire retardants, pallet delivery
system.





Competition





We
compete with traditional construction material suppliers and at least one
company, North American Technology Group, that offers a polymer composite
product that competes in the railroad tie market.  Most of our
potential competitors have substantially greater financial and marketing
resources and capabilities. These companies and others may independently develop
technology for the production of structural plastic products similar or superior
to our technology, which may result in our product becoming less competitive or
obsolete. Competition from other companies, and possibly from universities and
research institutions, may increase as advances in technology are
made.





Benefits:
Environmental impact, performance and cost





Utilizing
virtually 100% recycled plastic, our structural products have the distinct
advantage of being environmentally friendly.  Our products address the
increasing worldwide environmental concerns for deforestation coupled with the
specific goals for recycling, reducing greenhouse gases and manufacturing
products without toxic materials.  We believe that our products in
certain installations will last longer than conventional creosote treated wooden
ties, offering significant cost savings in maintenance and product replacement,
and will have freedom from biological attack (including termites).





Intellectual
Property





Our
licensed technologies are in two broad areas: structural formulations and fire
retardants. We plan to protect our products’ unique characteristics by combining
design features with material formulations and processing
techniques.  The compositions are used to produce structural materials
from waste materials. The processing capacity allows the production of efficient
shapes from these blends and the creation of fire retardants.





- 3
-


In the
area of compositions, there are five different compositions that all consist of
HDPE (High Density Polyethylene) a polymer commonly available from post-consumer
and post-industrial waste streams, together with either stiffer polymers or in
combination with fiberglass. Since our most completely tested and accepted
product solution is presently railroad crossties, it is important to note that
each of these polymer combinations can be used in railroad crosstie
manufacturing.





We have a
license from Rutgers for a pending patent on a unique processing technology that
produces finer microstructures in the blends, and leads to even tougher end
products.





Included
in our license are three pending general patents covering manufactured shapes.
One of the patents covers both I-beams and tongue-in-groove planking. Another
covers a method to produce even longer I-beams with variable
shapes.   The third covers a newly designed railroad crosstie
that obviates the need for the expensive steel tie plate.





We also
have licenses from Rutgers for two pending fire retardant patents. One retardant
is designed to be sprayed onto plastic lumber and render it unable to sustain a
fire. This technology is designed to coat thermoplastics. The other fire
retardant coating was developed for the US Military, specifically to be used to
protect their ammunition boxes.





Human
Resources





As of
December 31, 2008, we had five full time employees and one part-time
employee.





Risk
Factors








In
addition to the other information set forth in this Form 10-KSB the issues and
risks described below should be considered carefully in evaluating our outlook
and future.  If any of these risks or uncertainties actually occurs,
our business, financial condition or operating results could be materially
harmed.  In that case, the trading price of our Common Stock could
decline and you could lose all or part of your investment.





Axion
has not generated any meaningful operating revenues.   If we are
unable to commercially develop and sell our structural plastic products, we will
not be able to generate profits and we may be forced to curtail
operations.





As of the
date hereof, Axion has generated limited revenues.   As a result,
we have limited operating revenue and we anticipate that, for at least the near
future, we will operate at a loss.  Our ultimate success will depend
on our ability to commercially develop and sell our structural plastic
products.  If we are unable to commercially develop and sell our
structural plastic products, we will not be able to generate profits and we may
be forced to curtail operations.





We
are dependent on our ability to raise capital from external funding
sources.  If we are unable to continue to obtain necessary capital
from outside sources, we will be forced to reduce or curtail
operations.





We have
not generated any cash flow from operations and we will not be cash flow
positive for some time.  We have limited financial
resources.  As a result we may need to obtain additional capital from
outside sources to continue operations and commercialize our business
plan.  We cannot assure that adequate additional funding will be
available, especially given the current financial
turmoil.  If we are unable to continue to obtain needed capital from
outside sources, we will be forced to reduce or curtail our
operations.





Our
ability to execute our business plan depends upon our ability to obtain
financing through





·
            bank
      or other debt financing,


·
            equity
      financing,


·
            strategic
      relationships and/or


·
            other
      means.








Our
independent auditors have expressed that there is substantial doubt about our
ability to continue as a going concern.





Our independent auditors issued an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern on our financial statements for fiscal year 2008, based on
the significant operating losses and a lack of external financing.  As
of September 30, 2008, the amount of our accumulated deficit was approximately
$2,271,320.  Our financial statements do not include any adjustments
that resulted from the outcome of this uncertainty.  Our inability to
continue as a going concern would require a restatement of assets and
liabilities on a liquidation basis, which would differ materially and adversely
from the going concern basis on which our consolidated financial statements have
been prepared.





- 4
-


Our
products are new and, for the most part, have limited acceptance in the
marketplace.  If our products do not receive market acceptance, our
ability to execute our business plan most likely will be adversely
affected.





Although
earlier versions of our structural composite railroad crossties, I-beams and
bridge decking were sold by Polywood over four years ago, none of our other
products, including our fire retardant composite railroad crossties, have been
sold and are new and untested in the marketplace.  Potential customers
are often resistant to trying new untested products.  If our products
do not receive market acceptance, our ability to commercialize our business plan
most likely will be adversely affected.





Our
business will be highly reliant on third party manufacturers. If one or more
manufacturers that we engage do not meet our manufacturing requirements, our
ability to manufacture and sell our products will be materially
impaired.





We plan
on relying on third parties to manufacture our products, and during 2008, we
entered into agreements with one or more experienced third parties to
manufacture our products. Consequently, we are dependent on third party
outsourcing for the manufacture of our products. Our business is dependent upon
our retention of manufacturers and the development and deployment by third
parties of their manufacturing abilities. There can be no assurance that we will
obtain the requisite manufacturers or, once retained, that these manufacturers
will be able to meet our manufacturing needs in a satisfactory and timely
manner, or that we can obtain additional manufacturers when and if needed.
Although we believe there are a number of potential manufacturers available, if
we are unable to retain manufacturers quickly or cost effectively, our ability
to manufacture and sell our products will be materially impaired. Our reliance
on third party manufacturers involves a number of additional risks, including
the absence of guaranteed capacity and reduced control over the manufacturing
process, delivery schedules, production yields and costs, and early termination
of, or failure to renew, contractual arrangements. Although we believe that
these manufacturers will have an economic incentive to perform such
manufacturing for us, the amount and timing of resources to be devoted to these
activities is not within our control, and there can be no assurance that
manufacturing problems will not occur in the future. A significant price
increase, an interruption in supply from one or more of such manufacturers, or
the inability to obtain additional manufacturers when and if needed, could have
a material adverse effect on our business, results of operations and financial
condition.





If
we are unable to develop substantial sales and marketing capabilities, we most
likely will not be able to generate adequate sales.





Initially,
sales and marketing will be conducted by our senior management team who, through
its prior activities, has background and connections in our
industry.  Eventually, with incremental funding, we plan on hiring
sales and marketing staff and implementing a detailed marketing
program.  However, there can be no assurance that we will develop a
sales and marketing force or that our sales and marketing efforts will be
successful.





Our
ability to effect and sustain our business plan and generate profitable
operations most likely will be materially adversely affected if we are unable to
purchase raw materials of acceptable quality or cost.





We
believe that the raw materials that we will need to manufacture our products are
available from multiple sources at relatively stable prices, except for recycled
plastic, which has cyclical variation in supply, quality and cost. Our inability
to secure supplies of raw materials of acceptable quality and costs could have a
material adverse effect on our ability to effect and sustain our business plan
and generate profitable operations.





Because our competitors may have
greater financial, marketing and research and development resources, we may not
be able to successfully compete in our industry.





We
compete with traditional construction material suppliers and at least one
company, North American Technology Group, which offers a polymer composite
product that competes in the railroad tie market.  Most of our
potential competitors have substantially greater financial and marketing
resources and capabilities. These companies and others may independently develop
technology for the production of structural plastic products similar or superior
to our technology, which may result in our product becoming less competitive or
obsolete. Competition from other companies, and possibly from universities and
research institutions, may increase as advances in technology are
made.





We
depend upon senior management and key personnel. Any loss of their services
could negatively affect our business. Our failure to retain and attract such
personnel could harm our business, operations and product development
efforts.





Our
success will depend to a significant extent, on the performance of Messrs.
Kerstein, Marc Green, our President and Treasurer, and Michael Johnson, our
Chief Financial Officer, and others who we hire. We do not anticipate having key
person insurance in place in respect to these or other key personnel. To the
extent that the services of any of our key personnel become unavailable, we will
be required to retain other qualified persons. We may not be able to find a
suitable replacement for any such person. The loss of the services of key
persons could have a material adverse effect on our business, financial
condition and results of operations.





- 5
-


Our
products require sophisticated research and development and marketing and sales.
Our success will depend on our ability to attract, train and retain qualified
research and development and marketing and sales personnel. Competition for
personnel in all these areas is intense and we may not be able to hire
sufficient personnel to achieve our goals. If we fail to attract and retain
qualified personnel, our business, operations and product development efforts
most likely would suffer.





We
may not have adequate protection for the intellectual property rights on which
our business depends.





Our
success depends, in part, on our ability to protect our important intellectual
property rights (including those licensed from Rutgers). The steps we have taken
may not be adequate to deter misappropriation or unauthorized use of our
proprietary information or to enable us to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights. We and/or Rutgers
have obtained and continue to seek patents with respect to newly developed
technologies. We also rely on a combination of trade secret, nondisclosure and
other contractual arrangements, and copyright laws to protect our proprietary
rights. We will enter into confidentiality agreements with our employees and
limit access to and distribution of our proprietary information, and if it is
necessary to disclose proprietary information to third parties for business
reasons, we will require that such third parties sign a confidentiality
agreement prior to any disclosure. However, these confidentiality agreements
cannot guarantee there will not be disclosure or misappropriation of such
proprietary information. In addition, litigation may be necessary to enforce our
intellectual property rights, protect trade secrets, determine the validity and
scope of the proprietary rights of others, or defend against claims of
infringement or invalidity. Intellectual property laws provide limited
protection. Moreover, the laws of some foreign countries do not offer the same
level of protection for intellectual property as the laws of the United States.
Litigation may result in substantial costs and diversion of resources, which may
limit the development of our business.





If we or
our manufacturers were found to be infringing any third party patents, we or
they could be required to pay damages, alter our or their products or processes,
obtain licenses or cease certain activities. We cannot be certain that if we or
they required licenses for patents held by third parties that they would be made
available on terms acceptable to us or them, if at all.





Management and affiliates own enough
shares to have a substantial impact on shareholder vote which may limit
shareholders’ ability to influence various corporate
actions.





Our
executive officers, directors, affiliates and entities controlled by them own
approximately 33.8% of the outstanding Common Stock. As a result, these
executive officers and directors will have a substantial impact on the vote on
matters that require stockholder approval such as election of directors,
approval of a corporate merger and reorganization, increasing or decreasing the
number of authorized shares, adopting corporate benefit plans, affecting a stock
split, amending our Articles of Incorporation or other material corporate
actions.





Environmental
liabilities and environmental regulations may have an adverse effect on our
business.





Previously,
we held minority and non-operating interests in oil and gas
properties.  The oil and gas business is subject to environmental
hazards such as spills, leaks or any discharges of petroleum products and
hazardous substances.  Although no claims have been made to date and
we no longer have any such interests, potential environmental liability may not
be extinguished with regard to a holder, such as us, of oil and gas interests
during the period in which the interests were held. Accordingly, these
environmental hazards could expose us to material liabilities for property
damage, personal injuries and/or environmental harms, including the costs of
investigating and rectifying contaminated properties.





We
have outstanding warrants and debentures, and we are able to issue “blank check”
preferred stock, that could be issued resulting in the dilution of Common Stock
ownership.





As of
September 30, 2008, we had outstanding warrants and debentures that, when
exercised and converted, could result in the issuance of up to 2,156,400
additional shares of common stock.  In addition, our Articles of
Incorporation allow the board of directors to issue up to 2,500,000 shares of
preferred stock and to fix the rights, privileges and preferences of those
shares without any further vote or action by the shareholders. We currently have
no preferred stock outstanding. To the extent that outstanding warrants and
debentures or similar instruments or convertible preferred stock issued in the
future are exercised or converted, these shares will represent a dilution to the
existing shareholders.  The preferred stock could hold dividend
priority and a liquidation preference over shares of our Common
Stock.   Thus, the rights of the holders of Common Stock are and will
be subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that we may issue in the future. Any such issuance could be
used to discourage an unsolicited acquisition proposal by a third
party.





- 6
-


Future
sales of our Common Stock may cause stock price to decline.





Sales of
substantial amounts of our Common Stock in the public market, or the perception
that these sales may occur, could cause the market price of our Common Stock to
decline.  In addition, the sale of our Common Stock could impair our
ability to raise capital through the sale of additional common or preferred
stock.





Our
stock price is highly volatile and the purchase or sale of relatively few shares
can disproportionately influence the share price.





The
trading price and volume of our Common Stock has been and may continue to be
subject to significant fluctuations in response to:





·
            our
      ability to  execute our business
plan;


·
            actual
      or anticipated quarterly variations in our operating
    results;


·
            the
      success of our business and operating strategy;
  and


·
            the
      operating and stock price performance of other comparable
      companies.





The
trading price of our Common Stock may vary without regard to our operating
performance. Historically, we have been a thinly traded stock, therefore
relatively few shares traded can disproportionately influence share
price.





We
have limited operating history with regard to our new business and, as a result,
there is a limited amount of information about us on which to make an investment
decision.





Our new
business is just getting started and we have obtained only limited revenues.
Accordingly, there is very little operating history upon which to judge our
current operations.





Our
Common Stock is deemed to be a "penny stock" and trading of our shares is
subject to special requirements that could impede our stockholders' ability to
resell their shares.





Our
shares are subject to the Penny Stock Reform Act of 1990 which may potentially
decrease your ability to easily transfer our shares. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated. Penny stocks
generally are equity securities with a price of less than $5.00. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a transaction in
a penny stock, the broker-dealer make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny stock rules.





Because
the risk factors referred to above could cause actual results or outcomes to
differ materially from those expressed in any forward-looking statements made by
us, you should not place undue reliance on any such forward-looking
statements.  Further, any forward-looking statement speaks only as of
the date on which it is made and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or reflect the occurrence of
unanticipated events.  New factors emerge from time to time, and it is
not possible for us to predict which will arise.  In addition, we
cannot assess the impact of each factor on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.





Item
2. Properties





Axion
owns no real property and rents approximately 1,000 square feet of space in
Basking Ridge, New Jersey pursuant to an oral month-to-month lease at a monthly
rent of $2,100.  These premises serve as the corporate
headquarters.








Item
3.  Legal Proceeding





In November 2005 and November 2007,
Holdings was named as party to suits filed in the State of Indiana by the
Sycamore Springs Homeowners Association, as well as certain homeowners in the
Sycamore Springs neighborhood of Indianapolis, Indiana, and by the developers of
the Sycamore Springs neighborhood.  The claimants alleged that various
Mid-States Engineering entities that are alleged to be subsidiaries of MSE
Corporation, which Holdings acquired in 1997, adversely affected the drainage
system of the Sycamore Springs neighborhood, and sought damages from flooding
that occurred on September 1, 2003.  Mediation efforts held in
November 2007 and April 2008 have been successful, and each of the suits has
been settled. The agreement is a compromise of disputed claims asserted or which
may be asserted by the claimants against the settling defendants for any past,
present and future losses, damages, and claims they may have against the
settling defendants.The claims from the all
three lawsuits arise from a single occurrence with one deductible applying to
the matter, and defense of the actions were provided by Holdings’ insurance
carrier.  We assumed a $100,000 obligation payable to our insurer,
which represents the deductible pursuant to the terms of Holdings’ insurance
coverage.





- 7
-


In April 2006, Holdings commenced an
action against Tonga Partners, L.P. (“Tonga”), Cannell Capital, L.L.C. and J.
Carlo Cannell in the United States District Court of New York, for disgorgement
of short-swing profits pursuant to Section 16 of the Securities Exchange Act of
1934, as amended.  On November 10, 2004, Tonga converted a convertible
promissory note into 1, 701,341 shares of Common Stock, and thereafter, between
November 10 and November 15, 2004, sold such shares for a short-swing
profits.  In September 2008, the District Court granted Holdings
summary judgment against Tonga for disgorgement of short-swing profits in the
amount of $4,965,898.  The defendants have indicated that they will be
appealing from the order granting Holdings summary judgment.





We are also subject to various other
routine litigation incidental to our business. Management does not believe that
any of these routine legal proceedings would have a material adverse effect on
our financial condition or results of operations.





Item
4.  Submission of Matters To A Vote Of Security Holders





On July
3, 2008, Holdings held a special meeting of its shareholders.  The
purpose of the meeting was to (a) approve changing the name of Holdings from
“Analytical Surveys, Inc.” to “Axion International Holdings, Inc.”; (b) approve
a reverse stock split of the outstanding Common Stock on a 1-for-4 basis; (c) to
approve an amendment to Holdings’ Article of Incorporation to permit actions of
the shareholders to be taken without a meeting by written consent of the holders
of the minimum number of votes necessary to authorize such action; and (d) to
approve an amendment to Holdings’ Article of Incorporation to permit actions of
the shareholders on matters other than the election of directors to be approved
if the votes cast favoring the action exceed the votes cast opposing the action,
unless otherwise required by law or the Articles of
Incorporation.  Each such matter was approved at the special meeting
by the shareholders, and as a result, effective as of August 4, 2008,
“Analytical Surveys, Inc.” amended its Articles of Incorporation to change its
name to “Axion International Holdings, Inc.” and effectuated a 1-for-4 reverse
stock split of its outstanding Common Stock.  The following table sets
forth the number of votes cast (on a pre-reverse split basis) for and against,
as well as the number of abstentions for each such matter.  There were
no broker non-votes as to any such matter.





For
                        Against
                        AbstainName
      change from “Analytical Surveys, Inc.” to “Axion International Holdings,
      Inc.”
                        31,767,807
                        207,939
                        110,116Reverse
      stock split of outstanding Common Stock on a1-for-4
      basis
                        31,556,379
                        516,074
                        13,409Amendment
      to Articles of Incorporation to permit action by written consent of
      shareholders
                        31,532,349
                        475,639
                        77,874Amendment
      to Articles of Incorporation to permit action if votes cast in favor
      exceed the votes cast opposing such action
                        31,553,804
                        366,494
                        165,564







- 8
-


PART
II.





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





As of September 30, 2008, there were
approximately 4,400 record holders of our Common Stock, and there were
13,978,136 shares of our Common Stock outstanding.  Our Common Stock
has been traded on the Over-the-Counter Bulletin Board since June 1,
2007.  From June 1, 2007 to August 3, 2008, our Common Stock was
traded under the symbol “ANLT”, and then following the name change, since August
4, 2008, the date of the reverse split, our Common Stock was traded under the
symbol “AXIH”.  From April 3, 2007, until June 11, 2007, our Common
Stock was traded on the OTC Pink Sheets.  Prior to April 3, 2007, our
Common Stock was traded on the NASDAQ Capital Market.  Our business
changed to that of Axion’s on March 20, 2008, the date of the
merger.  The following table sets forth the high and low sales prices
for our Common Stock (on a post-reverse split basis) as reported on NASDAQ or
Over-the-Counter Bulletin Board, as applicable, by quarter during each of our
last two fiscal years.  The high and low sale prices reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
necessarily represent actual transactions.





High
                    
                    LowYear
      Ended September 30, 2008First
      quarter
                    $
                    0.68
                    
                    $
                    0.32Second
      quarter
                    
                    0.72
                    
                    
                    0.32Third
      quarter
                    
                    1.84
                    
                    
                    0.72Fourth
      quarter
                    
                    1.80
                    
                    
                    0.93Year
      Ended September 30, 2007First
      quarter
                    $
                    4.04
                    
                    $
                    1.76Second
      quarter
                    
                    3.80
                    
                    
                    1.76Third
      quarter
                    
                    2.36
                    
                    
                    0.68Fourth
      quarter
                    
                    1.20
                    
                    
                    0.24








Dividends





Since becoming a public company, we
have not declared or paid cash dividends on our Common Stock and do not
anticipate paying cash dividends in the foreseeable future.  We
presently expect that we will retain all future earnings, if any, for use in our
operations and the expansion of our business.





Sales
      of Unregistered Securities





In August 2008, a holder of our
convertible debentures elected to convert $282,564 of principal into 706,410
shares of Common Stock.  In September 2008, holders of our debentures
elected to convert an additional $714,200 of principal into 2,109,833 share of
Common Stock.  The issuance of such shares was made in reliance upon
the exemption from registration afforded by Section 4(2) and the provisions of
Regulation D under the Securities Act of 1933, as amended.





Issuer
      Purchases of Equity Securities.





None






- 9
-


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





The
discussion of our financial condition and results of operations set forth below
should be read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this Form 10-KSB. This Form 10-KSB
contains forward-looking statements that involve risk and uncertainties. The
statements contained in this Form 10-KSB that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995. When used in
this Form 10-KSB, or in the documents incorporated by reference into this Form
10-KSB, the words “anticipate,” “believe,” “estimate,” “intend”, “expect”,
“may”, “will” and similar expressions are intended to identify such
forward-looking statements. Such forward-looking statements include, without
limitation, statements relating to competition, management of growth, our
strategy, future sales, future expenses and future liquidity and capital
resources. All forward-looking statements in this Form 10-KSB are based upon
information available to us on the date of this Form 10-KSB, and we assume no
obligation to update any such forward-looking statements. Our actual results,
performance and achievements could differ materially from those discussed in
this Form 10-KSB.





Overview





Axion
International Holdings, Inc. (“Holdings”) was formed in 1981 to provide data
conversion and digital mapping services to users of customized geographic
information systems.  On March 20, 2008, Holdings consummated an
Agreement and Plan of Merger (the “Merger”), among Holdings, Axion Acquisition
Corp., a Delaware corporation and direct wholly-owned subsidiary of the Holdings
(the “Merger Sub”), and Axion International, Inc., a Delaware corporation which
incorporated on August 6, 2006 with operations commencing in November 2007,
(“Axion”).  Pursuant to the Merger, the Merger Sub was merged into
Axion, with Axion continuing as the surviving corporation and a wholly-owned
subsidiary of Holdings.  Each issued and outstanding share of Axion
became 47,630 shares of Holdings common stock (“Common Stock”), or 9,190,630
shares in the aggregate constituting approximately 90.7% of Holdings issued and
outstanding Common Stock as of the effective date of the Merger.  The
Merger resulted in a change of control, and as such, Axion (“we”, “our” or the
“Company”) is the surviving entity.





Axion is
the exclusive licensee of revolutionary patented technologies developed for the
production of structural plastic products such as railroad crossties, bridge
infrastructure, marine pilings and bulk heading.  We believe these
technologies, which were developed by scientists at Rutgers University
(“Rutgers”), can transform recycled consumer and industrial plastics into
structural products which are more durable and have a substantially greater
useful life than traditional products made from wood, steel and
concrete.  In addition, we believe our recycled composite products
will result in substantial reduction in greenhouse gases and also offer flexible
design features not available in standard wood, steel or concrete
products.





The
Merger has been accounted for as a reverse merger in the form of a
recapitalization with Axion as the successor.  The recapitalization
has been given retroactive effect in the accompanying financial
statements.  The accompanying consolidated financial statements
represent those of Axion for all periods prior to the consummation of the
Merger.





Critical
Accounting Policies





Management’s
Discussion and Analysis of Financial Condition and Results of Operations are
based upon our financial statements, which have been prepared in accordance with
generally accepted accounting principles (“GAAP”) in the U.S. The preparation of
financial statements in conformity with GAAP requires management to make
estimates, judgments and assumptions that affect the amounts reported in our
condensed consolidated financial statements and accompanying notes. Our critical
accounting policies are those that affect our financial statements materially
and involve difficult, subjective or complex judgments by
management.





An
accounting policy is deemed to be critical if it requires an accounting estimate
to be made based on assumptions about matters that are highly uncertain at the
time the estimate is made, and if different estimates that reasonably could have
been used or changes in the accounting estimate that are reasonably likely to
occur could materially change the financial statements.





Cash and Cash
Equivalents.  We consider all highly liquid investments with
maturities of three months or less to be cash equivalents.  Our
investments are subject to potential credit risk. Our cash management and
investment policies restrict investments to low-risk, highly liquid
securities.





Income
Taxes.  Income taxes are reflected under the liability method,
which establishes deferred tax assets and liabilities to be recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.





- 10
-


U.S.
generally accepted accounting principles require that we record a valuation
allowance against deferred tax assets if it is “more likely than not” that we
will not be able to utilize it to offset future taxes.  Because we are
a development stage company and have no history of profitable operations, we
have not recognized any of this net deferred tax asset.  We currently
provide for income taxes only to the extent that we expect to pay cash taxes
(primarily state taxes and the federal alternative minimum tax) on current
taxable income.





Use of
Estimates.  The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date the
financial statements and the reported amount of revenues and expenses during the
reporting period.  Actual results could differ from those
estimates.





Inventories.  Inventories
are priced at the lower of cost (first–in, first–out) or market and consist
primarily of raw materials.  No adjustment has been to the cost of
inventories as of September 30, 2008.





Fair Value of Financial
Instruments.  SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments”, requires that we disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.





Property and
Equipment:Property and equipment is recorded at cost and
depreciated over the estimated useful lives of the assets using principally the
straight-line method. When items are retired or otherwise disposed of, income is
charged or credited for the difference between net book value and proceeds
realized thereon.  Ordinary maintenance and repairs are charged to
expense as incurred, and replacements and betterments are
capitalized.  The range of estimated useful lives to be used to
calculate depreciation for principal items of property and equipment are as
follow:





Asset
      Category
                
                Depreciation/
      Amortization PeriodFurniture
      and fixtures
                
                3
      to 5 yearsComputer
      equipment and purchased software
                
                3
      yearsMachinery
      and equipment
                
                3
      to 5 yearsLeasehold
      improvements
                
                Term
      of lease





Goodwill and Intangible
Assets:We have
adopted SFAS No. 142, “Goodwill and Other Intangible
Assets”, (“SFAS No. 142”). As a result, we do not amortize goodwill, and
instead annually evaluates the carrying value of goodwill for impairment, in
accordance with the provisions of SFAS No. 142. Goodwill represents the excess
of the cost of investments in subsidiaries over the fair value of the net
identifiable assets acquired.  We hold licenses and expect both
licenses and the cash flow generated by the use of the licenses to continue
indefinitely due to the likelihood of continued renewal at little or no
cost.





Impairment of Long-Lived
Assets:  In accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” assets such as property, plant, and
equipment, and purchased intangibles, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Goodwill and other intangible assets are tested for
impairment annually. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset.  There were no events or changes in
circumstances that necessitated a review of impairment of long lived
assets.





Loss per share:  We
have adopted SFAS No. 128, "Earnings per Share."
 Loss per common share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding during
the period. There were no dilutive securities outstanding for the period ended
September 30, 2008.





Concentration of credit risk:Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of cash and bank certificates of
deposit. These accounts are maintained with financial institutions insured by
the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2008,
the balances at various financial institutions over the FDIC insured limit
relating to cash and cash equivalents totaled approximately $138,826. We believe
these balances are not at risk as they are held by sound financial
institutions.





Stock Based
Compensation:We
have adopted the fair value recognition provision of Statement of Financial
Accounting Standards (“SFAS”) No. 123R “Accounting for Share-Based Payment
Compensation,” (Revised 2004), disclosure requirements of SFAS No. 123R, for
stock options and similar equity instruments (collectively, “Options”) issued to
employees.  As of September 30, 2008, we have not incurred any stock
based compensation expense. At September 30, 2008, the unamortized value of
employee stock options under SFAS No. 123R was approximately $627,600, which
will be expensed in future periods in accordance with the terms of the
performance-based terms of the options.





- 11
-


We
account for stock awards issued to nonemployees in accordance with the
provisions of SFAS No. 123 and Emerging Issues Task Force (“EITF”) Issue No.
96-18 Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods or Services (“EITF
96-18”).  Under SFAS No. 123 and EITF 96-18, stock awards to
nonemployees are accounted for at their fair value as determined under
Black-Scholes option pricing model.





Stock Issuance
Costs.  Stock issuance costs consist primarily of placement
fees and expenses and professional fees. These expenses are charged against the
related proceeds from the sale of our stock in the periods in which they occur
or are charged to expense in the event of a terminated stock
issuance.





Reverse Merger Purchase
Accounting.In connection with our Merger, we have made
estimates regarding the fair value of the assets acquired and the liabilities
assumed.   Adjustments to these estimates are made during the
acquisition allocation period, which is generally up to twelve months from the
acquisition date.  Subsequent to the allocation period, costs incurred
in excess of the recorded acquisition accruals are generally expensed as
incurred and if accruals are not utilized for the intended purpose, the excess
will be recorded as an adjustment to the cost of the acquired entity, which was
charged to paid in capital.





Recent Accounting
Pronouncements





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
No. 141(R)”). This Statement replaces SFAS No. 141, Business Combinations, and
requires an acquirer to recognize the assets acquired, the liabilities assumed,
including those arising from contractual contingencies, any contingent
consideration, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions specified in the statement. SFAS No. 141(R) also requires the
acquirer in a business combination achieved in stages (sometimes referred to as
a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with SFAS No.
141(R)). In addition, SFAS No. 141(R)'s requirement to measure the
noncontrolling interest in the acquiree at fair value will result in recognizing
the goodwill attributable to the noncontrolling interest in addition to that
attributable to the acquirer.  SFAS No. 141(R) amends SFAS No. 109,
Accounting for Income
Taxes, to require the acquirer to recognize changes in the amount of its
deferred tax benefits that are recognizable because of a business combination
either in income from continuing operations in the period of the combination or
directly in contributed capital, depending on the circumstances. It also amends
SFAS No. 142, to, among other things; provide guidance on the impairment testing
of acquired research and development intangible assets and assets that the
acquirer intends not to use. SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. We do not
expect the adoption of SFAS No. 141(R) will have a material impact on our
financial statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS No. 160”), which amends
Accounting Research Bulletin 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. SFAS No. 160 also changes the
way the consolidated income statement is presented by requiring consolidated net
income to be reported at amounts that include the amounts attributable to both
the parent and the noncontrolling interest. It also requires disclosure, on the
face of the consolidated statement of income, of the amounts of consolidated net
income attributable to the parent and to the noncontrolling interest. SFAS No.
160 requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated and requires expanded disclosures in the
consolidated financial statements that clearly identify and distinguish between
the interests of the parent owners and the interests of the noncontrolling
owners of a subsidiary. SFAS No. 160 is effective for fiscal periods, and
interim periods within those fiscal years, beginning on or after December 15,
2008. We do not expect the adoption of SFAS No. 160 to have a material impact on
our financial statements.





In
February 2007, Financial the FASB issued SFAS No. 159, “The FairValue Option for Financial Assets and
Financial Liabilities”(“SFAS No. 159”),
which provides companies with an option to report selected financial assets and
liabilities at fair value with the changes in fair value recognized in earnings
at each subsequent reporting date. SFAS No. 159 provides an opportunity to
mitigate potential volatility in earnings caused by measuring related assets and
liabilities differently, and it may reduce the need for applying complex hedge
accounting provisions. If elected, SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. Management is currently evaluating
the impact that this statement may have on our results of operations and
financial position, and has yet to make a decision on the elective adoption of
SFAS No. 159.





In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
(“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure
assets and liabilities. SFAS No. 157 addresses the requests from investors for
expanded disclosure about the extent to which companies’ measure assets and
liabilities at fair value, the information used to measure fair value and the
effect of fair value measurements on earnings. SFAS No. 157 applies whenever
other standards require (or permit) assets or liabilities to be measured at fair
value, and does not expand the use of fair value in any new circumstances. SFAS
No. 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and will be adopted by the Company in the first quarter
of fiscal year 2009. We are unable at this time to determine the effect that the
adoption of SFAS No. 157 will have on our results of operations and financial
condition.




- 12
-


In May
2008, the FASB issued SFAS 162 “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements that are presented in conformity with
generally accepted accounting principles. SFAS 162 becomes effective 60 days
following the SEC’s approval of the Public Company Accounting Oversight Board
amendments AU Section 411 “The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles.” The Company does not expect that the
adoption of SFAS 162 will have a material impact on its consolidated financial
statements.






In April
2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of
Intangible Assets,” (“FSP No. 142-3”). FSP No. 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, in order to improve the consistency between the useful life of a
recognized intangible asset under SFAS No. 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141R,
“Business Combinations”
(revised 2007), and other U.S. generally accepted accounting principles. FAS
142-3 is effective for fiscal years beginning after December 15, 2008 and early
adoption is prohibited. The Company is currently evaluating the impact, if any,
that FAS 142-3 will have on its consolidated financial position, results of
operations and cash flows.






In June
2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP
03-6-1”), which classifies unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents as participating
securities and requires them to be included in the computation of earnings per
share pursuant to the two-class method described in SFAS No. 128, “Earnings per
Share.” FSP 03-6-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. It
requires all prior period earnings per share data presented to be adjusted
retrospectively. The Company is currently evaluating the effect, if any, that
the adoption of FSP 03-6-1 will have on its consolidated financial position,
results of operations and cash flows.






In
September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 requires more extensive
disclosure regarding potential adverse effects of changes in credit risk on the
financial position, financial performance, and cash flows of sellers of credit
derivatives. FSP 133-1 also amends FASB Interpretation No. 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others,” to require additional disclosure about
the current status of the payment or performance risk of a guarantee. FSP 133-1
also clarifies the effective date of FASB Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities,” by stating that the disclosures
required should be provided for any reporting period (annual or quarterly
interim) beginning after November 15, 2008. The Company is currently evaluating
the effect, if any, that the adoption of FSP 133-1 will have on its consolidated
financial position, results of operations and cash flows.







Litigation.We are
subject to various claims, lawsuits and administrative proceedings that arise
from the ordinary course of business.  Liabilities and costs
associated with these matters require estimates and judgment based on
professional knowledge and experience of management and our legal
counsel.  When estimates of our exposure for claims or pending or
threatened litigation matters meet the criteria of SFAS No. 5 “Accounting for
Contingencies”, amounts are recorded as charges to
operations.  The ultimate resolution of any exposure may change as
further facts and circumstances become known.  See Note 11 –
“Litigation and Other Contingencies”.





Results
of Operations





From
Inception through September 30, 2008





Revenue.We are a development
stage commercial company and have not generated any meaningful revenues from
operations. Revenues of $6,472 were primarily related a purchase of 6,000
railroad crossties to a foreign transit authority for testing.





Research and Development
Costs.Research and development costs totaled $310,761 and
included expenses related to prototype molds and products, professional
consulting fees, membership dues paid to technology-related organizations that
are directly related to our license, as well as salaries and expenses related to
the development of our quality control processes.  We continue to work
with the lead scientist at Rutgers University to enhance our product
formulations, develop new innovative products, and expand the reach of our
existing products.





Marketing and Sales
Expenses.Marketing and selling expenses totaled $90,945 and
included salaries and expenses directly related to our marketing and selling
efforts.  We are in the early stages of implementing our marketing and
sales strategies. Our initial target markets are the domestic and international
railroad industry, the U.S. military, golf architecture, and industrial
engineering firms. We have had early success with the US Army - in July and
September, we received orders for the fabrication and installation of two
thermoplastic composite I-Beam tank bridge at Fort Bragg, North
Carolina.





- 13
-


General and
Administrative.General and administrative costs totaling
$1,180,169 include salaries paid to our executive officers, consulting fees,
travel, supplies, insurance, professional fees and patent defense
costs.





Depreciation and
Amortization.Depreciation and amortization totaled $25,609
from inception through September 30, 2008.





Interest Expense,
Net.  Our Debentures and Series B Debentures earned interest at
the rate of 13% per annum until September 29, 2008.  Commencing on
September 29, 2008, our Debentures, Series B Debentures and New Debentures
earned interest at the rate of 9% per annum.  Accordingly, we recorded
coupon interest expense totaling approximately $104,439 for the period ending
September 30, 2008.  Additionally, we amortize the discount that
represents the fair value of beneficial conversion feature of the Debentures,
Series B Debentures and New Debentures as interest expense. We recorded
approximately $405,677 in non-cash interest expense from March 20, 2008 through
September 30, 2008 as we amortized the debenture discounts.  We
recorded an additional non-cash interest expense totaling $179,950 principally
related to the issuance of a new debenture issued as an incentive to a party
that acquired portions of our debentures.   Interest expense in
future periods will increase proportionately until such debentures are converted
into Common Stock or are repaid in full.





Income Taxes. Federal income tax expense
for fiscal year 2008 is projected to be zero. Accordingly, an effective federal
income tax rate of 0% was recorded for the period from inception through
September 30, 2008.  As a result of the uncertainty that sufficient future
taxable income can be recognized to realize additional deferred tax assets, no
income tax benefit from inception through September 30, 2008 was
recorded.





Net Loss.We recorded a net loss
of approximately $2,271,320 through September 30, 2008.  We will
continue to incur losses during the development stage of the
Company.





Liquidity
And Capital Resources:  Plan Of Operation




As of
September 30, 2008, we had $138,826 in cash and cash equivalents.  Our
debentures bear interest at the rate of 9% per annum and are due and payable on
September 30, 2010, if not converted into Common Stock.  As of
September 30, 2008, the aggregate outstanding principal amount of the
debentures was $725,763. The Series A Debentures and the Series B
Debentures are convertible at the option of the holders into Common Stock at a
rate of $0.40 and $0.30 per share, and accordingly, we may issue up to 1,614,954
shares of Common Stock if the remaining principal balance is converted in its
entirety.  The New Debentures are convertible at the option of the
holders into Common Stock at a rate of $1.50 per share, and accordingly, we may
issue up to 115,000 shares of Common Stock if the remaining principal balance is
converted in its entirety.  We may also elect to pay interest in the
form of Common Stock at the applicable conversion rate of each debenture. We
recorded the debentures at a discount after giving effect to the $986,747
intrinsic value of the beneficial conversion feature and recorded the discount
as equity.  We are amortizing the discount as interest expense over
the life of the debentures as the carrying value of the debentures accretes to
the respective face values.   We recorded non-cash interest
expense for the period from March 20 through September 30, 2008 totaling
$585,119.  The carrying value of the debentures at September 30, 2008
was $307,243.





We have
used $1,297,391 in our operating activities since inception, primarily as a
result of our initial and continuing activities devoted to commercializing our
business.   Financing activities, consisting principally of the sale
of securities, generated net cash proceeds totaling approximately $1,337,242
from inception through September 30, 2008. We used $358,742 to purchase
equipment, machinery, software, and leasehold improvements from inception to
September 30, 2008, including $261,425 for machinery and $56,329 for software
that will be used in the production and design of our products.  We
also invested approximately $48,000 in the acquisition of our license from
Rutgers during the period from inception through September 30,
2008.  We received $506,000 from the sale of assets we acquired in the
Merger.





- 14
-


We
assumed approximately $358,000 of liabilities in excess of the fair value of the
assets we acquired in the Merger.  Principally all of the obligations
are comprised of the fair value of the debentures, as discounted for the
beneficial conversion feature. We believe we will need to raise additional
capital through additional equity or debt financing in order to fund our
operations and repay our debt obligations. Our current operating plans for the
next fiscal year are to meet our existing customer commitments, enhance our
research and development capabilities, expand our marketing and sales and
engineering staffs, and continue to develop innovative solutions.  Our
ability to pay principal and interest on our outstanding debentures, which are
due in September 2010, as well as to meet our other debt obligations and
requirements to fund our planned capital expenditures, depends on our future
operating performance and ability to raise capital.We
may receive a substantial amount of cash pursuant to the judgment rendered
against Tonga, but the outcome and the timing of the appeal filed by Tonga is
uncertain.  We anticipate that we will have to raise additional funds
through the issuance of debt and/or equity during the next twelve
months.  There can be no assurance that financing will be available,
or if available, that such financing will be upon terms acceptable to us.Please see the Risk Factor
“We are dependent on our ability to raise capital from external funding
sources.  If we are unable to continue to obtain necessary capital
from outside sources, we will be forced to reduce or curtail operations” in
“Item 1.  Description of Business” above.





Disclosure
About Off-Balance Sheet Arrangements





We do not
have any transactions, agreements or other contractual arrangements that
constitute off-balance sheet arrangements.











Item
7.  Financial Statement





The
information required by this item is included in pages F-1 through F-22 attached
hereto and incorporated by reference. The index to the consolidated financial
statements can be found on page F-1.








- 15
-





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





None.











Item
8A(T). Controls and Procedures





Evaluation
of the Company's Disclosure Controls and Procedures




We carried out an evaluation, under the
supervision and with the participation of the Company’s management, including
our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of our “disclosure controls and procedures” (as defined in Rules
13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended 9the
“Exchange Act”)) as of September 30, 2008.  Based upon that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures are effective, in all
material respects, with respect to the recording, processing, summarizing, and
reporting, within the time periods specified in the Securities and Exchange
Commission's rules and forms, of information required to be disclosed by us in
the reports that we file or submit under the Exchange Act. In designing and
evaluating our disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurances of achieving the desired control objectives,
as ours are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.





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 defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act.  Internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation and fair presentation of financial statements for
external purposes, in accordance with generally accepted accounting
principles.  The effectiveness of any system of internal control over
financial reporting is subject to inherent limitations and therefore, may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness of future periods are subject to the risk that the 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 internal control over financial reporting using the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission.  Based on this evaluation.our
management  concluded that as of September 30, 2008 , our internal
controls over financial reporting were effective,





Management
will continue to monitor and evaluate the effectiveness of our internal controls
and procedures and its internal control over financial reporting on an ongoing
basis and are committed to taking further action and implementing enhancements
or improvements, as necessary.





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





Changes in internal control over
financial reporting.





There has been no change in our
internal control over financial reporting (as defined in Rules 13a-13(f) and
15d-15(f) under the Exchange Act) that occurred during our fourth fiscal quarter
of the fiscal year ended September 30, 2008, that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





Item
8B.  Other Information





None.








- 16
-


PART
III.





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





The
following table sets forth the names and ages of all of our current executive
officers and directors along with their current positions.





Name                                        
 Age                   Position


James
Kerstein                   
       50                   Chief
Executive Officer and Director


Marc
Green                                 61                   President,
Treasurer and Director


Michael
Johnson             
         56                   Chief
Financial Officer


Michael
Martin                          58                   Secretary
and Director


Lori A.
Jones                              51                   Director




The
principal occupations for the past five years (and in some instances, for prior
years) of each of our executive officers and directors are as
follows:





James J. Kerstein. Mr.
Kerstein has served as one of our directors and as our Chief Executive Officer
since the Effective Date.  He has served as the Chief Executive
Officer of Axion since 2007.  Prior to joining Axion, Mr. Kerstein was
the President of Plast-O-Matic Valves Inc., a privately-held manufacturer of
high end polymer valves focused on the semiconductor and wastewater
industries.   From 1996 to 2004, he was the founder, Chief
Executive Officer, President and Chairman of Polywood, Inc., a manufacturer of
recycled plastic resins utilizing the Rutgers University developed technologies
for the production of structural plastic products.  Mr. Kerstein is
credited as a co-inventor on multiple patents dealing with formulations and uses
of recycled plastics





Marc Y. Green. Mr. Green has
served as one of our directors and as our President and Treasurer since the
Effective Date.  He has served as President and Treasurer of Axion
since its inception in August 2006.  From July 2007 to December 2007,
Mr. Green was an Investment Advisor at Merrill Lynch Private Client Group
advising high net worth individuals  Prior to joining Merrill Lynch,
Mr. Green was a Senior Vice President of Keefe, Bruyette & Woods, an
investment banking firm, managing institutional sales.  From March
2003 to September 2004, Mr. Green served as Chief Operating Officer of Polywood,
Inc.





Michael Johnson. Mr. Johnson
was appointed as our Chief Financial Officer in April 2008.  Mr.
Johnson devotes approximately 30% of his time to our
business.  He is the founder and chief executive officer of Trumpe
Global Enterprises, a management consulting firm, and served as a Managing
Director and Chief Financial Officer of JP Morgan Chase in their Technology
& Operations division from September 2000 to December 2005.  Prior
to joining JP Morgan Chase, Mr. Johnson was an Executive Vice President and
Chief Financial Officer of African Continental Telecommunications Holdings Ltd.,
an African satellite telecommunications venture, from August 1997 to August
2000.  Mr. Johnson served as Senior Vice President of Finance and
Administration for NFL Properties from April 1996 to July 1997.  From
1982 to 1996, Mr. Johnson served in various capacities at AT&T, including
Chief Financial Officer and Vice President of General Business Communication
Systems.





Michael M. Martin. Mr. Martin
has served as our Secretary since the Effective Date and as one of our directors
since May 2008.  He is presently a partner in Regal Capital, LLC, an
M&A firm that specializes in developing strategic financial and business
models for emerging companies in strategic markets.  Prior to his
partnership at Regal, Mr. Martin had served as Chief Executive Officer of
BioEnergy of America, Inc., a company dedicated to developing renewable sources
of energy, and as managing director of R&M Financial Associates, a merger
and acquisition consulting firm specializing in small and mid-size companies
across multiple industries.  From 1991 to 1999, he was Chairman and
President of Proformix, Inc., a publicly traded manufacturer of computer
equipment. He has also served as President of Centercore of NJ, a
business-to-business consulting company, as well as President and of Centercore,
Inc., a publicly traded manufacturing company.  Mr. Martin also serves
on the Board of Directors of Adherex Technologies, Inc. and Millennium
Biotechnologies Group, Inc.





Lori A. Jones. Ms. Jones has
served as one of our directors since December 1, 2006.  She served as
our Chief Executive Officer from December 2004 to the Effective
Date.  Ms. Jones served as our interim Principal Financial Officer
from December 2006 to the Effective Date and as our Chief Financial Officer from
January 2003 until December 2004.  From March 2001 to January 2003,
Ms. Jones was a partner with Tatum CFO Partners LLP, a financial consulting
company.  From May 2000 to March 2001, Ms. Jones served as the chief
financial officer of Worldmerc Incorporated. From January 1999 to May 2000, Ms.
Jones was the chief financial officer of Billserv Inc., an electronic billing
presentation and payment service company.  From May 1990 to December
1998, Ms. Jones served in various capacities, including chief financial officer,
at Docucon, Inc., a document imaging services company.  Ms. Jones is a
C.P.A. and holds a M.B.A. from the University of Texas at San
Antonio.





- 17
-


Family
Relationships





There are
no family relationships among our executive officers and directors.





Legal
Proceedings





During the past five years, none of our
executive officers, directors, promoters or control persons has been involved in
a legal proceeding material to an evaluation of the ability or integrity of such
person.





Section
16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities
Exchange Act of 1934 requires our directors and executive officers, and any
persons who own more than 10 percent of a registered class of our equity
securities, to file reports of ownership and changes of ownership on Forms 3, 4
and 5 with the Securities
and Exchange Commission.  Officers, directors, and greater than 10%
shareholders are required to furnish us with copies of all such forms that they
file.





To our
knowledge, based solely on review of the copies of such reports furnished to us
during fiscal 2008, all such filing requirements were met, except Mr. Johnson
failed to file a Form 3 upon becoming the Chief Financial Officer.





Code
of Ethics





The Company adheres to the highest
legal and ethical standards in business. We adopted a code of ethics which our
senior financial officers, executive officers, and general and project managers
are expected to adhere to and promote throughout the
organization.  Our code of ethics may be found on our website at www.axion.com.  We
intend to disclose on our website any waivers or amendments to our code of
ethics within five business days of such action.





Item
10.  Executive Compensation





The following Summary Compensation
Table sets forth, for the years indicated, all cash compensation, paid,
distributed or accrued for services, including salary and bonus amounts,
rendered in all capacities by our Chief Executive Officer, our former Chief
Executive Officer and all other executive officers who received or are entitled
to receive compensation in excess of $100,000 during the stated
period.





Summary
      Compensation TableName
      and
                        Principal
      Position
                      
                      Fiscal
                        Year
                      
                      Salary
                      
                      Bonus
                      
                      Option
      Awards
                      
                      All
      other Compensation
                      
                      Total($)
                      
                      ($)
                      
                      ($)
                      
                      ($)
                      
                      ($)James
      Kerstein
                      
                      2008
                      
                      208,000
                      
                      -
                      
                      -
                      
                      10,200(1)
                      
                      218,200Chief
      Executive OfficerMarc
      Green
                      
                      2008
                      
                      120,000
                      
                      -
                      
                      -
                      
                      -
                      
                      120,000President
      and TreasurerMichael
      Johnson (2)
                      
                      2008
                      
                      22,500
                      
                      -
                      
                      -
                      
                      -
                      
                      22,500Chief
      Financial OfficerMike
      Martin
                      
                      2008
                      
                      -
                      
                      -
                      
                      -
                      
                      -
                      
                      -SecretaryLori
      A. Jones (3)
                      
                      2008
                      
                      38,586
                      
                      -
                      
                      -
                      
                      9,300
                      
                      47,866Former
      President, Chief Executive Officer and interim Principal Financial
      Officer
                      
                      2007
                      
                      175,000
                      
                      50,000
                      
                      9,964
                      
                      3,328(4)
                      
                      238,292





(1)
Includes automobile allowance in the amount of $850.00 per month.


(2)
Michael Johnson joined the in April 21, 2008 as Chief Financial Officer on a
part-time basis


(3) Lori
A. Jones resigned as President, Chief Executive Officer and interim Principal
Financial Officer on March 20, 2008.


(4)
Includes employer’s matching contribution to the 401k Incentive Savings
Plan








- 18
-





Employment
Agreements





James
Kerstein





Axion
entered into an employment agreement, dated as of January 1, 2008, with Mr.
Kerstein that provides for his continued employment with Axion as Chief
Executive Officer through January 1, 2013. Under the terms of the employment
agreement, Mr. Kerstein receives annual base compensation in the amount of
$208,000, which will be increased to the following amounts upon reaching the
following revenue milestones: (i) $388,000 upon Axion achieving annual revenues
of $10,000,000, (ii) $488,000 upon Axion achieving annual revenues of
$15,000,000, and (iii) $508,000 upon Axion achieving annual revenues of
$25,000,000.  Mr. Kerstein is also entitled to receive benefits
(including health insurance) provided to other senior executives and automobile
allowance of $850 per month.





In
addition, Mr. Kerstein was awarded options to purchase 16 shares of Common Stock
of Axion at an exercise price of $1.00 per share.  As a result of the
Merger and the reverse stock split, such options were automatically converted
into the right to purchase 762,076 shares of Common Stock of the Company, at an
exercise price of $.00002 per share.  The options are exercisable for
a term of five years, of which (i) 190,519 shares vest upon Axion achieving
annual revenues of $10,000,0000, (ii) 285,779 shares vest upon Axion achieving
annual revenues of $15,000,000 and (iii) 285,779 shares vest upon Axion
achieving annual revenues of $25,000,000; provided, all of the options vest in
the event of (i) a change of control, as defined in his employment agreement,
(ii) termination of Mr. Kerstein’s employment by Axion without cause, as defined
in his employment agreement, or (iii) termination of Mr. Kerstein’s employment
by Mr. Kerstein  for good reason, as defined in the employment
agreement.





If
Mr. Kerstein is terminated without cause, as defined in his employment
agreement, or by Mr. Kerstein for good reason, as defined in his employment
agreement, he will receive (i) the remainder of his salary, (ii) benefits
provided to other senior executives and (iii) automobile allowance of $850 per
month, each through the normal expiration date of his employment
term.  If Mr. Kerstein is terminated due to his permanent disability,
he will receive for a period of six months (i) his base salary, (ii) benefits
provided to other senior executives and (iii) automobile allowance of $850 per
month.  In addition, if Mr. Kerstein is terminated due to his death,
he will receive base salary for a period of six months.





The
agreement also contains covenants governing confidentiality, non-competition and
non-solicitation upon the termination of his employment. The non-compete
continues for a period of 12 months following termination of
Mr. Kerstein’s employment.





Mr.
Kerstein’s agreement was amended in December 2008 solely for the purpose of
making it more compliant with provisions of Section 409A of the Internal Revenue
Code that took effect on December 31, 2008.





Marc
Green





Axion has
entered into an employment agreement, dated as of January 1, 2008, with Mr.
Green that provides for his continued employment with Axion as President through
January 1, 2011. Under the terms of the employment agreement, Mr. Green
receives annual base compensation in the amount of $120,000, which will be
increased to the following amounts upon reaching the following revenue
milestones:  (i) $150,000 upon Axion achieving annual revenues of
$10,000,000, and (ii) $180,000 upon Axion achieving annual revenues of
$25,000,000.  Mr. Green is also entitled to receive benefits
(including health insurance) provided to other senior executives.





In
addition, Mr. Green was awarded options to purchase 8 shares of Common Stock of
Axion at an exercise price of $1.00 per share.  As a result of the
Merger and reverse stock split, such options were automatically converted into
the right to purchase 381,038 shares of Common Stock of the Company, at an
exercise price of $.00002 per share.  The options are exercisable for
a term of five years and vest upon Axion achieving annual revenues of
$25,000,000; provided, all of the options vest in the event of (i) a change of
control, as defined in his employment agreement, (ii) termination of Mr. Green’s
employment by Axion without cause, as defined in his employment agreement, or
(iii) termination of Mr. Green’s employment by Mr. Green for good reason, as
defined in the employment agreement.





If
Mr. Green is terminated without cause, as defined in his employment
agreement, or by Mr. Green for good reason, as defined in his employment
agreement, he will receive (i) his base salary for up to one year, (ii) benefits
provided to other senior executives (including health insurance) through the
normal expiration date of his employment term and (iii) automobile allowance of
$850 per month through the normal expiration date of his employment
term.  If Mr. Green is terminated due to his permanent disability, he
will receive for a period of six months (i) his base salary, and (ii) benefits
provided to other senior executives.  In addition, if Mr. Green is
terminated due to his death, he will receive base salary for a period of six
months.





- 19
-


The
agreement also contains covenants governing confidentiality, non-competition and
non-solicitation upon the termination of his employment. The non-compete
continues for a period of 12 months following termination of
Mr. Green’s employment.





Mr.
Green’s agreement was amended in December 2008 solely for the purpose of making
it more compliant with provisions of Section 409A of the Internal Revenue Code
that took effect on December 31, 2008.





Lori
A. Jones





Holdings
had entered into an employment agreement, dated as of April 1, 2005, with Ms.
Jones that provided for her continued employment as Chief Executive Officer or
such other position as may be mutually agreed. Under the terms of the employment
agreement, Ms. Jones was entitled to receive a base salary of $175,000 and bonus
compensation of $50,000 payable in 12 monthly installments upon the stockholder
approval or closing of an acquisition, merger or other strategic
transaction.  Pursuant to an agreement dated March 28, 2008, Ms. Jones
agreed to receive 25,000 shares of our Common Stock in lieu of the $50,000 cash
bonus she was entitled to receive as a result of the Merger.  Ms.
Jones was also entitled to receive benefits provided to other senior
executives.  Ms. Jones also participated in an incentive reward
program, which includes a 1% overriding royalty interest that is proportionately
reduced to our net interest in all oil and gas deals.





Upon
termination of Ms. Jones’ employment without cause, as defined in her employment
agreement, or if she resigned her employment for good reason, as defined in her
employment agreement, including a termination of employment in connection with a
change of control, as defined in her employment agreement, Ms. Jones was
entitled to receive salary for a period of twelve months.  Ms. Jones
agreed to terminate her employment agreement without any obligation on the part
of Holdings to pay her severance.





In April
2008, Holdings entered into a consulting arrangement with Ms. Jones whereby Ms.
Jones agreed to continue to provide consulting services to the Company’s new
management team through December 2008.  Pursuant to the consulting
arrangement, Ms. Jones is entitled to receive a fixed fee of $22,500 plus a
monthly fee of $3,000.





Compensation
of Directors





The following table shows compensation
to all directors who were not also employees or officers during fiscal year
ended September 30, 2008.





Compensation
      of DirectorsName
                  
                  Stock
                    Awards
                  
                  All
      other
                    Compensation
                  
                  Total($)
                  
                  ($)(3)
                  
                  ($)Rad
      Weaver (1)
                  
                  3,630
                  
                  1,037
                  
                  4,667Hank
      Cohn (1)
                  
                  2,135
                  
                  610
                  
                  2,745R.
      Thomas Roddy (2)
                  
                  3,849
                  
                  1,099
                  
                  4,948Edward
      P. Gistaro (2)
                  
                  3,849
                  
                  1,099
                  
                  4,948





(1)
Messrs Weaver and Cohn resigned as members of the Board of Directors effective
March 20, 2008.


(1)
Messrs Roddy and Gistaro resigned as members of the Board of Directors effective
May 11, 2008.


(2)
Expense to offset tax impact of Common shares issued in April to address unpaid
Board compensation





Outstanding
Equity Awards at Fiscal Year End





Option
      AwardsName
                
                Number
      of Securities Underlying Unexercised Options (#)
    Unexercisable
                
                Option
      Exercise Price
                  ($)
                
                Option
      Expiration
                  DateJames
      Kerstein
                
                762,076
                
                .00002
                
                1/1/13Marc
      Green
                
                381,038
                
                .00002
                
                1/1/13














- 20
-





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





The
following table sets forth information regarding the number of shares of our
Common Stock beneficially owned as of September 30, 2008, by each of our
directors, each of our executive officers, all of our executive officers and
directors as a group, and by any person or “group,” as that term is used in
Section 13(d)(3) of the Exchange Act, known to us to own beneficially more than
5% of the outstanding shares of our Common Stock. Except as otherwise set forth
below, the address of each of the persons listed below is c/o Axion, 665
Martinsville Road, Basking Ridge, New Jersey 07920.





Name
      and Address
                    Of
      Beneficial Owner
                  
                  Amount
      and Nature of Beneficial Ownership
                  
                  Percent
                    of
      Class (1)James
      Kerstein (2)
                  
                  2,000,450
                  
                  14.4%Marc
      Green (3)
                  
                  1,190,744
                  
                  8.6%Michael
      Martin (4)
                  
                  1,510,340
                  
                  10.8%Lori
      A. Jones
                  
                  26,960
                  
                  *Michael
      Johnson
                  
                  -
                  
                  *Rutgers
      – The State University of New Jersey
                    24
      Addison Drive
                    Fairfield,
      NJ 07004
                  
                  714,447
                  
                  5.1%ADH
      Ventures, LLC (5)
                    24
      Addison Drive
                    Fairfield,
      NJ 07004
                  
                  1,398,377
                  
                  9.9%Divash
      Capital Partners, LLC (6)
                    350
      Third Avenue
                    New
      York NY 10022
                  
                  812,500
                  
                  6.6%All
      directors and officers as a group
                    (5
      persons)
                  
                  4,728,494
                  
                  33.8%





* Less than 1% of outstanding
shares.





(1)
            As
      of September 30, 2008, we had 13,978,136 shares of common stock
      outstanding.  Unless otherwise indicated in these footnotes,
      each stockholder has sole voting and investment power with respect to the
      shares beneficially owned. All share amounts reflect beneficial ownership
      determined pursuant to Rule 13d-3 under the Exchange Act. All information
      with respect to beneficial ownership has been furnished by the respective
      director, executive officer or stockholder, as the case may
      be.


(2)
            Excludes
      options to purchase 762,076 shares of common stock, which options have not
      yet vested.


(3)
            Excludes
      options to purchase 381,038 shares of common stock, which options have not
      yet vested.


(4)
            Represents
      (a) 850,191 shares held by Mr. Martin and (b) 660,149 shares held by Regal
      Capital, LLC, of which Mr. Martin is the managing
  member.


(5)
            Represents
      (a) 1,398,377 shares of common stock and (b) shares of common stock
      issuable upon conversion of our 9% Convertible Debentures (which
      debentures prohibit the conversion thereof to the extent following the
      conversion the holder or its affiliates would beneficially own more than
      9.99% of the total number of issued and outstanding shares of our common
      stock) to the extent ADH Ventures, LLC will not be deemed to be a holder
      of more than 9.9% of the total number of issued and outstanding shares of
      our common stock following such
conversion.


(6)
            Represents
      (a) 812,500 shares of common stock and (b) 115,000 shares of common stock
      issuable upon conversion of our 9% Convertible
  Debentures.






- 21
-


Equity
Compensation Plan Information





The following table provides
information regarding the status of our existing equity compensation plans at
September 30, 2008.





Plan Category
                                            Number
      of securities to be issued upon exercise of outstanding options, warrants and rights
                                            
                                            
                                            Weighted-average
      exercise price of outstanding option, warrants and rights
                                            
                                            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in the second column)Equity
      compensation plans approved by security holders
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            2,096,720Equity
      compensation plans not approved by security holders
                                            
                                            1,350,614
                                            
                                            
                                            $
                                            0.0006
                                            
                                            
                                            21,250Total
                                            
                                            1,350,614
                                            
                                            
                                            $
                                            0.0006
                                            
                                            
                                            2,117,970










2000
Stock Incentive Plan


In September
2000, the Board of Directors adopted the 2000 Stock Incentive Plan (the “2000
Plan”). Pursuant to applicable law, the 2000 Plan has not been approved by our
shareholders.  The 2000 Plan provides for the granting of incentive
stock options and non-qualified stock options, as determined by a committee
appointed by the Board of Directors; however since the 2000 Plan has not been
approved by shareholders, only non-qualified stock options may be granted
pursuant to this plan.





Number of Shares Subject to the 2000
Plan.  The 2000 Plan authorizes the grant of options relating
to an aggregate of 12,500 shares of Common Stock.  If any corporate
transaction occurs which causes a change in our capitalization (for example, a
reorganization, recapitalization, stock split, stock dividend, or the like), the
number of shares of stock available and the number of shares of stock subject to
outstanding options granted under the 2000 Plan will be adjusted appropriately
and equitably to prevent dilution or enlargement of a participant’s
rights.





Eligibility for
Participation.  Individuals eligible to participate in the 2000
Plan are our employees and employees of our subsidiaries, but not any of our or
our subsidiaries’ officers.





Terms of
Options.  Options granted to employees may be either incentive
stock options (ISOs), which satisfy the requirements of Internal Revenue Code
Section 422, or nonstatutory stock options (NSOs), which are not intended to
satisfy such requirements.  The exercise price for the grant of an NSO
under the 2000 Plan may be any price that is greater than or equal to 85% of the
fair market value of the Common Stock on the date the NSO is
granted.  The exercise price of an ISO must be at least equal to 100%
(110% for 10%-shareholders) of the fair market value of our Common Stock on the
date the ISO is granted.  Options expire at the times determined by
the committee, as specified in the applicable award agreement. However, no
option is exercisable later than the tenth anniversary of the grant date, and
any ISO granted to a 10%-shareholder must be exercisable on or before the fifth
anniversary of the grant date.





Vesting and
Acceleration.  Options vest at the times determined by the
committee, as specified in the applicable award agreement. A participant’s
options become fully vested upon the termination of the participant’s employment
as a result of a reduction in force and upon the occurrence of our change in
control.  In general, a change in control will be deemed to have
occurred upon the acquisition by any person of more than 50% of our outstanding
voting securities (or securities subject to conversion into voting securities),
the acquisition by any person of the power to elect a majority of our directors,
certain mergers and other corporate transactions if the holder’s of our voting
securities before the transaction receive less than 50% of the outstanding
voting securities of the reorganized, merged or consolidated entity, after the
transaction, and our complete liquidation or dissolution, or the sale of all or
substantially all of our assets, if approval of our shareholders is required for
the transaction.





Term.  The 2000
Plan expires on September 8, 2010.







- 22
-


2000
Officer and Employee Recruitment Stock Incentive Plan





In
September 2000, the Board of Directors adopted the Officer and Employee
Recruitment Stock Incentive Plan (the “2000 Plan”). Pursuant to applicable law,
the 2000 Plan has not been approved by our shareholders.  The 2000
Plan provides for the granting of incentive stock options and non-qualified
stock options, as determined by a committee appointed by the Board of Directors;
however since the 2000 Plan has not been approved by shareholders, only
non-qualified stock options may be granted pursuant to this plan.





Number of Shares Subject to the 2000
Plan.  The 2000 Plan authorizes the grant of options relating
to an aggregate of 12,500 shares of Common Stock.  If any corporate
transaction occurs which causes a change in our capitalization (for example, a
reorganization, recapitalization, stock split, stock dividend, or the like), the
number of shares of stock available and the number of shares of stock subject to
outstanding options granted under the 2000 Plan will be adjusted appropriately
and equitably to prevent dilution or enlargement of a participant’s
rights.





Eligibility for
Participation.  Individuals eligible to participate in the 2000
Plan are our new employees and officers of the company.





Terms of
Options.  Options granted to employees may be either incentive
stock options (ISOs), which satisfy the requirements of Internal Revenue Code
Section 422, or nonstatutory stock options (NSOs), which are not intended to
satisfy such requirements.  The exercise price for the grant of an NSO
under the 2000 Plan may be any price that is greater than or equal to 85% of the
fair market value of the Common Stock on the date the NSO is
granted.  The exercise price of an ISO must be at least equal to 100%
(110% for 10%-shareholders) of the fair market value of our Common Stock on the
date the ISO is granted.  Options expire at the times determined by
the committee, as specified in the applicable award agreement. However, no
option is exercisable later than the tenth anniversary of the grant date, and
any ISO granted to a 10%-shareholder must be exercisable on or before the fifth
anniversary of the grant date.





Vesting and
Acceleration.  Options vest at the times determined by the
committee, as specified in the applicable award agreement. A participant’s
options become fully vested upon the termination of the participant’s employment
as a result of a reduction in force and upon the occurrence of our change in
control.  In general, a change in control will be deemed to have
occurred upon the acquisition by any person of more than 50% of our outstanding
voting securities (or securities subject to conversion into voting securities),
the acquisition by any person of the power to elect a majority of our directors,
certain mergers and other corporate transactions if the holder’s of our voting
securities before the transaction receive less than 50% of the outstanding
voting securities of the reorganized, merged or consolidated entity, after the
transaction, and our complete liquidation or dissolution, or the sale of all or
substantially all of our assets, if approval of our shareholders is required for
the transaction.





2003
Stock Option Plan





In July
2003, the Board of Directors adopted the 2003 Stock Option Plan (the “2003
Plan”). Pursuant to applicable law, the 2003 Plan was approved by our
shareholders in September 2003.  The 2003 Plan provides for the
granting of incentive stock options and non-qualified stock options, as
determined by a committee appointed by the Board of Directors.





Number of Shares Subject to the 2003
Plan.  The 2003 Plan authorizes the grant of options relating
to an aggregate amount equal to fifteen percent of the aggregate number of the
shares of the company’s outstanding common stock. If any corporate transaction
occurs which causes a change in our capitalization (for example, a
reorganization, recapitalization, stock split, stock dividend, or the like), the
number of shares of stock available and the number of shares of stock subject to
outstanding options granted under the 2003 Plan will be adjusted appropriately
and equitably to prevent dilution or enlargement of a participant’s
rights.





Eligibility for
Participation.  Individuals eligible to participate in the 2003
Plan are our employees and employees of our subsidiaries, but not any of our or
our subsidiaries’ officers.





- 23
-


Terms of
Options.  Options granted to employees may be either incentive
stock options (ISOs), which satisfy the requirements of Internal Revenue Code
Section 422, or nonstatutory stock options (NSOs), which are not intended to
satisfy such requirements.  The exercise price for the grant of an NSO
under the 2000 Plan may be any price that is greater than or equal to 85% of the
fair market value of the Common Stock on the date the NSO is
granted.  The exercise price of an ISO must be at least equal to 100%
(110% for 10%-shareholders) of the fair market value of our Common Stock on the
date the ISO is granted.  Options expire at the times determined by
the committee, as specified in the applicable award agreement. However, no
option is exercisable later than the tenth anniversary of the grant date, and
any ISO granted to a 10%-shareholder must be exercisable on or before the fifth
anniversary of the grant date.





Vesting and
Acceleration.  Options vest at the times determined by the
committee, as specified in the applicable award agreement. A participant’s
options become fully vested upon the termination of the participant’s employment
as a result of a reduction in force and upon the occurrence of our change in
control.  In general, a change in control will be deemed to have
occurred upon the acquisition by any person of more than 50% of our outstanding
voting securities (or securities subject to conversion into voting securities),
the acquisition by any person of the power to elect a majority of our directors,
certain mergers and other corporate transactions if the holder’s of our voting
securities before the transaction receive less than 50% of the outstanding
voting securities of the reorganized, merged or consolidated entity, after the
transaction, and our complete liquidation or dissolution, or the sale of all or
substantially all of our assets, if approval of our shareholders is required for
the transaction.





Individual
Performance Based Arrangements





We have
issued stock options pursuant to employment agreements with our Chief Executive
Officer and our President, granting the right to 762,076 and 381,038 shares of
Common Stock, respectively, at an exercise price of $.00002 per share, under the
terms of certain performance-based stock options.  We also issued
performance based stock options to various individuals, granting them the right
to purchase up to 207,500 shares of our common stock at $0.04 per share upon the
achievement of various performance goals.








Item
12.  Certain Relationships and Related Transactions





Rutgers
License Agreement.





Pursuant to a License Agreement (the
“License Agreement”) with Rutgers, Axion has acquired an exclusive
royalty-bearing license in specific but broad global territories to make, have
made, use, sell, offer for sale, modify, develop, import and export products
made using patent and patent pending applications owned by Rutgers.  As a
result of the License Agreement, Axion was granted the right to grant
sublicenses. These exclusive rights are for the following
territories:  United States, Canada, Central America, the Caribbean,
Mexico, South America, South Korea, Saudi Arabia and Russia.  We also
have co-exclusive rights for China.  We plan to use these patented
technologies in the production of structural plastic products such as railroad
crossties, bridge infrastructure, utility poles, marine pilings and bulk
heading.





Axion is obligated to pay 1.5 – 3.0%
royalties on various product sales to Rutgers, subject to a minimum of $10,000
in calendar year 2008, increasing to and remaining constant at $200,000 by and
after calendar year 2011, and to reimburse Rutgers for certain patent defense
costs.  We also pay annual membership dues to AIMPP, a department of
Rutgers, as well as consulting fees for research and development
processes.





The License Agreement runs until the
expiration of the last to expire issued patent within the Rutgers’ technologies
licensed under the License Agreement, unless terminated earlier.





Regal
Consulting Agreement.





Pursuant to a management consulting
agreement with Regal Capital LLC (“Regal’), of which our Secretary and Director
Michael Martin is a managing partner, we issued 2,572,007 shares of our Common
Stock to Regal as payment for management consulting services.  The
consulting agreement also provides for a monthly fee of $10,000 during the term
of the consulting services and an additional payment of a $230,000 fee
structured over time.  We accounted for the entire fee, other than the
$10,000 monthly fee, as a cost of raising capital and reduced the proceeds of
the private placement completed in December 2007 accordingly.  As of
September 30, 2008, we had paid the entire $230,000 fee.





Debentures.





Simultaneous with the Merger, ADH
Ventures, LLC (“ADH”) purchased $1,000,000 of the outstanding principal amount
of the outstanding principal amount of the Debentures, and an option to purchase
the remaining $643,050 of the Debentures within 30 days of the
Merger.  In addition, the holders of the Debentures agreed to extend
the maturity date to June 30, 2008 and to cancel 361,234 warrants to purchase
shares of our Common Stock at an exercise price of $0.40 per share, which
warrants had been issued in connection with the original issuance of the
Debentures.  In April 2008, Thor United Corp. (“Thor”) acquired
the remaining $643,050 of the Debentures, and as a result, the maturity
date of the Debentures was further extended to March 30, 2009, and the remaining
231,542 warrants which had been issued in connection with the original issuance
of the Debentures were cancelled.  In addition, the principal amount
of the $643,050 being assigned was increased to $645,000.





In April 2008, ADH and Thor each
elected to convert $50,000 of the Debentures into 125,000 shares of Common Stock
each, and we repaid $200,000 of the Debentures held by ADH.  In May 2008,
we issued a Series B 13% Secured Convertible Debenture due March 30, 2009 (the
“Series B Debenture”) in the principal amount of $200,000 to ADH, with
substantially the same terms as the Debentures.





In August 2008, ADH elected to convert
$282,564 of principal into 706,410 shares of Common Stock.





- 24
-


In September 2008, Divash Capital
Partners LLC (“Divash”) purchased $325,000 of principal amount of the Debentures
from the holders of such Debentures, including Thor.  In addition,
Divash has the option to purchase, at any time prior to April 1, 2009, $275,000
of additional Debentures from the holders thereof.  In connection with
the acquisition of the Debentures, the Company agreed to issue to Divash a 9%
Convertible Debenture due September 30, 2010 (the “New Debentures”) in the
principal amount of $172,500.  The New Debenture was issued without
any further cash consideration and is convertible at a conversion price of $1.50
per share.





In addition, in September 2008, the
holders of the Debentures and of the Series B Debenture agreed to amend the
Debentures and Series B Debenture (a) to reduce the annual interest rate from
13% to 9%; (b) to extend the maturity date from March 30, 2009 to September 30,
2010; and (c) to eliminate the debenture holders’ security interest in the
assets of the Company and its subsidiaries.





Simultaneous with the purchase of
$325,000 of the Debentures, Divash converted all such Debentures into 812,500
shares of our Common Stock.  In addition, ADH agreed to convert, at a
conversion price of $.30 per share, $389,200 of its Debentures into 1,297,334
shares of our Common Stock.  In consideration for ADH’s agreement to
convert the Debentures in September 2008 and to amend its Debentures and Series
B Debenture as described above, ADH’s Debentures and Series B Debenture were
amended to reduce the conversion price from $.40 per share to $.30 per
share.





As a result of the foregoing
transactions, as of September 30, 2008, there were outstanding (a) $353,236
principal amount of the Debentures outstanding, of which $78,236 was held by ADH
and $225,000 was held by Thor, (b) $200,000 principal amount of the Series B
Debentures, all of which was held by ADH and (c) $172,500 principal amount of
the New Debentures.  During the period ended September 30, 2008, we
issued 120,081 shares of common stock at $0.40 per share in satisfaction of
$48,806 in interest earned under these debentures.





- 25
-


Item
13.  Exhibits








Exhibit No.
              
              Description of Document2.1
              
              Agreement
      and Plan of Merger by and among Analytical Surveys, Inc., Axion
      Acquisition Corp, and Axion International, Inc. dated as of November
      20, 2007 (incorporated by reference to Exhibit 2.1 to the Company’s
      Current Report on Form 8-K dated November 21, 2007).2.2
              
              Certificate
      of Merger of the Merger Sub and Axion, dated March 20, 2008 (incorporated
      by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
      filed on March 26, 2008).3.1
              
              Articles
      of Incorporation, as amended (incorporated by reference to the Company’s
      Registration Statement on Form S-18, (Registration No. 2-93108-D)).3.1
              
              By-Laws
      (incorporated by reference to the Company’s Registration Statement on Form
      S-18 (Registration No. 2-93108-D)).3.3
              
              Amendment
      to By-laws (incorporated by reference to the Company’s Annual Report on
      Form 10-K for the year ended September 30, 1998).3.4
              
              Articles
      of Amendment, filed July 21, 2008 (incorporated by reference to Exhibit
      3.1 to the Company’s Current Report on Form 8-K filed on August 6,
      2008).4.1
              
              Form
      of Class E Warrant dated May 31, 2006, (incorporated by reference to
      Exhibit D of the Company’s Proxy Statement, filed June 29,
      2006).4.2
              
              Securities
      Purchase Agreement dated as of November 24, 2006, among the Company and
      the Purchasers named therein, (incorporated by reference to Exhibit 4.1 to
      the Company’s Current Report on Form 8-K dated November 30, 2006).4.3
              
              13%
      Secured Convertible Debenture due November 24, 2007, issued to Monarch
      Capital Fund, (incorporated by reference to Exhibit 4.2 to the Company’s
      Current Report on Form 8-K dated November 30, 2006).4.4
              
              13%
      Secured Convertible Debenture due November 24, 2007, issued to Harborview
      Master Fund LP, (incorporated by reference to Exhibit 4.3 to the Company’s
      Current Report on Form 8-K dated November 30, 2006).4.5
              
              13%
      Secured Convertible Debenture due November 24, 2007, issued to DKR
      SoundShore Oasis Holding Fund LTD, (incorporated by reference to Exhibit
      4.4 to the Company’s Current Report on Form 8-K dated November 30, 2006).4.6
              
              Form
      of the Company’s Amended and Restated 13% Secured Convertible Debenture
      due June 30, 2008 (incorporated by reference to Exhibit 4.1 to the
      Company’s Current Report on Form 8-K filed on March 26,
    2008).10.1
              
              Analytical
      Surveys, Inc. Officer and Employee Recruitment Stock Incentive Plan and
      Form of Stock Option Agreement (incorporated by reference to the Company’s
      Annual Report on Form 10-K/A for the year ended September 30, 2000).
      (1)10.2
              
              Analytical
      Surveys, Inc. Year 2000 Stock Incentive Plan and form of agreement
      (incorporated by reference to the Company’s Annual Report on Form 10-K/A
      for the year ended September 30, 2000). (1)10.3
              
              Analytical
      Surveys, Inc. Year 2003 Stock Option Plan and form of agreement
      (incorporated by reference to the Company’s Proxy Statement dated July 21,
      2003). (1)10.4
              
              Registration
      Rights Agreement entered into as of November 24, 2006, among the Company
      and the Purchasers, (incorporated by reference to Exhibit 4.8 to the
      Company’s Current Report on Form 8-K dated November 30, 2006).10.5
              
              Amendment
      and Waiver Agreement entered into as of September 30, 2007, among the
      Company and the Purchasers of the 13% Secured Convertible Debenture due
      November 24, 2007 (incorporated by reference to Exhibit 99.1 to the
      Company’s Current Report on Form 8-K dated October 3, 2007)
    .10.6
              
              Amendment
      and Waiver Agreement entered into as of December 31, 2007, among the
      Company and the Purchasers of the 13% Secured Convertible Debenture due
      November 24, 2007 (incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K dated January 4,
    2008).10.7
              
              Employment
      Agreement, dated as of January 1, 2008, between James Kerstein and Axion
      International, Inc. (incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K filed March 26, 2008).
      (1)10.8
              
              Employment
      Agreement, dated as of January 1, 2008, between Marc Green and Axion
      International, Inc. (incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K filed March 26, 2008).
      (1)10.9
              
              Letter
      Agreement, dated December 6, 2007, between Regal Capital, LLC and Axion
      International, Inc. (incorporated by reference to Exhibit 10.3 to the
      Company’s Current Report on Form 8-K filed March 26,
  2008).10.10
              
              Assignment
      and Amendment Agreement, dated March 20, 2008, among the Assignors named
      therein, ADH Ventures, LLC and the Company (incorporated by reference to
      Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 26,
      2008).10.11
              
              License
      Agreement, dated February 1, 2007, by and between Rutgers, the State
      University of New Jersey, and Axion International, Inc. (incorporated by
      reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB
      filed May 15, 2008) (2)10.12
              
              *Securities
      Purchase Agreement, dated September 25, 2008, by and among, Thor United
      Corp., Berkshire International Finance, Divash Capital Partners LLC and
      the Company10.13
              
              *December
      2008 Amendment to Employment Agreement between James Kerstein and Axion
      International, Inc.10.14
              
              *December
      2008 Amendment to Employment Agreement between Marc Green and Axion
      International, Inc.22.1
              
              *Subsidiaries
      of the Company23.2
              
              *Consent
      of Jewett, Schwartz, Wolfe & Associates31.1
              
              *Section
      302 Certification of Chief Executive Officer31.2
              
              *Section
      302 Certification of Chief Financial Officer32.1
              
              *Section
      906 Certification of Chief Executive Officer32.2
              
              *Section
      906 Certification of Chief Financial
  Officer





* Filed
herein


(1)
Indicates management contract of compensatory plan or arrangement


(2)
Portions have been deleted and filed separately with the Securities and Exchange
Commission.  Confidential treatment has been requested with regard to
the deleted portions.






- 26
-


Item 14. Principal Accountant Fees and
Services.





(a)
              Audit
      Fees.





Audit
fees billed by Jewett, Schwartz, Wolfe & Associates (“Jewett”) for the audit
of our annual financial statements for the fiscal year ended September 30, 2008,
and for the review of the financial statements included in our Quarterly Reports
on Form 10-QSB filed with the SEC for that year totaled $14,750.





(b)
            Audit-Related
      Fees.





The
aggregate fees billed for professional services rendered by Malone & Bailey,
PC., former auditors of Holdings, for assurance and related services for the
fiscal year ended September 30, 2008, were approximately
$1,500.  Audit-related fees were related to the transition to our
current independent auditors and the review of the Merger
transaction.





(c)
              Tax
      Fees.





The
aggregate fees billed for professional services rendered by Jewett. for tax
compliance, tax advice, and tax planning during the fiscal year ended September
30, 2008  totaled  $15,000.  These tax fees in
fiscal were incurred for preparation of the federal and state income tax returns
of Holdings for the fiscal year ended September 30, 2007.





(d)
              All
      Other Fees.





There
were no other fees billed by Jewett, Schwartz, Wolfe & Associates from the
period  of inception to the fiscal year ended September 30, 2008, for
services rendered by or not reportable as Audit Fees, Audit-Related Fees or Tax
Fees.




- 27
-





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





AXION
INTERNATIONAL HOLDINGS, INC.




Date:
              January
      13, 2009
              By:
      /s/ James
      Kerstein

                  James
      Kerstein
                  Chief
      Executive OfficerBy:
      /s/ Michael
      Johnson
                  Michael
      Johnson
                Chief
      Financial Officer











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





SIGNATURE
                    TITLE/s/James
      Kerstein
                      James
      Kerstein
                    Director
      and Chief Executive Officer,
                      (principal
      executive officer)
                    January
      13, 2009/s/Michael Johnson
                      Michael
      Johnson
                    Chief
      Financial Officer
                      (principal
      financial and accounting officer)
                    January
      13, 2009/s/ Michael M.
      Martin
                      Michael
      M. Martin
                    Chairman
      of the Board of Directors
                    January
      13, 2009/s/Marc
      Green
                      Marc
      Green
                    Director
                    January
      13, 2009/s/Lori
      Jones
                      Lori
      Jones
                    Director
                    January
      13, 2009








- 28
-




INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS






Audited
Consolidated Financial Statements as of and for the Years Ended September 30,
2008 and 2007




Index to Consolidated Financial
      Statements
            F-1Report of Independent Registered
      Public Accounting Firm
            F-2Consolidated Balance
      Sheet
            F-3Consolidated Statements of
      Operations
            F-4Consolidated Statements of
      Stockholder’s Deficit
            F-5Consolidated Statements of Cash
      Flows
            F-7Notes to Consolidated Financial
      Statements
            F-8




F-1










REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
board of directors and stockholders of
 Axion
International Holding, Inc.
 
 We have
audited the accompanying consolidated balance sheet of Axion International
Holdings, Inc. (A Development Stage Company) as of September 30, 2008 and the related  consolidated
statement of operations, changes in consolidated stockholders' equity and cash
flows for the period from November 1, 2007 (inception) through September
30, 2008. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts in the
consolidated financial statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above presents
fairly, in all material respects, the financial position of Axion International
Holdings, Inc. (A Development Stage Company) as of September 30, 2008 and the
results of its operations and its cash flows for the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying consolidated financial statements referred to above have been
prepared assuming that the Company will continue as a going concern. As more
fully described in Note 1, the Company’s need to seek new sources or methods of
financing or revenue to pursue its business strategy, raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans
as to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 /s/
Jewett, Schwartz, Wolfe and Associates
 
 Hollywood,
Florida
 January
7, 2009
 
 200 South
Park Road, Suite 150  •  Hollywood, Florida
33021  •  Main 954.922.5885  •  Fax
954.922.5957  •  www.jsw-a.com
 Member -
American Institute of Certified Public Accountants • Florida Institute of
Certified Public Accountants
 Private
Companies Practice Section of the AICPA • Registered with the Public Company
Accounting Oversight Board of SEC
 
 F
-2
 AXION
      INTERNATIONAL HOLDING, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      BALANCE SHEETAt
      September 30, 2008(Audited)AssetsCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      138,826Inventories
                      
                      
                      110,416Prepaid
      expenses
                      
                      
                      7,264Total
      current assets
                      
                      
                      256,505Property,
      equipment, and leasehold improvements, at cost:Equipment
                      
                      
                      9,838Machinery
      and equipment
                      
                      
                      261,425Purchased
      software
                      
                      
                      56,329Furniture
      and fixtures
                      
                      
                      9,322Leasehold
      improvements
                      
                      
                      29,300366,214Less
      accumulated depreciation
                      
                      
                      (25,609
                      )Net
      property and leasehold improvements
                      
                      
                      340,605Long-term
      and intangible assetsLicense,
      at acquisition cost,
                      
                      
                      68,284Deposits
                      
                      
                      4,00072,284Total
      assets
                      
                      $
                      669,394Liabilities and Stockholders'
      DeficitCurrent
      liabilitiesAccounts
      payable
                      
                      $
                      35,953Accrued
      liabilities
                      
                      
                      534,878Interest
      payable
                      
                      
                      55,641Accrued
      payroll
                      
                      
                      23,142Total
      current liabilities
                      
                      
                      649,614Senior
      secured convertible debenture, net of discount
                      
                      
                      307,243Total
      liabilities
                      
                      
                      956,857Commitments
      and contingencies
                      
                      
                      -Stockholders'
      deficit:Common
      stock, no par value; authorized, 100,000,000 shares;13,978,136
      shares issued and outstanding at September 30, 2008
                      
                      
                      1,983,858Deficit
      accumulated during development stage
                      
                      
                      (2,271,320
                      )Total
      stockholders' deficit
                      
                      
                      (287,463
                      )Total
      liabilities and stockholders' deficit
                      
                      $
                      669,394See
      accompanying notes to consolidated financial statements.
 
 F -
3
 
 AXION
      INTERNATIONAL HOLDING INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENT OF OPERATIONSFrom
      November 1, 2007 (inception) through September 30, 2008(Audited)Revenue
                      
                      $
                      6,472Cost
      of goods sold
                      
                      
                      743Gross
      margin
                      
                      
                      5,729Research
      and development costs
                      
                      
                      310,761Marketing
      and sales
                      
                      
                      90,945General
      and administrative expenses
                      
                      
                      1,180,169Depreciation
      and amortization
                      
                      
                      25,609Total
      operating costs and expenses
                      
                      
                      1,607,483Loss
      from operations
                      
                      
                      (1,601,754
                      )Other
      expense (income), netOther
      income
                      
                      
                      (20,000
                      )Interest
      expense, net
                      
                      
                      689,566Total
      other expense, net
                      
                      
                      669,566Loss
      before income taxes
                      
                      
                      (2,271,320
                      )Provision
      for income taxes
                      
                      
                      -Net
      loss
                      
                      
                      (2,271,320
                      )Weighted
      average common shares - basic and diluted
                      
                      
                      9,138,437Basic
      and diluted net loss per share
                      
                      $
                      (0.25
                      )See
      accompanying notes to consolidated financial statements.
 
 F -
4
 
 AXION
      INTERNATIONAL HOLDING INC(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ DEFICITSeptember
      30, 2008Common
      StockShare
      (per share amounts adjusted to reflect 4-to1 reverse
split)
                                      
                                      Amount
                                      
                                      Paid
      in Capital
                                      
                                      Deficit
      accumulated during development stage
                                      
                                      TotalIssuance
      of common stock to founders
                                      
                                      21.25
                                      
                                      $
                                      85
                                      
                                      $
                                      (85
                                      )
                                      $
                                      -
                                      
                                      $
                                      -Issuance
      of common stock for license
                                      
                                      4
                                      
                                      
                                      15
                                      
                                      
                                      19,985
                                      
                                      
                                      -
                                      
                                      
                                      20,000Issuance
      of common stock for services
                                      
                                      14
                                      
                                      
                                      54
                                      
                                      
                                      19,946
                                      
                                      
                                      -
                                      
                                      
                                      20,000Private
      placement of common stock, including conversion of note payable to common
      stock, net of issuance costs
                                      
                                      10
                                      
                                      
                                      39
                                      
                                      
                                      822,292
                                      
                                      
                                      -
                                      
                                      
                                      822,331Exchange
      of shares
                                      
                                      9,190,589
                                      
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      -Shares
      issued in reverse merger
                                      
                                      1,002,432
                                      
                                      
                                      (193
                                      
                                      
                                      193
                                      
                                      
                                      -
                                      
                                      
                                      -Liabilities
      assumed in excess of fair value of assets pursuant to
    merger
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      (358,386
                                      )
                                      
                                      -
                                      
                                      
                                      (358,386
                                      )Private
      placement of  common stock at $0.88 per share
                                      
                                      536,250
                                      
                                      
                                      
                                      
                                      
                                      471,900
                                      
                                      
                                      
                                      
                                      
                                      471,900Shares
      issued pursuant to conversion of debenture and interest payable
      thereon
                                      
                                      3,186,324
                                      
                                      
                                      
                                      
                                      
                                      890,278
                                      
                                      
                                      
                                      
                                      
                                      890,278Shares
      issued to settle accrued liabilities
                                      
                                      62,493
                                      
                                      
                                      
                                      
                                      
                                      24,990
                                      
                                      
                                      
                                      
                                      
                                      24,990Adjustment
      to conversion price of debentures
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      92,745
                                      
                                      
                                      
                                      
                                      
                                      92,745Net
      loss
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      (2,271,320
                                      )
                                      
                                      (2,271,320
                                      )Balance
      at September 30, 2008
                                      
                                      13,978,136
                                      
                                      $
                                      -
                                      
                                      
                                      1,983,858
                                      
                                      
                                      (2,271,320
                                      )
                                      $
                                      (287,463
                                      )See
      accompanying notes to consolidated financial statements.
 
 
 F -
5
 AXION
      INTERNATIONAL HOLDING INC(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENT OF CASH FLOWSFrom
      November 1, 2007 (inception) through September 30, 2008(Audited)Cash
      flow from operating activities:Net
      loss
                      
                      $
                      (2,271,320
                      )Adjustments
      to reconcile net loss to netcash
      used in operating activitiesDepreciation,
      and amortization
                      
                      
                      25,609Accretion
      of interest expense on convertible debentures
                      
                      
                      585,119Issuance
      of common stock for services and for accrued interest
                      
                      
                      68,806Gain
      on sale of assets
                      
                      
                      (20,000
                      )Changes
      in operating assets and liabilities
                      
                      
                      -Collection
      of accounts receivable acquired in merger
                      
                      
                      59,048Inventories
                      
                      
                      (110,416
                      )Prepaid
      expenses and other
                      
                      
                      (5,507
                      )Assets
      held for resale
                      
                      
                      -Accounts
      payable
                      
                      
                      304,929Accrued
      liabilities
                      
                      
                      66,341Net
      cash used in operating activities
                      
                      
                      (1,297,391
                      )Cash
      flows from investing activities:Purchase
      of equipment and leasehold improvements
                      
                      
                      (358,742
                      )Proceeds
      from sale of assets acquired in merger
                      
                      
                      506,000Costs
      to acquire license
                      
                      
                      (48,284
                      )Net
      cash provided by investing activities
                      
                      
                      98,974Cash
      flows from financing activities:Proceeds
      from short term note
                      
                      
                      27,154Issuance
      of common stock, net of expenses
                      
                      
                      1,267,077Issuance
      of convertible debenture
                      
                      
                      (200,000
                      )Repayment
      of convertible debenture
                      
                      
                      200,000Cash
      acquired in reverse merger
                      
                      
                      43,011Net
      cash provided by financing activities
                      
                      
                      1,337,242Net
      increase in cash
                      
                      
                      138,825Cash
      at beginning of period
                      
                      
                      -Cash
      at end of period
                      
                      $
                      138,825Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                      
                      $
                      -Non-cash
      financing activities:Common
      stock issued for consulting services
                      
                      $
                      20,000Conversion
      of notes
                      
                      $
                      890,278Common
      stock issued settlement of accrued liabilities
                      
                      $
                      24,990Common
      stock issued for license agreement
                      
                      $
                      20,000Common
      stock issued pursuant to merger
                      
                      $
                      358,385See
      accompanying notes to consolidated financial statements.
 
  F -
6
  AXION
INTERNATIONAL HOLDING INC.
 AND
SUBSIDIARIES
 
 Notes
to Consolidated Financial Statements
 From
November 1, 2007 (inception) through September 30, 2008
 
 (1)       Summary of Significant Accounting
Policies
 
 (a)         Business and Basis of Financial
Statement Presentation
 
 Axion
International Holdings, Inc. (“Holdings”), formerly Analytical Surveys, Inc.,
was formed in 1981 to provide data conversion and digital mapping services to
users of customized geographic information systems.  However, Holdings
experienced a steady decrease in the demand for its services. In fiscal 2006,
Holdings acted upon its belief that it would not be able to sustain the
operations of its historical business.  Holdings focused on completing
its long-term contracts that would generate cash and sold its Wisconsin-based
operations and assigned its long-term contracts that required new or additional
working capital to complete.  Holdings transitioned its principal
business into that of an independent oil and gas enterprise focused on
leveraging non-operating participation in drilling and production prospects for
the development of U.S. on-shore oil and natural gas reserves.
 
 Holdings’
success as an oil and gas company was contingent upon its ability to raise
additional funds in order to build a portfolio of investments that generate cash
flow sufficient to meet its operating expenses and capital
requirements.  Additionally, Holdings was dependent on outside sources
of financing to fund its operations and meet its future obligations.  The
oil and gas activities did not result in positive operating results and efforts
to secure additional funds were unsuccessful, which severely restricts Holdings’
ability to engage in additional activities.  In May 2007, Holdings
terminated its oil and gas executives and took steps to reduce expenses and
commitments in oil and gas investments.
 
 As a
result, in November 2007, Holdings entered into an Agreement and Plan of Merger,
among Holdings, Axion Acquisition Corp., a Delaware corporation and a newly
created direct wholly-owned subsidiary of Holdings (the “Merger Sub”), and Axion
International, Inc., a Delaware corporation which incorporated on August 6, 2006
with operations commencing in November 2007 (“Axion”).  On March 20,
2008 (the “Effective Date”), Holdings consummated the merger (the “Merger”) of
Merger Sub into Axion, with Axion continuing as the surviving corporation and a
wholly-owned subsidiary of Holdings.  Each issued and outstanding
share of Axion became 47,630 shares of Holdings’ common stock (“Common Stock”),
or 9,190,630 shares in the aggregate constituting approximately 90.7% of
Holdings’ issued and outstanding Common Stock as of the Effective Date of the
Merger.  The Merger resulted in a change of control, and as such,
Axion (“we”, “our” or the “Company”) is the surviving entity.
 
 The
preparation of the financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
 Our
consolidated financial statements include the accounts of our majority-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
 
 Development Stage
Company.The accompanying financial statements have been
prepared in accordance with the Statement of Financial Accounting Standards
(“SFAS”) No. 7 ”Accounting and
Reporting by Development-Stage Enterprises”.  A
development-stage enterprise is one in which planned principal operations have
not commenced or if its operations have commenced, there has been no significant
revenues there from.  To date, we have generated of $6,472 in revenue,
which was primarily related to the sale 6,000 railroad crossties to a foreign
transit authority for testing.   To date, our operations consist
of raising capital and preparing for more significant commercial product sales.
There is no guarantee that we will be able to sell product or generate
revenues.
 
 Reverse
Merger.  The Merger has been accounted for as a reverse merger
in the form of a recapitalization with Axion as the successor.  The
recapitalization has been given retroactive effect in the accompanying financial
statements. The accompanying consolidated financial statements represent those
of Axion for all periods prior to the consummation of the Merger.
 
 Going Concern. We have
incurred significant losses since inception and we have a working capital
deficit. These conditions raise substantial doubt about our ability to continue
as a going concern. We must raise additional capital through the sale of equity
or debt securities, through an offering of debt securities, or through
borrowings from financial institutions.
  (b)         Statement of Cash
Flows
 
 For
purposes of the statement of cash flows, we consider all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
 
 (c)         Equipment and Leasehold
Improvements
 
 Equipment
and leasehold improvements are recorded at cost and are depreciated and
amortized using the straight-line method over estimated useful lives of three to
ten years.  Repairs and maintenance are charged directly to operations
as incurred.
 
 (d)         Allowance
for Doubtful Accounts
 
 We accrue
a reserve on a receivable when, based upon the judgment of management, it is
probable that a receivable will not be collected and the amount of any reserve
may be reasonably estimated.  As of September 30, 2008 we had an
allowance for doubtful accounts of $0.
 
 (e)       Inventories. 
Inventories are priced at the lower of cost (first–in, first–out) or market and
consist primarily of raw materials.  No adjustment has been to the cost of
inventories as of September 30, 2008.
 
 (f)          Revenue
and Cost Recognition
 
 Our
revenue recognition policies are in compliance with Staff Accounting Bulletin
(SAB) No. 104, “Revenue Recognition.”   Revenue is recognized
when persuasive evidence of an agreement with the customer exists, products are
shipped or title passes pursuant to the terms of the agreement with the
customer, the amount due from the customer is fixed or determinable,
collectibility is reasonably assured, and when there are no significant future
performance obligations.
 
 Customers
are billed based on the terms included in the contracts, which are generally
upon delivery of certain products or information, or achievement of certain
milestones defined in the contracts.  When billed, such amounts are
recorded as accounts receivable.  Revenue earned in excess of billings
represents revenue related to services completed but not billed, and billings in
excess of revenue earned represent billings in advance of services
performed.
 
 Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance, such as indirect labor, supplies, tools and
depreciation costs.  Losses on contracts are recognized in the period
such losses are determined.  We do not believe warranty obligations on
completed contracts are significant.  Changes in job performance, job
conditions, and estimated profitability, including those arising from contract
penalty provisions, and final contract settlements may result in revisions to
costs and income and are recognized in the period in which the revisions are
determined.
 
 
 F -
7
 
 
 (g)       Income Taxes
 
 Income
taxes are reflected under the liability method, which establishes deferred tax
assets and liabilities to be recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
 
 U.S.
generally accepted accounting principles require that we record a valuation
allowance against deferred tax assets if it is “more likely than not” that we
will not be able to utilize it to offset future taxes.  Due to the
size of the net operating loss carryforward in relation to our recent history of
unprofitable operations and due to the continuing uncertainties surrounding our
future operations as discussed above, we have not recognized any of this net
deferred tax asset.  We currently provide for income taxes only to the
extent that we expect to pay cash taxes (primarily state taxes and the federal
alternative minimum tax) on current taxable income.
 
 (h)         Impairment of Long-Lived Assets Other
Than Goodwill
 
 We account for the impairment and
disposition of long-lived assets in accordance with SFAS No. 144,Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 requires that our long-lived
assets be assessed for potential impairment in their carrying values whenever
events or changes in circumstances indicate such impairment may have
occurred.  An impairment charge to current operations is recognized
when the estimated undiscounted future net cash flows of the asset are less than
its carrying value. Any such impairment is recognized based on the differences
in the carrying value and estimated fair value of the impaired
asset.
 
 (i)          Stock-Based
Compensation
 
 We did
not record any stock-based compensation from inception through September 30,
2008.
 
 We have
three nonqualified stock option plans with 2,117,970 shares available for grant
as of September 30, 2008.  The exercise price of the options are
established by the Board of Directors on the date of grant and are generally
equal to the market price of the stock on the grant date.  The Board
of Directors may determine the vesting period of any option issued. The options
issued are exercisable in whole or in part for a period of up to ten years from
the date of grant. All outstanding options pursuant to such plans on the date of
the Merger became fully vested pursuant to the change of control that occurred
in connection with the Merger.  No options have been granted pursuant
to the plans since the effective date of the Merger. Subsequent to the Merger
the options granted to the employees under the provisions of these plans have
expired.  Accordingly, at September 30, there were no options
outstanding under these plans.
 
 We have
also issued stock options pursuant to employment agreements with our Chief
Executive Officer and our President, granting the right to 762,076 and 381,038
shares of Common Stock, respectively, at an exercise price of $.00002 per share,
under the terms of certain performance-based stock options.  We also
issued performance based stock options to various individuals, granting them the
right to purchase up to 207,500 shares of our common stock at $0.04 per share
upon the achievement of various performance goals.
 
 (j)         Earnings (Loss) Per
Share
 
 Basic
earnings (loss) per share are computed by dividing earnings (loss) available to
common shareholders by the weighted average number of common shares outstanding
for the period.  Diluted earnings (loss) per share include the effects
of the potential dilution of outstanding options, warrants, and convertible debt
on our Common Stock as determined using the treasury stock method. Additionally,
for the year ended September 30, 2008, potential dilutive common shares under
our convertible instruments, warrant agreements and stock option plans of
3,607,012 were not included in the calculation of diluted earnings per share as
they were antidilutive.
 (k)         Financial
Instruments
 
 The
carrying amounts of financial instruments are estimated to approximate estimated
fair values. The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties.
The carrying amounts of cash, receivables, accounts payable, and accrued
liabilities approximate fair value due to the short maturity of these
instruments. The carrying amounts of debt approximate fair value due to the
variable nature of the interest rates and short-term maturities of these
instruments.
 
 (l)          Concentration of Credit
Risk
 
 We
maintain our cash with a major U.S. domestic bank. The amounts held in this bank
exceed the insured limit of $250,000 from time to time.  The terms of
these deposits are on demand to minimize risk.  We have not incurred
losses related to these deposits.
 
 (m)         Operating Cycle
 
 In
accordance with industry practice, we include in current assets and liabilities
amounts relating to long-term contracts, which generally have operating cycles
extending beyond one year. Other assets and liabilities are classified as
current and non-current on the basis of expected realization within or beyond
one year.
 
 F
-8
 (2)  Merger
 
 On March
20, 2008, we consummated a merger pursuant to an Agreement and Plan of Merger,
among Axion, Holdings, and the Merger Sub.  The Merger Sub was merged
into Axion, with Axion continuing as the surviving corporation and a
wholly-owned subsidiary of Holdings.   Each issued and
outstanding share of Axion became 47,630 shares of Common Stock of Holdings, or
9,190,630 shares in the aggregate constituting approximately 90.7% of the issued
and outstanding capital stock of the Company as of the effective date of the
merger.  For accounting purposes, these actions resulted in a reverse
merger, and Axion is the accounting survivor and surviving business entity;
however, Holdings is the surviving legal entity.
 
 We
assumed liabilities in excess of the fair value of the assets we
acquired.  We reduced paid in capital as follows:
 Fair
      value of net assets acquired:
                    
                    $
                    600,612Consideration
      given:Fair
      value of liabilities assumed
                    
                    
                    958,998Net
      liabilities acquired over fair value of assets, recorded as a reduction to
      paid in capital
                    
                    $
                    358,386
 
 (3)       Assets
Held for Resale
 
 Pursuant
to the merger, we acquired a natural gas well with a fair market value of
$486,000.  We sold the well to the operator of the well on April 11,
2008, with an effective date of March 1, 2008.  Net proceeds totaled
$486,000, which is the recorded fair value of these assets at the date of
acquisition.  The natural gas well was subject to a mortgage held by
the holders of our then 13% senior secured debentures due March 30,
2009.  The mortgage was released and the net proceeds were held in a
restricted account as additional security under the terms and conditions
outlined in the debenture agreement related to operational milestones. In July,
2008 those operational milestones were achieved and the funds were
released.
 
 We also
sold Holdings’ equipment for proceeds totaling $20,000, which resulted in a
gain, as the acquired equipment was deemed to have no value.
 
 
 
 
 (4)       Intangibles
and Exclusive Agreement
 
 In
February 2007, we acquired an exclusive, royalty-bearing license in specific but
broad global territories to make, have made, use, sell, offer for sale, modify,
develop, import, export products made using patent applications owned by Rutgers
University.  We plan to use such these revolutionary patented
technologies in the production of structural plastic products such as railroad
crossties, bridge infrastructure, utility poles, marine pilings and bulk
heading.
 
 We paid
approximately $32,000 and issued 714,447 shares of our Common Stock as
consideration to Rutgers.  We have estimated the fair market value of
the consideration received in exchange for the shares totaled approximately
$20,000.  We recorded these amounts, as well as legal expenses we
incurred to acquire the license, as an intangible asset.  The license
has an indefinite life and will be tested for impairment on an annual
basis
 
 We are
obligated to pay royalties on various product sales to Rutgers, and to reimburse
Rutgers for certain patent defense costs.  Patent defense costs paid
to Rutgers, a related party, for the fiscal period ending September 30, 2008
totaled $55,172. We also pay annual membership dues to AIMPP, a department of
Rutgers, as well as consulting fees for research and development
processes.  Membership dues and consulting fees totaled $22,678 for
the period ending September 30, 2008.
 
 (5)  Debt
 
 The
components of debt are summarized as follows.
 
 Long-Term
      Debt
                    
                    
                    Sept
      30, 2008Senior
      secured convertible debentures
                    
                    $
                    725,736Discount
      for beneficial conversion feature
                    
                    
                    (418,493)307,243Less
      current portion
                    
                    
                    —$
                    307,243
 
 Pursuant
to the Merger, we assumed three 13% Senior Secured Convertible Debentures (the
“Debentures”) totaling $1,643,050.  Simultaneous with the Merger, in
connection with the assignment of $1,000,000 of the outstanding principal amount
of the Debentures, the holders of the Debentures agreed to extend the maturity
date to June 30, 2008 and to cancel 361,234 warrants to purchase shares of our
Common Stock at an exercise price of $0.40 per share, which warrants had been
issued in connection with the original issuance of the Debentures.  In
April 2008 in connection with the assignment of the remaining $643,050 of the
Debentures, the maturity date of the Debentures was further extended to March
30, 2009, the remaining 231,542 warrants which had been issued in connection
with the original issuance of the Debentures were cancelled, and the principal
amount of the $643,050 being assigned was increased to $650,000.
 
 In April
2008, holders of the Debentures elected to convert $100,000 principal into
250,000 shares of Common Stock, and we repaid $200,000 of the outstanding
principal. In May 2008, we issued a Series B Debenture (the “Series B
Debenture”) in the principal amount of $200,000 to ADH Ventures, LLC (“ADH”),
one of the holders of the Debentures and which beneficially owns more than 5% of
our outstanding Common Stock, with substantially the same terms as the existing
Debentures.
 
 F
-9
 In August
2008, one of the holders of the Debentures elected to convert $282,564 of
principal into 706,410 shares of Common Stock. In September 2008, the Debenture
holders converted an additional $714,200 into 2,109,834 shares of Common Stock.
They also agreed to amend and restructure the Debentures and the Series B
Debentures to (i) lower the interest rate from 13% to 9%, (ii) extend the
maturity date to September 30, 2010 and (iii) eliminate such holders’ security
interest in the assets of the Company and its subsidiaries. In addition, the
Debenture and Series B Debenture in the aggregate principal amount of $667,436
held by ADH were amended to reduce the conversion price from $.40 to
$.30.  Accordingly, we increased the discount tothese debentures by
$92,745.
 
 In
September 2008, we issued a new 9% Convertible Debenture due September 30, 2010
(the “New Debenture) in the principal amount of $172,500 to Divash Capital
Partners LLC.  The New Debenture was issued without any further cash
consideration and is convertible at a conversion price of $1.50 per
share.  We recorded interest expense equal to the principal amount of
the New Debenture.
 
 At the
time of the merger we evaluated the application of EITF 98-05, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios,” and EITF 00-27, “Application of Issue No. 98-5 to
Certain Convertible Instruments” and concluded that the conversion option
of the Debentures was a beneficial conversion feature with intrinsic
value.  We recorded the fair value of the beneficial conversion
feature of the Debentures, which we estimate to be $986,748, as a discount to
par value which was being amortized over the term of the Debentures. As the
Debentures have been converted and restructured the intrinsic value as been
adjusted and will continue to be amortized over the remaining term.
 
 The
following table summarizes the issuances, repayments, and conversion of the
Series A, Series B, and New debentures from inception to September 30,
2008:
 
 Acquired
      in Merger
                            
                            $
                            1,643,050Repayments
                            
                            
                            (200,000
                            )Issuances
                            
                            
                            379,450Conversion
                            
                            
                            (1,096,764
                            )Balance,
      September 30, 2008
                            
                            $
                            725,736
 
 
 Required
principal payments on long-term debt at September 30, 2008 totaled $0 for the
fiscal year ending September 30, 2009; and $725,736 for fiscal
2010.
 
 
 F
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 (6)  Stockholder’s
Equity
 
 We are
authorized to issue 100,000,000 shares of Common Stock, no par value, and
2,500,000 shares of Preferred Stock, no par value. There were 13,978,136 shares
of Common Stock and no outstanding shares of Preferred Stock on September 30,
2008.
 
 We may
issue up to 2,500,000 shares of preferred stock, no par value, with dividend
requirements, voting rights, redemption prices, liquidation preferences and
premiums, conversion rights and other terms without a vote of the
shareholders.  We also may issue up to 2,117,970 shares pursuant to
our three nonqualified stock option plans and 1,350,614 shares pursuant to stock
options that were granted outside the parameters of such plans.
 
 From
inception through September 30, 2008, we have issued shares of Common Stock to
our founders, partners, and investors as follows.  We have adjusted
the number of shares issued to reflect the post-merger shares, or the number of
shares the holders received in exchange for Axion shares, and for the 1-for4
reverse stock split:
 
 In August
2006, we issued 4,048,529 shares of our Common Stock to founding stockholders
without consideration.
 
 In
February 2007, we issued 714,447 shares of our Common Stock to Rutgers
University as partial consideration for issuance of an exclusive license
agreement to the Company.  We have estimated the fair market value of
those shares to be $20,000.
 
 Pursuant
to a management consulting agreement with Regal Capital LLC (“Regal’), we issued
2,572,007 shares of our Common Stock to Regal as payment for management
consulting services.  The consulting agreement also provides for a
monthly fee of $10,000 each during the term of the consulting services and an
additional payment of a $230,000 fee structured over time.  We
accounted for the entire fee, other than the $10,000 monthly fee, as a cost of
raising capital and reduced the proceeds of the private placement completed in
December 2007 accordingly.  As of September 30, 2008, we had paid the
entire $230,000 fee.
 
 In
December 2007 and January 2008 we completed a private placement of 1,855,655
shares of Common Stock at $0.548 per share, with gross proceeds totaling
$1,019,064.  Approximately 49,535 shares were to repay a $27,164 note
payable, with the balance received in cash.
 
 In April,
2008, we issued 37,493 shares of our Common Stock to five former Holdings board
members in full settlement of all outstanding past due directors’ compensation,
payment of which had not been made since October 2006.  We also issued
25,000 shares to Holdings’ former Chief Executive Officer in lieu of a cash
bonus that she was entitled to receive as a result of the Merger.
 
 In April
2008, holders of the Debentures elected to convert $100,000 principal into
250,000 shares of Common Stock, and we repaid $200,000 of the outstanding
principal. In May 2008, we issued the Series B Debenture in the principal amount
of $200,000, with substantially the same terms as the Debentures. We also
completed an additional private placement of 471,900 common shares at $0.88 per
share during the period from June 2008 to September 2008.
 
 In August
2008, one of the holders of the Debentures elected to convert $282,564 of
principal into 706,410 shares of Common Stock. In September the Debenture
holders converted an additional $714,200 into 2,109,834 shares of Common Stock.
They also agreed to amend and restructure the debentures to lower the interest
rate from 13% to 9% and extend the maturity date to September 30. 2010. In
September we issued the New Debenture in the principal amount of $172,500, with
a maturity date of September 30, 2010 and a conversion price of
$1.50
 
 F
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 The
following table sets forth the number of shares of Common Stock that were
issuable upon conversion of outstanding warrants and convertible debt as of
September 30, 2008.
 
 Conversion/
      Exercise Price
                            
                            Common
      Shares
                              IssuableClass
      A Warrants
                            
                            95,473
                            
                            $
                            5.36
                            
                            
                            95,473Class
      B Warrants
                            
                            95,473
                            
                            
                            5.96
                            
                            
                            95,473Class
      E Warrants
                            
                            188,018
                            
                            
                            4.74
                            
                            
                            188,018Note
      Warrants issued to advisors in November 2006
                            
                            47,482
                            
                            
                            2.36
                            
                            
                            47,482Series
      A Debentures
                            
                            78,236
                            
                            
                            0.30
                            
                            
                            260,787Series
      A Debentures
                            
                            275,000
                            
                            
                            0.40
                            
                            
                            687,500Series
      B Debentures
                            
                            200,000
                            
                            
                            0.30
                            
                            
                            666,667New
      Debentures
                            
                            172,500
                            
                            
                            1.50
                            
                            
                            115,000Total
      shares issuable and weighted average prices
                            
                            
                            
                            $
                            1.30
                            
                            
                            2,156,400
 
 (7)  Stock–based
compensation
 
 We did
not record any stock-based compensation from inception through September 30,
2008.
 
 Pursuant
to employment agreements dated January 1, 2008, our Chief Executive Officer will
have the right to purchase up to 762,076 post-merger and post-split shares of
Common Stock at an exercise price of $.0004 per share, and our President has the
right to purchase up to 381,038 shares of Common Stock at an exercise price of
$.0004 per share, under the terms of certain performance-based stock
options.  The options have a five year term and will vest upon the
achievement of annual revenue targets as follows.
  Number
      of shares (post merger and post split)
                      
                      Vests
      upon achievement of annual revenue totaling
                      
                      Exercise
      Price
                      
                      
                      Intrinsic
      value on date of grant190,519
                      
                      $10
      million
                      
                      $
                      .00002
                      
                      
                      $
                      104,600285,779
                      
                      $15
      million
                      
                      $
                      .00002
                      
                      
                      $
                      156,900285,779
                      
                      $25
      million
                      
                      $
                      .00002
                      
                      
                      $
                      156,900381,038
                      
                      $25
      million
                      
                      $
                      .00002
                      
                      
                      $
                      209,200
 
 The
intrinsic value of the options, based on the fair market value of shares sold in
a private placement in December 2007, totaled $627,600.  Stock-based
compensation expense will be recognized in future periods in accordance with the
performance-based terms of the options.
 
 We also
granted performance based stock options to various individuals, granting them
the right to purchase up to 207,500 shares of our common stock at $0.04 per
share upon the achievement of various performance goals.
 
 We have
three nonqualified stock option plans with 2,117,970 shares available for grant
as of September 30, 2008.  The exercise price of the options are
established by the Board of Directors on the date of grant and are generally
equal to the market price of the stock on the grant date.  The Board
of Directors may determine the vesting period for each new grant. , and options
issued are exercisable in whole or in part for a period of up to ten years from
the date of grant. All outstanding options pursuant to such plans on the date of
the Merger became fully vested pursuant to  the change of control that
occurred in connection with the Merger.  No options have been granted
pursuant to the plans since the effective date of the Merger. Subsequent to the
Merger the options granted to the employees under the provisions of these plans
have expired.  Accordingly, at September 30, 2008, there were no
options outstanding under these plans.
 
 F
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 (8)
              Income
      Taxes
 
 We have
not recorded any income tax expense or benefit for fiscal year 2008 due to our
substantial operating losses and the valuation allowance applied against our
deferred tax assets.
 
 Deferred
income taxes arise from the temporary differences between financial statement
and income tax recognition of net operating losses and other items. Loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
 
 We
account for income taxes pursuant to SFAS 109 Accounting for Income Taxes.
The components of our deferred tax assets and liabilities are as
follows:
 
 Deferred
      tax assetsAccrued
      liabilities
                          
                          $
                          230,302NOL
      carryforward
                          
                          
                          1,670,801Valuation
      allowance
                          
                          
                          (1,901,103
                          )Net
      deferred tax assets
                          
                          $
                          -
 
 At
September 30, 2008, we had net operating loss carryforwards of approximately
$1,670,000 that will expire through September 30, 2028.  We recorded a
valuation allowance to reflect the estimated amount of deferred tax assets that
may not be realized due to the uncertainty surrounding our ability to generate
sufficient future taxable income to fully realize the deferred tax
assets.  For the year ended September 30, 2008, the valuation
allowance increased by approximately by $1,901,000.
 
 (9)       Leases
 
 We lease
approximately 1,000 square feet of space in Basking Ridge, New Jersey pursuant
to an oral month-to-month lease at a monthly rent of $2,100.  These
premises serve as the corporate headquarters.  Facility rent expense
totaled $19,000 the year ended September 30, 2008.
 
 (10)              Litigation
and Other Contingencies
 
 In
November 2005 and November 2007, Holdings was named as party to suits filed in
the State of Indiana by the Sycamore Springs Homeowners Association, as well as
certain homeowners in the Sycamore Springs neighborhood of Indianapolis,
Indiana, and by the developers of the Sycamore Springs
neighborhood.  The claimants alleged that various Mid-States
Engineering entities that are alleged to be subsidiaries of MSE Corporation,
which Holdings acquired in 1997, adversely affected the drainage system of the
Sycamore Springs neighborhood, and sought damages from flooding that occurred on
September 1, 2003.  Mediation efforts held in November 2007 and April
2008 have been successful, and each of the suits has been settled. The agreement
is a compromise of disputed claims asserted or which may be asserted by the
claimants against the settling defendants for any past, present and future
losses, damages, and claims they may have against the settling defendants.The claims from the all
three lawsuits arise from a single occurrence with one deductible applying to
the matter, and defense of the actions were provided by Holdings’ insurance
carrier.  We assumed a $100,000 obligation payable to our insurer,
which represents the deductible pursuant to the terms of Holdings’ insurance
coverage.
 
 In April
2006, Holdings commenced an action against Tonga Partners, L.P. (“Tonga”),
Cannell Capital, L.L.C. and J. Carlo Cannell in the United States District Court
of New York, for disgorgement of short-swing profits pursuant to Section 16 of
the Securities Exchange Act of 1934, as amended.  On November 10,
2004, Tonga converted a convertible promissory note into 1,701,341 shares of
Common Stock, and thereafter, between November 10 and November 15, 2004, sold
such shares for a short-swing profits.  In September 2008, the
District Court granted Holdings summary judgment against Tonga for disgorgement
of short-swing profits in the amount of $4,965,898.  The defendants
have indicated that they will be appealing from the order granting Holdings
summary judgment.
 
 We are
also subject to various other routine litigation incidental to our business.
Management does not believe that any of these routine legal proceedings would
have a material adverse effect on our financial condition or results of
operations.
 
 (11)             Impact of Accounting
Pronouncements
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
No. 141(R)”). This Statement replaces SFAS No. 141, Business Combinations, and
requires an acquirer to recognize the assets acquired, the liabilities assumed,
including those arising from contractual contingencies, any contingent
consideration, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions specified in the statement. SFAS No. 141(R) also requires the
acquirer in a business combination achieved in stages (sometimes referred to as
a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with SFAS No.
141(R)). In addition, SFAS No. 141(R)'s requirement to measure the
noncontrolling interest in the acquiree at fair value will result in recognizing
the goodwill attributable to the noncontrolling interest in addition to that
attributable to the acquirer.  SFAS No. 141(R) amends SFAS No. 109,
Accounting for Income
Taxes, to require the acquirer to recognize changes in the amount of its
deferred tax benefits that are recognizable because of a business combination
either in income from continuing operations in the period of the combination or
directly in contributed capital, depending on the circumstances. It also amends
SFAS No. 142, to, among other things; provide guidance on the impairment testing
of acquired research and development intangible assets and assets that the
acquirer intends not to use. SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008. We do
not expect the  adoption of SFAS No. 141(R) will have a material
impact on our financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS No. 160”), which amends
Accounting Research Bulletin 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. SFAS No. 160 also changes the
way the consolidated income statement is presented by requiring consolidated net
income to be reported at amounts that include the amounts attributable to both
the parent and the noncontrolling interest. It also requires disclosure, on the
face of the consolidated statement of income, of the amounts of consolidated net
income attributable to the parent and to the noncontrolling interest. SFAS No.
160 requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated and requires expanded disclosures in the
consolidated financial statements that clearly identify and distinguish between
the interests of the parent owners and the interests of the noncontrolling
owners of a subsidiary. SFAS No. 160 is effective for fiscal periods, and
interim periods within those fiscal years, beginning on or after December 15,
2008. We do not expect the adoption of SFAS No. 160 to have a material impact on
our financial statements.
 
 F
-13
 In
February 2007, Financial the FASB issued SFAS No. 159, “The FairValueOption for Financial Assets and
Financial Liabilities”(“SFAS No. 159”),
which provides companies with an option to report selected financial assets and
liabilities at fair value with the changes in fair value recognized in earnings
at each subsequent reporting date. SFAS No. 159 provides an opportunity to
mitigate potential volatility in earnings caused by measuring related assets and
liabilities differently, and it may reduce the need for applying complex hedge
accounting provisions. If elected, SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. Management is currently evaluating
the impact that this statement may have on our results of operations and
financial position, and has yet to make a decision on the elective adoption of
SFAS No. 159.
 
 In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
(“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure
assets and liabilities. SFAS No. 157 addresses the requests from investors for
expanded disclosure about the extent to which companies’ measure assets and
liabilities at fair value, the information used to measure fair value and the
effect of fair value measurements on earnings. SFAS No. 157 applies whenever
other standards require (or permit) assets or liabilities to be measured at fair
value, and does not expand the use of fair value in any new circumstances. SFAS
No. 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and will be adopted by the Company in the first quarter
of fiscal year 2009. We are unable at this time to determine the effect that the
adoption of SFAS No. 157 will have on our results of operations and financial
condition.
  In May
2008, the FASB issued SFAS 162 “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements that are presented in conformity with
generally accepted accounting principles. SFAS 162 becomes effective 60 days
following the SEC’s approval of the Public Company Accounting Oversight Board
amendments AU Section 411 “The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles.” The Company does not expect that the
adoption of SFAS 162 will have a material impact on its consolidated financial
statements.
   In April
2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of
Intangible Assets,” (“FSP No. 142-3”). FSP No. 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, in order to improve the consistency between the useful life of a
recognized intangible asset under SFAS No. 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141R,
“Business Combinations”
(revised 2007), and other U.S. generally accepted accounting principles. FAS
142-3 is effective for fiscal years beginning after December 15, 2008 and early
adoption is prohibited. The Company is currently evaluating the impact, if any,
that FAS 142-3 will have on its consolidated financial position, results of
operations and cash flows.
   In June
2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP
03-6-1”), which classifies unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents as participating
securities and requires them to be included in the computation of earnings per
share pursuant to the two-class method described in SFAS No. 128, “Earnings per
Share.” FSP 03-6-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. It
requires all prior period earnings per share data presented to be adjusted
retrospectively. The Company is currently evaluating the effect, if any, that
the adoption of FSP 03-6-1 will have on its consolidated financial position,
results of operations and cash flows.
   In
September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 requires more extensive
disclosure regarding potential adverse effects of changes in credit risk on the
financial position, financial performance, and cash flows of sellers of credit
derivatives. FSP 133-1 also amends FASB Interpretation No. 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others,” to require additional disclosure about
the current status of the payment or performance risk of a guarantee. FSP 133-1
also clarifies the effective date of FASB Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities,” by stating that the disclosures
required should be provided for any reporting period (annual or quarterly
interim) beginning after November 15, 2008. The Company is currently evaluating
the effect, if any, that the adoption of FSP 133-1 will have on its consolidated
financial position, results of operations and cash flows.
  
 F
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