UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSSION


WASHINGTON,
D.C. 20549





FORM
10-KSB





x   ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934:
 For the
fiscal year ending September 30, 2008





 ̈  TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934:
 For the
transition period from   _________ to
_________





Commission
file number: 333-124704





XIOM
CORP.





(Name
of small business issuer in its charter)





Delaware
            
            11-3460949(State
      or other jurisdiction of incorporation
            
            (I.R.S.
      Employeror
      organization)
            
            Identification
      No.)





78 Lamar
Street, West Babylon, New York 11704





(Address
of Principal
executive offices)              (Zip Code)





Issuer’s
telephone number: (631) 643-4400





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


Common
Share, Par Value, $.0001


(Title of
each Class)





Securities
registered under Section 12(g) of the Exchange Act:  None





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such a 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. x Yes   ̈ No





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part II of this Form 10-KSB
or any amendment to this Form 10-KSB. x





The
issuer’s revenues for its most recent fiscal
year:  $2,370,933





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates based on the average bid and asked price of such common equity,
as of January 9, 2009 was approximately $1,407,361





The
number of shares of Common Stock outstanding as of January 9, 2009 was:
12,758,909





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








XIOM
CORP.


ANNUAL
REPORT ON FORM 10-KSB





For
Fiscal Year Ended September 30, 2008





INDEX





Page No:PART
      I
                  
                  3ITEM
      1.
                  DESCRIPTION
      OF BUSINESS
                  3Plan
      of Operations
                  7Results
      of Operations
                  8ITEM
      2.
                  DESCRIPTION
      OF PROPERTY
                  9ITEM
      3.
                  LEGAL
      PROCEEDINGS
                  9ITEM
      4.
                  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDEDRS
                  10PART
      II
                  
                  10ITEM
      5.
                  MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                  10ITEM
      6.
                  MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
                  12Off
      Balance Sheet Arrangements
                  13ITEM
      7.
                  FINANCIAL
      STATEMENTS
                  F-1ITEM
      8.
                  CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                  14ITEM
      8A.
                  CONTROLS
      AND PROCEDURES
                  14ITEM
      8B.
                  OTHER
      INFORMATION
                  14PART
      III
                  
                  14ITEM
      9.
                  DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16 (a) OF THE EXCHANGE ACT
                  14ITEM
      10
                  EXECUTIVE
      COMPENSATION
                  16ITEM
      11.
                  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  18ITEM
      12.
                  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
                  18ITEM
      13.
                  EXHIBITS
      AND REPORTS ON FORM 8-K
                  19ITEM
      14.
                  PRINCIPAL
      ACCOUNTING FEES AND SERVICES
                  19Signatures
                  
                  20


2


XIOM
CORP.





Part
I





Item
1.  Description of Business





FORWARD
LOOKING STATEMENTS





The
following discussion should be read in conjunction with our audited financial
statements and notes thereto included herein.  In connection with, and
because we desire to take advantage of, the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange
Commission.  Forward-looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments.  Forward looking statements
are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond our control and many of which, with
respect to future business decisions, are subject to change.  These
uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward-looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.





ABOUT
OUR COMPANY





XIOM
Corp, formerly Panama Industries, Ltd., (“XIOM”, or “the Company”), was
incorporated in Delaware on March 2, 1998. The company formally changed its name
to XIOM in August 2004.





Spin-off
from the former parent company





The
former parent of XIOM, ThermalTec International, Corp. (“TTI”), now
Accountabilities, Inc. and publicly traded under the symbol “ACTB”, was
incorporated in 1994 under the laws of the State of Delaware. XIOM was spun-out
of TTI in July of 2001 to its shareholders of record as of June 22, 2001, upon
which each shareholder of TTI received one (1) share of XIOM common stock for
every three (3) shares of TTI common stock. XIOM was spun-off because it had a
specific technical focus that needed further development and TTI had intended to
focus on specific target merger candidates involved in totally unrelated
businesses. In May of 2001, TTI management determined that the combination of
XIOM and these businesses would have been difficult to integrate, cause numerous
management problems as well as accounting and financial reporting issues. As
such, it was decided by the management of TTI that XIOM, as a wholly-owned
subsidiary, would be better off as a separate stand alone company, able to focus
on its own specific operations and business plan objectives. XIOM has been,
since inception, engaged in the
thermal spray coating industry. Its primary business objective is to continually
refine and market their polymer based thermal spraying coating
technology.


3





Where
you can find us





Our
corporate offices and manufacturing facility are located at 78 Lamar Street,
West Babylon, New York. The main telephone number is (631) 643-
4400.  Our website is http://www.xiom-corp.com.  Any
information contained on our website should not be considered as part of this
prospectus.  The information contained on our website is used for
disseminating sales and marketing purposes.





BUSINESS
OF THE COMPANY – PRINCIPAL PRODUCTS AND SERVICES





Materials
used with XIOM 1000 System are produced from various formulas of plastic
powders. The powder mixture is melted and projected onto a substrate via a
mixture of air and flammable gases that produce the actual
coating.  The air, flammable gases and powder mixture are brought
together through a specialized and patented gun with a flame nozzle where the
powder material is melted and sprayed forward onto the surface to be
coated.  The gases and heated coating are cooled by the surface that
it adheres to.





The
company is a technology business offering delivery of plastic powder coatings at
on-site locations utilizing the XIOM 1000 System.  Powder coating
currently is a process in which metal parts are brought into a factory
environment where they are cleaned and prepared to receive a powder
coating.  Plastic in powder form is then applied to the various metal
parts by means of an electrostatic charge that causes the powder to adhere to
the surface.  The coated part is then heated in an oven for a period
of time to cause the plastic to melt and adhere to the
substrate.   Our process operates
differently.  Although we use plastic powder, we do not
electrostatically charge that powder in order for it to adhere to a
substrate.  We use a different mechanism which simultaneously applies
and fuses the powder to a substrate.  The advantage of this process is
that the coating process is totally portable and can be applied anywhere, not
necessarily in a factory setting, and can be applied without use of an oven to
cure the coating., and can be applied to most substrates in addition to the
metal substrate to which powder coatings are traditionally applied in a factory,
using an oven.





The
company’s plastic spray technology is unique and has patents
pending.  The patents cover technology and processes to apply and
deliver powder coatings through a specialized spray system that allows those
coatings to be applied both on site and in a factory.  The patents
will last, upon issuance for a period of 17 years, unless other patents are
applied for.  With our process, the on-site plastic powder coating
process, you can deposit coatings on wood, steal, fiberglass, concrete and
plastic – a variety of substrates not all available to traditional powder
coating.  Our process is quick, does not use an expensive oven for
curing and can be used both outside and inside a building.





The
technology associated with the XIOM 1000 Thermal Spray system was developed
personally by the two operating officers of the Company, who, in August 2004,
irrevocably transferred all rights title and interest in all current patents,
patents pending and any future intellectual property rights that may be derived
from this technology in exchange for restricted common shares on the Company.
This technology was developed and enhanced over time with funding from contacts
with the New York State Energy Research & Development Authority (“NYSERDA”).
The refinements made to the technology pursuant to these contracts have resulted
in the XIOM 1000 Thermal Spray system that is currently marketed for commercial
sale.


4





HISTORY
OF THE TECHNOLOGY





The
history of applying polymer coatings dates back to the early 1950’s starting
with the fluidized bed process and then in the 1960’s to the Electrostatic
Powder Sprayer (“EPS”).  Today EPS is the standard for applying
organic polymer coatings.  It is commonly referred to as “Powder
Coating” which to this familiar with the process means EPS applied plastic
powder coatings followed by oven curing at approximately 400 F, where melting
and film formation takes place.





EPS is a
large business today as polymer coatings, thermoplastic and thermoses are
applied to a variety of substrates.  They can be applied to cold
surfaces before being cured to film thickness typically between 1 to 4 mils
(50-200 microns). There are little Volatile Organic Compounds (“VOC”) and
reduced Hazardous Air Pollutants (“HAP”). For these reasons EPS has captured
substantial business from the established liquid coating processes we know as
traditional painting.





The
company’s products contain no VOCs . There is a current trend by the EPA to ban
VOCs for products sold to the public for safety and health purposes, but there
is no guarantee that our VOC-less products, although safer, will prove to be any
more functionally effective than those alternative coating products such as
paints that do have VOCs.





The
traditional powder coating industry, directly competitive to the company’s
products, usually requires a large investment in ovens and production lines,
sophisticated preparation and cleaning equipment, and in many cases operates
with sophisticated in-line computerized production control systems to manage the
powder coating process.  The XIOM system is designed to do powder
coating outside a traditional factory setting. The company’s system enables a
plastic coating to be directly sprayed onto a surface, contains no preparation
equipment and requires no oven with which to cure powder
coatings.  The company’s system has no computerized control whatsoever
and, in fact, does not even use electricity but relies on air, propane and
oxygen to achieve a coating result.





Traditional
powder coaters who do coating inside a factory environment could possibly try to
re-engineer their systems to prevent the company from selling its
systems.  But it would require them to manufacture smaller, more
portable ovens as well as develop more portable production and control systems
in order to compete with the company’s on-site coating
capability.  The company acknowledges that in the event that enough
traditional powder coaters alter their existing operations and create portable
systems and ovens that could be mounted on mobile units equipped with power
systems for operation, might compromise our ability to sell our
systems.





There can
be no assurance that the company’s technology will ever supplant traditional
powder coating technology and become commercially
successful.  However, our technical data on our coatings gives us
grounds to be optimistic (see attached test results from an independent
laboratory).  Because XIOM coatings are actually solid plastic
coatings, they have the possibilities of being more durable and
weather-resistant than conventional painting systems which are another large
alternative to the company’s powder coating systems.


5





The
company, believes, but cannot prove that its coatings are superior to
paint.  The company would have to conduct long term tests of its solid
plastic coatings versus liquid paints in many environments over a period of many
years using an independent agency to monitor such tests to prove its
belief.  The expense to do so would be extremely high since some
plastic coatings are reputed to last many years.  The company would
have to continue to pay its overhead during such tests and possibly not sell
anything because customers may want such proof and might not want to rely on our
assertions, or the assertions of other plastic feed stock manufacturer’s as to
the efficacy of plastic after it passes through our system.  In that
case the company would run out of funds long before such tests were
completed.  Investors would be well advised not to invest in the
company if they need the assurance of long term testing on coatings from our
process being able to outlast paint coatings.  In this case the
company would strongly advise such investors not to invest in the
company.





Unlike
most painting systems, XIOM’s coatings have no dripping and overspray problems
and absolutely no VOCs.  XIOM materials cure instantly after being
applied and no curing ovens are needed.





Due to
the fact that the entire XIOM system weighs just 70 pounds, the entire system
can be easily used onsite.  The company is acting on its belief that
there is a demand for plastic coatings applied outside a factory setting; the
company cannot prove that its belief is accurate.





XIOM
coatings can be applied at thicknesses from 3 mils up to 1 inch as compared to
traditional powder coatings which usually vary from 1 to 4 mils
thick.  The company believes that thicker coatings generally give
greater protection against corrosion than thin coatings.  The company
does not have definitive data to conclusively prove this assertion.





EPS
applied plastic coatings are further characterized by their wide use in OEM and
production applications for decorative purposes where appearance and durability
are required.  While there is some use of functional EPS coatings, by
and large the vast majority of use for decorative applications.  Large
numbers of relatively small components can best take advantage of the economic
benefits from EPS powder processing thus conforming to the limits of batch
processing and over size restrictions.





UNIQUE
THERMAL SPRAY TECHNOLOGY





The XIOM
powder spray process uses the rich history of EPS Powder Coatings but takes the
technology a step further to meet the field requirements of on-site liquid
painting, thus bridging the gap between “in house” EPS and “on-site” liquid
painting developing a true portable on-site polymer coating system.





Two major
advances account for XIOM’s coating technology:


6





First,
The XIOM 1000 Thermal Spray system is currently the Company’s only equipment
product for on-site portability.  It permits spraying of relatively
low melting point polymer powder without over heating and generation of
combustion with no VOC’s. High deposit rate and efficiency further characterize
the XIOM 1000 system.





Second,
XIOM plastic powders are designed specifically for Thermal
Spraying.  New materials technology utilizing multiplex combinations,
blends, additives and composites, this taking advantage of synergy and covalent
bonding to produce exceptionally high adhesion to most substrates and functional
properties heretofore not possible with polymers (plastic
coatings).  For instance XIOM is the first to produce thermal sprayed
polymer/zinc primer coats, which deliver very high quantities of zinc to the
substrate for corrosion control.  These polymer/zinc primer coatings
not only bond securely to steel substrate, but they facilitate bonding of
sprayed top coatings as well.





Many XIOM
powders are unique and therefore patentable, with patents
pending.  Substrates such as wood, plastic, masonry and fiberglass –
not processable via EPS – are now readily sprayable with the XIOM 1000 system,
along with steel, aluminum and non-ferrous substrates.





The new
powder coatings properties produced with the XIOM 1000 system are manifested in
the wide variety of applications both functional and decorative now
solvable.





The
Company currently has approximately 20 varied material formulations to create
spray coatings.  The Coating functionality includes any-corrosions;
wear resistance, architectural, anti-foul, anti-microbial, anti-graffiti,
glow-in-the-dark, and grip and release.  The Company’s materials come
in over 100 different colors.  The Company can mix ceramics and
metals, if desired, for added wear, into its plastic coatings and can add
anti-microbial formulations into the coatings.  The system sprays
eight pounds of plastic material an hour using different spray nozzles, allowing
for both round patters and up to a 9-inch fan spray pattern.  The
system is electrically controlled.  The fuel system is oxygen and
propane with air as a cooling gas.  Preparation of surfaces is the
same as for painting.  Since these are plastic coatings, all solids
with no hollows and voids, they will last longer than paint-based coating
systems and can be applied thick or thin.





PLAN
OF OPERATIONS





Liquidity,
Capital Resources and Operations:





During
the fiscal years ended September 30, 2008 and 2007, net cash used by operating
activities was $1,119.031 and $941,137 respectively. The Company incurred net
losses of $2,984,628 and $2,721,651 for the fiscal years ended September 30,
2008 and 2007, respectively. Additionally, at September 30, 2008, the Company
had a Stockholders’ Deficit of $796,876.





These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. The Company anticipates that in order to fulfill its plan of
operations, it will need to seek financing from outside sources.  To this
end, the Company is constantly pursuing private debt and equity sources.
 However, there is no assurance that any future financing, if successful,
will be sufficient to allow the Company to operate profitably or
successfully. It is also the intention of the Company’s management to
improve profitability by significantly increasing sales of its patented thermal
spray process in fiscal 2009 while maintaining reasonable levels general and
administrative expenses as the company grows.


7


Under the
federal securities laws, any offering of securities must be registered unless an
exemption from registration is available, and, with limited exceptions, no
exemption from registration is generally available for a private placement
transaction which is made concurrently with a public offering.  We may be
considered to have commenced a public offering of securities on May 6, 2005,
when we first filed the registration statement on Form SB-2.





In
private placement transactions completed subsequent to the filing of our initial
registration statement, from January 1, 2006 through October 20, 2006 (the
effective date of the registration statement) we sold a total of 563,718 shares
of restricted common stock from which we received gross offering proceeds of
$670,399. These securities were offered and sold in reliance upon claimed
private placement exemptions from registration. As a result, the purchasers of
the shares may have the right to claim that the purchase transactions violated
the federal securities laws. If any of these transactions did violate federal
securities laws, the purchasers in those transactions may have claims against us
for damages or for rescission and recovery of their full subscription price,
plus interest. Although none of the purchasers of these shares has made or
threatened any claim against us alleging violation of federal securities laws,
in the event the purchasers of these securities successfully asserted claims for
rescission it would have a substantial adverse effect on our business and on our
ability to continue to operate. We may not have sufficient funds available to
pay such claims, and there is no assurance that we would be able to obtain funds
from other sources.  In that event, we may be forced to cease operations
and liquidate our available assets to pay our liabilities, including, but not
limited to, the rescission claims.





Results
of Operations:





For
the Fiscal Years Ended September 30, 2008 vs. September 30, 2007




For the
fiscal year ended September 30, 2008, the Company had $2,370,933 in sales and
cost of sales of $1,483,288. This is in comparison to total sales of $933,194
and cost of sales of $755,380 for fiscal year ended September 30, 2007. . Gross
profit for fiscal 2008 was $887,645 or 37%, an increase of $709,831 or 400%
compared to the gross profit in fiscal 2007 of $177,184 or 19%.  This
increase in sales and gross profit in fiscal 2008 results primarily from a
significant increase in system and powder sales compared to fiscal
2007.




General
and administrative expenses increased from $2,509,724 in fiscal 2007 to
$3,544,827 in fiscal 2008 by $1,035,103 or 41%.  This increase was due to
additional consulting engineering expense to refine the thermal spray process
and coatings, as well as financial consulting related to money raising
activities, marketing expenses and general overhead increases necessary to
accommodate the anticipated customer demand for the Company’s
products.




Other
expense decreased from $389,741 in fiscal 2007 to $327,446 in fiscal
2008.  This decrease of 62,295 or 16% was due to the absence of
$311,044 in losses on joint venture investments offset by an increase of
$248,749 in interest expense due to the Company's increased use of debt for
financing purposes in fiscal 2008.


8





The net
loss increased from $2,721,651($0.35 per share) in fiscal 2007 to $2,984,628
($0.31 per share) in fiscal 2008. This increase of $262,977 or 10% was primarily
related to the increase in gross profits offset by the increase in general and
administrative expenses described above.





We have,
in our history, generated limited income from operations, have incurred
substantial expenses and have sustained losses.  In addition, we
expect to continue to incur significant operating expenses.  As a
result, we will need to generate significant revenues to achieve profitability,
which may not occur.  We expect our operating expenses to increase as
a result of our planned expansion.  Even if we do achieve
profitability, we may be unable to sustain or increase profitability on a
quarterly or annual basis in the future. We expect to have quarter-to-quarter
fluctuations in revenues, expenses, losses and cash flow, some of which could be
significant. Results of operations will depend upon numerous factors, some
beyond our control, including regulatory actions, market acceptance of our
products and services, new products and service introductions, and
competition.





Inflation:





The
amounts presented in the financial statements do not provide for the effect of
inflation on the Company’s operations or its financial position. Amounts shown
for machinery, equipment and leasehold improvements and for costs and expenses
reflect historical cost and do not necessarily represent replacement cost. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation
adjustments.





Employees:





As of
December 31, 2008, we employed approximately 16 persons.  None of our
employees are covered by collective bargaining agreements.  We believe
that our relations with or employees are good.





Item
2. Description of Property





XIOM
leases approximately 7,000 square feet of manufacturing and warehouse facility
in West Babylon, New York pursuant to a four-year lease at $5,000 per month.
This location also serves as Corporate Headquarters. In addition, the Company
leases a 2,000 square foot training and testing facility adjacent to the above
space on a month-to-month basis for $1,300 per month. Rent expense for fiscal
2008 and 2007 was approximately $94,600 and $76,500, respectively. The
manufacturing and warehouse facility is adequate for the needs of the Company at
this time. However, if it were necessary to expand the manufacturing and
warehouse capacity, the Company would need to relocate its facilities, at an
additional cost per month. Such location would be relatively easy to locate,
however the initial cost of moving might be substantial.





Item
3. Legal Proceedings





We are
not aware of any litigation, pending, or threatened at this
time.


9


Indemnification
of Officers and Directors





At
present we have not entered into individual indemnity agreements with our
Officer or Director.  However, our By-Laws and Certificate of
Incorporation provide a blanket indemnification that we shall indemnify, to the
fullest extent under Delaware law, our directors and officers against certain
liabilities incurred with respect to their service in such
capabilities.  In addition, the Certificate of Incorporation provides
that the personal liability of our directors and officers and our stockholders
for monetary damages will be limited.





Item
4. Submission of Matters to a Vote of Security Holders





In August
2007, the Board of Directors of XIOM, by written consent of the holders in
excess of 50% of the voting rights of the shareholders of the Company, approved
an increase in the number of authorized shares of common stock from 10,000,000
to 50,000,000. The Certificate of Amendment of Certificate of Incorporation of
XIOM CORP dated August 31, 2007 has been previously filed as an attachment to
the Annual Report for September 30, 2007 as Exhibit 3(i).





Part
II





Item
5. Market for Common Equity and Related Stockholder Matters





General:





The
authorized capital stock consists of 50,000,000 shares of common stock, par
value $.0001 per share. As of January 9, 2009, there were 12,758,909 shares of
Common Stock issued and outstanding. This does not include shares underlying
warrants or options yet to be exercised. The following summary description of
the Common Stock is qualified in its entirety by reference to the Company's
Certificate of Incorporation and all amendments thereto.





Common
Stock:





Our
authorized capital stock consists of 50,000,000 shares of common stock, par
value $.0001 per share. Each share of Common Stock entitles its holder to one
non-cumulative vote per share and, the holders of more than fifty percent (50%)
of the shares voting for the election of directors can elect all the directors
if they choose to do so, and in such event the holders of the remaining shares
will not be able to elect a single director.  Holders of shares of
Common Stock are entitled to receive such dividends, as the board of directors
may, from time to time, declare out of Company funds legally available for the
payment of dividends.  Upon any liquidation, dissolution or winding up
of the Company, holders of shares of Common Stock are entitled to receive pro
rata all of the assets of the Company available for distribution to
stockholders.





Stockholders
do not have any pre-emptive rights to subscribe for or purchase any stock,
warrants or other securities of the Company.  The Common Stock is not
convertible or redeemable.  Neither the Company's Certificate of
Incorporation nor its By-Laws provide for pre-emptive rights.


10


Price
Ranges of XIOM CORP. Common Stock:





Market
Information:





The
Company’s Common Stock is traded on the NASD OTC Bulletin Board under the symbol
“XMCP.OB” commencing on or about December 18, 2006.





There is
currently a limited trading market for the Company’s Common Stock with the price
being very volatile.  The following table shows the reported high and
low closing prices per share for our common stock through September 30,
2008.  Since that date through January 9, 2009, the the closing price
per share has been between $0.12 and $0.75.





High
                  
                  
                  LowFiscal
      2008:Fourth
      quarter
                  
                  $
                  1.81
                  
                  
                  $
                  0.52Third
      quarter
                  
                  
                  2.19
                  
                  
                  
                  1.50Second
      quarter
                  
                  
                  2.90
                  
                  
                  
                  1.05First
      quarter
                  
                  
                  1.60
                  
                  
                  
                  1.05Fiscal
      2007:Fourth
      quarter
                  
                  
                  1.60
                  
                  
                  
                  1.05Third
      quarter
                  
                  
                  1.90
                  
                  
                  
                  1.01Second
      quarter
                  
                  
                  3.35
                  
                  
                  
                  0.60First
      quarter
                  
                  
                  1.70
                  
                  
                  
                  1.60





Liquidation:





In the
event of a liquidation of the Company, all stockholders are entitled to a pro
rata distribution after payment of any claims.





Dividend
Policy:





The
Company has never declared or paid cash dividends on its common stock and
anticipates that all future earnings will be retained for development of its
business.  The payment of any future dividends will be at the
discretion of the Board of Directors and will depend upon, among other things,
future earnings, capital requirements, the financial condition of the Company
and general business conditions.





Stock
Transfer Agent:





Our
transfer agent and registrar of the Common Stock is Manhattan Transfer Registrar
Company, P.O. Box 756, Miller Place, NY  11764, (631) 928-7655,(631) 928-6171
Fax


11





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





Forward-looking
Information





Certain
statements in this document are forward-looking in nature and relate to trends
and events that may affect the Company’s future financial position and operating
results. The words “expect” “anticipate” and similar words or expressions are to
identify forward-looking statements.  These statements speak only as
of the date of the document; those statements are based on current expectations,
are inherently uncertain and should be viewed with caution. Actual results may
differ materially from the forward-looking statements as a result of many
factors, including changes in economic conditions and other unanticipated events
and conditions.  It is not possible to foresee or to identify all such
factors.  The Company makes no commitment to update any
forward-looking statement or to disclose any facts, events or circumstances
after the date of this document that may affect the accuracy of any
forward-looking statement.





XIOM,
Corp.’s plans for the next twelve months:





XIOM
plans to move into an expansion phase have been adversely affected by the
weakened economy during fiscal 2008 and such plans are expected to be further
adversely affected by the continued weakening of the economy during the
beginning of fiscal 2009.





During
the first quarter of fiscal 2008, the Company introduced its XIOM 5000, a high
speed spray gun which can apply material five times faster than the XIOM 1000
system each and significantly reduce the cost per square foot of spray coating
to less than $1.00 per square foot. During the last two years, over 200 of
XIOM’s spray systems were sold. The sales were primarily to customers in North
America with 40 systems going to overseas customers.





The
Company now offers the XIOM 1000 and XIOM 5000 spray gun in a combination
package for $15,000.  The Company expects to sell approximately 100 of
these systems on a worldwide basis during fiscal 2009.  However, there
can be no assurance that the Company will be able to achieve this target since
this will entail a shipping rate approximately equal to what the Company has
achieved in the past.  During an expected weak economy in fiscal 2009,
training and support which will be required to support a customer base
aggregating approximately 300 members as well as supplying the requisite
materials used in the spray systems will be a significant economic and
logistical challenge for the Company.





The
Company’s overhead expense run rate has been decreased to approximately $50,000
per month during the second quarter of fiscal 2009. We have $200,000 of
firm contracts in house. Without this contract revenue, the company would need
to sell at least 7 of its combination gun packages per month to cover the
current monthly overhead expenses.  .





The
Company plans to incur patent acquisition expenditures of approximately $50,000
during fiscal 2009.  In the past, the company has issued common
stock in exchange for a variety of services resulting in non-cash
expenses. The Company in effect traded equity for services rather than cash
where it was possible.  The Company expects that it will minimize this
strategy on a going forward basis.


12


The
Company has a joint venture in the United States whose purpose is to develop
contract revenues from spraying coatings on ship hulls and ship super
structures.  This joint venture is with New Bedford
Coatings.  The venture has been funded and equipped, and is doing
trial coatings for its client at this time.  It is anticipated that
significant spray activity will start mid-fiscal 2009.





The
Company formed a European distribution arrangement during the second quarter of
fiscal 2008.  Through this arrangement, the Company has sold 20
systems to date and has established 6 independent European sub-distributors to
date.  The Company plans to maintain its sales efforts in Europe
during fiscal 2009.





The
Company believes that it has enough funds to only operate for the next 3 months
even if it does not sell any systems. The Company bases that statement on the
following facts and assumptions:





a)
            The
      Company has received a contract from EMIG to develop and apply thin
      coatings that attain full cure for within the spray cycle.  The
      contract is for $184,000.





b)
            The
      Company has received a co-funded contract from NYSERDA for $325,000 to
      install Xiom equipment in an industrial powder coating line to reduce
      energy costs and the carbon
footprint.





The
Company is stepping up its efforts in Asia.  To that end, it has sold
a total of 9 systems in Japan, Korea and China.  Sales to these
countries were made in the last 180 days.  The Company is not in able
to accurately forecast sales for fiscal 2009 for these countries.The Company
does not have sufficient cash resources and revenue to adequately support
overseas marketing plans for the foreseeable future. Therefore, without
increasing revenues or acquiring additional capital, it is likely that our
current overseas marketing plans will have to proceed at a slower
rate.





Our
source of liquidity comes from two sources.  Internally, if we
increase sales, we would be able to increase the acquisition of raw materials
and increase our production.  This would in turn increase the
short-term liquidity of the Company.  Externally, we may gain long-term
liquidity from the sale of common stock and from the exercise of warrants by the
shareholders from the recent private placements.





There are
no known trends, events or uncertainties that have or are reasonably likely to
have a material impact on the Company’s short-term or long-term liquidity, other
than the inability to sell our products, or the failure to sell any of future
shares of common stock or the lack of exercise of the warrants by the
shareholders.  Near term the current turmoil in financial markets may
make new fund raising more difficult than in the recent past.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to
investors.


13





Item
7.       Financial Statements





Index To
Financial Statements





Report
      of Independent Registered Public Accounting Firm
                      F-2Consolidated
      Balance Sheets as of September 30, 2008 and 2007
                      F-3Consolidated
      Statements of Operations for the years endedSeptember
      30, 2008 and 2007
                      F-4Consolidated
      Statements of Changes in Stockholders’ Equity(Deficit)
      for the years ended September 30, 2008 and 2007
                      F-5Consolidated
      Statements of Cash Flows for the years endedSeptember
      30, 2008 and 2007
                      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 XIOM Corp.:





I have
audited the accompanying consolidated balance sheets of XIOM Corp. and
subsidiary (the Company) as of September 30, 2008 and 2007 and the related
consolidated statements of operations, stockholders’ equity(deficit), and cash
flows for the years then ended. These financial statements are the
responsibility of the Company’s management. My responsibility is to express an
opinion on these financial statements based on my audits.





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





In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of XIOM Corp. and subsidiary as
of September 30, 2008 and 2007 and the results of their operations and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.





The
accompanying consolidated financial statements referred to above have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 18 to the consolidated financial statements, the Company has
incurred losses for the years ended September 30, 2008 and 2007 and has a
deficiency in stockholders’ equity at September 30, 2008. These factors raise
substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to this matter are also described in Note 18. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





/s/
Michael T. Studer CPA P.C.





Freeport,
New York


January
12, 2009


F-2





XIOM
Corp.


Consolidated
Balance Sheets


As
of September 30, 2008 and 2007





2008
                                          
                                          
                                          2007AssetsCurrent
      AssetsCash
      and Cash Equivalents
                                          
                                          $
                                          289,857
                                          
                                          
                                          $
                                          312,718Accounts
      Receivable, Net of Allowance for Doubtful Accounts of $30,000 and $40,000,
      respectively
                                          
                                          
                                          158,232
                                          
                                          
                                          
                                          115,854Inventory
                                          
                                          
                                          307,107
                                          
                                          
                                          
                                          174,234Loan
      Receivable
                                          
                                          
                                          153,125
                                          
                                          
                                          
                                          -Prepaid
      Expenses
                                          
                                          
                                          16,816
                                          
                                          
                                          
                                          13,073Other
      Current Assets
                                          
                                          
                                          17,200
                                          
                                          
                                          
                                          55,660Total
      Current Assets
                                          
                                          
                                          942,337
                                          
                                          
                                          
                                          671,539Fixed
      Assets, Net of Accumulated Depreciation & Amortization
                                          
                                          
                                          215,343
                                          
                                          
                                          
                                          203,697Other
      AssetsIntangible
      Assets, Net of Accumulated Amortization
                                          
                                          
                                          433,040
                                          
                                          
                                          
                                          343,353Retainage
      Receivable
                                          
                                          
                                          47,288
                                          
                                          
                                          
                                          23,705Security
      Deposits
                                          
                                          
                                          11,445
                                          
                                          
                                          
                                          6,815Total
      Other Assets
                                          
                                          
                                          491,773
                                          
                                          
                                          
                                          373,873Total
      Assets
                                          
                                          $
                                          1,649,453
                                          
                                          
                                          $
                                          1,249,109Liabilities and Stockholders' Equity
      (Deficit)Current
      LiabilitiesAccounts
      Payable and Accrued Expenses
                                          
                                          $
                                          656,903
                                          
                                          
                                          $
                                          560,998Convertible
      Note Payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          250,000Notes
      Payable
                                          
                                          
                                          12,702
                                          
                                          
                                          
                                          51,143Total
      Current Liabilities
                                          
                                          
                                          669,605
                                          
                                          
                                          
                                          862,141Long-Term
      LiabilitiesConvertible
      Notes Payable, Net of Unamortized Discounts
                                          
                                          
                                          1,090,888
                                          
                                          
                                          
                                          636,590Shareholder
      Loan
                                          
                                          
                                          15,437
                                          
                                          
                                          
                                          9,775Total
      Liabilities
                                          
                                          
                                          1,775,930
                                          
                                          
                                          
                                          1,508,506Common
      Stock, Subject To Rescission Rights
                                          
                                          
                                          670,399
                                          
                                          
                                          
                                          670,399Stockholders'
      Equity (Deficit)Common
      Stock, $.0001 Par Value, 50,000,000 authorized shares, 10,425,000 and
      7,642,945 shares, respectively, issued and outstanding (excluding 563,718
      shares subject to rescission rights)
                                          
                                          
                                          1,043
                                          
                                          
                                          
                                          764Additional
      Paid-In Capital
                                          
                                          
                                          6,598,723
                                          
                                          
                                          
                                          3,481,454Retained
      Earnings (Deficit)
                                          
                                          
                                          (7,396,642
                                          )
                                          
                                          
                                          (4,412,014
                                          )Total
      Stockholders' Equity (Deficit)
                                          
                                          
                                          (796,876
                                          )
                                          
                                          
                                          (929,796
                                          )Total
      Liabilities and Stockholders' Equity Deficit)
                                          
                                          $
                                          1,649,453
                                          
                                          
                                          $
                                          1,249,109





See
accompanying notes to financial statements


F-3





XIOM
Corp.


Consolidated
Statements of Operations


For
The Years Ended September 30, 2008 and 2007





2008
                  
                  
                  2007Sales
                  
                  $
                  2,370,933
                  
                  
                  $
                  933,194Cost
      of Sales
                  
                  
                  1,483,288
                  
                  
                  
                  755,380Gross
      Profit
                  
                  
                  887,645
                  
                  
                  
                  177,814Selling,
      General and Administrative Expenses
                  
                  
                  3,544,827
                  
                  
                  
                  2,509,724Operating
      Income (Loss)
                  
                  
                  (2,657,182
                  )
                  
                  
                  (2,331,910
                  )Other
      Income (Expenses);Loss
      on Joint Venture Investments
                  
                  
                  -
                  
                  
                  
                  (311,044
                  )Interest
      Expense
                  
                  
                  (327,446
                  )
                  
                  
                  (78,697
                  )Total
      Other Income (Expenses)
                  
                  
                  (327,446
                  )
                  
                  
                  (389,741
                  )Net
      Income (Loss)
                  
                  $
                  (2,984,628
                  )
                  
                  $
                  (2,721,651
                  )Basic
      and Diluted Income (Loss) per Share
                  
                  $
                  (0.31
                  )
                  
                  $
                  (0.35
                  )Weighted
      Average Number of Shares Outstanding, Basic and Diluted
                  
                  
                  9,486,008
                  
                  
                  
                  7,752,047





See
accompanying notes to financial statements


F-4





XIOM
Corp.
 Consolidated
Statements of Stockholders' Equity (Deficit)
 For
The Years Ended September 30, 2008 and 2007





Common Stock
                  
                  
                  Additional
                  
                  
                  Retained
                  
                  
                  TotalNumber of
                  
                  
                  Par
                  
                  
                  Paid-In
                  
                  
                  Earnings
                  
                  
                  Shareholders'Shares
                  
                  
                  Value
                  
                  
                  Capital
                  
                  
                  (Deficit)
                  
                  
                  Equity (Deficit)Balance,
      September 30, 2006
                  
                  
                  6,532,255
                  
                  
                  
                  653
                  
                  
                  
                  1,444,415
                  
                  
                  
                  (1,690,363
                  )
                  
                  
                  (245,295
                  )Issuance
      of Common Stock for Consulting Services
                  
                  
                  449,820
                  
                  
                  
                  46
                  
                  
                  
                  661,220
                  
                  
                  
                  
                  
                  
                  
                  661,266Issuance
      of Common Stock for Sales Commissions
                  
                  
                  8,679
                  
                  
                  
                  1
                  
                  
                  
                  13,018
                  
                  
                  
                  
                  
                  
                  
                  13,019Issuance
      of Common Stock for the purchase of a thermal spray technology (as
      restated)
                  
                  
                  75,000
                  
                  
                  
                  8
                  
                  
                  
                  74,992
                  
                  
                  
                  
                  
                  
                  
                  75,000Issuance
      of Common Stock related to a private placement agreement
      penalty
                  
                  
                  25,000
                  
                  
                  
                  3
                  
                  
                  
                  (3
                  )
                  
                  
                  
                  
                  
                  
                  -Issuance
      of Common Stock for equity investments in joint ventures and related stock
      option
                  
                  
                  250,000
                  
                  
                  
                  25
                  
                  
                  
                  324,975
                  
                  
                  
                  
                  
                  
                  
                  325,000Common
      Stock Warrants exercised in exchange for Note Payable
                  
                  
                  13,334
                  
                  
                  
                  1
                  
                  
                  
                  9,999
                  
                  
                  
                  
                  
                  
                  
                  10,000Private
      placements of Restricted Common Stock
                  
                  
                  54,889
                  
                  
                  
                  5
                  
                  
                  
                  78,295
                  
                  
                  
                  
                  
                  
                  
                  78,300Exercise
      of Common Stock Warrants
                  
                  
                  67,301
                  
                  
                  
                  6
                  
                  
                  
                  50,469
                  
                  
                  
                  
                  
                  
                  
                  50,475Issuance
      of Common Stock to repay Notes Payable
                  
                  
                  30,000
                  
                  
                  
                  3
                  
                  
                  
                  29,997
                  
                  
                  
                  
                  
                  
                  
                  30,000Options
      exercised in exchange for Accrued Compensation, Shareholder Loan and
      Accrued Consulting Fees
                  
                  
                  146,667
                  
                  
                  
                  14
                  
                  
                  
                  139,986
                  
                  
                  
                  
                  
                  
                  
                  140,000Purchase
      and retirement of Treasury Shares
                  
                  
                  (10,000
                  )
                  
                  
                  (1
                  )
                  
                  
                  (13,999
                  )
                  
                  
                  
                  
                  
                  
                  (14,000
                  )Value
      of stock options granted during the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  286,223
                  
                  
                  
                  
                  
                  
                  
                  286,223Value
      of Warrants attached to Convertible Notes
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  143,672
                  
                  
                  
                  
                  
                  
                  
                  143,672Beneficial
      conversion feature of Convertible Notes
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  238,195
                  
                  
                  
                  
                  
                  
                  
                  238,195Net
      (Loss) for the year ended September 30, 2007
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (2,721,651
                  )
                  
                  
                  (2,721,651
                  )Balance,
      September 30, 2007
                  
                  
                  7,642,945
                  
                  
                  
                  764
                  
                  
                  
                  3,481,454
                  
                  
                  
                  (4,412,014
                  )
                  
                  
                  (929,796
                  )


F-5





XIOM
Corp.


Consolidated
Statements of Stockholders' Equity (Deficit)


For
The Years Ended September 30, 2008 and 2007





Common Stock
                    
                    
                    Additional
                    
                    
                    Retained
                    
                    
                    TotalNumber of
                    
                    
                    Par
                    
                    
                    Paid-In
                    
                    
                    Earnings
                    
                    
                    Shareholders'Shares
                    
                    
                    Value
                    
                    
                    Capital
                    
                    
                    (Deficit)
                    
                    
                    Equity (Deficit)Balance,
      September 30, 2007
                    
                    
                    7,642,945
                    
                    
                    
                    764
                    
                    
                    
                    3,481,454
                    
                    
                    
                    (4,412,014
                    )
                    
                    
                    (929,796
                    )Option
      grants in October 2007
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    123,917
                    
                    
                    
                    
                    
                    
                    
                    123,917Shares
      issued for services during the quarter ended  December 31,
      2007
                    
                    
                    250,000
                    
                    
                    
                    25
                    
                    
                    
                    299,975
                    
                    
                    
                    
                    
                    
                    
                    300,000Shares
      issued for Accrued Expenses
                    
                    
                    48,000
                    
                    
                    
                    5
                    
                    
                    
                    71,995
                    
                    
                    
                    
                    
                    
                    
                    72,000Options
      exercised against Accrued Compensation and Accrued Accounting
      Fees
                    
                    
                    82,000
                    
                    
                    
                    8
                    
                    
                    
                    77,992
                    
                    
                    
                    
                    
                    
                    
                    78,000Shares
      issued for Convertible Note
                    
                    
                    269,791
                    
                    
                    
                    27
                    
                    
                    
                    249,973
                    
                    
                    
                    
                    
                    
                    
                    250,000Shares
      issued for services during the quarter ended  March 31,
      2008
                    
                    
                    433,000
                    
                    
                    
                    43
                    
                    
                    
                    431,707
                    
                    
                    
                    
                    
                    
                    
                    431,750Shares
      issued for Accrued Expenses
                    
                    
                    5,000
                    
                    
                    
                    1
                    
                    
                    
                    7,499
                    
                    
                    
                    
                    
                    
                    
                    7,500Option
      grants in February 2008
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    226,080
                    
                    
                    
                    
                    
                    
                    
                    226,080Shares
      issued to buy out distributor contracts
                    
                    
                    51,000
                    
                    
                    
                    5
                    
                    
                    
                    50,995
                    
                    
                    
                    
                    
                    
                    
                    51,000Shares
      issued for equity investment
                    
                    
                    156,433
                    
                    
                    
                    16
                    
                    
                    
                    132,484
                    
                    
                    
                    
                    
                    
                    
                    132,500Private
      placements of common stock
                    
                    
                    388,136
                    
                    
                    
                    39
                    
                    
                    
                    418,961
                    
                    
                    
                    
                    
                    
                    
                    419,000Shares
      issued for Accrued Interest due on Convertible Notes
                    
                    
                    44,185
                    
                    
                    
                    4
                    
                    
                    
                    48,600
                    
                    
                    
                    
                    
                    
                    
                    48,604Shares
      issued for services during the quarter ended  June 30,
      2008
                    
                    
                    33,750
                    
                    
                    
                    4
                    
                    
                    
                    36,246
                    
                    
                    
                    
                    
                    
                    
                    36,250Exercise
      of Common Stock Warrants
                    
                    
                    26,500
                    
                    
                    
                    3
                    
                    
                    
                    29,147
                    
                    
                    
                    
                    
                    
                    
                    29,150Conversion
      of Convertible Notes
                    
                    
                    40,000
                    
                    
                    
                    4
                    
                    
                    
                    59,996
                    
                    
                    
                    
                    
                    
                    
                    60,000Finders
      fee related to Convertible Note
                    
                    
                    25,000
                    
                    
                    
                    3
                    
                    
                    
                    19,997
                    
                    
                    
                    
                    
                    
                    
                    20,000Value
      of Warrants attached to Convertible Note
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    132,275
                    
                    
                    
                    
                    
                    
                    
                    132,275Shares
      issued for Accrued Expenses
                    
                    
                    34,801
                    
                    
                    
                    3
                    
                    
                    
                    52,199
                    
                    
                    
                    
                    
                    
                    
                    52,202Shares
      issued for Accrued Interest due on Convertible Note
                    
                    
                    8,959
                    
                    
                    
                    1
                    
                    
                    
                    10,481
                    
                    
                    
                    
                    
                    
                    
                    10,482Conversion
      of Officers' Convertible Notes
                    
                    
                    804,908
                    
                    
                    
                    80
                    
                    
                    
                    547,258
                    
                    
                    
                    
                    
                    
                    
                    547,338Issuance
      of Common Stock to repay Note Payable
                    
                    
                    19,925
                    
                    
                    
                    2
                    
                    
                    
                    13,498
                    
                    
                    
                    
                    
                    
                    
                    13,500Options
      exercised against Accrued Compensation and Accrued Accounting
      Fees
                    
                    
                    60,667
                    
                    
                    
                    6
                    
                    
                    
                    75,994
                    
                    
                    
                    
                    
                    
                    
                    76,000Net
      (Loss) for the year ended September 30, 2008
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (2,984,628
                    )
                    
                    
                    (2,984,628
                    )Balance,
      September 30, 2008
                    
                    
                    10,425,000
                    
                    
                    
                    1,043
                    
                    
                    
                    6,598,723
                    
                    
                    
                    (7,396,642
                    )
                    
                    
                    (796,876
                    )





See
accompanying notes to financial statements


F-6





XIOM
Corp.


Consolidated
Statements of Cash Flow


For
The Years Ended September 30, 2008 and 2007





2008
                    
                    
                    2007Cash
      Flows from Operating Activities:Net
      Income (Loss)
                    
                    $
                    (2,984,628
                    )
                    
                    $
                    (2,721,651
                    )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
      and Amortization
                    
                    
                    67,597
                    
                    
                    
                    45,391Increase
      in Allowance for Doubtful Accounts
                    
                    
                    30,000
                    
                    
                    
                    35,000Issuance
      of Shares for Services
                    
                    
                    992,000
                    
                    
                    
                    661,266Issuance
      of Shares for Accrued Interest
                    
                    
                    39,263
                    
                    
                    
                    -Value
      of Stock Option Grants
                    
                    
                    349,997
                    
                    
                    
                    286,223Amortization
      of Convertible Note Discounts
                    
                    
                    206,573
                    
                    
                    
                    47,557Loss
      on Investment in Wholly-Owned Subsidiary
                    
                    
                    176,352
                    
                    
                    
                    -Loss
      on Joint Venture Investments
                    
                    
                    -
                    
                    
                    
                    311,044Issuance
      of Shares for Sales Commissions
                    
                    
                    14,702
                    
                    
                    
                    13,019Issuance
      of Shares to Buy-out Distributor Agreements
                    
                    
                    51,000
                    
                    
                    
                    -Changes
      in operating assets and liabilities:Accounts
      Receivable, Net
                    
                    
                    (42,378
                    )
                    
                    
                    (24,663
                    )Inventory
                    
                    
                    (132,873
                    )
                    
                    
                    (119,434
                    )Prepaid
      Expenses
                    
                    
                    2,506
                    
                    
                    
                    86,305Other
      Current Assets
                    
                    
                    (3,040
                    )
                    
                    
                    (53,184
                    )Retainage
      Receivable
                    
                    
                    (23,583
                    )
                    
                    
                    (1,328
                    )Security
      Deposits
                    
                    
                    (4,630
                    )
                    
                    
                    -Accounts
      Payable and Accrued Expenses
                    
                    
                    142,111
                    
                    
                    
                    393,318Accrued
      Compensation, Before Non-Cash Adjustments
                    
                    
                    -
                    
                    
                    
                    100,000Total
      Adjustments
                    
                    
                    1,865,597
                    
                    
                    
                    1,780,514Net
      cash provided (used) in operating activities
                    
                    
                    (1,119,031
                    )
                    
                    
                    (941,137
                    )Cash
      Flows from Investing Activities:Purchase
      of Additional Overseas Patents
                    
                    
                    (114,507
                    )
                    
                    
                    (121,645
                    )Purchase
      of Fixed Assets
                    
                    
                    (54,423
                    )
                    
                    
                    (133,398
                    )Additional
      Investments in Joint Ventures
                    
                    
                    -
                    
                    
                    
                    (96,044
                    )Investment
      in Wholly-Owned Subsidiary, Net
                    
                    
                    (43,852
                    )
                    
                    
                    -Loan
      Receivable
                    
                    
                    (111,625
                    )
                    
                    
                    -Net
      cash provided (used) by investing activities
                    
                    
                    (324,407
                    )
                    
                    
                    (351,087
                    )Cash
      Flows from Financing Activities:Sale
      of Restricted Common Stock
                    
                    
                    419,000
                    
                    
                    
                    78,300Exercise
      of Common Stock Warrants
                    
                    
                    29,150
                    
                    
                    
                    50,475Proceeds
      from Convertible Notes
                    
                    
                    460,000
                    
                    
                    
                    1,220,900Proceeds
      from Officer' Convertible Notes
                    
                    
                    545,206
                    
                    
                    
                    -Proceeds
      from(repayment of) Notes Payable, Net
                    
                    
                    (38,441
                    )
                    
                    
                    37,565Proceeds
      from exercise of Stock Option
                    
                    
                    -
                    
                    
                    
                    110,000Purchase
      of Treasury Shares
                    
                    
                    -
                    
                    
                    
                    (14,000
                    )Proceeds
      from (repayment of) Shareholder Loan, Before Non-Cash
      Adjustments
                    
                    
                    5,662
                    
                    
                    
                    31,207Net
      cash provided (used) by financing activities
                    
                    
                    1,420,577
                    
                    
                    
                    1,514,447Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (22,861
                    )
                    
                    
                    222,223Cash
      & Cash Equivalents, Beginning of Period
                    
                    
                    312,718
                    
                    
                    
                    90,495Cash
      & Cash Equivalents, End of Period
                    
                    $
                    289,857
                    
                    
                    $
                    312,718Supplemental
      Disclosures:Non-Cash
      Financing and Investing Activities:Issuance
      of shares for equity investments
                    
                    $
                    132,500
                    
                    
                    $
                    215,000Options
      exercised in exchange for Accrued Compensation, Shareholder Loan and
      Accrued Professional Fees
                    
                    $
                    154,000
                    
                    
                    $
                    140,000Issuance
      of shares upon conversion of Convertible Notes
                    
                    $
                    310,000
                    
                    
                    
                    -Issuance
      of shares upon conversion of Officers' Notes
                    
                    $
                    547,338
                    
                    
                    
                    -Issuance
      of shares for Accrued Expenses
                    
                    $
                    115,000
                    
                    
                    
                    -Issuance
      of shares for Accrued Interest
                    
                    $
                    59,086
                    
                    
                    
                    -Issuance
      of shares to buy-out distributor agreements
                    
                    $
                    51,000
                    
                    
                    
                    -Issuance
      of Shares for Services
                    
                    $
                    992,000
                    
                    
                    $
                    661,266Value
      of Stock Option Grants
                    
                    $
                    349,997
                    
                    
                    $
                    286,223Issuance
      of shares for Sales Commissions
                    
                    $
                    14,702
                    
                    
                    $
                    13,019Issuance
      of shares to repay Notes Payable
                    
                    
                    -
                    
                    
                    $
                    30,000Issuance
      of shares for purchase of Thermal Spray Technology
                    
                    
                    -
                    
                    
                    $
                    75,000Note
      payable as consideration for warrants exercised
                    
                    
                    -
                    
                    
                    $
                    10,000Interest
      and Taxes Paid:Interest
      Expense
                    
                    
                    43,749
                    
                    
                    
                    -Income
      Taxes
                    
                    
                    -
                    
                    
                    
                    -





See
accompanying notes to financial statements


F-7


XIOM
Corp.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For The
Years Ended September 30, 2008 and 2007





1)           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





ENTITY
AND ORGANIZATION





XIOM
Corp. (“XIOM or “the Company”) was incorporated in March 1998, but was inactive
until May 1999. At that time, all operating assets and liabilities of Thermaltec
International Corp. (“Thermaltec”), the previous parent company, were
transferred into XIOM. In June 2001, XIOM was spun out from Thermaltec upon
which the shareholders of Thermaltec received one common share of XIOM for every
three common shares of Thermaltec. Through fiscal 2007, XIOM has continually
developed and refined its patented industrial based thermal spray coating
technology which is sold directly to commercial customers and coating
contractors.





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 of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.





REVENUE
RECOGNITION





Revenue
from product sales (thermal spray systems and powders) is recognized when all of
the following criteria are met: (1) persuasive evidence of an arrangement
exists, (2) the price is fixed or determinable, (3) collectibility is reasonably
assured, and (4) delivery has occurred. Persuasive evidence of an arrangement
and fixed price criteria are satisfied through sales orders. Collectibility
criteria is satisfied through credit approvals. Delivery criteria is satisfied
when the products are shipped to a customer and title, and risk of loss, pass to
the customer in accordance with the terms of sale. The Company has no obligation
to accept the return of products sold other than for replacement of damaged
products. Other than quantity price discounts negotiated with customers prior to
billing and delivery (which are reflected as a reduction in sales), the Company
does not offer any sales incentives or other rebate arrangements to
customers





Revenues
from long-term contracts are recognized on the percentage-of-completion method,
measured by the percentage of actual cost incurred to date, to the estimated
total cost for each contract. Estimated costs and revenues are based upon
engineering estimates of the work performed to date relative to the total work
required under the contract.  Changes in contract estimates which
result in changes in estimated profit are applied to the cumulative work
accomplished on the project.  The re-calculated grossprofit on the contract
is applied to the revenues recorded to date for the entire life of the contract
and the resulting income or loss is recorded in the current
period.


F-8


The
percentage of revenues derived from sales orders and long-term contracts for
fiscal 2008 and 2007 was 87% and 13%, respectively, and 88% and 12%,
respectively.





Revenue
derived from the sale of spray systems and powders for fiscal 2008 and 2007 was
$1,802,578 and $267,754, respectively, and $687,269 and $134,088,
respectively.





CASH
AND CASH EQUIVALENTS





For the
purpose of financial statement presentation, the Company includes cash on
deposit, money market funds, amounts held by brokers in cash accounts and funds
temporarily held in escrow to be cash equivalents.





ACCOUNTS
RECEIVABLE





Accounts
receivable have been adjusted for all known uncollectible contracts and customer
accounts. An allowance for doubtful contracts has been provided based on such
analysis.





INVENTORY





Inventory
consists primarily of various parts, materials and supplies utilized in the
assembly and the operation of the thermal spray coating system and is valued at
the lower of cost (first-in, first-out) or market.





PROPERTY,
EQUIPMENT AND DEPRECIATION





Property
and equipment is stated at cost. Major expenditures for property and those that
substantially increase useful lives, are capitalized. Maintenance, repairs, and
minor renewals are expensed as incurred. When assets are retired or otherwise
disposed of, their costs and related accumulated depreciation are removed from
the accounts and
resulting gains or losses are included in income. Depreciation is provided by
utilizing the straight-line method over the estimated useful lives of the
assets.





EQUITY
INVESTMENTS





Equity
investments of 20% to 50% ownership are accounted for using the Equity Method of
accounting. Equity investments of less than 20% ownership are accounted for
using the Cost Method of accounting and equity investments of greater than 50%
ownership are consolidated with the financials of the Company, as
appropriate.





EARNINGS
(LOSS) PER SHARE





The
Company has adopted SFAS No. 128, “Earnings per Share”, which requires
presentation of basic earnings per share (“Basic EPS”) and diluted earnings per
share (“Diluted EPS”) by all publicly traded entities, as well as entities that
have made a filing or are in the process of filing with a regulatory agency in
preparation for the sale of securities in a public market.


F-9


Basic EPS
is computed by dividing net income or loss available to common shareholders by
the weighted average number of common shares outstanding during the period. The
computation of Diluted EPS gives effect to all potentially dilutive common
shares during the period. The computation of Diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would have an
antidilutive effect on earnings.





INCOME
TAXES





The
Company has adopted Financial Accounting Standards Board Statement No. 109,
“Accounting for Income Taxes”.





DEFERRED
INCOME TAXES





Deferred
tax assets arise principally from net operating losses and capital losses
available for carryforward against future years’ taxable income.





FOREIGN
CURRENCY TRANSLATION





For
future foreign subsidiaries, where the functional currency is other than the
U.S. Dollar, revenue and expense accounts will be translated at the average
rates during the period, and the balance sheet items will be translated at
period end rates. Translation adjustments arising from the use of differing
exchange rates from period to period will be included as a component of
Stockholders’ Equity. Gains and losses from foreign currency transactions are
included in Net Income. In the years ended September 30, 2008 and 2007, all
foreign sales were transacted in U.S. dollars.





SHARE
BASED PAYMENTS





Share
based payments are made primarily to outside consultants and other professional
service providers, from time to time, subject to current cash flow conditions
and at the discretion of the Board of Directors. The compensation cost is
determined based on the estimated fair value of the shares at the measurement
date, which is the earlier of (a) the date at which a commitment for performance
by the counterparty to earn the shares is reached (generally the contract
date),or (b) the date at which the counterparty’s performance is complete. These
compensation costs are capitalized as prepaid expenses and expensed over the
remaining term of the respective contracts.





Common
stock options granted to employees are issued for past services from time to
time, at the discretion of the Board of Directors, and the value of each option
is recorded as compensation expense as of the grant date. The related excess tax
benefit received upon the exercise of stock options has not been recognized
because, in the opinion of management, it is more likely than not, that such tax
benefit will not be utilized in the future.





RECLASSIFICATIONS





Certain
accounts in the prior-year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current-year
financial statements.


F-10


RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
clarifies the principle that fair value should be used on the assumptions market
participants would use when pricing an asset or liability, and establishes a
fair value hierarchy that prioritizes the information used to develop those
assumptions. The Company does not expect the adoption of this statement, which
will be effective for the fiscal year beginning October 1, 2008, to have a
material effect in its financial statements.





In
September 2006, the FASB issued SFAS No.158, “Employers’ Accounting for Defined
Benefit Pension and Other Post Retirement Plans,” which requires the Company to
measure plan assets and liabilities as of the fiscal year end report date. The
Company will be required to adopt this provision September 30, 2009. The Company
does not expect the adoption of this statement to have a material effect on its
financial statements.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Liabilities,” which allows reporting entities to choose to
measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to reduce volatility in reported earnings that result from measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions, using the guidance in SFAS No. 133 (as amended),
“Accounting for Derivative Instruments and Hedging Activities,” The Company does
not expect the adoption of this statement, which will be effective for the
fiscal year beginning October 1, 2008, to have a material effect on its
financial statements.





In
December 2007, The FASB issued SFAS No. 160, “Non-Controlling Interests in
Consolidated Financial Statements,” that amends ARB 51, “Consolidated Financial
Statements,” to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. The Company has not yet determined
what impact the adoption of this requirement, which becomes effective October 1,
2009, will have on its financial statements.


F-11


In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” a
replacement of SFAS No. 141, “Business Combinations.” The objective of this
Statement is to improve the relevance, representational faithfulness and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. This Statement
establishes principles and requirements for how the acquirer recognizes and
measures the identifiable assets acquired and liabilities assumed, measures
goodwill acquired or gain from a bargain purchase, and determines what
information to disclose. The Company has not yet determined what impact the
adoption of this requirement, which becomes effective October 1, 2009, will have
on its financial statements with respect to future acquisitions.





2)           INVENTORY


Inventory
consisted of the following as of September 30, 2008 and
2007:


2008
                  
                  
                  2007Parts
      and Supplies
                  
                  $
                  163,922
                  
                  
                  $
                  73,609Coating
      Powders
                  
                  
                  99,415
                  
                  
                  
                  81,264Finished
      Goods
                  
                  
                  43,770
                  
                  
                  
                  19,361Total
      Inventory
                  
                  $
                  307,107
                  
                  
                  $
                  174,234





The
Company has determined that a reserve for obsolete, or slow moving, inventory is
not required because the assembly of the spray system and the blending of
powders is done based on actual sales orders and not for the shelf.





As of
September 30, 2008, there were approximately 82 days inventory of Part and
Supplies necessary to build the spray system and approximately 192 days
inventory of unblended Coating Powders based on sales for fiscal
2008.  The level of unblended Coating Powder inventory was determined
necessary in order to meet the demand related to spray systems sold in fiscal
2008 and prior, as well as anticipated powder sales related to new system sales
in fiscal 2009. The Finished Goods inventory at the respective balance sheet
dates represents completed systems and blended powders related to specific sales
orders that were shipped subsequent to the balance sheet dates.





3) FIXED
ASSETS


Fixed
assets consisted of the following as of September 30, 2008 and
2007:


Estimated usefulLife – years
                                
                                
                                2008
                                
                                
                                2007Machinery
      and equipment
                                
                                5-10
                                
                                
                                $
                                116,497
                                
                                
                                $
                                105,882Vehicles
                                
                                3-5
                                
                                
                                
                                28,411
                                
                                
                                
                                28,411Office
      Equipment
                                
                                3-5
                                
                                
                                
                                24,642
                                
                                
                                
                                20,053Furniture
      and Fixtures
                                
                                5-7
                                
                                
                                
                                12,430
                                
                                
                                
                                9,254Computer
      Software
                                
                                5-7
                                
                                
                                
                                27,861
                                
                                
                                
                                23,859Leasehold
      improvements
                                
                                5-31.5
                                
                                
                                
                                112,455
                                
                                
                                
                                80,414322,296
                                
                                
                                
                                267,873Less
      accumulated depreciation and amortization
                                
                                
                                
                                
                                
                                
                                (106,953
                                )
                                
                                
                                (64,176
                                )Net
      property and equipment
                                
                                
                                
                                
                                
                                $
                                215,343
                                
                                
                                $
                                203,697


F-12





Fixed
asset depreciation and amortization for the years ended September 30, 2008 and
2007 was $42,777 and 28,654, respectively.





4)           INTANGIBLE
ASSETS







2008
                    
                    
                    2007Patents
      pending related to the low temperature, low speed, thermal spray gun,
      control unit and powder feeder;Acquisition
      cost of technology in August of 2004
                    
                    $
                    122,500
                    
                    
                    $
                    122,500Additional
      legal fees and expenses
                    
                    
                    294,339
                    
                    
                    
                    179,777Technology
      related to the high temperature, high speed thermal spray technology
      acquired from an officer in February 2007
                    
                    
                    75,000
                    
                    
                    
                    75,000Total
      acquisition cost
                    
                    
                    491,839
                    
                    
                    
                    377,277Less:
      Accumulated Amortization
                    
                    
                    (58,799
                    )
                    
                    
                    (33,924
                    )Intangible
      Assets, Net
                    
                    $
                    433,040
                    
                    
                    $
                    343,353





The
patents pending and technology acquired are amortized using the straight-line
method over their estimated economic life of seventeen (17) years.





Amortization
expense for the years ended September 30, 2008 and 2007 was $24,875 and $16,737,
respectively. Amortization expense for each of the succeeding five fiscal years
ending September 30, 2009 through 2013 is expected to be approximately $30,000,
which will increase as additional patent expenses are incurred in the
future.





During
fiscal 2008 and 2007, the Company applied for, and received, additional domestic
and overseas patents pending for the thermal spray technology and process
related to the low temperature, low speed, thermal spray gun, modular control
unit and material powder feeder. Legal fees and expenses incurred to obtain
these patents totaled $114,507 and $121,645 in fiscal 2008 and 2007,
respectively.


F-13





In
February 2007, one of the officers, who is also a shareholder, sold his entire
interest in a certain spray technology he previously acquired personally from HV
Plastic Spray Systems, Inc., for 75,000 restricted common shares of XIOM. These
shares were valued based on the officer’s historical cost basis in the spray
technology, which was $75,000.





5)           RETAINAGE
RECEIVABLE





Retainage
receivable represents the cumulative amount held-back from each
percentage-of-completion billing pursuant to long-term contracts. Such amounts
will be paid to the Company upon the completion of each contract and final
customer approval..





6)           INVESTMENT
IN WHOLLY-OWNED SUBSIDIARY





In March
2008, XIOM completed an investment in XIOM – Europe Corp., a Delaware
corporation, whereby the Company issued 156,433 restricted shares of common
stock, valued at $132,500, and paid $75,500 to the shareholders of XIOM – Europe
Corp. in exchange for 100% of the issued and outstanding shares held by
them. Since March 2008, XIOM – Europe Corp. has been a
wholly-owned subsidiary of XIOM. XIOM-Europe Corp. owns less than a 50% interest
in a joint venture located in the United Kingdom that has had minimal activity
since inception.





The
$176,352 excess of the $208,000 purchase price over the $31,648 fair value of
the identifiable net assets acquired was initially recorded as goodwill. After
considering the relevant facts and circumstances, the Company decided to record
an impairment charge of $176,352 during the quarter ended March 31, 2008 that
reduced the goodwill to $0.





7)           INVESTMENTS
IN JOINT VENTURES





During
the first six months of fiscal 2007, XIOM established several separate equity
interests with joint venture partners in China, Europe, Massachusetts and
Kentucky. The Company’s equity interests range from 35% to 45% of the entire
legal business entity depending on several factors, including the level of
technology to be deployed and the related geography and size of the
potential marketplace. The equity interests were acquired by the Company in
exchange for a total of 150,000 shares of restricted common stock, the
payment of certain direct costs to establish the joint ventures
and the delivery of its patented thermal spray technology pursuant to
separate master licensing and master operating agreements with each joint
venture partner. The Company’s pro-rata share of net income, or loss, from each
joint venture is recorded in the books and records utilizing the Equity Method
of accounting.





Except
for the Massachusetts joint venture, these joint ventures were substantially
non-operational as of September 30, 2007 and 2008, and had no reportable
operating results for fiscal 2007 and 2008.  In 2007, the Company
recognized a loss to the extent that the total investment in each joint venture
exceeded its pro-rata share of the net book value of each joint venture at
September 30, 2007. This evaluation resulted in the Company recognizing a loss
of $311,044 and the establishment of a corresponding reserve for each joint
venture investment totaling this amount.




F-14




8)           ACCRUED
COMPENSATION





Accrued
Compensation represents compensation that has been accrued for each of the two
operating officers of the Company. The value of their services was determined to
be $60,000 each annually for both fiscal 2008 and 2007. During fiscal 2008 and
2007, $120,000 and $120,000, respectively, of Accrued Compensation was used by
the two operating officers as consideration for the exercise of certain
non-qualified stock options granted to them in March 2005 and March 2006 (See
Note 14.).




9)           NOTES
PAYABLE





Notes
Payable at September 30, 2008 and 2007 aggregated $12,702 and $51,143,
respectively, and represent several non-interest bearing demand notes payable to
several individuals in varying amounts.





10)        CONVERTIBLE
NOTES PAYABLE





Convertible
Notes Payable consisted of the following as of September 30, 2008 and
2007:





2008
                    
                    
                    2007Convertible
      Note with a face value of $500,000 maturing March 10, 2010, net of
      unamortized  discount of $145,959 at  September 30,
      2008
                    
                    $
                    354,041
                    
                    
                    
                    -Convertible
      Notes with a face value of $1,172,000 and $1,232,000,
      respectively, maturing April 10, 2012, net of
      unamortized  discount of $375,153 and $595,410 at September 30,
      2008 and 2007, respectively
                    
                    
                    736,847
                    
                    
                    $
                    636,590Convertible
      Note with a face value of $250,000 maturing April 2008
                    
                    
                    -
                    
                    
                    
                    250,000Total
                    
                    
                    1,090,888
                    
                    
                    
                    886,590Less
      amounts maturing within one year
                    
                    
                    -
                    
                    
                    
                    (250,000
                    )Long
      term liabilities
                    
                    $
                    1,090,888
                    
                    
                    $
                    636,590





a)           Convertible
Note With Face Value Of $500,000





In
      April 2008, XIOM raised gross proceeds of $500,000 related to a separate
      Convertible Note (“Note”) agreement. The Company recognized net proceeds
      of $460,000, after considering an 8% Broker/Finder Fee payment of $40,000.
      In addition, the Company issued 25,000 shares of restricted common stock
      worth $20,000, 6,250 warrants at an exercise price of $2.00 per share and
      5,000 warrants at an exercise price of $2.50 to the Brokers/Finders as
      additional consideration as per their agreement with the Company. The
      Note, which matures in March 2010, includes interest at 7% per annum,
      compounded monthly, payable semi-annually in cash or stock, at the option
      of the Note holder. Additionally, the Note includes two separate
      Warrants for 250,000 shares of common stock each, with an exercise price
      of $1.50 and $1.80 per share, respectively, through March 2013 and are
      immediately exercisable.  The Note is convertible, in whole or
      in part, into common shares of XIOM at a price of $1.50 per share at the
      option of the holder at any time, or upon any 30 day prepayment notice by
      the Company, until maturity.  The shares underlying the Note and
      Warrants have specific registration rights, including “piggy-back”
      registration rights, all at the expense of the Company. Unless earlier
      converted, the Note will automatically mature and be due and payable on
      the earlier of (a) the second anniversary of the Note or (b) the
      closing of a minimum of $5,000,000 of equity and/or, debt financing at a
      price per share (or conversion price) of not less than
    $3.00.


F-15





The
      issuance of this Note was accounted for as
  follows:





Convertible
      Note - Face Value
                    
                    $
                    500,000Broker/Finder
      fee
                    
                    
                    (40,000
                    )Net
      cash proceeds
                    
                    
                    460,000Value
      attributable to:Common
      shares issued to Broker/Finders
                    
                    
                    (20,000
                    )Warrants
      issued to Broker/Finder
                    
                    
                    (2,275
                    )Warrants
      issued to Note Holder
                    
                    
                    (130,000
                    )Convertible
      Note - Net
                    
                    $
                    307,725





The
      Company computed the value of the 25,000 shares of restricted common stock
      issued to the Broker/Finder by the closing price of $2.00 on the day of
      issuance of the Note discounted by 60% to reflect the restrictions
      associated with those securities.  The resulting value of
      $20,000 was recorded as a discount against the Note and a corresponding
      credit to Common Stock and Additional
  Paid-In-Capital.





In
      accordance with Emerging Issues Task Force ("EITF") Issue No. 00-27,
      the Company computed the value of the 11,250 warrants issued to the
      Broker/Finder and the 500,000 warrants issued to the Note Holder to
      aggregate $132,275 and recorded this amount as an increase to Additional
      Paid-In Capital and a discount against the Convertible Note. The Company
      valued the Warrants using the Black-Scholes option pricing model.
      Assumptions used in the calculation included the contractual term of the
      Warrants as the expected term (five years), a risk free rate of 2.7% and a
      market price volatility factor of
57%.





The
      debt discount attributable to the Broker/Finder fees and the value
      attributable to the common shares and warrants is being amortized as
      Interest Expense over the two year maturity period of the Convertible
      Note.





Interest
      expense related to this note consisted of the following for the years
      ended September 30, 2008 and 2007:





2008
                  
                  
                  2007Interest
                  
                  $
                  16,042
                  
                  
                  
                  -Amortization
      of discount
                  
                  
                  46,316
                  
                  
                  
                  -Total
                  
                  $
                  62,316
                  
                  
                  
                  -


F-16





b)           Convertible
Notes With Initial Face Value Of $1,232,000





The
Company entered into an investment banking relationship with one of its
management and financial consultants in April 2007. It was decided that
Convertible Exchangeable Notes (“Notes”) with interest at 7% per annum paid
semi-annually and due April 1, 2012 would be sold via a Confidential Private
Offering Memorandum (Offering”), with a minimum of $500,000 and a maximum of
$3,000,000 to be raised. Each note has a face value of $30,000 and is
convertible into 20,000 shares of common stock at a conversion price of
$1.50.  In addition, each Note includes 20,000 Warrants with an
exercise price of $2.00 per share and 20,000 Warrants with an exercise price of
$2.50 per share. Each Warrant is exercisable for one share of the Company’s
common stock at its stated exercise price at any time prior to the five year
anniversary of its issuance, or is callable by the Company in the event that the
Company’s common stock trades at a $5.00 “Bid Price”, or above, for 20
consecutive trading days. Each Note will convert automatically upon the
effectiveness of the SEC Registration Statement registering the underlying
common shares of the Notes and Warrants. If a Registration Statement is not
declared effective within one year from the final closing date of the Offering,
then the Note holders may elect to accelerate the maturity date and, in default
of payment, shall accrue interest at a default rate of 15% per annum until
payment is made.





In May
2007, the Broker had raised gross proceeds of $735,000 and escrow was closed on
this initial round of financing. The Company received net proceeds of $635,950,
after considering investment banking fees and related costs of $99,050. In
addition, the Company issued $73,500 worth of Notes to the Broker as additional
consideration as per their agreement with the Company. The second, and final,
round of financing closed in June 2007 with net proceeds of $334,950, after
considering investment banking fees and related costs of $50,050. In addition,
the Company issued $38,500 worth of Notes to the Broker as additional
consideration as per their agreement with the Company. In June 2007, XIOM
formally closed the Offering and, as required, proceeded to commence the
registration of the common shares related to the Notes and the underlying
Warrants.





The
      issuance of these Notes was accounted for as
  follows:




Convertible
      Notes - Face Value
                          
                          $
                          1,232,000Broker/Finder
      fees and other expenses
                          
                          
                          (261,100
                          )Net
      cash proceeds
                          
                          
                          970,900Value
      attributable to warrants
                          
                          
                          (143,672
                          )Value
      attributable to beneficial conversion feature
                          
                          
                          (238,195
                          )Convertible
      Notes - Net
                          
                          $
                          589,033





In
      accordance with EITF Issue No. 00-27, the Company computed the value of
      the 1,232,000 warrants issued to aggregate $143,672 and recorded this
      amount as an increase to Additional Paid-In Capital and a discount against
      the Convertible Notes. The Company valued the Warrants using the
      Black-Scholes option pricing model. Assumptions used in the calculation
      included the contractual term of the Warrants (five years) as the expected
      term, a risk free rate of 3.5% and a market price volatility factor of
      20%.


F-17


The
      debt discount attributable to the Broker/Finder fees, other expenses, and
      the value attributable to the warrants and the beneficial conversion
      feature is being amortized as Interest Expense over the five year maturity
      period of the Convertible Notes.





Interest
      expense related to these Convertible Notes consisted of the following for
      the years ended September 30, 2008 and
2007:





2008
                  
                  
                  2007Interest
                  
                  $
                  86,176
                  
                  
                  $
                  30,793Amortization
      of discount
                  
                  
                  160,258
                  
                  
                  
                  47,557Total
                  
                  $
                  246,434
                  
                  
                  $
                  78,350





In
October 2008, several Note Holders representing an aggregate principal amount of
$720,000 of these Convertible Notes demanded immediate payment thereof as a
result of the Registration Statement not being declared effective within one
year from the final closing date of the Offering, which was in early June 2007.
Pursuant to the Note Agreement, these Note Holders have elected to accelerate
the maturity date and, in default of payment, these Notes shall accrue interest
at a default rate of 15% per annum from the date of notice until payment of
principal and accrued interest is paid in full.





c)           Convertible
Note With Face Value Of $250,000





In April
2007, XIOM obtained bridge financing from an investment fund in the amount of
$250,000. The Company and the fund agreed to convert this note into 269,791
shares of common stock in March 2008. This note had a term of one year, was
non-interest bearing and has “piggy back” registration rights.





d)           Convertible
Note With Face Value Of $529,500





During
the quarter ended March 31, 2008, the two officers of XIOM sold unregistered
shares of common stock that they owned personally in a series of private
transactions. Upon completion of these transactions, each officer had sold
240,682 shares for combined gross proceeds of $529,500 that were loaned to the
Company. Legal fees for escrow services related to these transactions of
approximately $8,700 were incurred by the company. As a result, each officer
received a separate Promissory Note (“Note”) in the amount of $264,750. These
Notes were payable on demand, including accrued interest at 7% per annum, in
shares of restricted common stock of XIOM at a 50% discount to the average
closing share price for the three trading days prior to the demand.





During
July 2008, these Notes were converted into a total of 804,908 shares of
restricted common stock.


F-18


11)         SALES
TO MAJOR CUSTOMERS AND BY CUSTOMER GEOGRAPHIC AREA




For the
fiscal year ended September 30, 2008, the Company had two major customers which
accounted for 13% and 11% of total sales. The latter is the Company’s Canadian
distributor. These two customers represented 45% and 14%, respectively, of trade
accounts receivable as of September 30, 2008.


For the
fiscal year ended September 30, 2007, the Company had one major customer that
accounted for 15%, of total sales. That customer represented 16% of trade
accounts receivable as of September 30, 2007.





Sales by
customer geographic area, determined by the customer’s country of origin, are as
follows for the years ended September 30, 2008 and 2007:





2008
                    
                    
                    2007United
      States
                    
                    $
                    2,105,718
                    
                    
                    $
                    634,519Canada
                    
                    
                    265,215
                    
                    
                    
                    249,272United
      Kingdom
                    
                    
                    0
                    
                    
                    
                    49,403Total
                    
                    $
                    2,370,933
                    
                    
                    $
                    933,194





As of
September 30, 2008 and 2007, there are no long-lived assets in any foreign
operation outside of the United States.





12)         COMMITMENTS
AND CONTINGENCIES





LEASES




The
Company leases office, manufacturing and warehouse space pursuant to a four year
lease that expires May, 31 2010 for approximately $5,000 per month. In addition,
the Company leases a training and testing facility adjacent to the above space
on a month-to-month basis for $1,300 per month. Rent expense for fiscal 2008 and
2007 was approximately $94,600 and $76,500, respectively.





F-19


13)         COMMON
STOCK





Common
      Stock is as follows:
                
                As
      of September 30,2008
                
                
                2007Common
      Stock, $.0001 par value, shares authorized
                
                
                50,000,000
                
                
                
                50,000,000Shares
      issued and outstanding, including 563,718 shares subject to rescission
      rights
                
                
                10,988,718
                
                
                
                8,206,663Par
      Value
                
                $
                1,099
                
                
                $
                821





In August
2007, the Board of Directors of XIOM, by the written consent of the holders in
excess of 50% of the voting rights of the shareholders of the Company, approved
an increase in the number of authorized shares of common stock from 10,000,000
to 50,000,000 shares.




During
fiscal 2008 and 2007, the Company issued 804,551 and 458,499 shares,
respectively, of restricted common stock to several vendors as consideration for
engineering consulting, merger and acquisition consulting, marketing services,
management services and sales commissions provided during each fiscal year.
These shares were issued based on the fair market value of the services provided
and converted at the estimated fair market value of the common stock on the date
of each issuance.




F-20





In
December 2006 and February 2007, the Company completed separate private
placement offerings in which it sold and issued 41,000 shares and 13,889 shares,
respectively, of restricted common stock at a price of $1.30 per share and $1.80
per share, respectively, which approximated the fair market value on the date of
each issuance. In addition, the stockholders that purchased these shares also
received a warrant to purchase one share of common stock for each share they
purchased. Each warrant had an exercise price of $1.30 per share and $1.80 per
share, respectively, and a term of one year.





During
the first two quarters of fiscal 2007, the Company issued 80,635 shares of
registered common stock from the exercise of various warrants originally issued
and included in the SB-2 Registration Statement that became effective in October
2006. The exercise price of these warrants was $.75 per share. One of the
shareholders that exercised his warrant for 13,334 shares used part of a Note
Payable due him from the Company as consideration for his exercise
price.





In
February 2007, one of the officers, who is also a shareholder, sold his entire
interest in a certain spray technology he previously acquired personally from HV
Plastic Spray Systems, Inc., for 75,000 restricted common shares of XIOM. These
shares were valued based on the officer’s historical cost basis in the spray
technology, which was $75,000. This technology has been classified as an
Intangible Asset and is being amortized on a straight-line basis over its
estimated useful life, which is seventeen (17) years.





During
fiscal 2006, the Company sold and issued, in two separate private placements,
563,718 shares of restricted common stock for a total of $670,399. Because these
shares were issued during, but not included in, the Company’s SB-2 registration
statement that became effective in October 2006, such shares are subject to
rescission rights by the shareholders who purchased these shares. Common stock,
subject to rescission rights, has not been included in Stockholders’ Equity, but
has been disclosed separately on the face of the balance sheet (See Note
17).





In
January and June 2008, the Company issued 25,000 and 26,000 shares of restricted
common stock, respectively, to buy-out two separate exclusive distributor
agreements.





In March
2008, as further discussed in Note 10(c), the Convertible Note with a face value
of $250,000 was converted into 269,791 shares of restricted common
stock.





In March
2008, the Company sold and issued 388,136 shares of restricted common stock in
separate private placement offerings at a price between $.94 and $1.05 per
share, which approximated the fair market value on the date of each issuance.




In March
2008, as further described in Note 6, the Company completed an investment in
XIOM – Europe Corp. whereby the Company issued 156,433 restricted shares of
common stock valued at $132,500,


F-21





In April
2008, several Convertible Note holders elected to receive a total of 44,185
restricted common shares in lieu of payment for accrued interest due them as of
April 1, 2008 of approximately $48,600. These shares were issued at a price of
$1.10 per share, which approximated the fair market value on April 1,
2008.





In April
2008, the Company issued 26,500 shares of restricted common stock upon the
exercise of certain warrants that resulted in total proceeds of $29,150 being
remitted to the Company.





In June
2008, the Company issued 40,000 shares of restricted common stock upon the
conversion of several Convertible Notes, by the holders, with a total face value
of $60,000.




In July
2008, the two officers holding separate Promissory Notes (“Notes”) in the amount
of $264,750 each, exercised their right to convert the Notes and demanded that
payment be made, including accrued interest at 7% per annum, in shares of
restricted common stock of XIOM at a 50% discount to the average closing share
price for the three trading days prior to the demand date, which was July 21st.
This resulted in 402,454 shares of restricted common stock being issued to each
officer at a discounted price of $.68 per share.





In July
2008, the holder of the Convertible Note elected to receive a total of 8,959
restricted common shares in lieu of payment for accrued interest due him as of
July 31, 2008 of approximately $10,482. These shares were issued at a price of
$1.17 per share, which approximated the fair market value, less a 10% discount,
on July 29, 2008.





In August
2008, an employee holding a Promissory Note (“Note”) in the amount of $13,500
each, exercised their right to convert the Note and demanded that payment be
made, including accrued interest at 7% per annum, in shares of restricted common
stock of XIOM at a 50% discount to the average closing share price for the three
trading days prior to the demand date, which was July 21st. This resulted in
19,925 shares of restricted common stock being issued at a discounted price of
$.68 per share.





14)         STOCK
OPTIONS





In
September 2006, one principal in the Kentucky joint venture received an option
to purchase 100,000 shares of restricted common stock at $1.10 per share as
consideration for his services in establishing and setting up a separate
corporation as a master licensee of XIOM. The option was fully vested
and was exercisable, in whole or in part, at the sole discretion of the
grantee through August 31, 2008. The value of this option was determined based
on a calculated value method using the historical volatility of the industry
sector index related to the small-cap version of the Industrial Suppliers
sub-sector, within Support Services for Industrial Goods and Services.
Specifically, the Company used the Black-Scholes option-pricing formula, which
produced a value of $.16 per option share. This resulted in the Company
recording an additional investment in the Kentucky joint venture of $16,000 for
fiscal 2006 that was treated as Additional Paid-In Capital. Assumptions used in
the calculation included the contractual life of the option as the expected
term, a risk free rate of 3.5% and a market price volatility factor of 20%. This
option was exercised in full and 100,000 shares of restricted common stock were
issued in December 2006 in exchange for the entire exercise price of
$110,000.


F-22





In
October 2006, XIOM granted three separate options to purchase a total of 350,000
shares of restricted common stock at a price of $1.75 per share, which
approximates the fair market value on the date of the grant. The two operating
officers, who are also shareholders, each received an option to purchase 150,000
restricted common shares and a consultant to the company received an option to
purchase 50,000 restricted common shares as partial consideration for providing
accounting services for fiscal 2007. The options are fully vested and are
exercisable, in whole or in part, at the sole discretion of the grantee through
October 14, 2011 and may not be assigned, or otherwise transferred. The value of
the options was determined based on a calculated value method using the
historical volatility of the industry sector index related to the small-cap
version of the Industrial Suppliers sub-sector, within Support Services for
Industrial Goods and Services. Specifically, the Company used the Black-Scholes
option-pricing formula, which produced a value of approximately $.17 per option
share. This resulted in the Company recording an additional compensation and
consulting expense of approximately $60,000 that was treated as Additional
Paid-In Capital. Assumptions used in the calculation included the contractual
life of the option as the expected term, a risk free rate of 3.5% and a market
price volatility factor of 20%.





During
fiscal 2007, the two operating officers, who are also shareholders, partially
exercised their March 2005 and March 2006 options, and purchased 80,000 shares
of restricted common stock at $.75 per share and 40,000 shares of restricted
common stock at $1.50 per share.  Accrued Compensation and the
Shareholder Loan were off-set and used as consideration for acquiring these
option shares. A consultant to the company also partially exercised his March
2005 options and purchased 26,667 shares of restricted common stock at $.75 per
share. Accrued professional fees were off-set and used as consideration for
acquiring these option shares.





In July
2007, XIOM granted four separate options to purchase a total of 250,000 shares
of restricted common stock at a price of $1.25 per share, which approximates the
fair market value on the date of the grant. The two operating officers, who are
also shareholders, and a consultant, who provides engineering services, each
received an option to purchase 75,000 restricted common shares and another
consultant to the company received an option to purchase 25,000 restricted
common shares as partial consideration for providing accounting services for
fiscal 2007. The options are fully vested and are exercisable, in whole or in
part, at the sole discretion of the grantee through July 5, 2012 and may not be
assigned, or otherwise transferred. The Company used the Black-Scholes
option-pricing formula, which produced a value of approximately $.37 per option
share. This resulted in the Company recording an additional compensation and
consulting expense of approximately $91,000 that was treated as Additional
Paid-In Capital. Assumptions used in the calculation included the contractual
life of the option as the expected term, a risk free rate of 3.5% and a market
price volatility factor of 76%.





In
August, 2007, XIOM granted three separate options to purchase a total of 330,000
shares of restricted common stock at a price of $1.25 per share for 30,000
options for two employees and $1.50 for 300,000 options to a consultant, which
approximated the fair market value on the date of the grants. The options are
fully vested and are exercisable, in whole or in part, at the sole discretion of
the grantee through August 2012 and may not be assigned, or otherwise
transferred. The Company used the Black-Scholes option-pricing formula, which
produced a value of approximately $.41 per option share. This resulted in the
Company recording an additional compensation and consulting expense of
approximately $135,000 that was treated as Additional Paid-In Capital.
Assumptions used in the calculation included the contractual life of the option
as the expected term, a risk free rate of 3.5% and a market price volatility
factor of 76%.


F-23





In
October 2007, XIOM granted five separate options to purchase a total of 525,000
shares of restricted common stock at a price of $1.50 per share, which
approximates the fair market value on the date of the grant. The two operating
officers, who are also shareholders, and a consultant, who provides engineering
services, each received an option to purchase 150,000 restricted common shares,
a consultant to the company received an option to purchase 50,000 restricted
common shares as partial consideration for providing accounting services for
fiscal 2008 and another consultant received an option to purchase 25,000
restricted common shares as partial consideration for providing coating
application services for fiscal 2008. The options are fully vested and are
exercisable, in whole or in part, at the sole discretion of the grantee through
October 2012 and may not be assigned, or otherwise transferred. The Company used
the Black-Scholes option-pricing formula, which produced a value of
approximately $.24 per share for 500,000 option shares and approximately $.18
per share for 25,000 option shares. This resulted in the Company recording
additional compensation and consulting expenses totaling approximately $124,000
that was treated as Additional Paid-In Capital. Assumptions used in the
calculation included the contractual life of the option as the expected term, a
risk free rate of 3.5% and a market price volatility factor of 41%.





In
February 2008, XIOM granted an option to a financial consultant to purchase a
total of 300,000 shares of restricted common stock at a price of $1.05 per
share, which approximates the fair market value on the date of the grant. The
options are fully vested and are exercisable, in whole or in part, at the sole
discretion of the grantee through February 18, 2013 and may not be assigned, or
otherwise transferred. The Company used the Black-Scholes option-pricing
formula, which produced a value of approximately $.28 per option share. This
resulted in the Company recording an additional consulting expense of
approximately $85,000 that was treated as Additional Paid-In Capital.
Assumptions used in the calculation included the contractual life of the option
as the expected term, a risk free rate of 3.5% and a market price volatility
factor of 64%.





In
February 2008, XIOM granted four separate options to purchase a total of 500,000
shares of restricted common stock at a price of $1.25 per share, which
approximates the fair market value on the date of the grant. The two operating
officers, who are also shareholders, and a consultant, who provides engineering
services, each received an option to purchase 150,000 restricted common shares
and another consultant to the company received an option to purchase 50,000
restricted common shares as partial consideration for providing accounting
services for fiscal 2008. The options are fully vested and are exercisable, in
whole or in part, at the sole discretion of the grantee through February 28,
2013 and may not be assigned, or otherwise transferred. The Company used the
Black-Scholes option-pricing formula, which produced a value of approximately
$.28 per option share. This resulted in the Company recording an additional
compensation and consulting expense of approximately $141,000 that was treated
as Additional Paid-In Capital. Assumptions used in the calculation included the
contractual life of the option as the expected term, a risk free rate of 3.5%
and a market price volatility factor of 64%.




F-24




In March
2008, the two operating officers, who are also shareholders, partially exercised
their March 2005 and March 2006 options, and purchased 40,000 shares of
restricted common stock at $.75 per share and 20,000 shares of restricted common
stock at $1.50 per share.  Accrued Compensation was off-set and used
as consideration for acquiring these option shares. A consultant to the company
also partially exercised his March 2005 and March 2006 options and purchased
20,000 shares of restricted common stock at $.75 per share and 2,000 shares of
restricted common stock at $1.50 per share. Accrued professional fees were
off-set and used as consideration for acquiring these option
shares.




In
September 2008, the two operating officers, who are also shareholders, partially
exercised their March 2005 and March 2006 options, and purchased 20,000 shares
of restricted common stock at $.75 per share and 30,000 shares of restricted
common stock at $1.50 per share.  Accrued Compensation was off-set and
used as consideration for acquiring these option shares. A consultant to the
company also partially exercised his March 2006 options and purchased 10,667
shares of restricted common stock at $1.50 per share. Accrued professional fees
were off-set and used as consideration for acquiring these option
shares.





The
following is a summary of the stock option activity for the fiscal years ended
September 30, 2008 and 2007:





2008
                        
                        
                        2007Outstanding,
      beginning of year
                        
                        
                        1,354,167
                        
                        
                        
                        670,834Granted
      during the year
                        
                        
                        1,325,000
                        
                        
                        
                        930,000Exercised
      during the year
                        
                        
                        (142,667
                        )
                        
                        
                        (246,667
                        )Forefeited
      / expired / cancelled
                        
                        
                        -
                        
                        
                        
                        -Outstanding,
      end of year
                        
                        
                        2,536,500
                        
                        
                        
                        1,354,167Vested
      and exercisable, end of year
                        
                        
                        2,536,500
                        
                        
                        
                        1,354,167Assumptions
      used to value stock option grants;Expected
      volatility
                        
                        
                        20%-76
                        %
                        
                        
                        20
                        %Weighted
      average volatility
                        
                        
                        55
                        %
                        
                        
                        20
                        %Expected
      term (in years)
                        
                        
                        5.0
                        
                        
                        
                        5.0Risk
      free rate
                        
                        
                        3.5
                        %
                        
                        
                        3.5
                        %Aggregate
      intrinsic value of vested and exercisable options, end of
    year
                        
                        $
                        0
                        
                        
                        $
                        44,250Total
      intrinsic value of options exercised during the year
                        
                        $
                        86,000
                        
                        
                        $
                        96,000


F-25





Stock
options outstanding and exercisable at September 30, 2007 (all non-qualified)
consist of:





Granted
      inYear
      Ended
                        
                        Number
      Outstanding
                        
                        
                        Exercise
                        
                        ExpirationSeptember 30,
                        
                        and Exercisable
                        
                        
                        Price
                        
                        Date2006
                        
                        
                        67,500
                        
                        
                        $
                        0.75
                        
                        September
      30, 20102006
                        
                        
                        214,000
                        
                        
                        $
                        1.50
                        
                        February
      28. 20112007
                        
                        
                        350,000
                        
                        
                        $
                        1.75
                        
                        October
      14, 20112007
                        
                        
                        250,000
                        
                        
                        $
                        1.25
                        
                        July
      5, 20122007
                        
                        
                        300,000
                        
                        
                        $
                        1.50
                        
                        August
      14, 20122007
                        
                        
                        30,000
                        
                        
                        $
                        1.25
                        
                        August
      30, 20122008
                        
                        
                        525,000
                        
                        
                        $
                        1.50
                        
                        October
      15, 20122008
                        
                        
                        300,000
                        
                        
                        $
                        1.05
                        
                        February
      19, 20132008
                        
                        
                        418,000
                        
                        
                        $
                        1.25
                        
                        February
      29, 2013Total
                        
                        
                        2,536,500





15)         INCOME
TAXES





As of
September 30, 2008, the Company had net operating and capital loss carryforwards
of approximately $5,785,000 and $533,000, respectively, which expire at various
dates through 2018 and 2011, respectively.





Changes
in the ownership of the Company that have occurred in the past or that could
occur in the future may limit the future utilization of these net operating loss
and capital loss carryforwards pursuant to federal and state tax statutes and
regulations.  The amount of such limitations, if any, have not been
quantified by the Company.





At
September 30, 2008 and 2007, the Company provided a full valuation allowance
against the gross deferred tax asset arising from the net operating and capital
loss carry forwards because, in management’s opinion at this time, it is more
likely than not, such benefits will not be realized during the respective
carryforward periods.




16)         RELATED
PARTY TRANSACTIONS





The
Shareholder Loan balances of $15,437 and $9,775 at September 30, 2008 and 2007,
respectively, represent the net amount owed to one officer/shareholder for
monies advanced from time to time to cover the Company’s short-term cash flow
needs. This loan is unsecured, non-interest bearing and has no specific term for
repayment. During fiscal 2007, the Company converted $20,000 of Shareholder Loan
as partial consideration for purchasing 40,000 restricted shares of common stock
upon the exercise of certain stock options held by the
officer/shareholder.





In
February 2007, as further described in Note 13, one of the officers, who is also
a shareholder, sold his entire interest in a certain spray technology he
previously acquired personally from HV Plastic Spray Systems, Inc., for 75,000
restricted common shares of XIOM.





During
the quarter ended March 31, 2008, as further described in Note 10(d), two
officers/shareholders loaned a total of $529,500 to the Company and in July
2008 converted such debt into 402,454 shares of restricted common
stock.


F-26





In
October 2007, as further described in Note 14, the Company granted options to
two officers/shareholders to purchase a total of 300,000 shares of restricted
common stock at a price of $1.50 per share.





In
February 2008, as further described in Note 14, the Company granted options to
two officers/shareholders to purchase a total of 300,000 shares of restricted
common stock at a price of $1.25 per share.





17)         COMMON
STOCK, SUBJECT TO RESCISSION RIGHTS





Under the
federal securities laws, any offering of securities must be registered unless an
exemption from registration is available, and, with limited exceptions, no
exemption from registration is generally available for a private placement
transaction which is made concurrently with a public offering. XIOM may be
considered to have commenced a public offering of securities on May 6, 2005,
when they first filed their registration statement on Form SB-2.





Subsequent
to that date, from January 1, 2006 through October 20, 2006 (the effective date
of their registration statement), the Company offered and sold 563,718
restricted shares of common stock for a total of $670,399. Although XIOM made
these transactions in reliance upon claimed exemptions from registration that
the Company believed were valid, the purchasers may claim that the transactions
violated federal securities laws. If any of these transactions did violate
federal securities laws, the purchasers in those transactions may have claims
against XIOM for damages or for rescission of their purchase transaction and
recovery of the full subscription price paid, which would be a total of
$670,399, plus interest.





As of the
date of these financial statements, none of the purchasers has made or
threatened any claim against the Company alleging violation of the federal
securities laws.  In the event the purchasers of these securities
successfully asserted claims for rescission it would have a substantial adverse
effect on the business and on the ability to continue to operate. XIOM may not
have sufficient funds available to pay such claims, and there is no assurance
that the Company would be able to obtain such funds either from the proceeds of
any offering, or from other sources. In that event, the Company may be forced to
cease operations and liquidate our available assets to pay our liabilities,
including, but not limited to, the rescission claims.





18)         GOING
CONCERN





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements as of
September 30, 2008, the Company has a total Stockholders’ Deficit of $796,876
and a minimal amount of working capital. Additionally, the Company incurred a
Net Loss of $2,984,628 and $2,721,651 for the years ended September 30, 2008 and
2007, respectively.  These factors raise substantial doubt about the
Company’s ability to continue as a going concern.





The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence. The Company will continue seeking to raise money
through a series of equity and debt transactions in fiscal
2009.


F-27





19)         SUBSEQUENT
EVENT





In
October 2008, as further described in Note 10(b), several Note Holders
representing an aggregate principal amount of $720,000 of the 7% Convertible
Notes demanded immediate payment thereof as a result of the Registration
Statement not being declared effective within one year from the final closing
date of the Offering, which was in early June 2007.




In
November 2008, Convertible Notes maturing in April 2012 with face amounts
aggregating $232,000 and accrued interest of $8,143 were converted into 320,191
shares of common stock.  As an incentive for the holders of these
notes to make this conversion, the conversion price was reduced from $1.50 to
$0.75.  Additionally, the exercise prices of warrants issued with
those Notes for the purchase of 154,667 shares of common stock at $2.00 per
share and 154,667 shares of common stock at $2.50 per share were reduced to
$1.00 and $1.25 per share, respectively.
 
 In
November 2008, the Company's Board of Directors granted 275,000 shares of common
stock to officers, various employees, and external professionals in recognition
of service rendered to the Company.  Additionally, the Board also
authorized the Company to issue up to 1,175,000 shares to various external
professionals in connection with future services.


F-28


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





None.




Item
8a.    Controls and Procedures





Disclosure
Controls and Procedures





As of the
end of the period covered by this report, our management conducted an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934). Based on this evaluation, the
officers concluded that our disclosure controls and procedures needed
improvement in order to be effective to ensure that information required to be
disclosed by our company in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in Commission rules and forms. As a result, we have
instituted additional levels of review and are currently looking to retain a
financial professional with the requisite background and experience that will
coordinate and be responsible for our disclosure controls and procedures with
the assistance of our independent accounting firm.





Changes
in Internal Controls over Financial Reporting





Our
management, with the participation of the chief executive officer/chief
financial officer,  performed an evaluation as to whether any change
in the internal controls over financial reporting (as defined in Rules 13a-15
and 15d-15 under the Securities Exchange Act of 1934) occurred during the period
covered by this report. Based on that evaluation, the chief executive
officer/chief financial officer concluded that no change occurred in the
internal controls over financial reporting during the period covered by this
report that materially affected, or is reasonably likely to materially affect,
the internal controls over financial reporting.





Item
8b.    Other Information





None





Part
III





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





The
directors and officers of the Company are listed below with information about
their respective backgrounds.  Each Director is elected to serve a one
year term, until the next annual meeting of the shareholders or until their
successor is elected (or appointed) and qualified.





Name
              
              Age
              
              PositionAndrew
      B. Mazzone
              
              69
              
              Chairman,
      President, Chief Accounting/Financial Officer and
  PromoterThomas
      Gardega
              
              61
              
              Executive
      Vice President, Director and
Promoter


14





Andrew
Mazzone





Mr.
Mazzone has been the Chairman and President of the company since its inception
in 1998.  Mr. Mazzone was the President of TTI at the time of the
spin-out.  He resigned as Sole Officer and Director of TTI on November
1, 2001.  Thereafter, TTI acquired and changed its name to Steam Clean
USA, Inc. on or about August 15, 2002.  On July 1, 2003, Steam Clean
USA, Inc. acquired Humana Trans Services Group, Ltd.  At this point
Mr. Mazzone was invited to become Chairman of the Board of
Directors.  He served in that position until January 2004, when he
resigned as Chairman but remained as a Director and until May 5, 2004, when he
resigned from the Board
entirely.  From 1970 until February 15, 1995, Mr. Mazzone was employed
by Metco, Westbury, NY, a subsidiary of the Perkin Elmer Corp., a holding
company, which subsidiary, Metco, was engaged in the business of development of
metal spraying and metal powders.  Mr. Mazzone, as President, resigned
from Sulzer Metco after the acquisition of the Company in 1995.  From
1995 to October, 2001 Mr. Mazzone was President of Thermaltec
International.





At Metco,
Mr. Mazzone held various positions, including as Director of Logistics, Director
of Sales and Marketing, Director of Manufacturing, Executive Vice President and
President.





Mr.
Mazzone has degrees from Babson College, Babson Park, Massachusetts, in finance
and an advanced degree in economics, with a specialty in economic
history.  Mr. Mazzone devotes 100% of his efforts to the operations of
the Company (See “Principal Stockholders”).





Thomas
Gardega





Mr.
Gardega is Executive Vice President and has been an employee of the company
since September 24, 1999.  Mr. Gardega brings to the Company a vast
knowledge in the heat sprayed plastic coatings industry. Mr. Gardega was
responsible as project manager for all field operations of electrical
construction in the State of South Carolina for Basic Electrical, Inc. from
January 1997 until January 1999, including purchasing, manpower acquisition,
managing field office, project management and scheduling, materials, equipment,
permits, and meetings.





Mr.
Gardega held a position in Perkin Elmer’s (a publicly traded company), division
of Metco from 1978 to 1981 as special marketing representative and field service
engineer.  His function included training, customer support,
materials, and applicable processes.





Mr.
Gardega has held management positions in commercial electrical contracting
projects throughout the United States.  He also was President of
National Thermal Spray, Inc., a developer and marketer of thermal coating
systems from May 1985 until December 1989.  He is an acknowledged
expert in large scale installation of electrical and communications
systems.  He graduated from Empire State College in New York majoring
in business administration.





Code
of Ethics





Our board
of directors had adopted a code of ethics applicable to persons at our company
who are responsible for financial management. A copy of the code of ethics has
been previously filed as an attachment to the Annual Report for September 30,
2007 as Exhibit 14.1.


15





Audit
Committee and Audit Committee Financial Expert





Our board
of directors acts as our audit committee. No member of our board of directors is
an “audit committee financial expert,” as that term is defined in Item 401(e) of
Regulation S-B promulgated under the Securities Act. To date, we have conducted
limited operations and generated only minimal revenue since inception. In light
of the foregoing, and on evaluating our internal controls, our board of
directors determined that our internal controls are adequate to insure that
financial information is recorded, processed, summarized, and reported in a
timely and accurate manner in accordance with applicable rules and regulations
of the Securities and Exchange Commission. Accordingly, our board of directors
concluded that the benefits of retaining an individual who qualifies as an
“audit committee financial expert” would be outweighed by the costs of retaining
such a person.





Section
16(A) Beneficial Ownership Reporting Compliance





Under
section 16 of the Exchange Act, our directors and executive officers and
beneficial owners of more than 10% of the our common stock are required to file
certain reports, within specified time periods, indicating their holdings of and
transactions in our common stock and derivative securities.





Item
10. Executive Compensation





For the
fiscal year ended September 30, 2008, the Officers/Directors have been
compensated with salaries and other forms of remuneration as set forth
below:





Officer/Director
Compensation:





Each
operating officer is entitled to an annual base salary of $60,000, plus
reimbursement for documented out-of-pocket expenses.  The Board of
Directors also grants non-qualified options annually to each officer as
additional future compensation for services rendered. The timing and extent of
such option grants are made at the sole discretion of the Board of Directors and
have an exercise price equal to the estimated fair-market-value on the date of
the grant.  There is no other compensation given beyond the annual
base salaries and option grants.  The following Summary Compensation
Table sets forth the compensation for each executive officer for the past three
fiscal years ended September 30:


16


Summary Compensation
Table





Fiscal
                              
                              Annual
                              
                              
                              Long-term
      Compensation;Name & Position
                              
                              Year
                              
                              Salary
                              
                              
                              Securities Underlying
    OptionsAndrew
      Mazzone,
                              
                              2006
                              
                              $
                              60,000
                              
                              
                              
                              150,000Chairman
      & President
                              
                              2007
                              
                              $
                              60,000
                              
                              
                              
                              225,0002008
                              
                              $
                              60,000
                              
                              
                              
                              300,000Thomas
      Gardega
                              
                              2006
                              
                              $
                              60,000
                              
                              
                              
                              150,000Executive
      VP
                              
                              2007
                              
                              $
                              60,000
                              
                              
                              
                              225,0002008
                              
                              $
                              60,000
                              
                              
                              
                              300,000




The
following table details options granted to each executive officer in the last
fiscal year ended September 30, 2008:




Option Grants In Last Fiscal
Year


Percent
      of Total
                                        
                                        
                                        ExerciseNumber
      of Shares
                                        
                                        
                                        Options
      Granted
                                        
                                        
                                        Price
                                        
                                        ExpirationName
                                        
                                        Underlying Options
                                        
                                        
                                        To Employees
                                        
                                        
                                        ($/SH)
                                        
                                        DateAndrew
      Mazzone, Chairman & President
                                        
                                        
                                        150,000
                                        
                                        
                                        
                                        24
                                        %
                                        
                                        $
                                        1.50
                                        
                                        October
      15, 2012150,000
                                        
                                        
                                        
                                        24
                                        %
                                        
                                        $
                                        1.25
                                        
                                        February
      19, 2013Thomas
      Gardega, Executive Vice President
                                        
                                        
                                        150,000
                                        
                                        
                                        
                                        24
                                        %
                                        
                                        $
                                        1.50
                                        
                                        October
      15, 2012150,000
                                        
                                        
                                        
                                        24
                                        %
                                        
                                        $
                                        1.25
                                        
                                        February
      19,
2013




Options Exercised In Last Fiscal Year


Exercise
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Value of UnexercisedNumber of Options
                                                            
                                                            
                                                            Price
                                                            
                                                            
                                                            Unexercised
                                                            
                                                            
                                                            OptionsName
                                                            
                                                            Exercised
                                                            
                                                            
                                                            ($/SH)
                                                            
                                                            
                                                            Options
                                                            
                                                            
                                                            ($)Andrew
      Mazzone
                                                            
                                                            
                                                            40,000
                                                            
                                                            
                                                            $
                                                            1.50
                                                            
                                                            
                                                            
                                                            186,667
                                                            
                                                            
                                                            
                                                            -0-Chairman
      & President
                                                            
                                                            
                                                            -0-
                                                            
                                                            
                                                            $
                                                            1.75
                                                            
                                                            
                                                            
                                                            150,000
                                                            
                                                            
                                                            
                                                            -0--0-
                                                            
                                                            
                                                            $
                                                            1.25
                                                            
                                                            
                                                            
                                                            225,000
                                                            
                                                            
                                                            
                                                            -0-Thomas
      Gardega
                                                            
                                                            
                                                            60,000
                                                            
                                                            
                                                            $
                                                            0.75
                                                            
                                                            
                                                            
                                                            -0-
                                                            
                                                            
                                                            $
                                                            -0-Executive
      VP
                                                            
                                                            
                                                            -0-
                                                            
                                                            
                                                            $
                                                            1.75
                                                            
                                                            
                                                            
                                                            150,000
                                                            
                                                            
                                                            
                                                            -0-10,000
                                                            
                                                            
                                                            $
                                                            1.50
                                                            
                                                            
                                                            
                                                            365,000
                                                            
                                                            
                                                            
                                                            -0--0-
                                                            
                                                            
                                                            $
                                                            1.25
                                                            
                                                            
                                                            
                                                            150,000
                                                            
                                                            
                                                            
                                                            -0-




17





All
directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. Each executive officer is
elected annually by the Board of Directors to hold their respective office until
the annual meeting of shareholders and until their successors is chosen and
qualified.





Director
and Officer Insurance:





The
Company does not have directors and officers (“D & O”) liability insurance
at this time.





Item
11. Security Ownership of Certain Beneficial Owners and Management





The
following table sets forth information as of January 9, 2009 with respect to the
beneficial ownership of the 13,985,576 outstanding shares of the Company's
Common Stock by (i) each person known by the Company to beneficially own five
percent or more of the outstanding shares; (ii) the Company's officers and
directors; and (iii) the Company's officers and directors as a
group.  A person is deemed to be a beneficial owner of any securities
of which that person has the right to acquire beneficial ownership within sixty
(60) days.




Percentage
      ofIdentity of Shareholder
                                  
                                  Number of Shares
                                  
                                  
                                  Beneficial OwnershipAndrew
      B. Mazzone
                                  
                                  
                                  2,306,031
                                  
                                  
                                  
                                  16.5
                                  %513
      Dryden StreetWestbury,
      NY  11590President
      and DirectorThomas
      Gardega
                                  
                                  
                                  1,698,258
                                  
                                  
                                  
                                  12.1
                                  %200
      Landmark RoadConway,
      SC  29527Executive
      VP and Director_____________________All
      Officers and Directors as
                                  
                                  
                                  4,004,289
                                  
                                  
                                  
                                  28.6
                                  %A
      Group (2 Persons)





*           Less
than 5%





(1)
              Pursuant
      to the rules and regulations of the Securities and Exchange Commission,
      shares of Common Stock that an individual or entity has a right to acquire
      within 60 days pursuant to the exercise of options or warrants are deemed
      to be outstanding for the purposes of computing the percentage ownership
      of such individual or entity, but are not deemed to be outstanding for the
      purposes of computing the percentage ownership of any other person or
      entity shown in the table.





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





None


18


Director
Independence





None of
our current directors are considered independent at this time.





Item
13.  Exhibits





Index
to Exhibits:





SEC REFERENCENUMBER
              
              TITLE OF DOCUMENT31.1
              
              Certification
      of President Officer pursuant to 18 U.S.C. Section 1350, as adopted,
      Pursuant to section 906 of the Sarbanes-Oxley act of
      2002  (1)32.1
              
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted,
      Pursuant to section 906 of the Sarbanes-Oxley act of
      2002  (1)





(1)      Filed
herewith.





Reports
on Form 8-K:





None.




Item
14. Principal Accounting Fees and Services.





Audit
Fees.  The aggregate fees billed for professional services rendered by
our principal  accountants for the audit of our annual financial
statements and review of our quarterly financial statements were $32,500 and
$25,000 for fiscal years 2008 and 2007,  respectively.





Audit
Related Fees.  None.





Tax
Fees.  None





All Other
Fees.  None.





During
the fiscal years ended September 30, 2008 and 2007, the Registrant did not have
an audit committee.


19


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, XIOM CORP. has duly caused this Report to be signed on behalf of the
undersigned thereunto duly authorized on January 13, 2009.





XIOM
      CORP.By:
              /s/ Andrew MazzoneAndrew
      Mazzone, President and CEO





Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons in the capacities indicated:





Signature
            
            Title
            
            Date/s/ Andrew Mazzone
            
            President,
      Principal
            
            January
      13, 2009Andrew
      Mazzone
            
            Accounting/Financial
      Officer andDirector/s/ Thomas Gardega
            
            Executive
      Vice President and
            
            January
      13, 2009Thomas
      Gardega
            
            Director


20