Environmental Infrastructure (EIHC) 10-Q/A 2008 Q2 Quarterly report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________

FORM 10-QSB/A-2

__________________________

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934

For the quarterly period ended: June 30, 2008

Commission File number: 333-71748

___________________________

XIOM Corp.

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

Delaware

(State or other jurisdiction of Incorporation or organization)

11-3460949

(IRS Employee Identification No.)

78 Lamar Street

West Babylon, New York 11704

(631) 643-4400

 (Address of principal executive offices)

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 and 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. Yes x No ¨

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Common Stock, $.0001 par value	12,758,909
(Class)	(Outstanding as of January 9, 2009)

As more fully described in Note 11. to the financial statements included herein, this amended filing was necessary because the Company has restated its financial statements at June 30, 2008 and for the three month period and nine months then ended in order to correct errors related to the accounting treatment for a wholly-owned subsidiary and for the February 2007 acquisition of a certain thermal spray technology from the Company’s Chief Executive Officer in exchange for 75,000 shares of the Company’s common stock.

XIOM Corp.

Form 10-QSB

Index

	Page
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)		3
Balance Sheet		F-1
Statements of Operations		F-2
Statement of Stockholders’ Equity(Deficit)		F-3
Statements of Cash Flows		F-4
Notes to Financial Statements		F-6
Item 2. Management’s Discussion and
Analysis or Plan of Operation		4
Item 3. Controls and Procedures		7
Part II. OTHER INFORMATION
Item 6.  Exhibits		8
Signatures		8
Certifications

2

Part I:      Financial Information

Item 1.  Financial Statements

3

XIOM, Corp.

Consolidated Balance Sheets

	June 30,			September 30,
	2008			2007
	(As Restated)
Assets
Current Assets
Cash and Cash Equivalents	$	661,047		$	312,718
Accounts Receivable, Net of
Allowance for Doubtful Accounts		285,136			115,854
Inventory		289,933			174,234
Prepaid Expenses		207,346			13,073
Loan Receivable		150,833			-
Other Current Assets		23,709			55,660
Total Current Assets		1,618,004			671,539
Fixed Assets, Net of Accumulated
Depreciation & Amortization		213,183			203,697
Other Assets
Intangible Assets, Net of
Accumulated Amortization		399,702			343,353
Equity Investments		20,558			-
Retainage Receivable		35,175			23,705
Security Deposits		11,445			6,815
Total Other Assets		466,880			373,873
Total Assets	$	2,298,067		$	1,249,109
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts Payable and
Accrued Expenses	$	674,275		$	560,998
Officers' Convertible Notes Payable		545,206			-
Convertible Note Payable		-			250,000
Notes Payable		19,233			51,143
Total Current Liabilities
		1,238,714		$	862,141
Long-Term Liabilities
Convertible Notes Payable, Net of
Unamortized Discounts		1,030,251			636,590
Shareholder Loan		18,387			9,775
Total Liabilities		2,287,352			1,508,506
Common Stock, Subject To Rescission Rights		670,399			670,399
Stockholders' Equity (Deficit)
Common Stock, $.0001 par value, 50,000,000
shares authorized, 10,059,458 shares issued
and outstanding (excluding 563,718 shares
subject to rescission rights)		951			764
Additional Paid-In Capital		5,869,518			3,481,454
Retained Earnings (Deficit)		(6,530,153	)		(4,412,014	)
Total Stockholders' Equity (Deficit)		(659,684	)		(929,796	)
Total Liabilities and Stockholders' Equity (Deficit)	$	2,298,067		$	1,249,109

See accompanying notes to financial statements

F-1

XIOM, Corp.

Consolidated Statements of Operations

	For The Nine Months Ended						For The Three Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
	(As Restated)						(As Restated)
Sales	$	1,822,299		$	606,995		$	903,327		$	256,211
Cost of Sales		1,113,473			470,437			458,027			174,245
Gross Profit		708,826			136,558			445,300			81,966
General and Administrative Expenses		2,622,273			1,376,285			779,289			538,836
Operating Income (Loss)		(1,913,447	)		(1,239,727	)		(333,989	)		(456,870	)
Other Income (Expenses);
Loss on investment in joint venture		-			(6,525	)		-			(6,525	)
Interest Expense		(205,525	)		(9,315	)		(88,291	)		(9,315	)
Interest Income		833			-			833			-
Net Income (Loss)	$	(2,118,139	)	$	(1,255,567	)	$	(421,447	)	$	(472,710	)
Basic and Diluted Income (Loss) per Share	$	(0.23	)	$	(0.16	)	$	(0.04	)	$	(0.06	)
Weighted Average Number of Shares Outstanding, Basic and Diluted		9,053,514			7,641,019			9,928,991			7,990,150

See accompanying notes to financial statements

F-2

XIOM, Corp.

Consolidated Statement of Stockholders' Equity (Deficit)

For The Nine Months Ended June 30, 2008

	Common Stock				Additional		Retained			Total
	Number of		Par		Paid-In		Earnings			Shareholders'
	Shares		Value		Capital		(Deficit)			Equity (Deficit)
Balance, September 30, 2007 (as restated)		7,642,945		764		3,481,454		(4,412,014	)		(929,796	)
Option grants in October 2007						123,917					123,917
Shares issued for services during the quarter ended  December 31, 2007		250,000		25		299,975					300,000
Shares issued for Accrued Expenses		48,000		5		71,995					72,000
Options exercised against Accrued Compensation and Accrued Accounting Fees		82,000		8		77,992					78,000
Shares issued for Convertible Note		269,791		27		249,973					250,000
Shares issued for services during the quarter ended  March 31, 2008		433,000		43		431,707					431,750
Shares issued for Accrued Expenses		5,000		1		7,499					7,500
Option grants in February 2008						226,080					226,080
Shares issued to buy out distributor contracts		51,000		5		50,995					51,000
Shares issued for equity investment		156,433		16		132,484					132,500
Private placements of common stock		388,136		39		418,961					419,000
Shares issued for Accrued Interest due on Convertible Notes		44,185		4		48,600					48,604
Shares issued for services during the quarter ended  June 30, 2008		33,750		4		36,246					36,250
Exercise of Common Stock Warrants		26,500		3		29,147					29,150
Conversion of Convertible Notes		40,000		4		59,996					60,000
Finders fee related to Concertible Note		25,000		3		24,997					25,000
Value of Warrants attached to Convertible Note						37,375					37,375
Beneficial conversion feature of Convertible Note						60,125					60,125
Net (Loss) for the nine months ended June 30, 2008 (as restated)								(2,118,139	)		(2,118,139	)
Balance, June 30, 2008 (as restated)		9,495,740		951		5,869,518		(6,530,153	)		(659,684	)

See accompanying notes to financial statements

F-3

XIOM, Corp.

Consolidated Statements of Cash Flow

For The Nine Months Ended June, 30

	2008			2007
	(As Restated)
Cash Flows from Operating Activities:
Net Income (Loss)	$	(2,118,139	)	$	(1,255,567	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and Amortization		49,950			32,405
Issuance of Shares for Services		711,833			404,057
Issuance of Shares for Accrued Interest		28,781			-
Allowance for Doubtful Accounts		-			35,000
Loss on Investment in Wholly-Owned Subsidiary		176,352
Value of Stock Option Grants		349,997			40,000
Amortization of Convertible Note Discounts		116,161			5,195
Changes in Operating Assets and Liabilities:
Accounts Receivable, Net		(169,282	)		(45,096	)
Inventory		(115,699	)		(85,978	)
Prepaid Expenses		(20,106	)		94,378
Other Current Assets		(9,549	)		(30,356	)
Retainage Receivable		(11,470	)		(1,328	)
Security Deposits		(4,630	)		-
Accounts Payable and Accrued Expenses		223,480			226,834
Total Adjustments		1,325,818			675,111
Net cash provided (used) in operating activities		(792,321	)		(580,456	)
Cash Flows from Investing Activities:
Purchase of Additional Patents		(74,342	)		(78,743	)
Purchase of Fixed Assets		(41,323	)		(86,756	)
Additional Investments In Joint Ventures		-			(88,543	)
Investment in Wholly-Owned Subsidiary, Net		(43,852	)
Equity Investments		(20,558	)		-
Loan Receivable		(109,333	)		-
Net cash provided (used) by investing activities		(289,408	)		(254,042	)
Cash Flows from Financing Activities:
Proceeds From Exercise of Joint Venture Related Stock Option		-			110,000
Proceeds From Exercise of Stock Warrants		29,150			50,475
Sales of Restricted Common Stock		419,000			78,300
Proceeds from Convertible Notes		460,000			970,900
Proceeds From Officers' Convertible Notes		545,206			-
Proceeds From (Repayment of) Notes Payable		(31,910	)		257,556
Purchase of Treasury Shares		-			(14,000	)
Proceeds From (Repayment of) Shareholder Loan,
Before Non-Cash Adjustments		8,612			4,317
Net cash provided (used) by financing activities		1,430,058			1,457,548
Net increase (decrease) in cash and cash equivalents		348,329			623,050
Cash & Cash Equivalents, Beginning of Period		312,718			90,495
Cash & Cash Equivalents, End of Period	$	661,047		$	713,545

F-4

(Continued)

XIOM, Corp.

Statements of Cash Flow

For The Nine Months Ended June 30,

(Continued)

	2008		2007
Supplemental Disclosures
Non-Cash Financing and Investing Activities:
Issuance of shares for Equity Investments	$	132,500	$	215,000
Options exercised in exchange for Accrued Compensation, Shareholder Loan and Accrued Professional Fees	$	78,000	$	55,000
Issuance of shares for services	$	711,833	$	462,516
Value of Stock Option Grants	$	349,997	$	40,000
Issuance of shares upon coversion of Convertible Notes	$	310,000		-
Issuance of shares for Accrued Expenses	$	77,500		-
Issuance of shares to buy-out distributor contract	$	51,000		-
Issuance of Shares for Accrued Interest	$	48,604		-
Issuance of shares to repay Notes Payable		-	$	30,000
Note Payable as consideration for warrants exercised		-	$	10,000
Issuance of shares for purchase of HV Spray Technology		-	$	135,000
Interest and Taxes Paid:
Interest Expense	$	33,267	$	9,403
Income Taxes		-		-

See accompanying notes to financial statements

F-5

XIOM Corp.

NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED JUNE 30, 2008

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying consolidated unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. However, in the opinion of management, the accompanying unaudited financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of XIOM Corp. (“XIOM”, or the “Company”) as of June 30, 2008 and the related statements of operations, of stockholders’ equity(deficit) and of cash flows for the nine months then ended. For further information, refer to the audited financial statements and related disclosures that were filed by the Company with the Securities and Exchange Commission on Form 10-KSB/A-1 for the fiscal year ended September 30, 2007, Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934, File No. 333-71748.

2.    LOAN RECEIVABLE

In April 2008, XIOM loaned $150,000 to the Kentucky Joint Venture. The Promissory Note is payable in one year, including accrued interest at 5% per annum, with $35,000 payable within two months. The maker may prepay this Note in whole, or in part, prior to maturity without penalty or premium. Upon the determination of the Kentucky Joint Venture Partner, it may pay the remaining balance, plus accrued interest, in common stock of the joint venture entity based on five day average closing price prior to the settlement date.

3.     PREPAID EXPENSES

Prepaid Expenses at June 30, 2008 includes approximately $174,000 related to three separate consulting agreements for various financial and business development services to be provided to the Company during fiscal 2008. During the first six months of fiscal 2008, XIOM issued 620,000 restricted common shares for a combined value of $650,000 related to these agreements. As a result, the amount expensed for consulting services for the nine months ended June 30, 2008 was approximately $449,000.

4.     INVESTMENT IN WHOLLY-OWNED SUBSIDIARY

In late March 2008, XIOM completed an investment in XIOM – Europe Corp., a Delaware corporation, whereby the Company issued 156,433 restricted shares of common stock, valued at $132,500, and paid $75,500 to the shareholders of XIOM – Europe Corp in exchange for 100% of the issued and outstanding shares held by them. As of March 31, 2008, XIOM – Europe Corp. is a wholly-owned subsidiary of XIOM. XIOM-Europe Corp. owns less than a 50% interest in a joint venture located in the United Kingdom that has had minimal activity since inception

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

5.     OFFICERS’ CONVERTIBLE NOTES

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

F-6

XIOM Corp.

NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED JUNE 30, 2008

(Unaudited)

6.     CONVERTIBLE NOTE PAYABLE

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

At June 30, 2008, the Convertible Note consisted of;

Face Value of Convertible Note	$	500,000
Beneficial Conversion Feature Discount, Net of accumulated amortization of $6,263		(53,862	)
Value Attributable to Warrants Issued, Net of accumulated amortization of $3,893		(33,482	)
Fees Paid To Brokers/Finders, Net of accumulated amortization of $6,771		(58,229	)
Convertible Note, Net of Unamortized Discounts	$	354,427

In accordance with Emerging Issues Task Force (“ETIF”) 98-5, XIOM recognized an imbedded beneficial conversion feature present in this note. The Company measured an aggregate of $60,125 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, and recognized it as Additional Paid-In Capital and a discount against the Convertible Note. This discount is being amortized as Interest Expense over the two year maturity period of the Convertible Note.

In accordance with ETIF 00-27, XIOM recognized the value attributable to the Warrants in the amount of $37,375 as Additional Paid-In Capital and a discount against the Convertible Note. The Company valued the Warrants using the Black-Scholes pricing model. Assumptions used in the calculation included the contractual term of the Warrants (two years) as the expected term, a risk free rate of 3.5% and a market price volatility factor of 20%. The debt discount attributable to these Warrants is being amortized as Interest Expense over the two year maturity period of the Convertible Note.

7.     COMMON STOCK

During October 2007, the Company issued 298,000 shares of restricted common stock to several vendors as consideration for financial and business development services, marketing services, management services and equipment purchased. These shares were issued based on the fair market value of the services to be provided, or equipment purchased, and converted at the estimated fair market value of the common stock on the date of each issuance.

During the quarter ended March 31, 2008, XIOM issued 343,000 shares of restricted common stock to several vendors as consideration for financial and business development services, management services, manufacturing services, equipment purchased and to buy-out an exclusive distributor agreement. These shares were issued based on the fair market value of the services to be provided, equipment purchased or contract value, and converted at the estimated fair market value of the common stock on the date of each issuance.

In March 2008, the Company agreed to issue 120,000 shares of restricted common stock to one vendor that provided financial and business development services as consideration for unpaid fees in the amount of $27,500 and the balance of their agreement through August 2008 valued at $72,500.

On March 25, 2008, XIOM elected to convert the Convertible Note with a face value of $250,000 into 269,791 shares of restricted common stock as per the agreement.

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. At March 31, 2008, there is a Subscription Receivable balance of $25,000 related to one of the private placements that was off-set against Additional Paid-in Capital.

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.

F-7

XIOM Corp.

NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED JUNE 30, 2008

(Unaudited)

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

 During June 2008, the Company issued 33,750 shares of restricted common stock to two vendors as consideration for business development services and engineering services. These shares were issued based on the fair market value of the services provided and converted at the estimated fair market value of the common stock on the date of each issuance.

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.

The Company issued 26,000 shares of restricted common stock in June 2008 to buy-out an exclusive overseas distributor agreement. These shares were issued at a discount based on the agreed upon value of the contact plus expenses totaling 26,000.

 8.    STOCK OPTIONS

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

On February 19, 2008, XIOM granted an option to a financial consultant to purchase a total of 300,000 shares of restricted common stock at a price of $1.05 per share, which approximates the fair market value on the date of the grant. The options are fully vested and are exercisable, in whole or in part, at the sole discretion of the grantee through February 18, 2013 and may not be assigned, or otherwise transferred. The Company used the Black-Scholes option-pricing formula, which produced a value of approximately $.28 per option share. This resulted in the Company recording an additional consulting expense of approximately $85,000 that was treated as Additional Paid-In Capital. Assumptions used in the calculation included the contractual life of the option as the expected term, a risk free rate of 3.5% and a market price volatility factor of 64%.

On February 29, 2008, XIOM granted four separate options to purchase a total of 500,000 shares of restricted common stock at a price of $1.25 per share, which approximates the fair market value on the date of the grant. The two operating officers, who are also shareholders, and a consultant, who provides engineering services, each received an option to purchase 150,000 restricted common shares and another consultant to the company received an option to purchase 50,000 restricted common shares as partial consideration for providing accounting services for fiscal 2008. The options are fully vested and are exercisable, in whole or in part, at the sole discretion of the grantee through February 28, 2013 and may not be assigned, or otherwise transferred. The Company used the Black-Scholes option-pricing formula, which produced a value of approximately $.28 per option share. This resulted in the Company recording an additional compensation and consulting expense of approximately $141,000 that was treated as Additional Paid-In Capital. Assumptions used in the calculation included the contractual life of the option as the expected term, a risk free rate of 3.5% and a market price volatility factor of 64%.

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.

F-8

XIOM Corp.

NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED JUNE 30, 2008

(Unaudited)

9.     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 June 30, 2008, the Companyhas a total Stockholders’ Deficit of approximately $660,000 and incurred a Net Loss of approximately $2,118,000 for the nine months ended June 30, 2008. 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. However, the Company has seen a steady increase in sales orders for the patented industrial thermal spray technology and related powder formulas. Furthermore, the Company plans to continue raising capital through a series of private placement transactions for the balance of fiscal 2008. It also plans to expand sales by significantly increasing domestic marketing efforts, including pursuing major contracts through its network of strategic alliance relationships.  As a result of these factors, management believes it will have sufficient resources to meet the Company’s cash flow requirements for at least twelve months following the date of these financial statements.

10.   SUBSEQUENT EVENTS

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

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

11.   RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company has restated its financial statements at June 30, 2008 and for the three month period and nine months then ended in order to correct errors related to the accounting treatment for a wholly-owned subsidiary and for the February 2007 acquisition of a certain thermal spray technology from the Company’s Chief Executive Officer in exchange for 75,000 shares of the Company’s common stock.

As previously reported, the Company recorded an investment in a wholly-owned subsidiary utilizing the equity method of accounting with an original cost basis of $208,000. The financial statements of this wholly-owned subsidiary have now been consolidated with the financial statements of the Company and the investment of $208,000 has been eliminated in consolidation. As previously reported, the Company recorded the acquisition at an estimated fair value of $135,000 for the 75,000 shares of common stock issued at the date of acquisition. As restated, pursuant to SEC Staff Accounting Bulletin Topic 5G, the Company recorded the acquisition at the $75,000 transferor cost of the technology.

The effect of the restatement adjustments on the Balance Sheet at June 30, 2008 is as follows;

	As Previously
	Reported			Adjustments			As Restated
Cash	$	629,399		$	31,648		$	661,047
Accounts Receivable, Net		285,136			-			285,136
Inventory		289,933			-			289,933
Prepaid Expenses		207,346			-			207,346
Other Current Assets		174,542			-			174,542
Total Current Assets		1,586,356			31,648			1,618,004
Fixed Assets, Net		213,183			-			213,183
Intangible Assets, Net		455,052			(55,350	)		399,702
Equity Investment		228,558			(208,000	)		20,558
Other Other Assets		44,620			-			44,620
Total Assets	$	2,529,769		$	(231,702	)	$	2,298,067
Total Liabilities	$	2,287,352			-		$	2,287,352
Common Stock, Subject To Rescission Rights		670,399			-			670,399
Common Stock		951			-			951
Additional Paid-in Capital		5,929,518			(60,000	)		5,869,518
Retained Earnings (Deficit)		(6,358,451	)		(171,702	)		(6,530,153	)
Total Stockholders’ Equity (Deficit)		(427,982	)		(231,702	)		(659,684	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	2,529,769		$	(231,702	)	$	2,298,067

F-9

XIOM Corp.

NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED JUNE 30, 2008

(Unaudited)

The effect of the restatement adjustments on the Statement of Operations for the three month period ended June 30, 2008 is as follows;

	As Previously
	Reported			Adjustments			As Restated
Gross Profit	$	445,300			-		$	445,300
Selling, General and Administrative Expenses		780,153			(864	)		779,289
Operating Income (Loss)		(334,853	)		864			(333,989	)
Other Income (Expense)		(87,458	)		-			(87,458	)
Net Income (Loss)	$	(422,311	)	$	864		$	(421,447	)
Basic and Diluted Income (Loss) Per Share	$	(0.04	)	$	(0.00	)	$	(0.04	)

The effect of the restatement adjustments on the Statement of Operations for the nine months ended June 30, 2008 is as follows;

	As Previously
	Reported			Adjustments			As Restated
Gross Profit		708,826			-			708,826
Selling, General and Administrative Expenses		2,448,513			173,760			2,622,273
Operating Income (Loss)		(1,739,687	)		(173,760	)		(1,913,447	)
Other Income (Expense)		(204,692	)		-			(204,692	)
Net Income (Loss)	$	(1,944,379	)	$	(173,760	)	$	(2,118,139	)
Basic and Diluted Income (Loss) Per Share	$	(0.21	)	$	(0.02	)	$	(0.23	)

The impact of the above restatement adjustments on cash flow was limited to the adjustments related to an increase in Cash resulting from consolidating the wholly-owned subsidiary. All other restatement adjustments were non-cash and therefore had no impact on cash flow.

F-10

Item 2.  Management’s Discussion and Analysis and Plan of Operations.

FORWARD LOOKING STATEMENTS

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

Financial Condition, Liquidity and Capital Resources:

Net cash flow used by operating activities during the nine months ended June 30, 2008 and 2007 was approximately $792,000 and $580,000, respectively. Additionally, the Company incurred net losses of approximately $2,118,000 and $1,256,000 for the first nine months of fiscal 2008 and 2007, respectively and had net losses for the three months ended June 30, 2008 and 2007 of approximately $421,000 and $473,000 respectively. At June 30, 2008, the Company had a Stockholders’ (Deficit) of approximately $660,000. These factors continue to raise substantial doubt about the Company’s ability to continue as a going concern.

The Company has available funds of approximately $661,000 at June 30, 2008, which resulted primarily from the Convertible Note issued in April 2008 that produced net proceeds of $460,000.

The Officers’ Convertible Notes, with a combined balance of approximately $545,000, including accrued interest, were converted from debt to equity in July 2008. This results in an improved permanent capital base as well as the overall working capital structure of the Company. Additionally, the Common Stock Subject to Rescission Rights in the amount of approximately $670,000 is being addressed and it is anticipated that it will not be necessary to continue disclosing this balance as a contingent liability. If so determined, this balance will be reclassed to Stockholders’ Equity at the end of the current fiscal year, which will also improve the permanent capital base of the Company.

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The Company anticipates that in order to fulfill its plan of operations, it will need to seek additional financing from outside sources. As such, the Company is constantly pursuing private debt and equity sources to fund its current operations and plans for expansion. As a result of these factors, management believes it will have sufficient resources to meet the Company’s cash flow requirements for at least twelve months.

Results of Operations:

For the nine months ended June 30, 2008 vs. June 30, 2007

For the nine months ended June 30, 2008, the Company had sales of $1,822,299 and cost of sales of $1,113,473. This is in comparison to total sales of $606,995 and cost of sales of $470,437 for nine months ended June 30, 2007. The increase in sales and cost of sales in the first nine months of fiscal 2008 is the direct result of a significant increase in thermal spray systems and related powder sales compared to the first nine months of fiscal 2007. As a result, gross profit for the first nine months of fiscal 2008 was $708,826 (39%) compared to the gross profit for the first nine months of fiscal 2007 of $136,558 (22%). The gross profit for the first nine months of fiscal 2008 improved primarily due to an increase in sales of the XIOM 5000 system, which has a higher gross profit margin than the XIOM 1000 system, the first generation thermal spray system that is approximately three times slower than the XIOM 5000. Gross profit in the first nine months of fiscal 2007 was otherwise reduced because the majority of new system sales, from the XIOM 1000, were sold at substantially at wholesale prices and starter powder kits were included with all new system sold at no cost to the customer.

General and administrative expenses increased by approximately $1,246,000 when comparing the first nine months of fiscal 2008 to the first nine months of fiscal 2007. This increase was primarily due to additional financial and business development services and consulting expenses as well as the value of certain option grants recorded as additional compensation and consulting expense totaling approximately $1,060,000, which were all primarily non-cash in nature. The need to incur these types of non-cash expenses is expected to be significantly reduced in the future.

The net loss increased from $1,255,567, or ($.16) per share, to $2,118,139, or ($.23) per share when comparing the first nine months of fiscal 2007 to the first nine months of fiscal 2008, respectively. This increase of approximately $862,000 was directly related to the increase in general and administrative expenses described above, which included the value of additional stock option grants and the issuance of restricted common shares for services provided to the Company, all of which were primarily non-cash in nature. 

For the three months ended June 30, 2008 vs. June 30, 2007

For the three months ended June 30, 2008, the Company had sales of $903,327 and cost of sales of $458,027. This is in comparison to total sales of $256,211 and cost of sales of $174,245 for three months ended June 30, 2007. The increase in sales and cost of sales for the third quarter of fiscal 2008 results primarily from an increase in sales of the XIOM 5000 thermal spray system and related powders compared to the third quarter of fiscal 2007, which sold only the XIOM 1000 thermal spray system and related powders. As a result, gross profit for the third quarter of fiscal 2008 was $445,300 (49%) compared to the gross profit for the third quarter of fiscal 2007 of $81,966 (32%). Furthermore, sales and gross profit for the third quarter of fiscal 2008 accounted for approximately 50% and 63%, respectively, of the sales and gross profit generated for the nine months ended June 30, 2008.  

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General and administrative expenses increased by approximately $240,000 when comparing the third quarter of fiscal 2008 to the third quarter of fiscal 2007. This increase was primarily due to additional financial and business development services and consulting expenses, which were all primarily non-cash in nature. The need to incur these types of non-cash expenses is expected to be significantly reduced in the future.

The net loss decreased from $472,710, or ($.06) per share, to $421,447, or ($.04) per share, when comparing the three months ended June 30, 2007 to the three months ended June 30, 2008, respectively. This decrease of approximately $52,000 was directly related to the increase in sales and gross profit related to the XIOM 5000 thermal spray system and related powders described above.   

Plan of Operations:

The new model spray gun, the XIOM 5000, is being aggressively marketed here in the United States and abroad. It is the intention of the Company’s management to improve profitability by continuing to increase sales of this thermal spray system and related powder coatings. As mentioned previously, this new spray gun will allow the application of powder coatings at a rate that is approximately three times faster than the original model gun, the XIOM 1000, which results in a significantly reduced direct labor rate and an increased volume of powders that can be consumed for any application. This gives the end user of the system a greater economy of scale on each project, thus allowing better competitive pricing and the opportunity for increased profitability. As a result of this improved technology, the Company anticipates the demand to increase for this thermal spray system as well as the related powder coating sales. XIOM will also continue to purse major contracts through its network of strategic alliance relationships.

Management is also constantly reviewing overhead costs in an attempt to maintain reasonable levels of general and administrative expenses as the company continues to grow, with a planned reduction of shares being issued for services as sales increases and cash flow from operations improves.

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 through the balance of fiscal 2008. As a result, we will need to generate significant revenues to achieve profitability, which may not occur. 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 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.

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Item 3.  Controls and Procedures

Evaluation and Disclosure Controls and Procedures:

As of the end of the period covered by this report, our management conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act). Based on this evaluation, the officers concluded that our disclosure controls and procedures were not effective and needed improvement in order to be effective to ensure that information required to be disclosed by our company in reports that we file, or submit, under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms. The chief executive officer and chief financial officer concluded that its disclosure controls and procedures also needed improvement to ensure that information required to be disclosed in the reports that it files, or submits, under the Exchange Act is accumulated and communicated to its management, including its chief executive officer and chief financial officer, to allow timely decisions about required disclosure. As a result, we have instituted additional levels of review and are currently looking to retain a financial professional with the requisite background and experience that will coordinate and be responsible for our disclosure controls and procedures with the assistance of our independent accounting firm.

Changes in Internal Controls over Financial Reporting:

Our management, with the participation of the chief executive officer and chief financial officer, performed an evaluation as to whether any change in the internal controls over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934) occurred during the period covered by this report. Based on that evaluation, the chief executive officer and 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.

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Part II.  Other Information

Item 6.  Exhibits

Index to Exhibits:

SEC REFERENCE NUMBER		TITLE OF DOCUMENT
3.1	(1)	Certificate of Incorporation of XIOM Corp.
3.2	(1)	Certificate of Amendment to Certificate of Incorporation dated August 2004
3.3	(3)	Certificate of Amendment to Certificate of Incorporation dated August 2007
3.4	(1)	By-laws of the Registrant, as amended
31.1 &
31.2	(2)	Certifications pursuant to 18 U.S.C. Section 1350, as adopted, Pursuant to section 906 of the Sarbanes-Oxley act of 2002
32.1	(2)	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) Previously filed with Registration Statement Form SB-2, filed with the Securities and Exchange Commission on May 6, 2006, as amended.

(2) Filed herewith

(3) Certificate of Amendment to Certificate of Incorporation dated August 31, 2007 was included with Form 10-KSB, filed with the Securities and Exchange Commission on January 15, 2008

Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 7, 2008	XIOM, Corp.
	/s/ Andrew_B. Mazzone
	Andrew B. Mazzone
	Chief Executive Officer &
	Chief Financial Officer
	(Principal Executive Officer)

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