UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSSION


WASHINGTON,
D.C. 20549








FORM
10-K





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


For the
fiscal year ending September 30, 2009





 ̈  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





ENVIRONMENTAL
INFRASTRUCTURE HOLDINGS CORP.





(Exact
name of registrant as specified  in its charter)





Delaware
              
              32-0294481(State
      or other jurisdiction of incorporation
              
              (I.R.S.
      Employeror
      organization)
              
              Identification
      No.)





Four
Tower Bridge


200 Barr
Harbor Drive, Ste. 400


West
Conshohocken, PA  19428





(Address
of Principal executive offices)





Issuer’s
telephone number: (866) 629-7646





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





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





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. xYes   ̈
No





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.     x
Yes   ̈
No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.     
            ̈





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





Large
accelerated filer    ̈                                                                                     Accelerated
filer    ̈


Non-accelerated
filer   ̈  (Do
not check if a smaller reporting
company)         
  Smaller reporting company  x





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





Aggregate
market value of the voting and non-voting common equity held by non-affiliates
computed by reference to the price at which the common equity was last sold, or
the average bid and asked price of such common equity, as of the last business
day of the registrant's most recently completed second fiscal quarter:
$1,210,524 on March 31, 2009





Indicate
the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date. There were 48,696,789 shares of the
Company's common stock outstanding on January8, 2010.




Documents
incorporated by reference:  None.







Explanatory
Note













ENVIRONMENTAL
INFRASTRUCTURE HOLDINGS CORP.


ANNUAL
REPORT ON FORM 10-K





For
Fiscal Year Ended September 30, 2009





INDEX





Page No:PART
      I
                
                3ITEM
      1.
                BUSINESS
                3ITEM
      1A
                RISK
      FACTORS
                8ITEM
      2.
                PROPERTIES
                20ITEM
      3.
                LEGAL
      PROCEEDINGS
                20ITEM
      4.
                SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDEDRS
                20PART
      II
                
                20ITEM
      5.
                MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
      PURCHASES OF EQUITY SECURITIES
                20ITEM
      6
                SELECTED
      FINANCIAL INFOMATION
                22ITEM
      7.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
                22ITEM
      7A.
                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM
      8.
                FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
                F-1ITEM
      9.
                CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                29ITEM
      9A(T).
                CONTROLS
      AND PROCEDURES
                29ITEM
      9B.
                OTHER
      INFORMATION
                30PART
      III
                
                30ITEM
      10.
                DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
                30ITEM
      11
                EXECUTIVE
      COMPENSATION
                32ITEM
      12.
                SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                34ITEM
      13.
                CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE
                35ITEM
      14.
                PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                35PART
      IV
                
                36ITEM
      15.
                EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
                36Signatures
                
                36




2


ENVIRONMENTAL
INFRASTRUCTURE HOLDINGS CORP.





INTRODUCTORY
COMMENT





Throughout
this Annual Report on Form 10-K, the terms "we," "us," "our," and "our company"
refer to ENVIROMENTAL INFRASTRUCTURE HOLDINGS CORP. ("EIHC"), a Delaware
corporation formerly known as XIOM CORP and, unless the context indicates
otherwise, includes our wholly-owned subsidiary, XIOM Corp., a Delaware
Corporation.





FORWARD-LOOKING
STATEMENTS





The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This
document contains forward-looking statements, which reflect the views of our
management with respect to future events and financial performance. These
forward-looking statements are subject to a number of uncertainties and other
factors that could cause actual results to differ materially from such
statements. Forward-looking statements are identified by words such as
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"projects," "targets" and similar expressions. Readers are cautioned not to
place undue reliance on these forward-looking statements, which are based on the
information available to management at this time and which speak only as of this
date. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
For a discussion of some of the factors that may cause actual results to differ
materially from those suggested by the forward-looking statements, please read
carefully the information under "Risk Factors" beginning on page 8.





The identification in this document of
factors that may affect future performance and the accuracy of forward-looking
statements is meant to be illustrative and by no means exhaustive. All
forward-looking statements should be evaluated with the understanding of their
inherent uncertainty.





PART
I





Item
1.  BUSINESS




ABOUT
OUR COMPANY





Environmental
Infrastructure Holdings Corp (“EIHC”, or “the Company”), formerly XIOM Corp,,
was incorporated in Delaware on March 2, 1998. The company formally changed its
name to EIHC in December 2009.





Spin-off
from the former parent company





The
former parent of EIHC, 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. EIHC 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 EIHC common stock for
every three (3) shares of TTI common stock. EIHC 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
EIHC 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 EIHC, 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. EIHC 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





Investments in Joint Ventures and
Other Outside Entities




In 2007,
Xiom Corp provided equipment in kind and cash to co-found New Bedford Coatings,
LLC, based in New Bedford, Massachussetts as an experimental test and shop
facility to test coatings on large, commercial fishing boats.  To date, we
own 47% of the LLC.  Additionally, in 2007, Xiom Corp received a 25% stake
in Extreme Mobile Coatings Worldwide (OTCBB:  EMWW.OB) in exchange for
granting an exclusive license for our anti-microbial powder coating technology
in North America.  EMWW is a public company and intends to deploy its
franchising concept of our technology in 2010.





Reorganization





On
December 7, 2009, the Company reorganized its operations into a holding company
structure (the “Reorganization”) whereby XIOM became a direct wholly owned
subsidiary of the Company pursuant to an Agreement and Plan of Merger pursuant
to Section 251(g) of the Delaware General Corporation Law (the “Merger
Agreement”) dated as of December 7, 2009, by and among the Company, XIOM and
EIHC Merger Co. (“Merger Sub”).





To effect
the Reorganization, XIOM formed the Company as a wholly owned subsidiary, which
in turn formed Merger Sub as a wholly owned subsidiary.  Pursuant to
the Merger Agreement, Merger Sub then merged with and into XIOM (the “Merger”),
with XIOM being the surviving entity.  In the Merger, each share of
the common stock of Merger Sub issued and outstanding immediately prior to the
Merger and held by the Company was converted into and exchanged for a share of
XIOM common stock, par value $0.0001 (an “XIOM Common Share”), and Merger Sub’s
corporate existence ceased.  Each XIOM Common Share issued and
outstanding immediately prior to the Reorganization converted into and was
exchanged for one common share, par value $0.0001 per share, of the Company (a
“Company Common Share”), having the same rights, powers, preferences,
qualifications, limitations and restrictions as the stock being converted and
exchanged.  Immediately after the Merger, the Company Common Shares
existing prior to the Merger were cancelled.





The
certificate of incorporation and bylaws of the Company are identical to those of
XIOM (other than provisions regarding certain technical matters, as permitted by
Section 251(g) of the Delaware General Corporation Law), and the directors and
officers of the Company are identical to the directors and officers of XIOM
immediately prior to consummation of the Merger. XIOM’s stockholders will not
recognize gain or loss for United States federal income tax purposes upon the
conversion of the XIOM Common Shares.





Acquisition
and merger





On
December 7, 2009, Environmental Infrastructure Holdings Corp. (the “Company”),
and its wholly owned subsidiary, XIOM Corp. (“XIOM”), entered into that a
Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of
December 7, 2009, by and among the Company, XIOM, and each of the persons who
held membership interests (collectively, the “Sellers”) in Equisol, LLC
(“Equisol”).  Pursuant to the Purchase Agreement, the Company acquired
all of the issued and outstanding membership interests of Equisol, and in
exchange, the Sellers received shares of common stock of the Company
representing forty percent (40%) of the issued and outstanding shares of the
common stock of the Company on a fully diluted basis (the
“Acquisition”).





As a
condition to the closing of the Acquisition, the Company and XIOM raised a total
of $705,000 in capital for working capital purposes of the Company. Upon
the completion of the Acquisition, Messrs. Parrish and Given were elected to the
Board of Directors of the Company, and Mr. Parrish was named President, CEO and
Chairman of the Company.





Equisol
is an equipment solutions provider, delivering environmentally friendly
products, services and engineering solutions to its
customers.  Equisol has a broad range of services, including those
identified below, and a national presence that makes it different from any other
consulting, manufacturing, distribution, engineering or service company in the
environmental industry.


4





Consulting- On-site system
reviews/audits and phone consultation services to answer questions on existing
equipment systems to help customers determine the best available technology for
their application needs.





Design - Equipment
solutions that meet both customer's application needs and their budgets. These
solutions can range from simple feed and control systems to full turn-key
equipment packages.





Sales - Access to a wide
range of products that represent the best available technology in the water
industry. Equisol’s model is unique because Equisol can procure from many
different suppliers instead of being tied to a few key principle suppliers that
may not have the best solution for an application. Equisol can sell complete
equipment systems, basic Maintenance, Repair, and Operations (MRO) components,
or spare parts depending upon the need of a customer.





Fabrication - In order to
eliminate the need to build equipment systems on-site from many different pieces
and parts, Equisol can have systems fabricated as a complete turn-key skid and
delivered to the plant. This provides a way to test the equipment prior to
delivery and decrease the time needed for installation. Complete documentation,
drawings, and system P&IDs are provided for each system.





Installation - Equisol
uses its expertise to make sure the right equipment is installed correctly every
time. With installation, Equisol also offer start-up and commissioning services
as well as operator training.  Equisol also has certified tank
installers on staff to meet storage compliance and certification needs of
customers.





Services - Both
preventative maintenance and emergency response services to ensure customers’
automation and instrumentation equipment is functioning properly.





Where
you can find us





Our
corporate offices  are located at Four Tower Bridge,200 Barr Harbor
Drive, Ste. 400,West Conshohocken, PA  19428.The main telephone number
is (866) 629-7646.  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.


5


The
company’s plastic spray technology is unique and has patents issued and
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.





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.


6





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 seventy 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:





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.


7





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.





Employees:





As of
December 31, 2009, we employed approximately 45 persons.  None of our
employees are covered by collective bargaining agreements.  We believe
that our relations with our employees are good.





ITEM
1A. RISK FACTORS





RISK
FACTORS




An
investment in our common stock involves a high degree of risk.  You
should carefully consider the risks and uncertainties
described below and all other information contained in this prospectus before
deciding to invest in shares of our common stock.  While all risks and
uncertainties that we believe to be material to our business and therefore the
value of our common stock are described below, it is possible that other risks
and uncertainties that affect our business will arise or become material in the
future.





If
we are unable to effectively address these risks and uncertainties, our
business, financial condition or results of operations could be materially and
adversely affected.  In this event, the value of our common stock
could decline and you could lose part or all of your
investment.




Risks
Related To Our Business




EIHC
has incurred losses since inception and expects to incur significant net losses
in the foreseeable future and may never become profitable.





Since our
inception, we have incurred significant losses and negative cash flows from
operations.  As of September 30, 2009, we had an accumulated deficit
of $11,628,000, and anticipate incurring additional losses for at least the next
several years. We expect to spend significant resources over the next several
years to enhance our technologies and to fund research and development of our
pipeline of potential products.  In order to achieve profitability, we
must develop products and technologies that can be commercialized by us or
through future collaborations.  Our ability to generate revenues and
become profitable will depend on our ability, alone or with potential
collaborators, to timely, efficiently, and successfully complete the development
of our products, which may include manufacturing and marketing our
products.  There can be no assurance that any such events will occur
or that we will ever become profitable.  Even if we do achieve
profitability, we cannot predict the level of such profitability.  If
we sustain losses over an extended period of time, we may be unable to continue
our business.





Our
independent registered public auditors issued a report for the fiscal year ended
September 30, 2009, that contained a “going concern” explanatory
paragraph.




Our
independent registered public auditors issued a report on their audit of our
financial statements as of and for the fiscal year ended September 30, 2009. The
independent registered auditor’s report contains an explanatory paragraph
indicating that the net losses we have incurred and our working capital deficit
raise substantial doubt about our ability to continue as a going concern. Our
going concern uncertainty may affect our ability to raise additional capital,
and may also affect our relationships with suppliers and customers. Investors
should carefully read the independent registered public auditor’s report and
examine our financial statements.


8




We
continue to need to obtain significant additional capital to fund our
operations, and we may be unable to obtain such financing at all or on
acceptable terms.  If we are unable to obtain the funds necessary to
do so, we may be required to delay, scale back or eliminate our product
development or may be unable to continue our business.


The
development of our products will require a commitment of substantial funds, to
conduct the costly and time-consuming research, necessary to fully commercialize
our products. Our future capital requirements will depend on many factors,
including:





·
              the
      cost of prosecuting, defending and enforcing patent claims and other
      intellectual property rights;


·
              the
      cost of manufacturing our
products;


·
              competing
      technological and market developments;
and


·
              our
      ability to establish and maintain collaborative and other arrangements
      with third parties to assist in bringing our products to market and the
      cost of such arrangements.




T here can
be no assurance that we will not need additional capital sooner than currently
anticipated.
  We will
need to raise substantial additional capital to fund our future
operations.  We cannot be certain that additional financing will be
available on acceptable terms, or at all.  In recent years, it has
been difficult for companies to raise capital due to a variety of factors, which
may or may not continue.  To the extent we raise additional capital
through the sale of equity securities, the ownership position of investors in
this offering and our existing stockholders could be substantially
diluted.  If additional funds are raised through the issuance of
preferred stock or debt securities, these securities are likely to have rights,
preferences and privileges senior to our common stock.  Fluctuating
interest rates could also increase the costs of any debt financing we may
obtain.
  To date,
we have incurred significant expenses in product development and administration
in order to ready our products for market. There is no assurance that actual
cash requirements will not exceed our estimates, in which case we will require
additional financing to bring our products into commercial operation, finance
working capital and pay for operating expenses and capital requirements until we
achieve a positive cash flow. Additionally, more capital may be required in the
event that:





·
              we
      incur unexpected costs in completing the development of our technology or
      encounter any unexpected


·
              we
      incur delays and additional expenses as a result of technology
      failure;


·
              we
      are unable to create a substantial market for our product and services;
      or


·
              we
      incur any significant unanticipated
expenses.





Failure
to successfully address ongoing liquidity requirements will have a material
adverse effect on our business.  If we are unable to obtain additional
capital on acceptable terms when needed, we may be required to take actions that
harm our business and our ability to achieve cash flow in the future, including
possibly the surrender of our rights to some technologies or product
opportunities, curtailing or ceasing operations.


9




If
we obtain additional financing, you may suffer significant
dilution.




Because
we have generated only limited revenues since commencing operations, we are
dependent on raising additional financing through private and public financing
sources and strategic alliances with larger companies to fund our short and
long-term operations. As a result, we have been and likely will be required to
issue securities to obtain such funds, which issuances have in the past and will
in the future dilute the percentage ownership of our stockholders. In an effort
to preserve cash and to better align the long term interests of our consultants
and those with whom we conduct business with our long term interests, we have
been issuing securities as payment in lieu of cash, which also has a dilutive
effect on outstanding securities. This dilution could also have an adverse
impact on our earnings per share and reduce the price of our common stock. In
addition, the new securities may have rights, preferences or privileges senior
to those of our common stock. For example, in October 2008 the Company issued
1,175,000, restricted common shares with a fair market value of $822,500 to
several independent contractors in connection with professional service
agreements for financial and legal services to be provided to the Company
through various dates through September 2009. In November 2008, the Company
issued 308,333 common shares with a fair market value of $135,667 to employees
under the Company's Employee Stock Ownership Plan. In November 2008, the Company
issued 320,191 restricted common shares with a fair market value of $128,056 in
connection with the conversion of Convertible Notes Payable. In February 2009,
the Company issued 12,500 restricted common shares with a fair market value of
$18,750 to an employee in connection with a severance agreement. In February
2009, Company issued 121,048 restricted common shares at a price of $0.15 per
share to one holder of the Convertible Notes Payable in satisfaction of accrued
interest due in the amount of $18,157. In March 2009, the Company issued
1,225,000 restricted common shares with a fair market value of $163,000 to
several independent contractors in connection with professional service
agreements for financial and legal services to be provided to the Company
through various dates through February 2011. In March 2009, the Company issued
541,667 common shares with a fair market value of $73,733 to employees under the
Company's Employee Stock Ownership Plan in lieu of salaries. In March 2009, the
Company issued 65,400 restricted common shares at a price of $0.25 per share to
a vendor in satisfaction of an invoice due in the amount of $16,350. In April
and May 2009, the Company issued 90,000 restricted common shares with a fair
market value of $16,500 to third parties in satisfaction of claims and this
amount was recorded as a non-cash expense on the date of issuance.




In June
2009 the Company issued 620,000 restricted common shares with a fair market
value of $217,000 to several independent contractors in connection with
professional service agreements for financial and legal services to be provided
to the Company through May 2010. In June 2009, the Company issued 370,000 common
shares with a fair market value of $129,500 to employees under the Company's
Employee Stock Ownership Plan in lieu of salaries. In June 2009, the Company
issued 10,000 restricted common shares with a fair market value of $3,500 to a
former employee for consulting services. In June 2009, the Company issued
250,000 restricted common shares with an assigned value of $164,481 (including
$116,093 relating to the beneficial conversion feature of the notes) in
connection with the issuance of convertible notes with a face of $250,000 due in
December 2009. In June 2009, two independent contractors exercised options
previously granted in April 2009 for the purchase of 1,200,000 and 250,000
shares of common stock.  As they elected to utilize the cashless
exercise feature of those options, net amounts of 1,042,105 and 217,105 shares
of restricted common stock were issued. In July 2009, the Company issued 195,000
common shares with a fair market value of $84,550 to three independent
contractors for financial and legal services.  In July 2009, the
Company issued 100,000 restricted common shares with an assigned value of
$59,973 (including $41,678 relating to the beneficial conversion feature of the
notes) in connection with the issuance of convertible notes with an aggregate
face value of $100,000 due in January 2010. In July 2009, the Company issued
155,000 common shares with a fair market value of $75,950 to two officers of the
Company under the Company's Employee Stock Ownership Plan in lieu of salaries.
In July 2009, an officer of the Company exercised options for the purchase of
1,200,000 shares of common stock.  As he elected to utilize the
cashless exercise feature of those options, the net amount of 1,077,551 shares
of restricted common stock were issued. In August 2009, the Company issued
75,000 common shares with a fair market value of $30,000 to an independent
contractor for financial services. In August 2009, an officer of the Company
exercised options for the purchase of 300,000 shares of common
stock.  As he elected to utilize the cashless exercise feature of
those options, the net amount of 261,539 shares of restricted common stock were
issued. In August 2009, the Company issued 1,200 common shares with a fair
market value of $475 to an independent contractor for consulting services. In
August 2009, the Company issued 100,000 restricted common shares with an
assigned value of $32,000 (including $4,383 relating to the beneficial
conversion feature of the note) in connection with the issuance of a convertible
note with a face of $100,000 due in February 2010.


10




We
may not successfully establish and maintain collaborative and licensing
arrangements, which could adversely affect our ability to develop and
commercialize our products.




Our
technological strategy includes developing our powder technology as well as
establishing collaborations and licensing agreements with other companies. We
may not be able to maintain or expand these licenses and collaborations or
establish additional licensing and collaboration arrangements necessary to
develop and commercialize our products. Even if we are able to maintain or
establish licensing or collaboration arrangements, these arrangements may not be
on favorable terms and may contain provisions that will restrict our ability to
develop, test and market our products.  Any failure to maintain or
establish licensing or collaboration arrangements on favorable terms could
adversely affect our business prospects, financial condition or ability to
develop and commercialize our products.




We expect
to rely at least in part on third-party collaborators to perform a number of
activities relating to the development and commercialization of our products,
including the manufacturing of product materials and the design for our
products.  Our collaborative partners may also have or acquire rights
to control aspects of our product development.  As a result, we may
not be able to conduct these programs in the manner or on the time schedule we
currently contemplate. In addition, if any of these collaborative partners
withdraw support for our programs or products or otherwise impair their
development, our business could be negatively affected.  To the extent
we undertake any of these activities internally, our expenses may
increase.




In
addition, our success depends on the performance of our collaborators of their
responsibilities under these arrangements.  Some potential
collaborators may not perform their obligations in a timely fashion or in a
manner satisfactory to us. Because such
agreements may be exclusive, we may not be able to enter into a collaboration
agreement with any other company covering the same field during the applicable
collaborative period.  In addition, our collaborators’ competitors may
not wish to do business with us at all due to our relationship with our
collaborators.  If we are unable to enter into additional product
discovery and development collaborations, our ability to sustain or expand our
business will be significantly diminished.




If
we are unable to create and maintain sales, marketing and distribution
capabilities or enter into agreements with third parties to perform those
functions, we will not be able to commercialize our products.




We
currently have limited sales, marketing or distribution
capabilities.  Therefore, to commercialize our products, if and when
such products are ready for marketing, we expect to collaborate with third
parties to perform these functions.  We have limited experience in
developing, training or managing a sales force and will incur substantial
additional expenses if we decide to market any of our future products
directly.  Developing a marketing and sales force is also time
consuming and could delay launch of our future products.  In addition,
we will compete with many companies that currently have extensive and
well-funded marketing and sales operations.  Our marketing and sales
efforts may be unable to compete successfully against these
companies.




The
industry in which we operate is highly competitive, and competitive pressures
from existing and newcompanies could have a material adverse effect on our
financial condition and results of operations.


The
industry in which we operate is highly competitive and influenced by the
following:





·
              advances in
      technology;


·
              new
      product introductions;


·
              evolving industry
      standards;


·
              product
      improvements;


·
              rapidly changing
      customer needs;


·
              intellectual
      property invention and
protection;


·
              marketing and
      distribution capabilities;


·
              competition from
      highly capitalized companies;


·
              ability of customers
      to invest in information technology;
and


·
              price
      competition.


We can
give no assurance that we will be able to compete effectively in our
markets.  Many of our competitors have substantially greater capital
resources, research and development resources and experience, manufacturing
capabilities, regulatory expertise, sales and marketing resources, established
relationships with business and consumer products companies and production
facilities than us.


11


We
may encounter difficulties managing our growth, which could adversely affect our
business.




Our
strategy includes entering into and working on simultaneous technology discovery
and development programs across multiple markets.  We expect to
continue to grow to meet our strategic objectives.  If our growth
continues, it will continue to place a strain on us, our management and our
resources.  Our ability to effectively manage our operations, growth
and various projects requires us to continue to improve our operational,
financial and management controls, reporting systems and procedures, and to
attract and retain sufficient numbers of talented employees.  We may
not be able to successfully implement these tasks on a larger scale and,
accordingly, we may not achieve our research, development and commercialization
goals.  If we fail to improve our operational, financial and
management information systems, or fail to effectively monitor or manage our new
and future employees or our growth, our business would suffer
significantly.




We
may not be able to manufacture our planned products in sufficient quantities at
an acceptable cost, or at all, which could harm our future
prospects.


We lease
a single manufacturing facility.  If any of our proposed products
become available for widespread sale, we may not be able to arrange for the
manufacture of such product in sufficient quantities at an acceptable cost, or
at all, which could materially adversely affect our future
prospects.




Compliance
with the Sarbanes-Oxley Act of 2002 will result in increased
expenditures.




We are
exposed to significant costs and risks associated with complying with
increasingly stringent and complex regulation of corporate governance and
disclosure standards. Changing laws, regulations and standards relating to
corporate governance and public disclosure, including the Sarbanes-Oxley Act of
2002 and new SEC regulations require a growing expenditure of management time
and external resources. In particular, Section 404 of the Sarbanes-Oxley Act of
2002 requires management’s annual review and evaluation of our internal
controls, and attestations of the effectiveness of our internal controls by our
independent registered auditors.  Although we are not currently
required to comply with all of the requirements of Section 404, we have begun
the process of documenting and testing our internal controls. This process could
result in our needing to implement measures to improve our internal controls.
Any failure by us to maintain effective internal controls could have a material
adverse effect on our business, operating results and stock price. This process
may also require us to hire additional personnel and outside advisory services
and will result in significant accounting and legal expenses.




Risks
Related To Our Industry




Our
products may become obsolete and unmarketable if we are unable to respond
adequately to rapidly changing technology and customer demands.




Our
industry is characterized by rapid changes in technology and customer demands.
As a result, our products may quickly become obsolete and unmarketable. Our
future success will depend on our ability to adapt to technological advances,
anticipate customer demands, develop new products and enhance our current
products on a timely and cost-effective basis. Further, our products must remain
competitive with those of other companies with substantially greater resources.
We may experience technical or other difficulties that could delay or prevent
the development, introduction or marketing of new products or enhanced versions
of existing products. Also, we may not be able to adapt new or enhanced products
to emerging industry standards, and our new products may not be favorably
received.




If
we are unable to attract and retain key personnel and advisors, it may adversely
affect our ability to obtain financing, pursue collaborations or develop our
products.




We are
highly dependent on Michael Parrish, Chairman and Chief Executive Officer,
Andrew Mazzone, our principal accounting officer, James Weber, the president of
our subsidiary, XIOM Corp, and Kurt Given, president our subsidiary, Equisol,
LLC.  Our future success depends on our ability to attract, retain and
motivate highly qualified management and scientific, development and commercial
personnel and advisors.  To pursue our business strategy, we will need
to hire or otherwise engage qualified personnel and managers, including
personnel with expertise in discovery, development, manufacturing, marketing and
sales.  Competition for qualified personnel is intense among
companies, academic institutions and other organizations.  If we are
unable to attract and retain key personnel and advisors, it may negatively
affect our ability to successfully develop, test and commercialize our products
and could have a material adverse effect on our proposals, financial condition
and results of operations.


12




We
may be sued for product liability, which could adversely affect our
business.




Because
our business strategy involves the development and sale by either us or our
collaborators of commercial products incorporating our powder coating
technology, we may be sued for product liability. We may be held liable if any
product we develop and commercialize, or any product our collaborators
commercialize that incorporates any of our technology, causes injury or is found
otherwise unsuitable during product testing, manufacturing, marketing, sale or
consumer use.


If we and
our collaborators commence sale of commercial products, we will need to obtain
additional product liability insurance, and this insurance may be prohibitively
expensive, or may not fully cover our potential
liabilities.  Inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product liability
claims could prevent or inhibit the commercialization of products developed by
us or our product discovery and development collaborators.  We may be
obligated to indemnify our product discovery and development collaborators for
product liability or other losses they incur.  Any indemnification we
receive from such collaborators for product liability that does not arise from
our technology may not be sufficient to satisfy our liability to injured
parties. If we are sued for any injury caused by our products or products
incorporating our technology or any other products we develop, our liability
could exceed our total assets.




Risks
Related To Intellectual Property and Technology




If
our products are not effectively protected by valid, issued patents or if we are
not otherwise able to protect our proprietary information, it could harm our
business.




The
success of our operations will depend in part on our ability and that of our
licensors to:





·
              obtain any necessary
      patent protections for new technologies both in the United States and in
      other countires with substantial
markets;


·
              defend patents once
      obtained;


·
              maintain trade
      secrets and operate without infringing upon the patents and proprietary
      rights of others; and


·
              obtain appropriate
      licenses upon reasonable terms to patents or proprietary rights held by
      others that are necessary
      or useful to us in commercializing our technology, both in the United
      States and in other countries with substantial markets.




In the
event we are not able protect our intellectual property and proprietary
information, our business will be materially harmed.




We
may not have adequate protection for our unpatented proprietary information,
which could adversely affect our competitive position.




In
addition to any patents that we may apply for in the future, we will
substantially rely on trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain our competitive
position.  However, others may independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
our trade secrets or disclose our technology.  To protect our trade
secrets, we may enter into confidentiality agreements with employees,
consultants and potential collaborators.  However, these agreements
may not provide meaningful protection of our trade secrets or adequate remedies
in the event of unauthorized use or disclosure of such
information.  Likewise, our trade secrets or know-how may become known
through other means or be independently discovered by our
competitors.  Any of these events could prevent us from developing or
commercializing our products.


13




Our
ability to compete in the powder coating market may decline if we do not
adequately protect our proprietary technologies.




Because
of the substantial length of time and expense associated with the development of
new products, we, along with the rest of the industry, place considerable
importance on obtaining and maintaining patent protection for new technologies,
products and processes.  Our success will depend in part on our
ability to obtain and maintain intellectual property that protects our
technologies and technology products.  Patent positions may be highly
uncertain and may involve complex legal and factual questions for which we seek
patent protection.  No consistent standard regarding the allowance or
enforceability of claims in many of our pending patent applications has emerged
to date.  As a result, we cannot predict the breadth of claims that
will ultimately be allowed in any future patent applications, if any, including
those we have in-licensed or the extent to which we may enforce these claims
against our competitors. The degree of future protection for our proprietary
rights is therefore highly uncertain and we cannot assure you that:





·
            we
      will be the first to file patent applications or to invent the subject
      matter claimed in patent applications thatwe
      file, if any, which relate to the technologies upon which we
      rely;


·
            others
      will not independently develop similar or alternative technologies or
      duplicate any of ourtechnologies;


·
            any
      of our potential patent applications will result in issued
      patents;


·
            any
      of our potential patent applications will not result in interferences or
      disputes with third parties regardingpriority
      of invention;


·
            any
      patents that may be issued to us, our collaborators or our licensors will
      provide a basis for commerciallyviable
      products or will provide us with any competitive advantages or will not be
      challenged by third parties;


·
            we
      will develop any proprietary technologies that are
    patentable;


·
            the
      patents of others will not have an adverse effect on our ability to do
      business; or


·
            new
      proprietary technologies from third parties, including existing licensors,
      will be available for licensing to us on reasonable commercial terms,
      if at all.





In
addition, patent law outside the United States is uncertain and in many
countries intellectual property laws are undergoing review and revision. The
laws of some countries do not protect intellectual property rights to the same
extent as domestic laws. It may be necessary or useful for us to participate in
opposition proceedings to determine the validity of our competitors’ patents or
to defend the validity of any of our or our licensor’s future patents, which
could result in substantial costs and would divert our efforts and attention
from other aspects of our business.




Technologies
licensed to us by others, or in-licensed technologies, are important to our
business. In particular, we depend on certain technologies relating to
technology licensed to us, as well as our relationships with various
communications, software and integrator companies.  In addition, we
may in the future acquire rights to additional technologies by licensing such
rights from existing licensors or from third parties.  Such
in-licenses may be costly.  Also, we generally do not control the
patent prosecution, maintenance or enforcement of in-licensed
technologies.  Accordingly, we are unable to exercise the same degree
of control over this intellectual property as we do over our internally
developed technologies. If we cannot maintain the confidentiality of our
technologies and other confidential information in connection with our
collaborations, our ability to protect our proprietary information or obtain
patent protection in the future may be impaired, which could have a significant
adverse effect on our business, financial condition and results of
operations.




Disputes
concerning the infringement or misappropriation of our proprietary rights or the
proprietary rights of others could be time consuming and extremely costly and
could delay our research and development efforts.




Our
commercial success, if any, will be significantly harmed if we infringe the
patent rights of third parties or if we breach any license or other agreements
that we have entered into with regard to our technology or
business.


14




We are
aware of other companies and academic institutions that have been performing
research in the areas of powder coating technology.  To the extent any
of these companies or academic institutions currently have, or obtain in the
future, broad patent claims, such patents could block our ability to use various
aspects of our discovery and development process and might prevent us from
developing or commercializing newly discovered technologies or otherwise
conducting our business.  In addition, it is possible that some of the
new technologies that are discovered using our technology may not be patentable
or may be covered by intellectual property of third parties.




We are
not currently a party to any litigation, interference, opposition, protest,
reexamination or any other potentially adverse governmental, ex parte or
inter-party proceeding with regard to our patent or trademark
positions.  However, the technology industries are characterized by
extensive litigation regarding patents and other intellectual property
rights.  Many technology companies have employed intellectual property
litigation as a way to gain a competitive advantage.  If we become
involved in litigation, interference proceedings, oppositions, reexamination,
protest or other potentially adverse intellectual property proceedings as a
result of alleged infringement by us of the rights of others or as a result of
priority of invention disputes with third parties, we might have to spend
significant amounts of money, time and effort defending our position and we may
not be successful.  In addition, any claims relating to the
infringement of third-party proprietary rights or proprietary determinations,
even if not meritorious, could result in costly litigation, lengthy governmental
proceedings, divert management’s attention and resources, or require us to enter
into royalty or license agreements that are not advantageous to us.




Should
any person have filed patent applications or obtained patents that claim
inventions also claimed by us, we may have to participate in an interference
proceeding declared by the relevant patent regulatory agency to determine
priority of invention and, thus, the right to a patent for these inventions in
the United States.  Such a proceeding could result in substantial cost
to us even if the outcome is favorable.  Even if successful on
priority grounds, an interference action may result in loss of claims based on
patentability grounds raised in the interference action.  Litigation,
interference proceedings or other proceedings could divert management’s time and
efforts.  Even unsuccessful claims could result in significant legal
fees and other expenses, diversion of management’s time and disruption in our
business.  Uncertainties resulting from initiation and continuation of
any patent proceeding or related litigation could harm our ability to compete
and could have a significant adverse effect on our business, financial condition
and results of operations.




An
adverse ruling arising out of any intellectual property dispute, including an
adverse decision as to the priority of our inventions, could undercut or
invalidate our intellectual property position.  An adverse ruling
could also subject us to significant liability for damages, including possible
treble damages, prevent us from using technologies or developing products, or
require us to negotiate licenses to disputed rights from third
parties.  Although patent and intellectual property disputes in the
technology area are often settled through licensing or similar arrangements,
costs associated with these arrangements may be substantial and could include
license fees and ongoing royalties.  Furthermore, necessary licenses
may not be available to us on satisfactory terms, if at all.  Failure
to obtain a license in such a case could have a significant adverse effect on
our business, financial condition and results of operations.




Risks
Related to Our Fluctuating Operating Results, Possible Acquisitions and
Management of Growth




We
expect that our results of operations will fluctuate from period to period, and
this fluctuation could cause our stock price to decline, causing investor
losses.




Our
operating results could vary significantly in the future based upon a number of
factors, including many factors over which we have little or no
control.  We operate in a highly dynamic industry and future results
could be subject to significant fluctuations.  These fluctuations
could cause us to fail to meet or exceed financial expectations of securities
analysts or investors, which could cause our stock price to decline rapidly and
significantly.  Revenue and expenses in future periods may be greater
or less than revenue and expenses in the immediately preceding period or in the
comparable period of the prior year.  Therefore, period-to-period
comparisons of our operating results are not necessarily a good indication of
our future performance.  Some of the factors that could cause our
operating results to fluctuate include:





·
            our
      ability to develop technology;


15




·
            our
      ability or the ability of our product discovery and development
      collaborators to incorporate our
technology;


·
            our
      receipt of milestone payments in any particular
  period;


·
            the
      ability and willingness of collaborators to commercialize products
      incorporating our technology on expected timelines, or at
      all;


·
            our
      ability to enter into product discovery and development collaborations and
      technology collaborations, orto
      extend the terms of any existing collaboration agreements, and our payment
      obligations, expected revenueand
      other terms of any other agreements of this
  type;


·
            the
      demand for our future products and our collaborators’ products containing
      our technology; and


·
            general
      and industry specific economic conditions, which may affect our
      collaborators’ research anddevelopment
      expenditures.





If
we acquire products, technologies or other businesses, we will incur a variety
of costs, may have integration difficulties and may experience numerous other
risks that could adversely affect our business.




To remain
competitive, we plan to acquire additional businesses, products and technologies
and we currently are actively seeking material acquisitions that complement our
business.  We have limited experience in identifying acquisition
targets, successfully acquiring them and integrating them into our current
infrastructure.  We may not be able to successfully integrate any
businesses, products, technologies or personnel that we might acquire in the
future without a significant expenditure of operating, financial and management
resources, if at all.  In addition, future acquisitions could require
significant capital infusions and could involve many risks, including, but not
limited to, the following:





·
            we
      may have to issue convertible debt or equity securities to complete an
      acquisition, which would dilute ourstockholders
      and could adversely affect the market price of the common
      stock;


·
            an
      acquisition may negatively impact our results of operations because it may
      require us to incur large one-time
      charges to earnings, amortize or write down amounts related to goodwill
      and other intangible assets, or incur or assume substantial debt or
      liabilities, or it may cause adverse tax consequences, substantialdepreciation
      or deferred compensation charges;


·
            we
      may encounter difficulties in assimilating and integrating the business,
      technologies, products, personnelor
      operations of companies that we
acquire;


·
            certain
      acquisitions may disrupt our relationship with existing collaborators who
      are competitive to theacquired
      business;


·
            acquisitions
      may require significant capital infusions and the acquired businesses,
      products or technologiesmay
      not generate sufficient revenue to offset acquisition
    costs;


·
            an
      acquisition may disrupt our ongoing business, divert resources, increase
      our expenses and distract ourmanagement;


·
            acquisitions
      may involve the entry into a geographic or business market in which we
      have little or no priorexperience;
      and


·
            key
      personnel of an acquired company may decide not to work for
      us.


Any of
the foregoing risks could have a significant adverse effect on our business,
financial condition and results of operations.


To
the extent we enter markets outside of the United States, our business will be
subject to political, economic, legal and social risks in those markets, which
could adversely affect our business.




There are
significant regulatory and legal barriers in markets outside the United States
that we must overcome to the extent we enter or attempt to enter markets in
countries other than the United States.  We will be subject to the
burden of complying with a wide variety of national and local laws, including
multiple and possibly overlapping and conflicting laws.  We also may
experience difficulties adapting to new cultures, business customs and legal
systems.  Any sales and operations outside the United States would be
subject to political, economic and social uncertainties including, among
others:




16




·
            changes
      and limits in import and export
controls;


·
            increases
      in custom duties and tariffs;


·
            changes
      in currency exchange rates;


·
            economic
      and political instability;


·
            changes
      in government regulations and laws;


·
            absence
      in some jurisdictions of effective laws to protect our intellectual
      property rights; and


·
            currency
      transfer and other restrictions and regulations that may limit our ability
      to sell certain products orrepatriate
      profits to the United States.


Any
changes related to these and other factors could adversely affect our business
to the extent we enter markets outside the United
States.




Risks
Related to our Common Stock; Liquidity Risks




The
price of our common stock is expected to be volatile and an investment in common
stock could decline in value.




The
market price of our common stock, and the market prices in general for
securities of companies in our industry, are expected to be highly
volatile.  The following factors, in addition to other risk factors
described in this filing, and the potentially low volume of trades in common
stock, may have a significant impact on the market price of common stock, some
of which are beyond our control:





·
            announcements
      of technological innovations and discoveries by us or our
      competitors;


·
            developments
      concerning any research and development, manufacturing, and marketing
      collaborations;


·
            new
      products or services that we or our competitors
  offer;


·
            actual
      or anticipated variations in operating
results;


·
            the
      initiation, conduct and/or outcome of intellectual property and/or
      litigation matters;


·
            changes
      in financial estimates by securities
analysts;


·
            conditions
      or trends in technology or software
industries;


·
            changes
      in the economic performance and/or market valuations of other technology
      companies;


·
            our
      announcement of significant acquisitions, strategic partnerships, joint
      ventures or capital commitments;


·
            additions
      or departures of key personnel;


·
            global
      unrest, terrorist activities, and economic and other external factors;
      and


·
            sales
      or other transactions involving our common
  stock.





The stock
market in general has recently experienced relatively large price and volume
fluctuations.  In particular, market prices of securities of
technology companies have experienced fluctuations that often have been
unrelated or disproportionate to the operating results of these
companies.  Continued market fluctuations could result in extreme
volatility in the price of common stock, which could cause a decline in the
value of common stock.  Prospective investors should also be aware
that price volatility may be worse if the trading volume of common stock is
low.




It
is not anticipated that there will be an active public market for shares of our
common stock in the near term, and you may have to hold your shares of common
stock for an indefinite period of time. You may be unable to resell a large
number of your shares of common stock within a short time frame or at or above
their purchase price.




There is
not an active public or other trading market for our common stock, and there can
be no assurance that any market will develop or be sustained after the
completion of this offering.  Because our common stock is expected to
be thinly traded, an investor cannot expect to be able to liquidate its
investment in case of an emergency or if it otherwise desires to do
so.  Large transactions in common stock may be difficult to conduct in
a short period of time.  Further, the sale of shares of common stock
may have adverse federal income tax consequences.




17




It
is more difficult for our shareholders to sell their shares because we are not,
and may never be, eligible for the Nasdaq Stock Market or any National Stock
Exchange.




We are
not presently, nor is it likely that for the foreseeable future we will be,
eligible for inclusion in the Nasdaq Stock Market or for listing on any United
States national stock exchange.  To be eligible to be included in the
Nasdaq Stock Market, a company is required to have not less than $4,000,000 of
stockholders’ equity, a public float with a market value of not less than
$5,000,000, and a minimum bid price of $4.00 per share. At the present time, we
are unable to state when, if ever, we will meet the Nasdaq Stock Market
application standards.  Unless we are able to increase our net worth
and market valuation substantially, either through the accumulation of surplus
out of earned income or successful capital raising financing activities, we will
not be able to meet the eligibility requirements of the Nasdaq Stock
Market.  As a result, it will more difficult for holders of our common
stock to resell their shares to third parties or otherwise, which could have a
material adverse effect on the liquidity and market price of our common
stock.




Substantial
future issuances of our common stock could depress our stock price.




The
market price for our common stock could decline, perhaps significantly, as a
result of issuances of a large number of shares of our common stock in the
public market or even the perception that such issuances could
occur.  Sales of a substantial number of shares of common stock,
or the perception that holders of a large number of shares intend to sell their
shares, could depress the market price of our common stock.




Directors
and officers of the Company will have a high concentration of our common stock
ownership.




Based on
the aggregate number of shares of our common stock that are outstanding as of
January 8, 2010, our officers and directors beneficially own approximately 50.9%
of our outstanding common stock.  Such a high level of ownership by
such persons may have a significant effect in delaying, deferring or preventing
any potential change in control of the Company.  Additionally, as a result
of their high level of ownership, our officers and directors might be able to
strongly influence the actions of our Board of Directors, and the outcome of
actions brought to our stockholders for approval. Such a high level of ownership
may adversely affect the voting and other rights of our
stockholders.




Changes
in, or interpretations of, accounting rules and regulations, such as expensing
of stock options and other stock-based compensation, could result in unfavorable
accounting charges or require us to change our compensation
policies.




Accounting
methods and policies, including policies governing revenues recognition,
expenses, and accounting for stock options and other forms of stock-based
compensation are subject to further review, interpretation and guidance from
relevant accounting authorities, including the SEC. Changes to, or
interpretations of, accounting methods or policies in the future may require us
to reclassify, restate or otherwise change or revise our financial statements,
including those contained in this prospectus. Prior to January 1, 2006, we were
not required to record stock-based compensation charges if the employee’s stock
option exercise price equals or exceeds the fair market value of our common
stock at the date of grant.




On
December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
Payment,” which is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation (“SFAS No. 123R”). SFAS No. 123R supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement
of Cash Flows.” Generally, the approach in SFAS No. 123R is similar to the
approach described in SFAS No. 123.  However, SFAS No. 123R requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values.
Pro forma disclosure is no longer an alternative. We were required to adopt SFAS
No. 123R on January 1, 2006, and have adopted it as of that date.




18




Accordingly,
the adoption of SFAS No. 123R’s fair value method will have a significant impact
on the presentation of our results of operations if we utilize stock-based
compensation to reward and incentivize employees and others who contribute to
our growth and success, although it will have no impact on our overall financial
position. The impact of adoption of SFAS No. 123R cannot be predicted at this
time because it will depend on levels of sharebased payments granted in the
future and the assumptions for the variables which impact the
computation.




We may
rely heavily on stock options to motivate existing employees and to attract new
employees. When we are required to expense stock options, we may then choose to
reduce our reliance on stock options as a motivation tool. If we decide to
reduce our potential use of stock options in the future, it may be more
difficult for us to attract and retain qualified employees.  However,
if we decide to not reduce our reliance on stock options in the future, it will
decrease our reported earnings.




We
do not expect to make dividend payments in the foreseeable future.




The
Company has never declared or paid any cash dividends on its common stock. For
the foreseeable future, the Company intends to retain any earnings to finance
the development and expansion of its business, and it does not anticipate paying
any cash dividends on our common stock. Any future determination to pay
dividends will be at the discretion of the Board of Directors and will be
dependent upon then existing conditions, including the Company's financial
condition and results of operations, capital requirements, contractual
restrictions, business prospects, and other factors that the board of directors
consider relevant.




The
fact that we are subject to Penny Stock Regulation may make it less appealing
for a broker-dealer to engage in transactions involving our
securities.




The
Commission has adopted regulations which generally define a “penny stock” to be
any equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. As a
result, our common stock is subject to rules that impose additional sales
practice requirements on broker dealers who sell such securities to persons
other than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with their spouse). For transactions covered by such rules, the broker
dealer must make a special suitability determination for the purchase of such
securities and have received the purchaser’s written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a risk disclosure document mandated by the Commission relating to the penny
stock market. The broker dealer must also disclose the commission payable to
both the broker dealer and the registered representative, current quotations for
the securities and, if the broker dealer is the sole market maker, the broker
dealer must disclose this fact and the broker dealer’s presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Broker-dealers must wait two business days after
providing buyers with disclosure materials regarding a security before effecting
a transaction in such security. Consequently, the “penny stock” rules restrict
the ability of broker dealers to sell our securities and affect the ability of
investors to sell our securities in the secondary market and the price at which
such purchasers can sell any such securities, thereby affecting the liquidity of
the market for our common stock.




Stockholders
should be aware that, according to the Commission, the market for penny stocks
has suffered in recent years from patterns of fraud and abuse. Such patterns
include:





·
            control
      of the market for the security by one or more broker-dealers that are
      often related to the promoter or
issuer;


·
            manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;


·
            “boiler
      room” practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales
  persons;


·
            excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers; and


·
            the
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      inevitable collapse of those prices with consequent investor
      losses.




19





Our
management is aware of the abuses that have occurred historically in the penny
stock market.





Item
2. PROPERTY





EIHC
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. 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 2009 and 2008 was approximately $95,000 per annum. 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.





In
addition, as a result of the acquisition of Equisol, LLC in December, 2009, the
Company acquired leased facilities in Conshohocken, PA, Baton Rouge, LA, and
Kemah, TX. The Company is in the process of relocating its Corporate
Headquarters to Conshohocken, PA.





Item 3. LEGAL
PROCEEDINGS





On
December 22, 2009, the Company received a notice from holders of $820,000 of its
convertible notes that the Company was in default of its obligations under the
notes, and acceleration and demand for payment of the face amount of the notes
and all accrued and unpaid interest. The Company is in the process of reviewing
these claims, however, in the event that the holders proceed to legal
proceedings, and prevail in such action, it would have a material effect on the
Company’s financial position.





We are
not aware of any other litigation, pending, or threatened at this time. We may
occasionally become subject to legal proceedings and claims that arise in the
ordinary course of our business. It is impossible for us to predict with any
certainty the outcome of pending disputes, and we cannot predict whether any
liability arising from pending claims and litigation will be material in
relation to our consolidated financial postion or results of
operations.





Indemnification
of Officers and Directors





At
present we have not entered into individual indemnity agreements with our
Officers or Directors.  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




None





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 8, 2010, there were 48,696,789 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.




20





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.





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,
2009.  Since that date through January 8, 2010, the closing price per
share has been between $0.45 and $0.22.





High
                        
                        
                        LowFiscal
      2009:Fourth
      quarter
                        
                        $
                        0.49
                        
                        
                        $
                        0.21Third
      quarter
                        
                        
                        0.46
                        
                        
                        
                        0.09Second
      quarter
                        
                        
                        0.35
                        
                        
                        
                        0.10First
      quarter
                        
                        
                        0.75
                        
                        
                        
                        0.12Fiscal
      2008:Fourth
      quarter
                        
                        $
                        1.81
                        
                        
                        $
                        0.52Third
      quarter
                        
                        
                        2.19
                        
                        
                        
                        1.50Second
      quarter
                        
                        
                        2.90
                        
                        
                        
                        1.05First
      quarter
                        
                        
                        1.60
                        
                        
                        
                        1.05





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,
funds legally available, 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





21




Sales
of Unregistered Securities





In
October 2008 the Company issued 1,175,000, restricted common shares with a fair
market value of $822,500 to several independent contractors in connection with
professional service agreements for financial and legal services to be provided
to the Company through various dates through September 2009. In November 2008,
the Company issued 320,191 restricted common shares with a fair market value of
$128,056 in connection with the conversion of Convertible Notes Payable. In
February 2009, the Company issued 12,500 restricted common shares with a fair
market value of $18,750 to an employee in connection with a severance agreement.
In February 2009, Company issued 121,048 restricted common shares at a price of
$0.15 per share to one holder of the Convertible Notes Payable in satisfaction
of accrued interest due in the amount of $18,157. In March 2009, the Company
issued 1,225,000 restricted common shares with a fair market value of $163,000
to several independent contractors in connection with professional service
agreements for financial and legal services to be provided to the Company
through various dates through February 2011. In March 2009, the Company issued
65,400 restricted common shares at a price of $0.25 per share to a vendor in
satisfaction of an invoice due in the amount of $16,350. In April and May 2009,
the Company issued 90,000 restricted common shares with a fair market value of
$16,500 to third parties in satisfaction of claims and this amount was recorded
as a non-cash expense on the date of issuance.





In June
2009 the Company issued 620,000 restricted common shares with a fair market
value of $217,000 to several independent contractors in connection with
professional service agreements for financial and legal services to be provided
to the Company through May 2010. In June 2009, the Company issued 10,000
restricted common shares with a fair market value of $3,500 to a former employee
for consulting services. In June 2009, the Company issued 250,000 restricted
common shares with an assigned value of $164,481 (including $116,093 relating to
the beneficial conversion feature of the notes) in connection with the
issuance of convertible notes with a face of $250,000 due in December 2009. In
June 2009, two independent contractors exercised options previously granted in
April 2009 for the purchase of 1,200,000 and 250,000 shares of common
stock.  As they elected to utilize the cashless exercise feature of
those options, net amounts of 1,042,105 and 217,105 shares of restricted common
stock were issued. In July 2009, the Company issued 195,000 common shares with a
fair market value of $84,550 to three independent contractors for financial and
legal services.  In July 2009, the Company issued 100,000 restricted
common shares with an assigned value of $59,973 (including $41,678 relating to
the beneficial conversion feature of the notes) in connection with the issuance
of convertible notes with an aggregate face value of $100,000 due in January
2010. In July 2009, an officer of the Company exercised options for the purchase
of 1,200,000 shares of common stock.  As he elected to utilize the
cashless exercise feature of those options, the net amount of 1,077,551 shares
of restricted common stock were issued. In August 2009, the Company issued
75,000 common shares with a fair market value of $30,000 to an independent
contractor for financial services. In August 2009, an officer of the Company
exercised options for the purchase of 300,000 shares of common
stock.  As he elected to utilize the cashless exercise feature of
those options, the net amount of 261,539 shares of restricted common stock were
issued.In August 2009, the Company issued 1,200 common shares with a fair market
value of $475 to an independent contractor for consulting services. In August
2009, the Company issued 100,000 restricted common shares with an assigned value
of $32,000 (including $4,383 relating to the beneficial conversion feature of
the note) in connection with the issuance of a convertible note with a face of
$100,000 due in February 2010.




Purchase of Equity Securities by the
Small Business Issuer and Affiliated Purchasers





We did
not repurchase any shares of our common stock during the year ending September
30, 2009.





Item
      6.
            SELECTED
      FINANCIAL INFORMATION





Not
required





Item 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION.





Overview




We
currently do not plan to conduct any business other than the business in which
EIHC and its subsidiaries XIOM and EQUISOL are engaged. We expect to continue to
incur significant research, development and administrative expenses before any
of our current or proposed products are approved for marketing, if ever, and
generate significant revenues.




22





Plan
of Operations:





The
Company's commercial operations were negatively impacted in fiscal year 2009;
the worldwide economic downturn, which adversely affected construction
significantly, was the prime driver in the Company's severe reduction
in sales. The Company’s main market has been sales to the small construction
contractor; the drying up of that market world wide caused our sales to decline
from $2,371,000.00 in fiscal year 2008 to $899,979.96 in fiscal year
2009.




The
Company’s monthly overhead went from $295,000 in fiscal year 2008 to $272,000 in
fiscal year 2009.




The
Company continued to invest in both broadening and improving its product
line.  It now has four significant equipment offerings to
complement its consumable material offerings.  The Company now offers
its Xiom 1000 small roll spraying gun, the Scorpion 5000, the ECono gun, a small
low cost entry level gun for mass discount distribution-to be released in fiscal
year 2010, and the super high speed  wide spray pattern gun- expected
to be released in fiscal year 2010.




The
Company used its scarce resources to invest in product development and to search
for a merger partner with the vision and resources to deploy the Company’s
technology by the addition of capital, management and marketing.  To
that end the Company was merged into Equisol LLC in December of
2009.




In order
to continue operations in fiscal year 2009, the Company had to rely on various
investor loans and equity transactions to remain in operation. The Company was
successful in maintaining its technological capability with the raising of
various amounts of money. The amount raised in fiscal year 2009 was
$450,000.




The
Company renewed its exclusive distribution contract with Orica, a multi billion
dollar Company in Australia. Orica has for the past fiscal year tested and
worked with the Company to tailor the Company’s products for the Asian markets.
Orica awaits the testing of our new wide pattern spray gun in order to start its
Asian campaign in fiscal year 2010. The Company also concluded a contract with
Carlton Pools, a significant national US distributor of swimming pool supplies.
Carlton has developed, in conjunction with the Company, a proprietary line of
pool repair coatings which it is successfully distributing in the United
States.




The
Company’s joint venture in New Bedford is in a “hold” situation due to a lack of
funding. The Company intends to negotiate a plan of action in the near term to
set a viable direction. At the present time it is unclear as to which actions
the Company may be able to pursue in New Bedford.




European
operations remain small, due to a lack of funding, and presently are in a
holding pattern. Revenues in fiscal year 2009 were $37,000.




The
Company continued its efforts to pursue a Phase 2 contract from the US Navy for
its “no flame” gun technology. There is no assurance that the Company’s efforts
will be successful in this endeavor.




The
Company continued to complete and deliver its NYSERDA contract of $325,000 to an
industrial powder coater, the purpose of which is to save energy costs for
traditional powder coaters using the Company’s new technology.




The
Company continued to fund its intellectual property efforts throughout the year.
The Company believes that its proprietary technology has value, and that its
efforts to merge into stronger hands to protect its technological investment
will prove successful.




23




Critical
Accounting Policies




Management’s
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, management evaluates its estimates, including
those related to impairment of long-lived assets, finite lived intangible
assets, accrued liabilities and certain expenses. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ materially
from these estimates under different assumptions or conditions.




Our
significant accounting policies are summarized in Note 1 of our audited
financial statements for the year ended September 30, 2009. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our financial statements:




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.





The
percentage of revenues derived from sales orders and long-term contracts for
fiscal 2009 and 2008 was 93% and 7%, respectively, and 87% and 13%,
respectively. Revenue derived from the sale of spray systems and powders for
fiscal 2009 and 2008 was $731,000 and $171,000, respectively, and $1,803,000 and
$268,000, respectively.





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.




24





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.




Recently
Adopted Accounting Pronouncements




FASB ASC
820-10 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The changes to current practice resulting from
the application of this standard relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. This standard is effective for fiscal years beginning after
November 15, 2007; however, it provides a one-year deferral of the effective
date for non-financial assets and non-financial liabilities, except those that
are recognized or disclosed in the financial statements at fair value at least
annually. The Company adopted this standard for financial assets and financial
liabilities and nonfinancial assets and nonfinancial liabilities disclosed or
recognized at fair value on a recurring basis (at least annually) as of October
1, 2008. The Company adopted the standard for nonfinancial assets and
nonfinancial liabilities on October 1, 2009. The adoption of this standard in
each period did not have a material impact on the Company’s financial
statements.




FASB ASC
810-10 requires all entities to report noncontrolling (minority) interests in
subsidiaries as equity in the consolidated financial statements. The standard
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that does not result in deconsolidation and expands
disclosures in the consolidated financial statements. This standard is effective
for fiscal years beginning after December 15, 2008 and interim periods within
those fiscal years.  This standard is not currently applicable to the
Company because the Company does not have any non-controlling minority
interests.




FASB ASC
815-10 is effective January 1, 2009. This standard requires enhanced disclosures
about derivative instruments and hedging activities to allow for a better
understanding of their effects on an entity’s financial position, financial
performance, and cash flows. Among other things, this standard requires
disclosures of the fair values of derivative instruments and associated gains
and losses in a tabular formant. This standard is not currently applicable to
the Company since the Company does not have derivative instruments or hedging
activity.




FASB ASC
825-10 requires disclosures about the fair value of financial instruments for
interim reporting periods. This standard is effective for interim reporting
periods ending after June 15, 2009. The adoption of this standard did not have a
material impact on the Company’s financial statements.




FASB ASC
820-10 provides additional guidance for Fair Value Measurements when the volume
and level of activity for the asset or liability has significantly decreased.
This standard is effective for interim and annual reporting periods ending after
June 15, 2009. The adoption of this standard did not have a material effect
on the Company’s financial
statements.




FASB ASC
320-10 amends the other-than-temporary impairment guidance for debt and equity
securities. This standard is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of this standard did not have a
material effect on the Company’s financial
statements.




25




FASB ASC
855-10 is effective for interim or annual financial periods ending after June
15, 2009 and establishes general standards of accounting and disclosure of
events that occur after the balance sheet but before financial statements are
issued or are available to be issued. However, since the Company is a public
entity, management is required to evaluate subsequent events through the date
that financial statements are issued and disclose the date through which
subsequent events have been evaluated, as well as the date the financial
statements were issued. This standard was adopted for its interim period ending
June 30, 2009. Subsequent events have been evaluated through November 16, 2009
the date the financial statements were issued.




In June
2009, the FASB issued Accounting Standards Update No. 2009-01, The FASB
Accounting Standards Codification, which establishes the Codification as the
source of authoritative GAAP recognized by the FASB to be applied by
nongovernmental entities. This standard is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The
adoption of this standard is not expected to have an effect on the Company’s
financial reporting.




As of
September 30, 2009, the FASB has issued Accounting Standards Updates (ASU)
through No. 2009-12. None of the ASUs have had an impact on the Company’s
financial statements.




Recently
Issued Accounting Pronouncements Not Yet Adopted




FASB ASC
805 establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. This standard also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. This standard was adopted by the Company beginning October 1, 2009
and will change the accounting for business combinations on a prospective
basis.




FASB ASC
350-30 and 275-10 amend the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset. This standard is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited. The Company is
currently evaluating the effect of this statement on its financial position and
results of operations.




FASB ASC
260-10 provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
earnings per share pursuant to the two-class method. This standard is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. The Company does not
currently have any share-based awards that would qualify as participating
securities. Therefore, application of this standard is not expected to have an
effect on the Company's financial reporting.




FASB ASC
470-20 will be effective for financial statements issued for fiscal years
beginning after December 15, 2008. The standard includes guidance that
convertible debt instruments that may be settled in cash upon conversion should
be separated between the liability and equity components, with each component
being accounted for in a manner that will reflect the entity's nonconvertible
debt borrowing rate when interest costs are recognized in subsequent periods.
This standard is currently not applicable to the Company since the Company does
not have any convertible debt that may be settled for cash upon
conversion.




FASB ASC
815-10 and 815-40 are effective for financial statements for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years. The standard addresses the determination of whether an instrument (or an
embedded feature) is indexed to an entity’s own stock, which is the first part
of the scope exception for the purpose of determining whether the instrument is
classified as an equity instrument or accounted for as a derivative instrument
which would be recognized either as an asset or liability and measured at fair
value. The standard shall be applied to outstanding instruments as of the
beginning of the fiscal year in which this standard is initially applied. Any
debt discount that was recognized when the conversion option was initially
bifurcated from the convertible debt instrument shall continue to be amortized.
The cumulative effect of the change in accounting principles shall be recognized
as an adjustment to the opening balance of retained earnings. The Company
adopted this standard as of January 1, 2009, and was not required to reclassify
any of its warrants as liabilities.




26





Results
of Operations:





For
the Fiscal Years Ended September 30, 2009 Versus September 30, 2008




For the
fiscal year ended September 30, 2009, the Company had $902,000 in sales and cost
of sales of $593,000. This is in comparison to total sales of $2,371,000 and
cost of sales of $1,483,000 for fiscal year ended September 30, 2008. Gross
profit for fiscal 2009 was $309,000 or 34%, a decrease of $579,000 compared to
the gross profit in fiscal 2008 of $888,000 or 37%.  This decrease in
sales and gross profit in fiscal 2009 results primarily from general economic
conditions and the Company's limited ability to generate sales due to working
capital constraints.





Operating
expenses increased from $3,545,000 in fiscal 2008 to $3,726,000 in fiscal
2009.  Reductions in engineering expenses as well as cost containment
measures in the areas of marketing and general overhead lowered selling,
general, and administrative expenses by $101,000, or 3%.  Offsetting
those decreases was a $458,000 charge for impairment of certain intangible
assets, including technology acquired in 2004 and 2007 for which the carrying
value was determined to be non-recoverable.





Other
expense increased from $327,000 in fiscal 2008 to $815,000 in fiscal
2009.  This increase of $488,000 or 149% was primarily due to the
increase of $519,000 in interest expense.  This increase in interest
expense is directly related to the Company's increased use of debt for financing
purposes in fiscal 2009 coupled with increased interest rates and the
acceleration of amortization of debt discount.





Net loss
increased from $2,985,000 in fiscal 2008 to $4,232,000 in fiscal 2009. This
increase of $1,247,000 or 42% was attributable to the reduction of gross profits
and increases in other expenses offset by a decrease in general and
administrative expenses as 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.





Liquidity,
Capital Resources and Operations:





Our
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.





During
the fiscal years ended September 30, 2009 and 2008, net cash used by operating
activities was $583,000 and $1,119,000, respectively. The Company incurred net
losses of $4,232,000 and $2,985,000 for the fiscal years ended September 30,
2009 and 2008, respectively. Additionally, at September 30, 2009, the Company
had a Stockholders’ Deficit of $2,043,000.





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 2010 while maintaining reasonable levels of general and
administrative expenses as the company grows.




27





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
$670,000. 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.





In
connection with the acquisition of Equisol, LLC, the Company raised $705,000 in
a private placement. These funds were used for working capital
purposes.





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.





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.


28




Item
8.FINANCIAL
STATEMENTS





Index To
Financial Statements





Report
      of Independent Registered Public Accounting Firm
                                F-2Consolidated
      Balance Sheets as of September 30, 2009 and 2008
                                F-3Consolidated
      Statements of Operations for the years ended
                                  September
      30, 2009 and 2008
                                F-4Consolidated
      Statements of Changes in Stockholders’ Equity
                                  (Deficit)
      for the years ended September 30, 2009 and 2008
                                F-5Consolidated
      Statements of Cash Flows for the years ended
                                  September
      30, 2009 and 2008
                                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 Environmental Infrastructure Holdings
Corp.:





I have
audited the accompanying consolidated balance sheets of Environmental
Infrastructure Holdings Corp. (formerly XIOM Corp.) (the Company) as of
September 30, 2009 and 2008 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 Environmental Infrastructure
Holdings Corp. (formerly XIOM Corp.) as of September 30, 2009 and 2008 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 16 to the consolidated financial statements, the Company has
incurred losses for the years ended September 30, 2009 and 2008 and has a
deficiency in stockholders’ equity at September 30, 2009. 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 16. 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, 2010


F-2


Environmental
Infrastructure Holdings Corp.
 Consolidated
Balance Sheets
 As of
September 30, 2009 and 2008
  2009
                                          
                                          
                                          2008AssetsCurrent
      assets:Cash
      and cash equivalents
                                          
                                          $
                                          121,890
                                          
                                          
                                          $
                                          289,857Accounts
      receivable, net of allowance for doubtfulaccounts
      of $72,000 and $30,000, respectively
                                          
                                          
                                          62,402
                                          
                                          
                                          
                                          158,232Inventory
                                          
                                          
                                          188,942
                                          
                                          
                                          
                                          307,107Loans
      receivable
                                          
                                          
                                          112,625
                                          
                                          
                                          
                                          170,325Prepaid
      expenses
                                          
                                          
                                          104,390
                                          
                                          
                                          
                                          16,816Other
      current assets
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Total
      current assets
                                          
                                          
                                          590,249
                                          
                                          
                                          
                                          942,337Fixed
      assets, net of accumulated depreciation
                                          
                                          
                                          173,485
                                          
                                          
                                          
                                          215,343Other
      assets:Intangible
      assets, net of accumulated amortization andvaluation
      reserve
                                          
                                          
                                          -
                                          
                                          
                                          
                                          433,040Retainage
      receivable
                                          
                                          
                                          51,851
                                          
                                          
                                          
                                          47,288Security
      deposits
                                          
                                          
                                          11,445
                                          
                                          
                                          
                                          11,445Total
      other assets
                                          
                                          
                                          63,296
                                          
                                          
                                          
                                          491,773Total
      assets
                                          
                                          $
                                          827,030
                                          
                                          
                                          $
                                          1,649,453Liabilities and
      Stockholders' Equity (Deficit)Current
      liabilities:Accounts
      payable and accrued expenses
                                          
                                          $
                                          1,095,351
                                          
                                          
                                          $
                                          656,903Convertible
      notes payable with face values totaling $1,890,000net
      of unamortized discounts
                                          
                                          
                                          1,726,080
                                          
                                          
                                          
                                          -Other
      current liabilities
                                          
                                          
                                          17,104
                                          
                                          
                                          
                                          12,702Total
      current liabilities
                                          
                                          
                                          2,838,535
                                          
                                          
                                          
                                          669,605Long-term
      liabilities:Convertible
      notes payable with face values totaling $1,672,000,net
      of unamortized discounts
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,090,888Other
      long-term liabilities
                                          
                                          
                                          31,311
                                          
                                          
                                          
                                          15,437Total
      liabilities
                                          
                                          
                                          2,869,846
                                          
                                          
                                          
                                          1,775,930Common
      stock subject to rescission rights
                                          
                                          
                                          -
                                          
                                          
                                          
                                          670,399Stockholders'
      equity (deficit):Common
      stock, $.0001 par value, 50,000,000 authorizedshares,
      18,722,357 and 10,425,000 shares issued andoutstanding
      at September 30, 2009 and 2008, respectively,(excluding
      563,718 shares subject to rescission rightsas
      of September 30, 2008)
                                          
                                          
                                          1,876
                                          
                                          
                                          
                                          1,043Additional
      paid-in capital
                                          
                                          
                                          9,583,683
                                          
                                          
                                          
                                          6,598,723Retained
      earnings (deficit)
                                          
                                          
                                          (11,628,375
                                          )
                                          
                                          
                                          (7,396,642
                                          )Total
      stockholders' equity (deficit)
                                          
                                          
                                          (2,042,816
                                          )
                                          
                                          
                                          (796,876
                                          )Total
      liabilities and stockholders' equity (deficit)
                                          
                                          $
                                          827,030
                                          
                                          
                                          $
                                          1,649,453
  See
accompanying notes to consolidated financial statements
  F-3
  Environmental
Infrastructure Holdings Corp.
 Consolidated
Statements of Operations
 For the
Years Ended September 30, 2009 and 2008
  2009
                    
                    
                    2008Sales
                    
                    $
                    901,854
                    
                    
                    $
                    2,370,933Cost
      of sales
                    
                    
                    592,820
                    
                    
                    
                    1,483,288Gross
      Profit
                    
                    
                    309,034
                    
                    
                    
                    887,645Selling,
      general and administrative expenses
                    
                    
                    3,267,433
                    
                    
                    
                    3,368,475Impairment
      of intangible assets
                    
                    
                    458,404
                    
                    
                    
                    176,352Operating
      income (loss)
                    
                    
                    (3,416,803
                    )
                    
                    
                    (2,657,182
                    )Other
      income (expense):Gain
      on conversion of debt
                    
                    
                    30,942
                    
                    
                    
                    -Interest
      expense
                    
                    
                    (845,872
                    )
                    
                    
                    (327,446
                    )Total
      other income (expense)
                    
                    
                    (814,930
                    )
                    
                    
                    (327,446
                    )Net
      income (loss)
                    
                    $
                    (4,231,733
                    )
                    
                    $
                    (2,984,628
                    )Basic
      and diluted income (loss) per share
                    
                    $
                    (0.29
                    )
                    
                    $
                    (0.31
                    )Weighted
      average number of sharesoutstanding,
      basic and diluted
                    
                    
                    14,830,442
                    
                    
                    
                    9,486,008
  See
accompanying notes to consolidated financial statements
  F-4
  Environmental
Infrastructure Holdings Corp.
 Consolidated
Statements of Stockholders' Equity (Deficit)
 For the
Years Ended September 30, 2009 and 2008
  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
                  )Options
      granted in October 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  123,917
                  
                  
                  
                  -
                  
                  
                  
                  123,917Shares
      issued for services during the quarter endedDecember
      31, 2007
                  
                  
                  250,000
                  
                  
                  
                  25
                  
                  
                  
                  299,975
                  
                  
                  
                  -
                  
                  
                  
                  300,000Shares
      issued for accrued expenses
                  
                  
                  48,000
                  
                  
                  
                  5
                  
                  
                  
                  71,995
                  
                  
                  
                  -
                  
                  
                  
                  72,000Options
      exercised against accrued compensation andaccrued
      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 endedMarch
      31, 2008
                  
                  
                  433,000
                  
                  
                  
                  43
                  
                  
                  
                  431,707
                  
                  
                  
                  -
                  
                  
                  
                  431,750Shares
      issued for accrued expenses
                  
                  
                  5,000
                  
                  
                  
                  1
                  
                  
                  
                  7,499
                  
                  
                  
                  -
                  
                  
                  
                  7,500Options
      granted 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 convertiblenotes
                  
                  
                  44,185
                  
                  
                  
                  4
                  
                  
                  
                  48,600
                  
                  
                  
                  -
                  
                  
                  
                  48,604Shares
      issued for services during the quarter endedJune
      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 convertiblenotes
                  
                  
                  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 andaccrued
      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
                  )
    F-5
  Environmental
Infrastructure Holdings Corp.
 Consolidated
Statements of Stockholders' Equity (Deficit)
 For the
Years Ended September 30, 2009 and 2008
 (Continued)
 Common
      Stock
                  
                  
                  Additional
                  
                  
                  Retained
                  
                  
                  TotalNumber
      of
                  
                  
                  Par
                  
                  
                  Paid-In
                  
                  
                  Earnings
                  
                  
                  Shareholders'Shares
                  
                  
                  Value
                  
                  
                  Capital
                  
                  
                  (Deficit)
                  
                  
                  Equity
      (Deficit)Balance,
      September 30, 2008
                  
                  
                  10,425,000
                  
                  
                  $
                  1,043
                  
                  
                  $
                  6,598,723
                  
                  
                  $
                  (7,396,642
                  )
                  
                  $
                  (796,876
                  )Issuance
      of shares in connection withprofessional
      service agreements
                  
                  
                  3,290,000
                  
                  
                  
                  330
                  
                  
                  
                  1,316,719
                  
                  
                  
                  -
                  
                  
                  
                  1,317,049Adjustment
      to shares issued in connection withprofessional
      service agreements
                  
                  
                  (600,000
                  )
                  
                  
                  (60
                  )
                  
                  
                  (266,608
                  )
                  
                  
                  
                  
                  
                  
                  (266,668
                  )Issuance
      of shares in connection withcashless
      exercise of stock options
                  
                  
                  2,598,300
                  
                  
                  
                  259
                  
                  
                  
                  (259
                  )
                  
                  
                  -
                  
                  
                  
                  0Issuance
      of shares under Employee StockOwnership
      Plan for past performance
                  
                  
                  308,333
                  
                  
                  
                  31
                  
                  
                  
                  135,636
                  
                  
                  
                  -
                  
                  
                  
                  135,667Issuance
      of shares in connection withconversion
      of notes maturing in 2012
                  
                  
                  320,191
                  
                  
                  
                  32
                  
                  
                  
                  128,044
                  
                  
                  
                  -
                  
                  
                  
                  128,076Issuance
      of shares and beneficial conversion feature inconnection
      with issuance of convertible notes
                  
                  
                  450,000
                  
                  
                  
                  48
                  
                  
                  
                  244,796
                  
                  
                  
                  -
                  
                  
                  
                  244,844Issuance
      of shares in connection withseverance
      agreement
                  
                  
                  12,500
                  
                  
                  
                  1
                  
                  
                  
                  18,749
                  
                  
                  
                  -
                  
                  
                  
                  18,750Issuance
      of shares in connection withconsulting
      agreements
                  
                  
                  11,200
                  
                  
                  
                  1
                  
                  
                  
                  3,974
                  
                  
                  
                  -
                  
                  
                  
                  3,975Issuance
      of shares in connection withpayment
      of accrued interest
                  
                  
                  121,048
                  
                  
                  
                  12
                  
                  
                  
                  18,145
                  
                  
                  
                  -
                  
                  
                  
                  18,157Issuance
      of shares under Employee StockOwnership
      Plan in lieu of salaries
                  
                  
                  1,066,667
                  
                  
                  
                  107
                  
                  
                  
                  279,077
                  
                  
                  
                  -
                  
                  
                  
                  279,184Issuance
      of shares in connection withsettlement
      of claims by third parties
                  
                  
                  90,000
                  
                  
                  
                  9
                  
                  
                  
                  16,491
                  
                  
                  
                  -
                  
                  
                  
                  16,500Issuance
      of shares in connection withpayment
      of amount due to vendor
                  
                  
                  65,400
                  
                  
                  
                  7
                  
                  
                  
                  16,343
                  
                  
                  
                  -
                  
                  
                  
                  16,350Issuance
      of options to employees andindependent
      contractors
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  382,350
                  
                  
                  
                  -
                  
                  
                  
                  382,350Amendment
      to existing option agreements
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  21,160
                  
                  
                  
                  -
                  
                  
                  
                  21,160Reclassification
      of common stock formerlysubject
      to recission rights
                  
                  
                  563,718
                  
                  
                  
                  56
                  
                  
                  
                  670,343
                  
                  
                  
                  -
                  
                  
                  
                  670,399Net
      loss for the year ended September 30, 2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,231,733
                  )
                  
                  
                  (4,231,733
                  )Balance,
      September 30, 2009
                  
                  
                  18,722,357
                  
                  
                  $
                  1,876
                  
                  
                  $
                  9,583,683
                  
                  
                  $
                  (11,628,375
                  )
                  
                  $
                  (2,042,816
                  )
   F-6
  Environmental
Infrastructure Holdings Corp.
 Consolidated
Statements of Cash Flow
 For The
Years Ended September 30, 2009 and 2008
  2009
                                
                                
                                2008Cash
      flows from operating activities:Net
      income (loss)
                                
                                $
                                (4,231,733
                                )
                                
                                $
                                (2,984,628
                                )Adjustments
      to reconcile net income (loss) tonet
      cash used in operating activities:Provision
      for bad debts
                                
                                
                                42,000
                                
                                
                                
                                30,000Depreciation
      and amortization
                                
                                
                                71,550
                                
                                
                                
                                67,597Amortization
      of prepaid expenses originally establishedthrough
      the issuance of common shares
                                
                                
                                1,157,431
                                
                                
                                
                                -Value
      of common shares issued to employees and independent
      contractors
                                
                                
                                115,026
                                
                                
                                
                                992,000Value
      of stock options issued to employees and independent
      contractors
                                
                                
                                339,150
                                
                                
                                
                                349,997Value
      of stock option amendment
                                
                                
                                21,160
                                
                                
                                
                                -Issuance
      of common stock under the Employee Stock Ownership Plan
                                
                                
                                135,519
                                
                                
                                
                                -Issuance
      of common stock as severance payment
                                
                                
                                18,750
                                
                                
                                
                                -Issuance
      of common stock for services and contractual arrangements
                                
                                
                                20,000
                                
                                
                                
                                -Issuance
      of common stock for payment of accrued interest
                                
                                
                                -
                                
                                
                                
                                39,263Gain
      upon conversion of debt into common stock
                                
                                
                                (30,942
                                )
                                
                                
                                -Amortization
      of convertible note discounts
                                
                                
                                578,973
                                
                                
                                
                                206,573Write-off
      of notes receivable
                                
                                
                                67,200
                                
                                
                                
                                -Provision
      for impairment of intangible assets
                                
                                
                                458,404
                                
                                
                                
                                -Loss
      on investment in wholly-owned subsidiary
                                
                                
                                -
                                
                                
                                
                                176,352Issuance
      of common stock for sales commission
                                
                                
                                -
                                
                                
                                
                                14,702Issuance
      of common stock to buy-out distributor agreements
                                
                                
                                -
                                
                                
                                
                                51,000Changes
      in operating assets and liabilities:Accounts
      receivable
                                
                                
                                53,830
                                
                                
                                
                                (42,378
                                )Inventory
                                
                                
                                118,165
                                
                                
                                
                                (132,873
                                )Prepaid
      expenses
                                
                                
                                13,357
                                
                                
                                
                                2,506Other
      current assets
                                
                                
                                (9,500
                                )
                                
                                
                                (3,040
                                )Retainage
      receivable
                                
                                
                                (4,563
                                )
                                
                                
                                (23,583
                                )Security
      deposits
                                
                                
                                -
                                
                                
                                
                                (4,630
                                )Accounts
      payable and accrued expenses
                                
                                
                                483,036
                                
                                
                                
                                142,111Total
      adjustments
                                
                                
                                3,648,546
                                
                                
                                
                                1,865,597Net
      cash provided (used) in operating activities
                                
                                
                                (583,187
                                )
                                
                                
                                (1,119,031
                                )Cash
      flows from investing activities:Additions
      to intangibles
                                
                                
                                (55,056
                                )
                                
                                
                                (114,507
                                )Purchase
      of fixed assets
                                
                                
                                -
                                
                                
                                
                                (54,423
                                )Investment
      in wholly-owned subsidiary
                                
                                
                                -
                                
                                
                                
                                (43,852
                                )Increase
      in loan receivable
                                
                                
                                -
                                
                                
                                
                                (111,625
                                )Net
      cash provided (used) by investing activities
                                
                                
                                (55,056
                                )
                                
                                
                                (324,407
                                )Cash
      flows from financing activities:Proceeds
      from convertible notes
                                
                                
                                450,000
                                
                                
                                
                                460,000Proceeds
      from sale of restricted common stock
                                
                                
                                -
                                
                                
                                
                                419,000Proceeds
      from officers' convertible notes
                                
                                
                                -
                                
                                
                                
                                545,206Proceeds
      from exercise of stock warrants
                                
                                
                                -
                                
                                
                                
                                29,150Other
                                
                                
                                20,276
                                
                                
                                
                                (32,779
                                )Net
      cash provided (used) by financing activities
                                
                                
                                470,276
                                
                                
                                
                                1,420,577Net
      increase (decrease) in cash and cash equivalents
                                
                                
                                (167,967
                                )
                                
                                
                                (22,861
                                )Cash
      & cash equivalents, beginning of period
                                
                                
                                289,857
                                
                                
                                
                                312,718Cash
      & cash equivalents, end of period
                                
                                $
                                121,890
                                
                                
                                $
                                289,857Supplemental
      disclosuresNon-cash
      financing and investing activities:Issuance
      of shares for services
                                
                                $
                                1,504,457
                                
                                
                                $
                                992,000Issuance
      of shares upon conversion of convertible notes
                                
                                $
                                128,076
                                
                                
                                $
                                310,000Issuance
      of shares for equity investments
                                
                                
                                -
                                
                                
                                $
                                132,500Issuance
      of shares for accrued expenses
                                
                                
                                -
                                
                                
                                $
                                115,000Issuance
      of shares for accrued Interest
                                
                                
                                -
                                
                                
                                $
                                59,086Issuance
      of shares to buy-out distributor agreements
                                
                                
                                -
                                
                                
                                $
                                51,000Issuance
      of common stock under Employee Stock Ownership Plan
                                
                                $
                                135,667
                                
                                
                                
                                -Value
      of stock option grants
                                
                                $
                                279,150
                                
                                
                                $
                                349,997Value
      of stock option amendment
                                
                                $
                                21,160
                                
                                
                                
                                -Options
      exercised in exchange for Accrued Compensation,Shareholder
      Lien and Accrued Professional Fees
                                
                                $
                                -
                                
                                
                                $
                                154,000Issuance
      of shares upon conversion of Officers' Notes
                                
                                $
                                -
                                
                                
                                $
                                547,338Issuance
      of shares for Sales Commissions
                                
                                $
                                -
                                
                                
                                $
                                14,702Interest
      and Taxes Paid:Interest
      Expense
                                
                                
                                -
                                
                                
                                $
                                43,749Income
      Taxes
                                
                                
                                -
                                
                                
                                
                                -
    F-7




ENVIRONMENTAL
INFRASTRUCTURE HOLDINGS CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For The
Years Ended September 30, 2009 and 2008





1)        
   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





ENTITY
AND ORGANIZATION





Environmental
Infrastructure Holdings Corp. (“EIHC” 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 EIHC (then named XIOM Corp.). In June
2001, EIHC was spun out from Thermaltec upon which the shareholders of
Thermaltec received one common share of EIHC for every three common shares of
Thermaltec. Through fiscal 2007, EIHC has continually developed and refined its
patented industrial based thermal spray coating technology which is sold
directly to commercial customers and coating contractors. In December 2009, the
Company reorganized its operations into a holding company structure whereby the
operating company XIOM Corp. became a direct wholly owned subsidiary of the
Company and the Company changed its name to Environmental Infrastructure
Holdings Corp. At the same time, the Company acquired Equisol, LLC, an equipment
solutions provider, delivering environmentally friendly products, services and
engineering solutions to its customers.





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.





The
percentage of revenues derived from sales orders and long-term contracts for
fiscal 2009 and 2008 was 93% and 7%, respectively, and 87% and 13%,
respectively.





Revenue
derived from the sale of spray systems and powders for fiscal 2009 and 2008 was
$731,000 and $171,000, respectively, and $1,803,000 and $268,000,
respectively.


F-8





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 computes earnings per share in accordance with FASB ASC 260-10, 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.





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 accounts for income taxes in accordance with FASB ASC
740-10.





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, 2009 and 2008, all
foreign sales were transacted in U.S. dollars.


F-9


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.





RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS





Recently
Adopted Accounting Pronouncements




FASB ASC
820-10 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The changes to current practice resulting from
the application of this standard relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. This standard is effective for fiscal years beginning after
November 15, 2007; however, it provides a one-year deferral of the effective
date for non-financial assets and non-financial liabilities, except those that
are recognized or disclosed in the financial statements at fair value at least
annually. The Company adopted this standard for financial assets and financial
liabilities and nonfinancial assets and nonfinancial liabilities disclosed or
recognized at fair value on a recurring basis (at least annually) as of October
1, 2008. The Company adopted the standard for nonfinancial assets and
nonfinancial liabilities on October 1, 2009. The adoption of this standard in
each period did not have a material impact on its financial
statements.




FASB ASC
810-10 requires all entities to report noncontrolling (minority) interests in
subsidiaries as equity in the consolidated financial statements. The standard
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that does not result in deconsolidation and expands
disclosures in the consolidated financial statements. This standard is effective
for fiscal years beginning after December 15, 2008 and interim periods within
those fiscal years.  This standard is not currently applicable to the
Company because the Company does not have any non-controlling minority
interests.




FASB ASC
815-10 is effective January 1, 2009. This standard requires enhanced disclosures
about derivative instruments and hedging activities to allow for a better
understanding of their effects on an entity’s financial position, financial
performance, and cash flows. Among other things, this standard requires
disclosures of the fair values of derivative instruments and associated gains
and losses in a tabular formant. This standard is not currently applicable to
the Company since the Company does not have derivative instruments or hedging
activity.




FASB ASC
825-10 requires disclosures about the fair value of financial instruments for
interim reporting periods. This standard is effective for interim reporting
periods ending after June 15, 2009. The adoption of this standard did not have a
material impact on the Company’s financial statements.


F-10


FASB ASC
820-10 provides additional guidance for Fair Value Measurements when the volume
and level of activity for the asset or liability has significantly decreased.
This standard is effective for interim and annual reporting periods ending after
June 15, 2009. The adoption of this standard did not have a material effect on
its financial statements.




FASB ASC
320-10 amends the other-than-temporary impairment guidance for debt and equity
securities. This standard is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of this standard did not have a
material effect on its financial statements.




FASB ASC
855-10 is effective for interim or annual financial periods ending after June
15, 2009 and establishes general standards of accounting and disclosure of
events that occur after the balance sheet but before financial statements are
issued or are available to be issued. However, since the Company is a public
entity, management is required to evaluate subsequent events through the date
that financial statements are issued and disclose the date through which
subsequent events have been evaluated, as well as the date the financial
statements were issued. This standard was adopted for its interim period ending
June 30, 2009. Subsequent events have been evaluated through November 16, 2009
the date the financial statements were issued.




In June
2009, the FASB issued Accounting Standards Update No. 2009-01, The FASB
Accounting Standards Codification, which establishes the Codification as the
source of authoritative GAAP recognized by the FASB to be applied by
nongovernmental entities. This standard is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The
adoption of this standard is not expected to have an effect on the Company’s
financial reporting.




As of
September 30, 2009, the FASB has issued Accounting Standards Updates (ASU)
through No. 2009-12. None of the ASUs have had an impact on the Company’s
financial statements.




Recently
Issued Accounting Pronouncements Not Yet Adopted




FASB ASC
805 establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. This standard also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. This standard was adopted by the Company beginning October 1, 2009
and will change the accounting for business combinations on a prospective
basis.




FASB ASC
350-30 and 275-10 amend the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset. This standard is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited. The Company is
currently evaluating the effect of this statement on its financial position and
results of operations.




FASB ASC
260-10 provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
earnings per share pursuant to the two-class method. This standard is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. The Company does not
currently have any share-based awards that would qualify as participating
securities. Therefore, application of this standard is not expected to have an
effect on the Company's financial reporting.




FASB ASC
470-20 will be effective for financial statements issued for fiscal years
beginning after December 15, 2008. The standard includes guidance that
convertible debt instruments that may be settled in cash upon conversion should
be separated between the liability and equity components, with each component
being accounted for in a manner that will reflect the entity's nonconvertible
debt borrowing rate when interest costs are recognized in subsequent periods.
This standard is currently not applicable to the Company since the Company does
not have any convertible debt that may be settled for cash upon
conversion.


F-11


FASB ASC
815-10 and 815-40 are effective for financial statements for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years. The standard addresses the determination of whether an instrument (or an
embedded feature) is indexed to an entity’s own stock, which is the first part
of the scope exception for the purpose of determining whether the instrument is
classified as an equity instrument or accounted for as a derivative instrument
which would be recognized either as an asset or liability and measured at fair
value. The standard shall be applied to outstanding instruments as of the
beginning of the fiscal year in which this standard is initially applied. Any
debt discount that was recognized when the conversion option was initially
bifurcated from the convertible debt instrument shall continue to be amortized.
The cumulative effect of the change in accounting principles shall be recognized
as an adjustment to the opening balance of retained earnings. The Company
adopted this standard as of January 1, 2009, and was not required to reclassify
any of its warrants as liabilities.




2)
                INVENTORY




Inventory
consisted of the following as of September 30, 2009 and 2008:





2009
                  
                  
                  2008Parts
      and Supplies
                  
                  $
                  102,062
                  
                  
                  $
                  163,922Coating
      Powders
                  
                  
                  66,864
                  
                  
                  
                  99,415Finished
      Goods
                  
                  
                  20,016
                  
                  
                  
                  43,770Total
      Inventory
                  
                  $
                  188,942
                  
                  
                  $
                  307,107





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, 2009, there were approximately five months inventory of Part and
Supplies necessary to build the spray system and approximately nine months
inventory of unblended Coating Powders based on sales for fiscal
2009.





3)
                FIXED
      ASSETS




Fixed
assets consisted of the following as of September 30, 2009 and
2008:





Estimated usefulLife – years
                      
                      
                      2009
                      
                      
                      2008Machinery
      and equipment
                      
                      
                      5-10
                      
                      
                      $
                      116,497
                      
                      
                      $
                      116,497Vehicles
                      
                      
                      3-5
                      
                      
                      
                      28,411
                      
                      
                      
                      28,411Office
      Equipment
                      
                      
                      3-5
                      
                      
                      
                      24,642
                      
                      
                      
                      24,642Furniture
      and Fixtures
                      
                      
                      5-7
                      
                      
                      
                      12,430
                      
                      
                      
                      12,430Computer
      Software
                      
                      
                      5-7
                      
                      
                      
                      27,861
                      
                      
                      
                      27,861Leasehold
      improvements
                      
                      
                      5-31
                      
                      
                      
                      112,455
                      
                      
                      
                      112,455322,296
                      
                      
                      
                      322,296Less
      accumulated depreciation and amortization
                      
                      
                      
                      
                      
                      
                      (148,811
                      )
                      
                      
                      (106,953
                      )Net
      property and equipment
                      
                      
                      
                      
                      
                      $
                      173,485
                      
                      
                      $
                      215,343





Fixed
asset depreciation for the years ended September 30, 2009 and 2008 was $41,858
and $42,777, respectively.


F-12


4)
                INTANGIBLE
      ASSETS




Intangible
assets consisted of the following as of September 30, 2009 and
2008:





2009
                    
                    
                    2008Patents
      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
                    
                    
                    349,665
                    
                    
                    
                    294,339Technology
      related to the high temperature, high speed thermal spray technology
      acquired from an officer in February 2007
                    
                    
                    75,000
                    
                    
                    
                    75,000Total
      acquisition cost
                    
                    
                    547,165
                    
                    
                    
                    491,839Less:
      Accumulated amortization
                    
                    
                    (88,761
                    )
                    
                    
                    (58,799
                    )Less:
      Impairment reserve
                    
                    
                    (458,404
                    )
                    
                    
                    -Intangible
      Assets, Net
                    
                    $
                    -0-
                    
                    
                    $
                    433,040





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





Amortization
expense for the years ended September 30, 2009 and 2008 was $29,962 and $24,875,
respectively.





During
fiscal 2009 and 2008, 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 $55,326 and $114,507 in fiscal 2009 and 2008,
respectively.





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.





As of
September 30, 2009, management performed a review of the recoverability of the
intangible assets and determined that they were permanently impaired in light of
the Company's lack of ability to commercialize such
technology.  Consequently, the Company recorded a provision for
$458,404 representing 100% of the carrying value of such assets as of that
date.





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, the Company 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 the Company. 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.


F-13


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)
                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 2009 and 2008. During fiscal 2008,
$120,000 of accrued compensation was used by the two operating officers as
consideration for the exercise of certain non-qualified stock options (See Note
13).




8)
                CONVERTIBLE
      NOTES PAYABLE





Convertible
notes payable as of September 30, 2009 and 2008 consisted of the
following:





2009
                      
                      
                      2008Convertible
      notes due December 2009 through February 2010 with face values totaling
      $450,000 net of unamortized discounts totaling $119,013 as
      of  September 30, 2009
                      
                      $
                      330,987
                      
                      
                      
                      -Convertible
      note due March 2010 with a face value of $500,000 net of unamortized
      discount of $44,907 and $145,959 as of September 30, 2009 and 2008,
      respectively
                      
                      
                      455,093
                      
                      
                      $
                      354,041Convertible
      notes due April 2012 with face values totaling $940,000 and $1,172,000 net
      of unamortized discounts totaling $0 and $375,153 as of September 30, 2009
      and 2008, respectively
                      
                      
                      940,000
                      
                      
                      
                      736,847Total
                      
                      $
                      1,726,080
                      
                      
                      $
                      1,090,888





Based
upon the maturity dates of these notes and the circumstances related to the
convertible notes due April 2012 as described below, the convertible notes have
been classified between current and long term liabilities as of September 30,
2009 and 2008 as follows:




2009
                  
                  
                  2008Current
      liabilities
                  
                  $
                  1,726,080
                  
                  
                  
                  -Long
      term liabilities
                  
                  
                  -
                  
                  
                  $
                  1,090,888Total
                  
                  $
                  1,726,080
                  
                  
                  $
                  1,090,888





Details
concerning the convertible notes are as follows:





a)
            Convertible
      Notes Due December 2009 through February
2010





From June
2009 through August 2009, the Company raised $450,000 through the issuance of a
series of Convertible Notes (the “Notes”). Under the terms of the Notes, the
Company issued to the holders of such Notes 450,000 shares of restricted common
stock with a value of $82,689. The Notes, which mature from December 2009
through February 2010, include interest at 100% per annum and are convertible at
the option of the holder at any time into common shares of the Company at a
price equal to 75% of the thirty day moving average of the closing price of the
Company's stock immediately prior to such conversion. Unless converted at an
earlier date, the Notes will mature six months after issuance.





The
issuance of the Notes was accounted for as follows:


F-14





Face
      value of Notes
                  
                  $
                  450,000Value
      attributable to:Common
      shares issued
                  
                  
                  (82,689
                  )Beneficial
      conversion feature
                  
                  
                  (162,154
                  )Value
      attributable to convertible notes
                  
                  $
                  205,157





The
Company computed the value of the 450,000 shares of restricted common stock
issued by adjusting the closing price of the Company's common stock on the day
of issuance of each individual Note discounted by 40% to reflect the
restrictions associated with those securities. The resulting aggregate value of
$82,689 was recorded as a discount against the Notes with a corresponding
increase to common stock and additional paid-in
capital.  Additionally, the Company considered the estimated
conversion price of the Notes and the market value of the common shares that
would be issued, and found that there were beneficial conversion features which
aggregated $162,154.  Consequently, the Notes were further discounted
by that amount with a corresponding increase to common stock and additional
paid-in capital.





The debt
discount attributable to the common shares and the beneficial conversion feature
is being amortized as interest expense ratably over the expected six month
maturity period of each individual Note.





Interest
expense related to these Notes for the year ended September 30, 2009 consisted
of the following:





Interest
                  
                  $
                  103,819Amortization
      of discount
                  
                  
                  125,831Total
                  
                  $
                  229,650





b)
            Convertible
      Note Due March 2010





In April
2008, the Company raised gross proceeds of $500,000 related to a Convertible
Note Agreement (the “Note”). The Company recognized net proceeds of $460,000,
after considering an 8% 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 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 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 the Company 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 converted at an
earlier date, the Note will automatically mature and be due and payable on the
earlier of (a) March 2010, 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 or common
stock equivalent price equal to or greater than $3.00 per share.





The
issuance of the Note was accounted for as follows:





Face
      value
                  
                  $
                  500,000Finder
      fee
                  
                  
                  (40,000
                  )Net
      cash proceeds
                  
                  
                  460,000Value
      attributable to:Common
      shares issued to finder
                  
                  
                  (20,000
                  )Warrants
      issued to finder
                  
                  
                  (2,275
                  )Warrants
      issued to note holder
                  
                  
                  (130,000
                  )Value
      attributable to convertible note
                  
                  $
                  307,725




F-15


The
Company computed the value of the 25,000 shares of restricted common stock
issued to the 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





IThe
Company computed the value of the 11,250 warrants issued to the 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 Note. The Company valued the warrants using the Black-Scholes option pricing
model. Assumptions used in the valuation calculation included an expected term
of five years (the contractual term of the warrants), a risk free rate of 2.7%
and a market price volatility factor of 57%.





The debt
discount attributable to the finder fee and the value attributable to the common
shares and warrants is being amortized as interest expense ratably over the
expected two year maturity period of the convertible Note.





Interest
expense related to this Note for the years ended September 30, 2009 and 2008
consisted of the following:


2009
                  
                  
                  2008Interest
                  
                  $
                  36,014
                  
                  
                  $
                  16,042Amortization
      of discount
                  
                  
                  101,052
                  
                  
                  
                  46,316Total
                  
                  $
                  137,066
                  
                  
                  $
                  62,358





c)
            Convertible
      Notes Due April 2012





In April
2007, the Company elected to offer Convertible Exchangeable Notes (the “Notes”)
with interest at 7% per annum paid semi-annually and due April 1, 2012 via a
Confidential Private Offering Memorandum (the "Offering”) to raise between
$500,000 and $3,000,000. Each Note in the Offering 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 warrants for the purchase of 20,000
common shares at an exercise price of $2.00 per share and warrants for the
purchase of 20,000 common shares at an exercise price of $2.50 per share. Each
warrant is exercisable 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 was to convert automatically upon the effectiveness of an SEC
Registration Statement registering the underlying common shares of the Notes and
the warrants. Terms of the Notes include a provision that if the 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 the Notes would begin to accrue interest at a default rate of 15% per annum
until repaid.





In May
2007, the Company had raised gross proceeds of $735,000 and closed on the
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 finder as additional
consideration in accordance with the terms of the agreement with the Company. In
June 2007, the Company had raised gross proceeds of $385,000 and closed on the
second, and final, round of this financing.  The Company received 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
finder as additional consideration in accordance with the terms of the agreement
with the Company. In June 2007, the Company formally closed the Offering and, as
required, proceeded to commence the registration of the common shares related to
the Notes and the underlying Warrants.


F-16


The
issuance of the Notes was accounted for as follows:





Face
      value
                  
                  $
                  1,232,000Finder
      fee
                  
                  
                  (261,100
                  )Net
      cash proceeds
                  
                  
                  970,900Value
      attributable to:Warrants
      issued to finder
                  
                  
                  (143,672
                  )Warrants
      issued to note holder
                  
                  
                  (238,195
                  )Value
      attributable to convertible notes
                  
                  $
                  589,033





The
Company computed the value of the 1,642,667 warrants issued to aggregate
$143,672 and recorded this amount as an increase to additional paid-in capital
and a discount against the Notes. The Company valued the warrants using the
Black-Scholes option pricing model. Assumptions used in the calculation included
an expected term of five years (the contractual term of the warrants), a risk
free rate of 3.5% and a market price volatility factor of 20%.





The debt
discount attributable to the finder fee, other expenses, and the value
attributable to the warrants and the beneficial conversion feature is being
amortized as interest expense ratably over the five year maturity period of the
Notes.





Interest
expense related to this Note for the years ended September 30, 2009 and 2008
consisted of the following:


2009
                  
                  
                  2008Interest
                  
                  $
                  127,068
                  
                  
                  $
                  86,176Amortization
      of discount
                  
                  
                  352,090
                  
                  
                  
                  160,258Total
                  
                  $
                  479,158
                  
                  
                  $
                  246,434





In
October 2008, several holders representing an aggregate principal amount of
$720,000 of these Notes demanded immediate payment thereof as a result of the
Registration Statement not being declared effective in June 2008, one year after
the final closing date of the Offering. Pursuant to the terms of the Notes,
these holders have elected to accelerate the maturity date and, in default of
payment, have these Notes accrue interest at a default rate of 15% per annum
from the date of notice until principal and accrued interest is paid in
full.  Subsequent to year-end, on December 2009, the Company received
a notice from holders of $820,000 of such Notes indicating that the Company was
in default and demanded payment of the face amount of the notes and all accrued
and unpaid interest.  In light of the circumstances described above,
all of these Notes due in April 2012 have been classified as current liabilities
and
remaining unamortized discounts of $249,293 have been reduced to $0 as
of September 30, 2009.





In
November 2008, independent of the matter described in the preceding paragraph,
certain other holders of the Notes with an aggregate face value of $232,000
elected to convert such Notes and accrued interest into 320,191 shares of the
Company's common stock. As an incentive for these holders 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. On the date of conversion, the net book
value of these Notes and accrued interest aggregated $159,018 and the fair
market value of the common shares issued totaled
$128,076.  Consequently, the Company recorded a gain of $30,942 in
other income.








2009
            
            
            2008Convertible
      notes due December 2009 through February 2010
            
            $
            103,819
            
            
            $
            -Convertible
      note due March 2010
            
            
            23,805
            
            
            
            5,948Convertible
      notes due April 2012
            
            
            158,976
            
            
            
            41,991Total
            
            $
            286,600
            
            
            $
            47,939




9)
                SALES
      TO MAJOR CUSTOMERS AND BY CUSTOMER GEOGRAPHIC
  AREA




For the
fiscal year ended September 30, 2009 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, 2009.




For the
fiscal year ended September 30, 2008, 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, 2008.


F-17


Sales by
customer geographic area, determined by the customer’s country of origin, are as
follows for the years ended September 30, 2009 and 2008:




2009
                    
                    
                    2008United
      States
                    
                    $
                    763,000
                    
                    
                    $
                    2,106,000Canada
                    
                    
                    102,000
                    
                    
                    
                    265,000Europe
                    
                    
                    37,000
                    
                    
                    
                    -Total
                    
                    $
                    902,000
                    
                    
                    $
                    2,371,000





As of
September 30, 2009 and 2008, there are no long-lived assets in any foreign
operation outside of the United States.





10)
                COMMITMENTS
      AND CONTINGENCIES




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 2009 and
2008 was approximately $77,000 and $95,000, respectively.





11)
                COMMON
      STOCK





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 were subject
to rescission rights by the shareholders who purchased these shares. Common
stock, subject to rescission rights, has not been included in Stockholders’
Equity as of September 30, 2008, but has been disclosed separately on the face
of the balance sheet (See Note 15).





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, a 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,





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 the Company 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.


F-18


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, two employees holding promissory notes (“Notes”) in the amount
of $13,500 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 the Company 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.





In
October 2008 the Company issued 1,175,000 restricted common shares with a fair
market value of $822,500 to several independent contractors in connection with
professional service agreements for financial and legal services to be provided
to the Company through various dates through September 2009. The fair market
value of these issuances have been recorded as additions to prepaid expenses and
amortized over the applicable period. See Note 1 for additional information
regarding the accounting for these additions to prepaid expenses.





In
November 2008, the Company issued 308,333 common shares with a fair market value
of $135,667 to employees under the Company's Employee Stock Ownership
Plan.  As this award was in recognition of past performance and fully
vested upon issuance, the fair market value was recorded as a non-cash expense
on the date of issuance.





In
November 2008, the Company issued 320,191 restricted common shares with a fair
market value of $128,056 in connection with the conversion of convertible notes
payable.





In
February 2009, the Company issued 12,500 restricted common shares with a fair
market value of $18,750 to an employee in connection with a severance
agreement.  As this award was in recognition of prior performance and
fully vested upon issuance, the fair market value was recorded as a non-cash
expense on the date of issuance.





In
February 2009, Company issued 121,048 restricted common shares at a price of
$0.15 per share to one holder of the convertible notes payable in satisfaction
of accrued interest due in the amount of $18,157.





In March
2009, the Company issued 1,225,000 restricted common shares with a fair market
value of $163,000 to several independent contractors in connection with
professional service agreements for financial and legal services to be provided
to the Company through various dates through February 2011. The fair market
value of these issuances have been recorded as additions to prepaid expenses and
amortized over the applicable period. See Note 1 for additional information
regarding the accounting for these additions to prepaid expenses.





In March
2009, the Company issued 541,667 common shares with a fair market value of
$73,733 to employees under the Company's Employee Stock Ownership Plan in lieu
of salaries. As this award related to services to be provided to the Company
through various dates throughout the balance of calendar 2009, the fair market
value of these issuances have been recorded as additions to prepaid expenses and
are being amortized over the applicable period. See Note 1 for additional
information regarding the accounting for these additions to prepaid
expenses.





In March
2009, the Company issued 65,400 restricted common shares at a price of $0.25 per
share to a vendor in satisfaction of an invoice due in the amount of
$16,350.





In April
and May 2009, the Company issued 90,000 restricted common shares with a fair
market value of $16,500 to third parties in satisfaction of claims and this
amount was recorded as a non-cash expense on the date of issuance.





In June
2009 the Company issued 620,000 restricted common shares with a fair market
value of $217,000 to several independent contractors in connection with
professional service agreements for financial and legal services to be provided
to the Company through May 2010. The fair market value of these issuances have
been recorded as additions to prepaid expenses and amortized over the applicable
period. See Note 1 for additional information regarding the accounting for
these additions to prepaid expenses.


F-19


In June
2009, the Company issued 370,000 common shares with a fair market value of
$129,500 to employees under the Company's Employee Stock Ownership Plan in lieu
of salaries. As this award related to services to be provided to the Company
through various dates throughout the balance of calendar 2009, the fair market
value of these issuances have been recorded as additions to prepaid expenses and
are being amortized over the applicable period. See Note 1 for additional
information regarding the accounting for these additions to prepaid
expenses.





In June
2009, the Company issued 10,000 restricted common shares with a fair market
value of $3,500 to a former employee for consulting services.  As this
award was in recognition of prior performance and fully vested upon issuance,
the fair market value was recorded as a non-cash expense on the date of
issuance.





In June
2009, the Company issued 250,000 restricted common shares with an assigned value
of $164,481 (including $116,093 relating to the beneficial conversion feature of
the notes) in connection with the issuance of convertible notes with a face
of $250,000 due in December 2009.  See Note 8(a) for additional
information regarding the accounting for the issuance of those
notes.





In June
2009, two independent contractors exercised options previously granted in April
2009 for the purchase of 1,200,000 and 250,000 shares of common
stock.  As they elected to utilize the cashless exercise feature of
those options, net amounts of 1,042,105 and 217,105 shares of restricted common
stock were issued and the $125 related increase to the par value of common stock
was charged to additional paid in capital.





In June
2009, 350,000 shares previously issued in October 2008 to an independent
contractor for financial services were returned to the Company in connection
with the modification that service agreement.  The return of such
shares was recorded as a reduction of prepaid expenses with a corresponding
reduction of common stock and additional paid-in capital utilizing the original
fair market value at the time of issuance of $245,000.





In July
2009, the Company issued 195,000 common shares with a fair market value of
$84,550 to three independent contractors for financial and legal
services.  As these awards were in recognition of prior performance
and fully vested upon issuance, the fair market value was recorded as a non-cash
expense on the date of issuance.





In July
2009, the Company issued 100,000 restricted common shares with an assigned value
of $59,973 (including $41,678 relating to the beneficial conversion feature of
the notes) in connection with the issuance of convertible notes with an
aggregate face value of $100,000 due in January 2010.





In July
2009, the Company issued 155,000 common shares with a fair market value of
$75,950 to two officers of the Company under the Company's Employee Stock
Ownership Plan in lieu of salaries. As this award related to services to be
provided to the Company through various dates throughout the balance of calendar
2009, the fair market value of these issuances have been recorded as additions
to prepaid expenses and are being amortized over the applicable period. See
Note 1 for additional information regarding the accounting for these
additions to prepaid expenses.





In July
2009, an officer of the Company exercised options for the purchase of 1,200,000
shares of common stock.  As he elected to utilize the cashless
exercise feature of those options, the net amount of 1,077,551 shares of
restricted common stock were issued and the $108 related increase to the par
value of common stock was charged to additional paid in capital.





In August
2009, the Company issued 75,000 common shares with a fair market value of
$30,000 to an independent contractor for financial services.  As this
award was in recognition of prior performance and fully vested upon issuance,
the fair market value was recorded as a non-cash expense on the date of
issuance.





In August
2009, 250,000 shares previously issued in March 2009 to an independent
contractor for financial services were returned to the Company in connection
with the modification of that service agreement.  The return of such
shares was recorded as a reduction of prepaid expenses with a corresponding
reduction of common stock and additional paid-in capital  utilizing
the original fair market value at the time of issuance of
$21,668.


F-20


In August
2009, an officer of the Company exercised options for the purchase of 300,000
shares of common stock.  As he elected to utilize the cashless
exercise feature of those options, the net amount of 261,539 shares of
restricted common stock were issued and the $26 related increase to the par
value of common stock was charged to additional paid in capital.





In August
2009, the Company issued 1,200 common shares with a fair market value of $475 to
an independent contractor for consulting services.  As this award was
in recognition of prior performance and fully vested upon issuance, the fair
market value was recorded as a non-cash expense on the date of
issuance.





In August
2009, the Company issued 100,000 restricted common shares with an assigned value
of $32,000 (including $4,383 relating to the beneficial conversion feature of
the note) in connection with the issuance of a convertible note with a face of
$100,000 due in February 2010.





12)
                STOCK
      OPTIONS





In
October 2007, the Company 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, the Company 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, the Company 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-21


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.





In
February 2009, the Company granted options for the purchase of 1,500,000 shares
of restricted common stock at $0.25 per share for a period of five years to two
officers of the Company and two independent contractors. These options were 100%
vested upon issuance. The Company estimated the fair value of these options to
be $60,000 and, as these awards were in recognition of past performance and
fully vested upon issuance, recorded a non-cash expense of that amount on the
date of grant.





In
February 2009, the Company granted options for the purchase of 1,250,000 shares
of restricted common stock at $0.50 to $0.75 per share for a period of one to
two years to several independent contractors in connection with professional
services agreements. These options were 100% vested upon issuance. The Company
estimated the fair value of these options to be $2,500 and, reflecting the terms
of the agreements, recorded a non-cash expense of that amount on the date of
grant.





In
February 2009, the Company amended outstanding options for the purchase of
1,936,500 shares of common stock at exercise prices ranging from $0.75 to $1.50
per share at various dates from September 2010 through February 2013 and reduced
the exercise prices to range from $0.25 to $0.58. These options were 100% vested
upon issuance. The Company estimated the fair value of these options immediately
before and after the amendment and determined the fair value to have increased
by $21,160, and recorded a non-cash expense of that amount on the date of the
amendment.





In April
2009, the Company granted options for the purchase of 1,200,000 shares of
restricted common stock at $0.05 per share for a period of five years to an
independent contractor in connection with a professional services agreement.
These options were 100% vested upon issuance and included a provision for a
cashless exercise. The Company estimated the fair value of these options to be
$43,200 and, reflecting the terms of the agreement, this amount has been
recorded as an addition to prepaid expenses on the date of grant and is being
amortized over the applicable service period.





In April
2009, the Company granted options for the purchase of 1,200,000 shares of
restricted common stock at $0.05 per share for a period of five years to an
officer of the Company. These options were 100% vested upon issuance and
included a provision for a cashless exercise.  The Company estimated
the fair value of these options to be $43,200 and, as this award was in
recognition of past performance and fully vested upon issuance, recorded a
non-cash expense of that amount on the date of grant.





In May
2009, the Company granted options for the purchase of 900,000 and 250,000 shares
of restricted common stock at $0.05 per share for a period of five years to
three employees of the Company and an independent contractor,
respectively.  These options were 100% vested upon issuance and
included a provision for a cashless exercise.  The Company estimated
the fair value of these options to be $233,450 and, as these awards were in
recognition of past performance and fully vested upon issuance, recorded a
non-cash expense of that amount on the date of grant.


F-22


The
following is a summary of the stock option activity for the fiscal years ended
September 30, 2009 and 2008:





2009
                  
                  
                  2008Outstanding,
      beginning of year
                  
                  
                  2,536,500
                  
                  
                  
                  1,354,167Granted
      during the year
                  
                  
                  6,250,000
                  
                  
                  
                  1,325,000Exercised
      during the year
                  
                  
                  (2,600,000
                  )
                  
                  
                  (142,667
                  )Forefeited
      / expired / cancelled
                  
                  
                  -
                  
                  
                  
                  -Outstanding,
      end of year
                  
                  
                  6,186,500
                  
                  
                  
                  2,536,500Vested
      and exercisable, end of year
                  
                  
                  6,186,500
                  
                  
                  
                  2,536,500Assumptions
      used to value stock option grants;Expected
      volatility
                  
                  
                  80
                  %
                  
                  
                  20%-76
                  %Weighted
      average volatility
                  
                  
                  80
                  %
                  
                  
                  55
                  %Expected
      term (in years)
                  
                  
                  5.0
                  
                  
                  
                  5.0Risk
      free rate
                  
                  
                  1.7% - 2.3
                  %
                  
                  
                  3.5
                  %Aggregate
      intrinsic value of vested and exercisable options, end of
    year
                  
                  $
                  698,100
                  
                  
                  $
                  44,250Total
      intrinsic value of options exercised during the year
                  
                  $
                  968,723
                  
                  
                  $
                  96,000





Stock
options outstanding and exercisable at September 30, 2009 (all non-qualified)
consist of:





Granted inYear Ended
                      
                      Number Outstanding
                      
                      
                      Exercise
                      
                      ExpirationSeptember 30,
                      
                      and Exercisable
                      
                      
                      Price
                      
                      Date2006
                      
                      
                      67,500
                      
                      
                      $
                      0.25
                      
                      September
      30, 20102006
                      
                      
                      214,000
                      
                      
                      $
                      0.50
                      
                      February
      28. 20112007
                      
                      
                      350,000
                      
                      
                      $
                      0.58
                      
                      October
      14, 20112007
                      
                      
                      250,000
                      
                      
                      $
                      0.42
                      
                      July
      5, 20122007
                      
                      
                      300,000
                      
                      
                      $
                      0.42
                      
                      August
      14, 20122007
                      
                      
                      30,000
                      
                      
                      $
                      1.25
                      
                      August
      30, 20122008
                      
                      
                      525,000
                      
                      
                      $
                      0.50
                      
                      October
      15, 20122008
                      
                      
                      300,000
                      
                      
                      $
                      1.05
                      
                      February
      19, 20132008
                      
                      
                      500,000
                      
                      
                      $
                      0.42
                      
                      February
      29, 20132009
                      
                      
                      1,500,000
                      
                      
                      $
                      0.25
                      
                      February
      27, 20142009
                      
                      
                      750,000
                      
                      
                      $
                      0.50
                      
                      March
      23, 20142009
                      
                      
                      500,000
                      
                      
                      $
                      0.75
                      
                      March
      23, 20142009
                      
                      
                      900,000
                      
                      
                      $
                      0.05
                      
                      May
      26, 2014Total
                      
                      
                      6,186,500





13)
                INCOME
      TAXES





As of
September 30, 2009, the Company had net operating and capital loss carryforwards
of approximately $6,634,000  and
$533,000, respectively, which expire at various dates through
2029.


F-23


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, 2009 and 2008, the Company’s net deferred tax asset is fully
offset by a valuation allowance because the Company believes it is more likely
than not, such benefits will not be realized during the respective carryforward
periods.. Management will continue to assess the valuation allowance and to the
extent it is determined that such allowance is no longer required; the tax
benefit of the remaining net deferred tax assets will be recognized in the
future. Unrecognized tax benefits, if they arise in the future, including any
interest or penalties, would reduce the amount of net operating loss
carryforwards available for utilization in future periods.




The
reconciliation of the effective income tax rate to the Federal statutory rate is
as follows:




Federal
      income tax rate
                  
                  
                  34.0
                  %Unrecognized
      benefit of current year losses
                  
                  
                  (34.0
                  )Effective
      income tax rate
                  
                  
                  0.0
                  %




14)
                RELATED
      PARTY TRANSACTIONS





Shareholder
loan balances of $2,000 and $15,437 at September 30, 2009 and 2008,
respectively, are classified in other long-term liabilities and represent
the net amount owed to two officers and shareholders 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.





In
February 2007, as further described in Note 4, 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, 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.





In
October 2007, as further described in Note 12, 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 12, 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.





In
February 2009, as further described in Note 12,the Company granted options for
the purchase of 1,500,000 shares of restricted common stock at $0.25 per share
for a period of five years to two officers of the Company and two independent
contractors. These options were 100% vested upon issuance. The Company estimated
the fair value of these options to be $60,000 and, as these awards were in
recognition of past performance and fully vested upon issuance, recorded a
non-cash expense of that amount on the date of grant.





In April
2009, as further described in Note 12, the Company granted options for the
purchase of 1,200,000 shares of restricted common stock at $0.05 per share for a
period of five years to an officer of the Company. These options were 100%
vested upon issuance and included a provision for a cashless
exercise.  The Company estimated the fair value of these options to be
$43,200 and, as this award was in recognition of past performance and fully
vested upon issuance, recorded a non-cash expense of that amount on the date of
grant.





15)
                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. The Company may
be considered to have commenced a public offering of securities on May 6, 2005,
when it first filed a registration statement on Form SB-2.


F-24




Subsequent
to that date, from January 1, 2006 through October 20, 2006 (the effective date
of the registration statement), the Company offered and sold 563,718 restricted
shares of common stock for a total of $670,399. Although the Company 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 the Company 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.  Accordingly, the Company classified the
$670,399 as temporary equity on the balance sheet and excluded the 563,718
shares from the total of outstanding shares as of September 30,
2008.





The
Company believes the statute of limitations precludes any claims for rescission
beginning with October 2009 (three years from the date the shares were sold). As
of January 13, 2010, the date that these financial statements were issued,
none of the purchasers of those securities has made or threatened any claim
against the Company alleging violation of the federal securities laws.
Therefore, the Company has reclassified the $670,399 from temporary equity to
permanent equity and included the 563,718 shares in the total outstanding shares
as of September 30, 2009.





16)         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, 2009, the Company has a total Stockholders’ Deficit of $2,043,000
and negative working capital of $1,999,000.  Additionally, the Company
incurred a Net Loss of $4,232,000 and $2,985,000 for the years ended September
30, 2009 and 2008, 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 2010.





17)         SUBSEQUENT
EVENTS





On December 7, 2009,the Company and its
wholly owned subsidiary, XIOM Corp. (“XIOM”), entered into a certain Membership
Interest Purchase Agreement  dated as of December 7, 2009, by and
among the Company, XIOM, and each of the persons who held membership interests
in Equisol, LLC (“Equisol”).  Pursuant to the Purchase Agreement, the
Company acquired all of the issued and outstanding membership interests of
Equisol, and in exchange, the sellers received shares of common stock of the
Company representing forty percent (40%) of the issued and outstanding shares of
the common stock of the Company on a fully diluted basis.  Prior to
issuance of Company common stock to the sellers of Equisol on December 7, 2009,
the Company had 23,247,407 shares of common stock outstanding.





In
connection with the purchase, the Company raised $705,000 for working capital
uses.






F-25


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





None.





Item
9A(T).CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures





Management
of the Company is responsible for the preparation and integrity of the
consolidated financial statements appearing in our annual report on
Form 10-K.  The financial statements were prepared in conformity
with generally accepted accounting principles appropriate in the circumstances
and, accordingly, include certain amounts based on our best judgments and
estimates.   Financial information in this annual report on
Form 10-K is consistent with that in the financial statements.




Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as such term is defined in Rules 13a-15(f)
under the Securities Exchange Act of 1934 (“Exchange Act”).  The
Company’s internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the consolidated financial statements.  Our internal
control over financial reporting is supported by a program of reviews by
management, written policies and guidelines, careful selection and training of
qualified personnel, and a written Code of Business Conduct adopted by our
Company’s Board of Directors, applicable to all Company Directors and all
officers and employees of our Company and subsidiaries.Our internal control over
financial reporting includes those policies and procedures that:




·      pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of EIHC;




·      provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures of EIHC are being made
only in accordance with authorizations of management and directors of EIHC;
and




·      provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of EIHC’s assets that could have a material
effect on the financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements and even when determined to be effective, can
only provide reasonable assurance with respect to financial statement
preparation and presentation.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





Management,
including our then principal executive officer and principal financial
officer,  assessed the effectiveness of the Company’s internal control
over financial reporting as of September 30, 2008.  In making this
assessment, management used the criteria set forth by [the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework.  Based on our assessment as further discussed in the
following paragraph, management believes that the Company maintained ineffective
internal control over financial reporting as of September 30, 2008.




Based on
this evaluation, management and the officers of the company concluded that our
disclosure controls and procedures needed improvement and were ineffective 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.  Additionally, management and the chief
executive officer/chief financial officer concluded that our company's
disclosure controls and procedures needed improvement to ensure that the
information required to be disclosed by our company in the reports that we file
or submit under the Exchange Act is accumulated and communicated to management
and its chief executive officer/chief financial officer to allow timely
decisions about required disclosure.


29


As a
result, during the quarter ended December 31, 2008 we instituted additional
levels of review and have retained the services of additional financial
professionals with the requisite background and experience that will coordinate
and be responsible for our disclosure controls and procedures.





Changes
in Internal Controls over Financial Reporting





Our
management, with the participation of our 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, management and 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, other than the measures
undertaken as noted in the preceding paragraph.





Item
9b. OTHER INFORMATION





None





Part
III





Item 9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE.





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.n connection
with the Acquisition, Andrew B. Mazzone resigned as President and CEO of each of
the Company and XIOM.  Mr. Mazzone will continue to serve as a member
of Board of Directors of each of the Company and XIOM.  Additionally,
Thomas Gardega resigned as a director and as Secretary of each of the Company
and XIOM.





Effective
as of December 7, 2009, the following individuals were elected to the Board of
Directors of the Company:





Name
                    
                    Age
                    
                    PositionMichael
      D. Parrish
                    
                    46
                    
                    Chairman
      of the Board of Directors/CEO, PresidentGregory
      N. Moore (1)
                    
                    60
                    
                    Director
      and Chairman of the Audit Committee of the Board of
    DirectorsAndrew
      B. Mazzone
                    
                    69
                    
                    DirectorJames
      W. Zimbler
                    
                    44
                    
                    Secretary/DirectorKurt
      M. Given
                    
                    45
                    
                    Treasurer/Director









(1)           Member
of our Audit Committee.





Michael
D. Parrish




In
connection with the Acquisition, the Company entered into an Employment
Agreement dated as of December 7, 2009 (the “Employment Agreement”) with Michael
D. Parrish, the Chairman of Equisol and a Seller under the Purchase
Agreement.  Under the terms of the Employment Agreement, Mr. Parrish
will be employed as the President and CEO of the Company for an initial term of
two (2) years, which term may be extended for an additional
one-year.  The initial term of employment commenced on the closing
date of the Acquisition.  Mr. Parrish will also serve as the Chairman
of the Board of Directors of the Company.  Mr. Parrish will have an
annual base salary of $175, 000, and he is also eligible to receive
discretionary performance bonuses.


30


Mr.
Parrish has extensive operational and general management experience; his focus
is on financial performance and strategic alliances.  Mr. Parrish has
over 24 years of leadership and finance experience in a variety of global
firms.  Prior to Equisol, Mr. Parrish held various executive positions
in several General Electric Companies where he served in positions such as
General Manager for global logistics and services for GE’s Water business, and,
earlier, as Managing Director for GE Capital specializing in ecommerce, six
sigma, and productivity of several of GE’s equipment management
groups.  Prior to GE, Mr. Parrish served for 14 years active duty in
the U.S. Army where he held various leadership positions of increasing
responsibility as an Army Aviator culminating as a member of the Army
Acquisition Corps.  Mr. Parrish has a Bachelor’s degree in Engineering
from the U.S. Military Academy at West Point as well as a Masters Degree in
Astronautical Engineering from Stanford University and an MBA with honors from
the Wharton School at the University of Pennsylvania.   He is the
current President of the West Point Society of Philadelphia and serves on the
boards of the USO of SE PA/NJ and the Delaware Valley Industrial Resources
Council.





Gregory
N. Moore




Gregory
N. Moore, has over 25 years of senior management experience in major
multi-national companies and extensive international experience in major
worldwide markets.  He served as the Senior Vice President and
Controller of YUM! Brands, Inc. from 2003 to 2005.  Prior thereto, Mr.
Moore was the Vice President and General Auditor of Yum from 1997 to
2003.  Before that, he was with PepsiCo, Inc. and held the position of
Vice President and Controller of Taco Bell and Controller of PepsiCo Wines and
Spirits International.  Since retiring, he has been a frequent speaker
and lecturer and currently sits on two boards:  Texas Roadhouse, Inc.
(NASDAQ) serving as Chairman of the Audit Committee and Nominating &
Corporate Governance Committee, and as a member of the Compensation Committee;
and 3 Day Blinds, a privately held company owned by two private equity firms,
for which he chairs the Audit Committee.





Andrew B.
Mazzone




Mr.
Mazzone was Chairman and President of Xiom Corp since its inception in 1998
until October 30, 2009, when he stepped down as Chairman and President and
assumed the position of Director.  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.





James W.
Zimbler




James W.
Zimbler, has been a principal of Keystone Capital Resources, LLC, since its
inception in March 2004.  Keystone is involved as a consultant in the
mergers and acquisitions of public companies and consulting for private
companies that wish to access the public markets.  Prior to becoming a
founding member of Keystone, he was involved in consulting for capital raising,
re-capitalization and mergers and acquisitions for various
clients.  Mr. Zimbler was one of the initial shareholders in
Accountabilities, Inc., f/k/a Human Trans Services Holding Corp (“ACBT”).   Mr.
Zimbler has recently focused his energies in the field of turnarounds of small
emerging private and public companies.  He has served on the Board of
Directors and/or Officer of several companies since 2000.


31


Kurt M.
Given




Kurt M.
Given, is responsible for the day-to-day business functions and operations of
Equisol, including marketing, technology, and linking together sales,
administration, and customer relationships. With 20 years of water treatment
experience at GE Betz, he has held positions in engineering and management for
both the chemical and feed equipment product lines. From 1999 to 2002, he was
group Leader and Product Manager for the Equipment team, overseeing all
activities including pricing, marketing, profitability, capital equipment,
contracts and product management. He has a bachelor of Science degree in
Chemical Engineering from Pennsylvania State University and holds a patent for
dust control foam generation.





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.





Audit
Committee and Audit Committee Financial Expert





Mr.
Gregory Moore serves as our audit committee. Mr. Moore is an “audit committee
financial expert,” as that term is defined in Item 401(e) of Regulation S-B
promulgated under the Securities Act.





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 11.EXECUTIVE
COMPENSATION





For the
fiscal year ended September 30, 2009, the Officers/Directors have been
compensated with salaries and other forms of remuneration as set forth
below:





Officer/Director
Compensation:





During
fiscal 2009 and 2008, each operating officer was 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 was 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:


32


Summary
Compensation Table


Name
      and
                                Principal
      Position
                              
                              Year
                              
                              Salary
      ($)
                              
                              
                              Bonus
      ($)
                              
                              
                              Stock
                                Awards
                                ($)
                              
                              
                              Option
                                Awards
      ($)
                              
                              
                              Non-
                                equity
                                Incentive
                                Plan
                                Compensation
                              
                              
                              Nonqualified
                                Deferred
                                Compensation
                                Earnings
      ($)
                              
                              
                              All
      Other
                                Compensation
                                ($)
                              
                              
                              Total
      ($)Michael
      D. Parrish, President,
                              
                              2009
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-Chairman
      & CEO
                              
                              2008
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-Andrew
      B. Mazzone,
                              
                              2009
                              
                              $
                              60,000
                              
                              
                              
                              28,689
                              
                              
                              
                              109,130
                              
                              
                              
                              61,200
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              259,019President,
      XIOM Corp.
                              
                              2008
                              
                              $
                              60,000
                              
                              
                              
                              39,286
                              
                              
                              
                              78,240
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              138,240Kurt
      M. Given, President,
                              
                              2009
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-Equisol
      LLC
                              
                              2008
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-Thomas
      Gardega,
                              
                              2009
                              
                              $
                              60,000
                              
                              
                              
                              30,374
                              
                              
                              
                              35,700
                              
                              
                              
                              78,900
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              204,984formerly
      Executive VP
                              
                              2008
                              
                              $
                              60,000
                              
                              
                              
                              39,286
                              
                              
                              
                              78,240
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              -0-
                              
                              
                              
                              138,240





The
following table details options granted to each executive officer in the last
fiscal year ended September 30, 2009:




Outstanding
Equity Awards at Fiscal Year-End


OPTION
      AWARDSName
                          
                          Number of
                            Securities
                            Underlying
                            Unexercised
                            Options (#)
                            Exercisable
                          
                          
                          Number of
                            Securities
                            Underlying
                            Unexercised
                            Options (#)
                            Unexercisable
                          
                          
                          Equity Incentive
                            Plan Awards:
                            Number of
                            Securities
                            Underlying
                            Unexercised
                            Unearned Options
                          
                          
                          Option Exercise
                            Price ($)
                          
                          
                          Option Expiration
                            DateMichael
      D. Parrish,
                            President,
      Chairman & CEO
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          N/A
                          
                          
                          
                          N/AAndrew
      B. Mazzone,
                            President,
      XIOM Corp.
                          
                          
                          36,667
                            150,000
                            75,000
                            150,000
                            150,000
                            450,000
                          
                          
                          
                          -
                            -
                            -
                            -
                            -
                            -
                          
                          
                          
                          36,667
                            150,000
                            75,000
                            150,000
                            150,000
                            450,000
                          
                          
                          
                          $0.50
                            $0.58
                            $0.42
                            $0.50
                            $0.42
                            $0.25
                          
                          
                          
                          3/1/11
                            10/15/11
                            7/6/12
                            10/15/12
                            2/28/13
                            2/27/14Kurt
      M. Given,
                            President,
      Equisol LLC
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          N/A
                          
                          
                          
                          N/AThomas
      Gardega,
                            formerly
      Executive VP
                          
                          
                          140,000
                            150,000
                            75,000
                            150,000
                            150,000
                            450,000
                            300,000
                          
                          
                          
                          -
                            -
                            -
                            -
                            -
                            -
                            -
                          
                          
                          
                          140,000
                            150,000
                            75,000
                            150,000
                            150,000
                            450,000
                            300,000
                          
                          
                          
                          $0.50
                              $0.58
                              $0.42
                              $0.50
                              $0.42
                              $0.25
                              $0.05
                          
                          
                          
                          3/1/11

                            10/15/11
                            7/6/12
                            10/15/12
                            2/28/13
                            2/27/14
                            5/26/14




33




Director
Compensation


Name
                
                Fees
                  Earned
                  or
                  Paid in
                  Cash
                  ($)
                
                
                Stock
                  Awards($)
                
                
                Option
                  Awards
                  ($)
                
                
                Non-Equity
                  Incentive Plan
                  Compensation
                
                
                Non-Qualified
                  Deferred
                  Compensation
                  Earnings
                
                
                All Other
                  Compensation($)
                
                
                Total
                  ($)Gregory
      N. Moore
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -James
      W. Zimbler
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -





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.




Stock
Option Plan




We
previously adopted an equity incentive plan, the XIOM Corp. Amended 2008
Employee and Consultant Stock Plan (the “Plan”), pursuant to which we are
authorized to grant options, restricted stock and stock appreciation rights to
purchase up to 3,375,000 shares of common stock to our key employees, officers,
directors, consultants and other agents and advisors. Registration for the
underlying shares with the Securities and Exchange Commission was terminated on
October 30, 2009.




As of
January 8, 2010, we currently have outstanding options and warrants to
purchase approximately 6,186,500 shares of our common stock, with a
weighted-average exercise price of $0.46. Of the outstanding options, 100% are
vested.





Item 12.SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS





The
following table sets forth information as of January 8, 2010 with respect to the
beneficial ownership of the 48,696,789 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.


34





Percentage
      ofIdentity of Shareholder
                                            
                                            Number of Shares
                                            
                                            
                                            Beneficial Ownership
                                            (1)Michael
      D Parrish, Chairman, President and CEO
                                            
                                            
                                            12,033,999
                                            
                                            
                                            
                                            24.71
                                            %31
      Fox Ridge DriveMalvern
      , PA 19355Kurt
      M. Given, Director and Treasurer
                                            
                                            
                                            6,979,565
                                            
                                            
                                            
                                            14.33
                                            %2230
      Locust DriveLansdale,
      PA 19446Andrew
      B. Mazzone, Director
                                            
                                            
                                            6,132,454
                                            
                                            
                                            
                                            11.86
                                            %513
      Dryden StreetWestbury,
      NY  11590James
      W. Zimbler, Director and Secretary
                                            
                                            
                                            650,000
                                            
                                            
                                            
                                            (
                                            *)165
      Fernleaf CourtState
      College, PA 16801Martin
      Hodus, Shareholder
                                            
                                            
                                            2,525,000
                                            
                                            
                                            
                                            5.19
                                            %271-19E
      Grand Central ParkwayFloral
      Park, NY 11005_____________________All
      Officers and Directors as
                                            
                                            
                                            25,796,018
                                            
                                            
                                            
                                            50.90
                                            %A
      Group (4 Persons)





(*)
              Less
      than 5% ownership





(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
13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE.





Transactions
Between Us and Our Affiliates




On
February 27, 2009, the Company granted both Mr. Andrew Mazzone, then President
of the Company and Mr. Thomas Gardega, then Executive Vice President of the
Company five-year options to purchase 450,000 shares of restricted common stock
at a price of $0.25 per share. At the date of grant, the previous closing market
price of the Company's stock was $0.15. These options were fully vested at
issuance.


On April
1, 2009, the Company granted Mr. Mazzone five-year options to purchase 1,200,000
shares of restricted common stock at a price of $0.05. At the date of grant, the
previous closing market price of the Company's stock was $0.09. These options
were fully vested at issuance. On July 23, 2009, Mr. Mazzone exercised
those options using a cashless exercise provision, and received 1,077,551 shares
of restricted common stock.
 
 On May
25, 2009, the Company granted Mr. Mazzone and Mr. Gardega five-year options for
the purchase of 300,000 shares of restricted common stock at a price of $0.05
per share. At the date of grant, the previous closing market price of the
Company's stock was $0.39. These options were fully vested at issuance. On
August 26, 2009 Mr. Mazzone exercised these options using a cashless
exercise provision, and received 261,539 shares of restricted common
stock.


Director
Independence





One of
our current directors, Mr. Gregory Moore, is considered to be independent at
this time.





Item
14.PRINCIPAL ACCOUNTANT FEES AND SERVICES





Michael
T. Studer, CPA, P.C. as our independent accountants, audited our financial
statements for the year ending September 30, 2009, and performed reviews of our
financial statements included in our Forms 10-Q during our fiscal year ended
September 30, 2009.





Audit Fees:  The
aggregate fees billed by Michael T. Studer, CPA, P.C. during the
fiscal years ended September 30, 2009 and 2008 for professional services for the
audit of our financial statements and the review of financial statements
included in our Forms 10-Q were $27,500 and $32,500, respectively.





Audit-Related
Fees:  Michael T. Studer, CPA, P.C. did not provide or bill
for, and was not paid for, any audit-related fees in the fiscal years ended
September 30, 2009 and 2008.





Tax Fees:  Michael
T. Studer, CPA, P.C. did not provide or bill for, and was not paid for, any tax
services in the fiscal years ended September 30, 2009 and 2008.


35


All Other
Fees:  Michael T. Studer, CPA, P.C. did not provide or bill
for, and was not paid for, any other services in the fiscal years ended
September 30, 2009 and 2008.





The Company’s Board of Directors has
annually reviewed and approved the engagement of the Company’s auditors and
approved in advance the fee arrangements with regard to audit services and
reviews of financial statements included in the Company’s Forms 10-Q, along with
audit-related fees and tax fees. Substantially all such fees were approved in
advance for 2009 and 2008.





PART
IV





Item
15.  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.




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, 2010.





ENVIRONMENTAL
      INFRASTRUCTURE
                HOLDINGS
      CORP.By:
              /s/
      Michael D. ParrishMichael
      D. Parrish, President, Chairman 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/
      Michael D. Parrish
                                
                                Chairman
      of the Board of Directors, CEO and
                                
                                January
      13, 2010Michael
      D. Parrish
                                
                                President,
      Principal Executive Officer andDirector/s/
      Andrew B. Mazzone
                                
                                Principal
      Accounting/Financial
      Officer and
                                
                                January
      13, 2010Andrew
      B. Mazzone
                                
                                Director/s/
      Kurt M. Given
                                
                                Director
                                
                                January
      13, 2010Kurt
      M. Given/s/
      Gregory N. Moore
                                
                                Director
                                
                                January
      13, 2010Gregory
      N. Moore/s/
      James W. Zimbler
                                
                                Director
                                
                                January
      13, 2010James
      W. Zimbler




36