Environmental Infrastructure (EIHC) 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

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

For the quarterly period ended June 30, 2010

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: 333-124704

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. Employer
or 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)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o      NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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  o  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 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 Exchange Act).   YES ¨      NO x

Number of shares of Environmental Infrastructure Holdings Corp.. Common Stock, $.001 par value, outstanding as of July 31, 2010: 44,422,309

ENVIROMENTAL INFRASTRUCTURE HOLDINGS CORP.

Form 10-Q

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1	Financial Statements:
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Notes to Consolidated Financial Statements	5
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	8
Item 4	Controls and Procedures	10
Item 4T	Controls and Procedures	10
PART II.	OTHER INFORMATION
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 4	Submission of Matters to a Vote of Security Holders
SIGNATURES		20

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Part I – FINANCIAL INFORMATION

Item 1. – FinancialStatements

Environmental Infrastructure Holdings Corp

Consolidated Balance Sheets

	(unreviewed)			(unaudited)
	June 30, 2010			December 31, 2009
ASSETS
Current Assets
Cash and cash equivalents		29,670			245,780
Accounts Receivable, net of allowance for doubtful accounts		491,373			760,871
Inventory		333,694			351,488
Prepaid expenses		17,650			30,465
Other current assets		2,000			2,000
Total Current Assets		874,387			1,390,604
Fixed Assets, net of accumulated depreciation		164,633			176,854
Assets of discontinued operations held for sale
Other Assets
Intangible assets, net of valuation reserve		290,315			305,315
Retainage receivable		51,851			51,851
Security deposits		11,445			11,445
Total Other Assets		353,611			368,611
Total Assets		1,392,631			1,936,069
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable		821,577			899,825
Line of credit		400,780			550,000
Accrued expenses		334,853			297,415
Accrued compensation		150,000			150,000
Accrued interest		777,504			455,551
Notes payable, net of discount		2,140,748			2,195,004
Total Current Liabilities		4,625,462			4,547,795
LIABILITIES OF DISCONTINUED OPERATION HELD FOR SALE
LONG TERM LIABILITES		275,264			286,356
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock (50,000,000 shares authorized, 44,422,309 outstanding)		4,822			4,181
Additional paid in capital		5,865,079			557,611
Retained earnings		(9,377,996	)		(8,495,848	)
Total Company Deficit
Noncontrolling interest
Total Stockholders' Deficit		(3,508,095	)		(7,934,056	)
Total Liabilities and Stockholder's Deficit		1,392,631			(3,099,905	)

See accompanying notes to these consolidated financial statements.

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Environmental Infrastructure Holdings Corp

Consolidated Statements of Operations

(unreviewed)

	Three Months ended						Six Months ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Revenues		999,566			1,059,518			1,838,039			2,526,519
Cost of Revenues		454,544			984,906			936,168			1,642,536
Gross Profit		545,022			74,612			901,871			883,983
		55	%		7	%		49	%		35	%
Operating Expenses
Selling, General & Administrative Expenses		642,148			182,144			1,447,703			1,154,123
Impairment of goodwill		-						-
Operating Income (Loss)		(97,126	)		(107,532	)		(545,832	)		(270,140	)
Other Income (Expense)
Interest Income		12			23			151			35
Interest Expense		(124,403	)		(20,397	)		(322,611	)		(31,739	)
					39,231						39,231
Income (loss) from		(221,517	)		(127,906	)		(868,292	)		(301,844	)
Income tax provision		-			-			-			-
Income from Continuing Operations		(221,517	)		(127,906	)		(868,292	)		(301,844	)
Income from Discontinued Operations, net of tax		-			(21,395	)		-			(21,395	)
Net Income (loss)		(221,517	)		(149,301	)		(868,292	)		(323,239	)

See accompanying notes to these consolidated financial statements.

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ENVIROMENTAL INFRASTRUCTURE HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unreviewed and Unaudited)

1. Description of Company and Basis of Preparation

Environmental Infrastructure Holdings Corp (“EIHC”, or the “Company”), was incorporated in Delaware on November 5, 2009. The Company was formed to be the holding company of XIOM Corp. and its subsidiaries.  See “Reorganization” below.  The Company is the successor issuer of XIOM for purposes of the Securities Act of 1933, as amended, and the filings made by XIOM thereunder.  Pursuant to Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), the Company is the successor issuer of XIOM with respect to XIOM Common Shares, which were registered pursuant to Section 12(g) of the Act. Pursuant to such rule, the Company Common Shares may be deemed to be registered pursuant to Section 12(g) of the Act.

Reorganization

On December 7, 2009, XIOM 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”).

In December 2009, Equisol was acquired by EIHC. EIHC issued 18,563,693 shares to the owners of Equisol, LLC and committed to issue 7,751,609 additional shares so that the owners of Equisol, LLC would own 40% of the fully diluted shares of EIHC. Because outstanding shares were 23,247,407 at the time of the acquisition, the sellers received the equivalent of 53% of the outstanding shares of EIHC. In addition, the most of the board members and management of EIHC resigned at the time of the acquisition. Accordingly, the acquisition was accounted for as a reverse merger of EIHC into Equisol. Results of operations prior to the merger presented in these financial statements are those of Equisol, LLC. Equisol’s equity prior to the merger has been retroactively restated for the equivalent number of shares received in the merger. As part of the merger agreement, Equisol spun off to its members a wholly-owned subsidiary as of December 7, 2009. As a result, this subsidiary has been accounted for as a discontinued operation in the comparative financial statements. Also, in connection with the merger, the Company’s fiscal year end was changed from September 30th to December 31st.

The consolidated balance sheets at June 30, 2010 include the accounts of EIHC and its wholly-owned subsidiaries Equisol LLC (“Equisol”), and XIOM Corp. (“Xiom”). The consolidated statements of operations and cash flows for the three- and six-months ended June 30, 2010  include the accounts of EIHC, Equisol, and Xiom. Consistent with the reverse merger acquisition accounting, the consolidated balance sheets at June 30, 2010 include the accounts of EIHC, Equisol and XIOM. The consolidated statements of operations and cash flows for the three- and six-months ended June 30, 2009 include the accounts of Equisol and the discontinued operation. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has experienced negative cash flows from operations since the acquisition and had an accumulated deficit at June 30, 2010 of approximately $ 9.4 million.

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Management’s plan

Management will not be able to meet its operating cash flow requirements using cash on hand or existing debt facilities. The Company’s XIOM subsidiary is experiencing losses, and has not been able to pay its notes payable as they became due. The Company needs to raise additional funds to complete the commercialization of XIOM’s product line, and to restructure XIOM’s debt.

There are no assurances that such additional funding will be achieved and that the Company will succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be forced to restructure its XIOM subsidiary.

The unaudited consolidated financial statements and notes are presented as permitted by Form 10-Q.  These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles, have been omitted pursuant to such SEC rules and regulations.  The accompanying consolidated financial statements at June 30, 2010 and for the three- and six-month periods ended June 30, 2010 and 2009 are unaudited, but include all adjustments, consisting of normal recurring entries, which the Company’s management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet as of December 31, 2009, is derived from unaudited statements included in the Company’s Form 10-K filed with the SEC on April 15, 2010. The consolidated financial statements should be read in conjunction with the Company’s unaudited consolidated financial statements in that Form 10-K. The Company’s operating results will fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.

2. Loss Per Share

The Company’s net loss for the three months ended June 30, 2010 and 2009, were $428,287 and $188,048, respectively.

Weighted Average Number of shares deemed to be outstanding for the three months ended June 30, 2009	13,159,513
Weighted Average number of shares deemed to be outstanding for the period from June 30, 2009 to the acquisition date of December 7, 2009 (that is, the number of common shares issued by XIOM (the legal parent, accounting acquirer in the reverse acquisition)	18,084,450
Weighted average number of shares outstanding from the acquisition date to June 30, 2010	41,811,000
Weighted-average number of common shares outstanding for the three months ended June 30, 2010	42,482,541
Weighted-average number of common shares outstanding for the six months ended June 30, 2010	44,442,829

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Basic and diluted loss per common share are computed based on the weighted average number of common shares outstanding.  Common share equivalents (which consist of options and warrants) are excluded from the computation of diluted loss per share when the effect would be antidilutive.

3.           Intangible Assets

 The patents pending and technology acquired are amortized using the straight-line method over their estimated economic life of seventeen (17) years. The trade name and customer names are amortized over 10 years.

During fiscal 2009 and earlier, 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 $7,851 in fiscal 2009.

As previously disclosed, the company’s XIOM subsidiary received a letter on December 22, 2009 from certain of its noteholders notifying XIOM of an Event of Default and demanding repayment in full, along with accrued and unpaid interest. XIOM does not have sufficient funds to repay the notes, and it is the position of management that EIHC is not responsible for the debt. Discussions with the note holders for a resolution are continuing.

4.      ��    Income Taxes

As of December 31, 2009, the Company had net operating and capital loss carryforwards of approximately $6,634,000, which expire at various dates through 2016.

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 June 30, 2010 and 2009, the Company provided a full valuation allowance against the gross deferred tax asset arising from the net operating and capital loss carry forwards because, in management’s opinion at this time, it is more likely than not, such benefits will not be realized during the respective carryforward periods.

5.           New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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.

As of March 31, 2010, the FASB has issued Accounting Standards Updates (ASU) through No. 2010-11. None of the ASUs have had an impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In April, 2010, the FASB issued ASUs No. 2010-12 through 2010-18. In May, 2010, the FASB issued ASU No. 2009-19. The Company is currently evaluating the effect of these standards updates on its financial position and results of operations.

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Item 2. — Management’s Discussion and Analysis of Financial Condition And Results of Operations

SAFE HARBOR STATEMENT

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 19 and the Risk Factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2009.

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.

Overview

Environmental Infrastructure Holdings Corp. (“EIHC or “the Company”) was incorporated as a Delaware Corporation in December 2009. Subsequent to the incorporation, Equisol was acquired by EIHC, which was the product of a reorganization as a holding company structure whereby the operating company XIOMCorp. became a direct wholly owned subsidiary of the Company and the Company changed its name to Environmental Infrastructure Holdings Corp. EIHC issued 18,563,693 shares to the owners of Equisol, LLC and committed to issue 7,751,609 additional shares so that the owners of Equisol, LLC would own 40% of the fully diluted shares of EIHC. Because 23,247,407 shares were outstanding at the time of the acquisition, the sellers received the equivalent of 53% of the outstanding shares of EIHC. In addition, the board members and management of EIHC resigned at the time of the acquisition. Accordingly, the acquisition was accounted for as a reverse merger of EIHC into Equisol. Results of operations prior to the merger presented in these financial statements are those of Equisol, LLC. Equisol’s equity prior to the merger has been retroactively restated for the equivalent number of shares received in the merger. As part of the merger agreement, Equisol spun off to its members a wholly-owned subsidiary as of December 7, 2009. As a result, this subsidiary has been accounted for as a discontinued operation in the comparative financial statements. Also, in connection with the merger, the Company’s fiscal year end was changed from September 30th to December 31st.

Critical Accounting Policies

Our 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 consolidated financial statements requires us 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, we evaluate our estimates based upon historical experience and 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. Our actual results may differ materially from these estimates.

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We believe our critical accounting policies affect our more significant estimates and judgments used in the preparation of our consolidated financial statements.  Our Annual Report on Form 10-K for the year ended December 31, 2009 contains a discussion of these critical accounting policies. There have been no significant changes in our critical accounting policies since December 31, 2009, except as noted below.  See our Note 1 to our unaudited consolidated financial statements for the three and six months ended June 30, 2010, as set forth herein, and our Note 4 of those financial statements for the summary of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Results of Operations

We recorded net losses of $ 221,517 and $149,301  for the three month periods ended June 30, 2010 and 2009, and $868,292 and $323,239 for the six month periods ended June 30, 2010 and 2009. Our net loss in the first half increased over last year as a result of the reverse acquisition. EIHC expenses and the loss from XIOM in the three and six months of 2010 aggregated to $221,961 and $ 863,550. The results of operations at Equisol swung from a loss of $60,847 and $249,447 in the three and six months ended June 30,  2009 to a profit of $7,472 and a loss of $ 54,244 in the three and six months ended June 30, 2010. In the second quarter 2010, the Company focused on completing the integration of its two acquisitions and began to establish its corporate infrastructure. Management intends to continue to consolidate and improve the operational efficiency of its entities and hopes to begin its planned acquisition strategy later in the year.

Revenues decreased from $1,059,000 to $999,000 in the current quarter versus last year, and $2,526,000 to $1,838,000 in the first half of last year to this year as a result of the economic downturn, and the decision by Equisol to exit several low profitability lines such as residential and commercial electrical and instrumentation work. For this year, Equisol’s customers are re-engaging their delayed contracts and they are seeing significantly increased quote and bid volume going into the third quarter. Gross margins improved from 7% in last year’s second quarter to 55% in the this year’s second quarter, and from 35% in last year’s first half to 49% in this year’s first half.

Selling, general, and administrative expenses increased from $182,144 in the second quarter of 2009 to $642,148 in the second quarter of 2010. XIOM accounted for $147,000 of the current quarter  2010 selling, general, and administrative expenses. Equisol selling, general, and administrative expenses were $305,000, a decrease of $150,000 from last year’s second quarter, primarily as a result of reductions in personnel-related costs.

Liquidity and Capital Resources

At June 30, 2010, we had cash and cash equivalents of $29,670 compared to $246,000 at December 31, 2009. Working capital was a negative $3,751,000 at June 30, 2010, compared to negative working capital of $3,157,000 at December 31, 2009. To date, we have funded our operations, including our research and development activities, through funds derived from several private placements of an aggregate of approximately $3.5 million of equity securities and convertible debt issues.

Based on our current plan of operations and the cash on hand, we believe that our current cash balances will not be sufficient to fund operations through December 31, 2010. Our subsidiary, XIOM does not have the cash to pay the convertible notes which are currently in default.

As of June 30, 2010, we had an accumulated deficit of approximately $9.4 million. Our ability to continue our operations as a going concern is subject to our ability to obtain required additional capital to fund our operations until our sales efforts result in positive cash flow, and there can be no assurance that we will be able to do so.

As of June 30, 2010, we had short-term debt obligations of our XIOM subsidiary with a face value of $850,000 which have matured and not been paid and an additional $820,000 have been declared in default by the note holders. We have no capital lease obligations, no operating lease obligations other than the rent on the premises we occupy, and no material purchase obligations.

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We do not believe that inflation has had a material impact on our business or operations.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements, and we do not engage in trading activities involving non-exchange traded contracts.  In addition, we have no financial guarantees, debt or lease agreements or other arrangements that could trigger a requirement for an early payment or that could change the value of our assets, other than those disclosed above.

Item 4 - Controls and Procedures

Item 4T — Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of June 30, 2010, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on such evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in InternalControl Over Financial Reporting

During the quarter ended June 30, 2010, there were no changes in internal controls over financial reporting which materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II— OTHER INFORMATION

Item 1 – Legal Proceedings

Noteholders of the Company’s XIOM subsidiary holding notes with a face value of $820,000 have issued a notice of default.

Item 1A – Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, subsection “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 which could materially affect our business, financial condition, or future results of operations.  The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and future results of operations.  Other than as set forth below, there have been no material changes from the risk factors previously disclosed in Item 1A, subsection “Risk Factors” to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

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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 June 30, 2010, we had an accumulated deficit of $9.4 million, and may incur additional losses in 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.

Management expects that our independent registered public auditors will issue their report for the fiscal year ended December 31, 2009, with a “going concern” explanatory paragraph.

Our independent registered public auditors have not yet issued their report on their audit of our financial statements as of and for the fiscal year ended December 31, 2009. We expect that the independent registered auditor’s report will contain 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.

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. In March 2010, we issued 1,880,000 shares to investors in a private placement of our common stock.

Our subsidiary, XIOM Corp., is unable to pay $850,000 of convertible notes which have matured and has been declared in default by note holders holding an additional $820,000 of convertible notes.

As previously disclosed,the company’s XIOM subsidiary received a letter on December 22, 2009 from certain of its note holders notifying of an Event of Default and demanding repayment in full, along with accrued and unpaid interest. XIOM does not have sufficient funds to repay the notes. Discussions with the note holders for a resolution are continuing, but there is no assurance that a resolution can be reached. 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.

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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;

•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, or to extend the terms of any existing collaboration agreements, and our payment obligations, expected revenue and 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 and

development expenditures.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

On February 18, 2010, we issued 456,309 shares in a cashless exercise of stock options. On March 1, 2010, we issued 25,000 shares to a noteholder as part of the terms of the note. On March 18, 2010, we issued 1,880,000 shares to a group of investors in a private placement. On March 30, 2010, we issued 250,000 shares in a cashless exercise of stock options.

Item 3. – Defaults

Our subsidiary, XIOM Corp has been declared in default by note holders of $820,000 of its convertible debt.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ENVIRONMENTAL INFRASTRUCTURE HOLDINGS CORP.

(Registrant)

Date:	August 23, 2010	By:	/s/ Michael D. Parrish
			Michael D. Parrish
			Chief Executive Officer
			(duly authorized officer and principal
			executive officer)

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