Environmental Infrastructure (EIHC) 10-Q 2009 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________

FORM 10-Q

__________________________

 (Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2009

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to_____

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 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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨ No ¨

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated Filer	¨
Non-accelerated filer	¨	Smaller reporting company	ý
(Do not check if a smaller
reporting company)

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

The number of shares outstanding of the Registrant’s Common Stock, $.0001 par value, as of August 14, 2009 was 18,935,618.

XIOM Corp.

Form 10-Q

Index

	Page
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	F-1
Consolidated Balance Sheets	F-1
Consolidated Statements of Operations	F-2
Consolidated Statement of Stockholders’ Equity (Deficit)	F-3
Consolidated Statements of Cash Flows	F-4
Notes to Consolidated Financial Statements	F-5
Item 2. Management’s Discussion and Analysis or Plan of Operation	3
Item 3. Quantitative and Qualitative Disclosures About Market Risks	5
Item 4. Controls and Procedures	5
Part II. OTHER INFORMATION
Item 6.  Exhibits	7
Signatures	8
Certifications

2

Part I: Financial Information

Item 1.  Financial Statements

XIOM Corp.

Consolidated Balance Sheets

	June 30,			September 30,
	2009			2008
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	253,643		$	289,857
Accounts receivable, net of allowance for doubtful accounts of $44,000 and $30,000, respectively		72,601			158,232
Inventory		212,728			307,107
Loan receivable		158,750			153,125
Prepaid expenses		563,419			16,816
Other current assets		17,200			17,200
Total current assets		1,278,341			942,337
Fixed assets, net of accumulated depreciation		182,750			215,343
Other assets:
Intangible assets, net of accumulated amortization		437,174			433,040
Retainage receivable		51,851			47,288
Security deposits		11,445			11,445
Total other assets		500,470			491,773
Total assets	$	1,961,561		$	1,649,453
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses	$	937,810		$	656,903
Convertible notes payable due December 2009,net of unamortized discounts		98,529			-
Convertible notes payable due March 2010,net of unamortized discounts		429,830			-
Current portion of convertible notes payable due April 2012,net of unamortized discounts		524,123			-
Notes payable		38,555			12,702
Total current liabilities		2,028,847			669,605
Long-term liabilities:
Convertible notes payable due April 2012,net of unamortized discounts		141,654			1,090,888
Shareholder loan		33,192			15,437
Total liabilities		2,203,693			1,775,930
Common stock subject to rescission rights		670,399			670,399
Stockholders' equity (deficit):
Common stock, $.0001 par value, 50,000,000authorized shares, 16,423,349 and 10,059,458 shares, respectively, issued and outstanding (excluding 563,718 shares subject to rescission rights)		1,645			1,043
Additional paid-in capital		8,663,845			6,598,723
Retained earnings (deficit)		(9,578,021	)		(7,396,642	)
Total stockholders' equity (deficit)		(912,531	)		(796,876	)
Total liabilities and stockholders' equity (deficit)	$	1,961,561		$	1,649,453

See accompanying notes to consolidated financial statements

F-1

XIOM Corp.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months						For the Nine Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
Sales	$	103,203		$	903,327		$	692,967		$	1,822,299
Cost of sales		98,791			458,027			441,614			1,113,473
Gross Profit		4,412			445,300			251,353			708,826
Selling, general and administrative expenses		738,911			779,289			2,164,597			2,622,273
Operating income (loss)		(734,499	)		(333,989	)		(1,913,244	)		(1,913,447	)
Other income (expense):
Gain on conversion of debt		0			-			30,942			-
Interest expense		(113,256	)		(87,458	)		(299,077	)		(204,692	)
Total other income (expense)		(113,256	)		(87,458	)		(268,135	)		(204,692	)
Net income (loss)	$	(847,755	)	$	(421,447	)	$	(2,181,379	)	$	(2,118,139	)
Basic and diluted income (loss) per share	$	(0.05	)	$	(0.04	)	$	(0.16	)	$	(0.23	)
Weighted average number of shares outstanding, basic and diluted		15,558,493			9,928,991			13,691,255			9,053,514

See accompanying notes to consolidated financial statements

F-2

XIOM Corp.

Consolidated Statements of Stockholders' Equity (Deficit)

For The Nine Months Ended June 30, 2009

(Unaudited)

	Common Stock						Additional			Retained			Total
	Number 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 with professional service agreements		3,000,000			302			1,202,198			-			1,202,500
Adjustment to shares issued in connection with professional service agreements		(350,000	)		(35	)		(244,965	)		-			(245,000	)
Issuance of shares in connection with cashless exercise of stock options		1,259,210			125			(125	)		-			-
Issuance of shares under Employee Stock Ownership Plan for past performance		308,333			31			135,636			-			135,667
Issuance of shares in connection with conversion of notes maturing in 2012		320,191			32			128,044			-			128,076
Issuance of shares and beneficial conversion feature in connection with issuance of convertible notes		250,000			26			164,455			-			164,481
Issuance of shares in connection with severance agreement		12,500			1			18,749			-			18,750
Issuance of shares in connection with consulting agreement		10,000			1			3,499			-			3,500
Issuance of shares in connection with payment of accrued interest		121,048			12			18,145			-			18,157
Issuance of shares under Employee Stock Ownership Plan in lieu of salaries		911,667			91			203,142			-			203,233
Issuance of shares in connection with settlement of claims by third parties		90,000			9			16,491			-			16,500
Issuance of shares in connection with payment of amount due to vendor		65,400			7			16,343			-			16,350
Issuance of options to employees and independent contractors		-			-			379,850			-			379,850
Issuance of options in connection with professional service agreements		-			-			2,500			-			2,500
Amendment to existing option agreements		-			-			21,160			-			21,160
Net (Loss) for the six months ended March 31, 2009		-			-			-			(2,181,379	)		(2,181,379	)
Balance, March 31, 2009		16,423,349		$	1,645		$	8,663,845		$	(9,578,021	)	$	(912,531	)

See accompanying notes to consolidated financial statements

F-3

XIOM Corp.

Consolidated Statements of Cash Flow

For The Nine Months Ended June 30, 2009 and 2008

(Unaudited)

	2009			2008
Cash flows from operating activities:
Net income (loss)	$	(2,181,379	)	$	(2,118,139	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		55,389			49,950
Amortization of prepaid expenses originally established through the issuance of common shares		641,395			-
Value of stock options issued to employees and independent contractors		339,150			349,997
Value of stock option amendment		21,160			-
Issuance of common stock under the Employee Stock Ownership Plan		135,667			-
Issuance of common stock as severance payment		18,750			-
Issuance of common stock for services and contractual arrangements		20,000			711,833
Issuance of common stock for payment of accrued interest		-			28,781
Amortization of convertible note discounts		166,666			116,161
Gain upon conversion of debt into common stock		(30,942	)		-
Loss on investment in wholly-owned subsidiary		-			176,352
Changes in operating assets and liabilities:
Accounts receivable, net		85,631			(169,282	)
Inventory		94,378			(115,699	)
Prepaid expenses		15,936			(20,106	)
Other current assets		-			(9,549	)
Retainage receivable		(4,563	)		(11,470	)
Security deposits		-			(4,630	)
Accounts payable and accrued expenses		325,495			223,480
Total adjustments		1,884,112			1,325,818
Net cash provided (used) in operating activities		(297,267	)		(792,321	)
Cash flows from investing activities:
Additions to intangibles		(26,305	)		(74,342	)
Purchase of fixed assets		(625	)		(41,323	)
Investment in wholly-owned subsidiary		-			(43,852	)
Equity investments		-			(20,558	)
Increase in loan receivable		(5,625	)		(109,333	)
Net cash provided (used) by investing activities		(32,555	)		(289,408	)
Cash flows from financing activities:
Proceeds from convertible notes		250,000			460,000
Proceeds from (repayment of) notes payable, net		25,853			(31,910	)
Proceeds from sale of restricted common stock		-			419,000
Proceeds from officers' convertible notes		-			545,206
Proceeds from exercise of stock warrants					29,150
Proceeds from shareholder loan		17,755			8,612
Net cash provided (used) by financing activities		293,608			1,430,058
Net increase (decrease) in cash and cash equivalents		(36,214	)		348,329
Cash & cash equivalents, beginning of period		289,857			312,718
Cash & cash equivalents, end of period	$	253,643		$	661,047
Supplemental disclosures
Non-cash financing and investing activities:
Issuance of shares for services	$	1,444,483		$	711,833
Issuance of shares upon conversion of convertible notes	$	128,076		$	310,000
Issuance of shares for equity investments		-		$	132,500
Issuance of shares for accrued expenses	$	16,350		$	77,500
Issuance of shares for accrued Interest	$	18,157		$	48,604
Issuance of shares to buy-out distributor agreements		-		$	51,000
Issuance of common stock under Employee Stock Ownership Plan	$	135,667			-
Value of stock option grants	$	382,350		$	349,997
Value of stock option amendment	$	21,160			-
Options exercised in exchange for accrued compensation, shareholder loan and accrued professional fees		-		$	78,000
Interest and Taxes Paid:
Interest Expense		-		$	33,267
Income Taxes		-			-

See accompanying notes to consolidated financial statements

F-4

XIOM Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended June 30, 2009

(Unaudited)

1) BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q 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, 2009 and the related statements of operations and of cash flows for the three 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-2 for the fiscal year ended September 30, 2008, Annual Report pursuant to Section 13 or 15(d) of the Securities Act of 1934, File No. 333-124704 and on Form 10-Q for the quarters ended December 31, 2008 and March 31, 2009.

2) PREPAID EXPENSES

During the quarter ended June 30, 2009, activity in prepaid expenses included an increase of $389,700 relating to professional service agreements and the issuance of common stock and options as described in Notes 4 and 5 below.  During the three and nine months ended June 30, 2009, operating results included $211,345 and $444,978, respectively, of expense related to the amortization of such costs and a reduction of $245,000 related to the number of shares issued leaving a balance of $553,477 within prepaid expenses at June 30, 2009 related to those agreements and arrangements.

3) CONVERTIBLE NOTES PAYABLE

In October 2008, several holders of Convertible Notes Payable maturing in April 2012 with an aggregate face value of $740,000 demanded immediate payment thereof as a result of the registration statement registering the underlying common shares and warrants not being declared effective by the Securities and Exchange Commission within one year from the final closing date of the Offering, which was in June 2007.  Pursuant to the Note Agreement, these holders have elected to accelerate the maturity date and declare these Notes immediately due and payable.  Consequently, these Notes have been classified in current liabilities, net of the related unamortized discount of $215,877, and they currently accrue interest at the annual rate of 15%.

F-5

In November 2008, other holders of Convertible Notes Payable maturing in April 2012 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 book value of these Notes, the related unamortized discount, and accrued interest aggregated $159,018, the fair market value of the common shares issued totaled $128,076 and the Company recorded a gain of $30,942 as other income.

In June 2009, the Company issued convertible notes in the amount of $250,000.  These notes mature in December 2009, accrue interest at 100% per annum, and the principal and accrued interest are convertible into common stock at any time at the option of the holder at seventy-five percent of the average closing price for the thirty-day period prior to the date of conversion.  Additionally, in connection with the issuance of these notes, the Company issued 250,000 restricted common shares.

The issuance of these notes was accounted for as follows:

Convertible note - Face value	$	250,000
Value attributable to:
Common stock		(48,387	)
Beneficial conversion feature		(116,093	)
Convertible note - Net	$	85,520

The value of the 250,000 shares of restricted common stock was calculated by ratably allocating the proceeds to the face value of the notes and the value of the common stock.  The value of the common stock was determined by utilizing the closing price of $0.40 on the day of issuance of the notes discounted by 40% to reflect the restrictions associated with those securities.  The resulting value of $48,387 was recorded as a discount against the note and a corresponding credit to common stock and additional paid-in-capital.

The value of the beneficial conversion feature was calculated by comparing the fair market value of the common shares issuable upon conversion of the notes on their day of issuance to the net carrying value of the note after deducting the discount attributable to the issuance of the 250,000 common shares discussed above.  The resulting amount of $116,093 was recorded as an additional discount to the carrying value of the notes with a corresponding increase to additional paid-in-capital.

The total discount of $164,480 related to the value attributable to the common shares and the beneficial conversion feature is being amortized on the straight line basis as interest expense through the maturity date of the notes.

F-6

Interest expense related to these notes for the three and nine months periods ended June 30, 2009 consisted of:

Interest	$	9,888
Amortization of discount		13,010
Total	$	22,898

4) COMMON STOCK

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. During the quarter ended June 30, 2009, the agreement with one of the contractors was modified and that individual returned 350,000 shares and the return of such shares was recorded utilizing the original fair market value at the time of issuance of $245,000.  Therefore, the net number of shares issued in connection with this transaction was reduced to 825,000 shares with a fair market value of $577,500.  The fair market value of these issuances have been recorded as additions to prepaid expenses and amortized over the applicable period. See Note 2 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 as described in Note 3.

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 2 for additional information regarding the accounting for these additions to prepaid expenses.

F-7

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 relating 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 2 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 2 for additional information regarding the accounting for these additions to prepaid expenses.

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 2 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 3 for additional information regarding the accounting for the issuance of those notes.

In June 2009, two independent contractors exercised 1,200,000 and 250,000 options previously granted in April 2009.  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.

F-8

5) STOCK OPTIONS

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 in accordance with the provisions of Statement of Financial Accounting Standards No. 123(R), Share Based Payment, determined the fair value to have increased by $21,160, and a 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-9

6) 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, the Company has a stockholders’ deficit of $912,531 as of June 30, 2009 and incurred a net loss of $847,755 and $2,181,379 for the three and nine months, respectively, then ended. 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 steady 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 during the next twelve months. It also plans to continue 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.

7) SUBSEQUENT EVENTS

In July 2009, the Company issued 750,000 shares of common stock and warrants for the purchase of 750,000 shares of restricted common stock at prices ranging from $0.05 to $0.25 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, included a provision for a cashless exercise, and had an estimated fair value of $95,000 on the date of issuance.

In July 2009, the Company issued convertible notes in the amount of $100,000 under terms and conditions similar to the convertible notes issued in June 2009.  These notes mature in January 2010, accrue interest at 100% per annum, and the principal and accrued interest are convertible into common stock at any time at the option of the holder at seventy-five percent of the average closing price for the thirty-day period prior to the date of conversion.  Additionally, in connection with the issuance of these shares, the Company issued 100,000 restricted common shares.

In July 2009, an officer of the Company exercised 1,200,000 options previously granted in April 2009.  As he elected to utilize the cashless exercise feature of those options, the Company issued 1,077,551 shares of restricted common stock.

The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that there were no additional subsequent events to recognize or disclose in these financial statements.

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”.

Results of Operations:

For the three months ended June 30, 2009 versus June 30, 2008

The Company reported sales of $103,203 and cost of sales of $98,791 for the quarter ended June 30, 2009. This is in comparison to sales of $903,327 and cost of sales of $458,027 for the quarter ended June 30, 2008. Gross profit for the quarter ended June 30, 2009 was $4,412, or 4%, a decrease of $440,888 and a decrease in gross margin as a percentage of sales compared to the gross profit for the quarter ended June 30, 2008 of $445,300, or 49%.  Sales and gross profits have declined due to general economic factors.

General and administrative expenses decreased to $738,911 for the quarter ended June 30, 2009 from $779,289 for the quarter ended June 30, 2008.  This decrease of $40,378, or 5%, was due reductions in consulting engineering expense to refine the thermal spray process and coatings as well as cost containment measures in the areas of marketing expenses and general overhead.

Other expense increased to $113,256 for the quarter ended June 30, 2009 from $87,458 for the quarter ended June 30, 2008. This increase of $25,798, or 29%, is related to Convertible Notes Payable and is directly attributable to the increase in the average outstanding balance of such indebtedness during fiscal 2009 compared to the prior period.

The net loss increased to $847,755, or $0.05, per share during the quarter ended June 30, 2009 from a net loss of $421,447, or $0.04, per share during the quarter ended June 30, 2008.  This increase of $426,308, or 101%, related to the changes in gross profit, general and administrative expenses, and other expenses as described above.

3

For the nine months ended June 30, 2009 versus June 30, 2008

The Company reported sales of $692,967 and cost of sales of $441,614 for the nine months ended June 30, 2009. This is in comparison to sales of $1,822,299 and cost of sales of $1,113,473 for the nine months ended June 30, 2008. Gross profit for the nine months ended June 30, 2009 was $251,353, or 36%, a decrease of $457,473 and a slight decrease in gross margin as a percentage of sales compared to the gross profit for the nine months ended June 30, 2008 of $708,826, or 39%.  While sales have declined due to general economic factors, gross profit as a percentage of sales has only slightly declined and this is attributable to reductions in system manufacturing costs and increased margins on powder sales compared to the prior period.

General and administrative expenses decreased to $2,164,597 for the nine months ended June 30, 2009 from $2,622,273 for the nine months ended June 30, 2008.  This decrease of $457,676, or 17%, was due reductions in consulting engineering expense to refine the thermal spray process and coatings as well as cost containment measures in the areas of financial consulting related to marketing expenses and general overhead.

Other expense increased to $268,135 for the nine months ended June 30, 2009 from $204,692 for the nine months ended June 30, 2008. This increase of $63,443, or 31%, was due to: a) An increase of $94,385, or 46%, in interest expense related to Convertible Notes Payable and is directly attributable to a comparable increase in the average outstanding balance of such indebtedness during fiscal 2009 compared to the prior period; and was offset by b) The recording of a gain of $30,942 related to the conversion of a portion of the Convertible Notes Payable into common stock during the quarter ended December 31, 2008.

The net loss increased to $2,181,379, or $0.16, per share during the nine months ended June 30, 2009 from a net loss of $2,118,139, or $0.23, per share during the nine months ended June 30, 2008.  This increase of $63,240, or 3%, related to the changes in gross profit, general and administrative expenses, and other expenses as described above.

Liquidity, Capital Resources and Operations:

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 fiscal 2009. 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.

During the nine months ended June 30, 2009, net cash used by operating activities was $297,267 and the Company incurred a net loss of $847,755. Additionally, at June 30, 2009, the Company had negative working capital of $750,506 and a stockholders’ deficit of $912,531. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

4

The Company recognizes 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 calendar 2009 and 2010 while maintaining reasonable levels general and administrative expenses.

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Not applicable as we are a smaller reporting company.

Item 4. 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 report on Form 10-Q.  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 report on Form 10-QSB is consistent with that in the financial statements.

5

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.

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 assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2009.  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 effective internal control over financial reporting as of June 30, 2009.

Based on this evaluation, management and the officers of the company concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by our company in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms.  Additionally, management and the chief executive officer/chief financial officer concluded that our company's disclosure controls and procedures were effective 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.

During the nine months ended March 31, 2009 we have instituted additional levels of review and have retained the services of additional financial professionals with the requisite background and experience that coordinate and are 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.

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Part II.  Other Information

Item 1.        LEGAL PROCEEDINGS

None

Item 1A.     RISK FACTORS

There have been no material changes to the risk factors disclosed in our report on Form 10-K for the year ended September 30, 2008.

Item 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

Item 3.        DEFAULTS UPON SENIOR SECURITIES

None

Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

Item 5.        OTHER INFORMATION

None

Item 6.  Exhibits

Index to Exhibits:

SEC
REFERENCE
NUMBER	TITLE OF DOCUMENT
31.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted, Pursuant to section 906 of the Sarbanes-Oxley act of 2002
31.2	Certifications pursuant to 18 U.S.C. Section 1350, as adopted, Pursuant to section 906 of the Sarbanes-Oxley act of 2002
32.1	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

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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: August 14, 2009	XIOM Corp.
	/s/ Andrew B. Mazzone
	Andrew B. Mazzone
	Chief Executive Officer/Chief Financial/Accounting Officer
	(Principal Executive Officer)

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