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EX-31.2 - Environmental Infrastructure Holdings Corpex31-2.htm
EX-32.2 - Environmental Infrastructure Holdings Corpex32-2.htm
EX-31.1 - Environmental Infrastructure Holdings Corpex31-1.htm
EX-32.1 - Environmental Infrastructure Holdings Corpex32-1.htm


t
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-K
 

 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
For the fiscal year ending December 31, 2011
 
o 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 or organization)
 
(I.R.S. Employer 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: None
 
Securities registered under Section 12(g) of the Exchange Act:
Common Share, Par Value, $.0001
(Title of Class)
 
Securities registered under Section 12(g) of the Exchange Act:  None
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No x
 
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 o
 
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 o No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
Indicate by check mark whether the registrant is 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.
 
 Large accelerated filer: o
 Accelerated filer: o
 Non-accelerated filer: o
 Smaller reporting company: x
(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 Act).  Yes o No x
 
Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter: $2,293,574 on June 30, 2011

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date. There were 1,129,729 shares of the Company's common stock and 6,948,810 shares of the Company’s preferred stock outstanding on April 16, 2012.

DOCUMENTS INCORPORATED BY REFERENCE:  None.
 
 
 
ENVIRONMENTAL INFRASTRUCTURE HOLDINGS CORP.
ANNUAL REPORT ON FORM 10-K

For Year Ended December 31, 2011

INDEX

   
Page No:
     
PART I
 
 
     
ITEM 1.
4
ITEM 1A
7
ITEM 2.
17
ITEM 3.
17
ITEM 4.
18
     
PART II
 
 
     
ITEM 5.
19
ITEM 6
21
ITEM 7.
21
     
ITEM 8.
F-1
ITEM 9.
26
ITEM 9A(T).
26
ITEM 9B.
26
     
PART III
 
29
     
ITEM 10.
27
ITEM 11.
28
ITEM 12.
29
ITEM 13.
30
ITEM 14.
30
     
PART IV
   
     
ITEM 15.
31
     
Signatures
 
32
 


 
ENVIRONMENTAL INFRASTRUCTURE HOLDINGS CORP.

INTRODUCTORY COMMENT

Throughout this Annual Report on Form 10-K, the terms "we," "us," "our," and "our company" refer to ENVIRONMENTAL INFRASTRUCTURE HOLDINGS CORP. ("EIHC"), a Delaware corporation and, unless the context indicates otherwise, includes our wholly-owned subsidiary Equisol, LLC (“Equisol.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This document contains forward-looking statements, which reflect the views of our management with respect to future events and financial performance. These forward-looking statements are subject to a number of uncertainties and other factors that could cause actual results to differ materially from such statements. Forward-looking statements are identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "targets" and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which are based on the information available to management at this time and which speak only as of this date. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under "Risk Factors" beginning on page 7.

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

PART I

Item 1.  BUSINESS


ABOUT OUR COMPANY

EIHC Merger Co. was formed on November 5, 2009 as a wholly owned subsidiary of XIOM. On December 7, 2009 XIOM and EIHC Merger Co., executed an Agreement and Plan of Merger (the “Plan”) pursuant to Section 251(g) of the Delaware General Corporation Law. Pursuant to the plan, XIOM was repositioned as a wholly owned subsidiary of EIHC Merger Co.. EIHC Merger Co., then changed its name to Environmental Infrastructure Holdings Corp. (“EIHC” or the “Company”).

The Company is the successor issuer of XIOM for purposes of the Securities Act of 1933, as amended, and the filings made by XIOM hereunder. Pursuant to Rule 12(g)-3(a) promulgated under the Securities and 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.

On December 7, 2009, EIHC acquired Equisol, LLC (“Equisol”), a Pennsylvania limited liability company established on April 25, 2003. EIHC issued 18,563,693 shares to the owners of Equisol and committed to issue 8,084,942 additional shares so that the former owners of Equisol would own 40% of the fully diluted shares of EIHC. Because outstanding shares were 24,372,407 at the time of the acquisition, the sellers received the equivalent of 52% of the outstanding shares of EIHC. In addition, 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 unaudited consolidated financial statements are those of Equisol. 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. Also, in connection with the merger, the Company’s fiscal year end was changed from September 30 to December 31.
 
 
Operations

From offices located in Pennsylvania, Texas and Louisiana, Equisol and its subsidiaries operate as an equipment solutions provider, delivering environmentally friendly products, services, and engineering solutions to customers.

On July 16, 2004, Equisol’s subsidiary PD Acquisition, LLC (“PDIR”) acquired the business and certain assets of an engineering company, Penn-Del, Inc., for a total of approximately $477,790 in cash and 25,000 Class A units of membership interest of Equisol (now 34,261 shares of EIHC Common Stock).

On March 1, 2006, Equisol’s subsidiary Gulf States Acquisition, LLC (“Gulf States”), acquired a 100% stock ownership interest in an engineering company, Gulf States Chlorinator & Pump Inc. (“GSCP”) for $350,000 in cash.

On August 29, 2007, Equisol’s subsidiary Gulf States Acquisition, LLC acquired a 100% stock ownership in an engineering company, Electrical & Instrumentation, Inc. (“E&I”), for 104,607 Class A Units of membership interest of Equisol (now 143,359 shares of EIHC common stock). Thereafter, the acquired company’s operations were included with Equisol’s operations and the acquiree filed a final income tax return for the period January 1, 2007 to August 29, 2007. In February 2010, the E&I division of Equisol ceased operations (see Note 7).

In November 2010, the Board of Directors of EIHC determined that it was in the best interest of the stockholders to dispose of the XIOM subsidiary. Accordingly, the assets and liabilities of XIOM have been shown as held for sale in the accompanying unaudited consolidated financial statements. Efforts to sell the XIOM subsidiary were unsuccessful, and on March 25, 2011, XIOM filed a voluntary petition in the United States Bankruptcy Court – District of Delaware under Chapter 7 of the United States Bankruptcy Code requesting liquidation of the assets and liabilities of XIOM Corp. On October 13, 2011, the U.S. Bankruptcy Court approved the trustees report of no distribution and abandonment of Xiom’s assets and closed the bankruptcy proceedings the effect of which on the consolidated financials of the Company is the cancellation of 5,305,000 Xiom options and 3,653,916 Xiom warrants, and a net profit gain of $2,551,066, all attributed to the discontinued operation.
 
Subsequent Events

On February 1 2012, the Company initiated a 1:200 reverse split of its common stock.

Description of Our Company

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

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

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

Sales - Access to a wide range of products that represent the best available technology in the water industry. Equisol’s model is unique because Equisol can procure from many different suppliers instead of being tied to a few key principle suppliers that may not have the best solution for an application. Equisol can sell complete equipment systems, basic Maintenance, Repair, and Operations (MRO) components, or spare parts depending upon the need of a customer.
 
 
Fabrication - In order to eliminate the need to build equipment systems on-site from many different pieces and parts, Equisol can have systems fabricated as a complete turn-key skid and delivered to the plant. This provides a way to test the equipment prior to delivery and decrease the time needed for installation. Complete documentation, drawings, and system P&IDs are provided for each system.

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

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

Where you can find us

Our corporate offices are located at Four Tower Bridge, 200 Barr Harbor Drive, Ste. 400,West Conshohocken, PA  19428.The main telephone number is (866) 629-7646. Any information contained on our website should not be considered as part of this prospectus.  The information contained on our website is used for disseminating sales and marketing purposes.

BUSINESS OF THE COMPANY – PRINCIPAL PRODUCTS AND SERVICES

Environmental Infrastructure Holdings Corp was founded to acquire and manage diverse entities and subsidiaries specializing in environmentally related companies focused on the improvement of our nation’s and world’s infrastructure.  Currently the company has one wholly owned subsidiary in Equisol, LLC.
 
 Equisol, LLC was founded to address the recurring need of industrial and commercial businesses to maximize efficiencies and meet environmental compliance requirements.  These include the need to accurately treat their water and process systems through filtration and/or chemical injection as well as comply with the Clean Air and Clean Water Acts through air and monitoring.  Equisol is a nationally recognized equipment solutions provider delivering environmentally friendly products, services and engineering solutions to our customers.  Specializing in the Water & Wastewater Industry, the company provides:
 
·  
Turnkey Solutions
 
·  
Systems design, fabrication, and sales
 
·  
Equipment and Systems Service and Repair
 
·  
Optimization, Calibration & Maintenance
 
·  
24 Hour Environmental Engineering and Consulting
 
Equisol’s primary customer is the industrial end user; the Company works in conjunction with water treatment chemical companies, industry consultants, original equipment manufacturers (OEMs) and equipment distributors to market its services and expand its customer base.  Equisol’s major customers are refineries, power plants, engineering firms, and manufacturing facilities in addition to supporting commercial, municipal, as well as governmental facilities.  Additionally, the top five major water treatment companies, including GE, Nalco, and Siemens, now use Equisol to support their equipment needs.  Currently, the company has approximately 10 teammates, the majority of which are in the Gulf Coast Region between Houston and New Orleans and all have significant experience in the industry, specifically with electrical, mechanical, instrumentation skills.  The company’s other geographical strength is in the New York to DC corridor.  Because of the company’s national focus, Equisol has been able to compete and win at the corporate level in addition to our successes at the local, plant level.  Our competition are the billion dollar engineering firms and the thousands of small, regional, mom & pop firms (which we consider potential acquisition targets). Equisol has grown rapidly through acquisitions and organic growth.  Equisol was selected by Entrepreneur Magazine as one of the nation’s Top 100 Fastest Growing New Entrepreneurial Companies for 2004. According to Inc.com Magazine, the company was the 7th fastest growing privately held environmental services company in America for 2008, when it was the 601st fastest growing privately held company and we expect that ranking to continue to improve, as it did from 2007, when Equisol was the 620th fastest growing privately held company. The Entrepreneurs Forum of Greater Philadelphia named Equisol, LLC to the Philly 100 list of fastest growing companies in the region in 2009.
 
 
While Equisol sells nationally and has worked in most states, Canada, and internationally, part of the Company’s growth needs are to acquire on-site assets in the West and strengthen our Midwest and Southeast presence.
 
Employees:

As of December 31, 2011, we employed approximately 12 people.  None of our employees are covered by collective bargaining agreements.  We believe that our relations with our employees are good.

Item 1A. RISK FACTORS

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

If we are unable to effectively address these risks and uncertainties, our business, financial condition or results of operations could be materially and adversely affected.  In this event, the value of our common stock could decline and you could lose part or all of your investment.
 
Risks Related To Our Business
 
EIHC has incurred losses since inception and expects to incur significant net losses in the foreseeable future and may never become profitable.

Since our inception, we have incurred significant losses and negative cash flows from operations. As of December 31, 2011, we had an accumulated deficit of $9.6 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.
 
Our independent registered public auditors issued their report for the fiscal year ended December 31, 2011, with a “going concern” explanatory paragraph.
 
Our independent registered public auditors issued their report on their audit of our financial statements as of and for the fiscal year ended December 31, 2011. The independent registered auditor’s report contains an explanatory paragraph indicating that the net losses we have incurred and our working capital deficit raise substantial doubt about our ability to continue as a going concern. Our going concern uncertainty may affect our ability to raise additional capital, and may also affect our relationships with suppliers and customers. Investors should carefully read the independent registered public auditor’s report and examine our financial statements.
 
 
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.
 
We continue to need to obtain significant additional capital to fund our operations, and we may be unable to obtain such financing at all or on acceptable terms.  If we are unable to obtain the funds necessary to do so, we may be required to delay, scale back or eliminate our product development or may be unable to continue our business.
 
The development of our products will require a commitment of substantial funds, to conduct the costly and time-consuming research, necessary to fully commercialize our products. Our future capital requirements will depend on many factors, including:

•the cost of prosecuting, defending and enforcing patent claims and other intellectual property rights;
•the cost of manufacturing our products;
•competing technological and market developments; and
•our ability to establish and maintain collaborative and other arrangements with third parties to assist in bringing our products to market and the cost of such arrangements.

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

•we incur unexpected costs in completing the development of our technology or encounter any unexpected
technical or other difficulties;
•we incur delays and additional expenses as a result of technology failure;
•we are unable to create a substantial market for our product and services; or
•we incur any significant unanticipated expenses.

Failure to successfully address ongoing liquidity requirements will have a material adverse effect on our business.  If we are unable to obtain additional capital on acceptable terms when needed, we may be required to take actions that harm our business and our ability to achieve cash flow in the future, including possibly the surrender of our rights to some technologies or product opportunities, curtailing or ceasing operations.
 
 
We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely affect our ability to develop and commercialize our products.
 
Our technological strategy includes developing our powder technology as well as establishing collaborations and licensing agreements with other companies. We may not be able to maintain or expand these licenses and collaborations or establish additional licensing and collaboration arrangements necessary to develop and commercialize our products. Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our ability to develop, test and market our products.  Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our products.
 
We expect to rely at least in part on third-party collaborators to perform a number of activities relating to the development and commercialization of our products, including the manufacturing of product materials and the design for our products.  Our collaborative partners may also have or acquire rights to control aspects of our product development.  As a result, we may not be able to conduct these programs in the manner or on the time schedule we currently contemplate. In addition, if any of these collaborative partners withdraw support for our programs or products or otherwise impair their development, our business could be negatively affected.  To the extent we undertake any of these activities internally, our expenses may increase.
 
In addition, our success depends on the performance of our collaborators of their responsibilities under these arrangements.  Some potential collaborators may not perform their obligations in a timely fashion or in a manner satisfactory to us.  Because such agreements may be exclusive, we may not be able to enter into a collaboration agreement with any other company covering the same field during the applicable collaborative period.  In addition, our collaborators’ competitors may not wish to do business with us at all due to our relationship with our collaborators.  If we are unable to enter into additional product discovery and development collaborations, our ability to sustain or expand our business will be significantly diminished.
 
If we are unable to create and maintain sales, marketing and distribution capabilities or enter into agreements with third parties to perform those functions, we will not be able to commercialize our products.
 
We currently have limited sales, marketing or distribution capabilities.  Therefore, to commercialize our products, if and when such products are ready for marketing, we expect to collaborate with third parties to perform these functions.  We have limited experience in developing, training or managing a sales force and will incur substantial additional expenses if we decide to market any of our future products directly.  Developing a marketing and sales force is also time consuming and could delay launch of our future products.  In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations.  Our marketing and sales efforts may be unable to compete successfully against these companies.
 
The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations.
 
The industry in which we operate is highly competitive and influenced by the following:

•advances in technology;
•new product introductions;
•evolving industry standards;
•product improvements;
•rapidly changing customer needs;
•intellectual property invention and protection;
•marketing and distribution capabilities;
•competition from highly capitalized companies;
•ability of customers to invest in information technology; and
•price competition.
 
We can give no assurance that we will be able to compete effectively in our markets.  Many of our competitors have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise, sales and marketing resources, established relationships with business and consumer products companies and production facilities than us.
 
 
We may encounter difficulties managing our growth, which could adversely affect our business.
 
Our strategy includes entering into and working on simultaneous technology discovery and development programs across multiple markets as well as acquiring potential new sales channels and geographic businesses.  We expect to continue to grow to meet our strategic objectives.  If our growth continues, it will continue to place a strain on us, our management and our resources.  Our ability to effectively manage our operations, growth and various projects requires us to continue to improve our operational, financial and management controls, reporting systems and procedures, and to attract and retain sufficient numbers of talented employees.  We may not be able to successfully implement these tasks on a larger scale and, accordingly, we may not achieve our research, development and commercialization goals.  If we fail to improve our operational, financial and management information systems, or fail to effectively monitor or manage our new and future employees or our growth, our business would suffer significantly.
 
Compliance with the Sarbanes-Oxley Act of 2002 will result in increased expenditures.
 
We are exposed to significant costs and risks associated with complying with increasingly stringent and complex regulation of corporate governance and disclosure standards. Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations require a growing expenditure of management time and external resources. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires management’s annual review and evaluation of our internal controls, and attestations of the effectiveness of our internal controls by our independent registered auditors.  Although we are not currently required to comply with all of the requirements of Section 404, we have begun the process of documenting and testing our internal controls. This process could result in our needing to implement measures to improve our internal controls. Any failure by us to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. This process may also require us to hire additional personnel and outside advisory services and will result in significant accounting and legal expenses.
 
Risks Related To Our Industry
 
Our products may become obsolete and unmarketable if we are unable to respond adequately to rapidly changing technology and customer demands.
 
Our industry is characterized by rapid changes in technology and customer demands. As a result, our products may quickly become obsolete and unmarketable. Our future success will depend on our ability to adapt to technological advances, anticipate customer demands, develop new products and enhance our current products on a timely and cost-effective basis. Further, our products must remain competitive with those of other companies with substantially greater resources. We may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products or enhanced versions of existing products. Also, we may not be able to adapt new or enhanced products to emerging industry standards, and our new products may not be favorably received.
 
If we are unable to attract and retain key personnel and advisors, it may adversely affect our ability to obtain financing, pursue collaborations or develop our products.
 
We are highly dependent on Michael Parrish, our chairman and chief executive officer, Kurt Given, the CEO of our subsidiary, Equisol, LLC, and Don Gibson and Michael Cooper, President of our subsidiary, Equisol, LLC and President of Equisol Energy Services, LLC respectively.  Our future success depends on our ability to attract, retain and motivate highly qualified management and scientific, development and commercial personnel and advisors.  To pursue our business strategy, we will need to hire or otherwise engage qualified personnel and managers, including personnel with expertise in discovery, development, manufacturing, marketing and sales.  Competition for qualified personnel is intense among companies, academic institutions and other organizations.  If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test and commercialize our products and could have a material adverse effect on our proposals, financial condition and results of operations.
 
We may be sued for product liability, which could adversely affect our business.
 
Because our business strategy involves the development and sale by either us or our collaborators of commercial products incorporating our powder coating technology, we may be sued for product liability. We may be held liable if any product we develop and commercialize, or any product our collaborators commercialize that incorporates any of our technology, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or consumer use.
 
 
If we and our collaborators commence sale of commercial products we will need to obtain additional product liability insurance, and this insurance may be prohibitively expensive, or may not fully cover our potential liabilities.  Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of products developed by us or our product discovery and development collaborators.  We may be obligated to indemnify our product discovery and development collaborators for product liability or other losses they incur.  Any indemnification we receive from such collaborators for product liability that does not arise from our technology may not be sufficient to satisfy our liability to injured parties. If we are sued for any injury caused by our products or products incorporating our technology or any other products we develop, our liability could exceed our total assets.
 
Risks Related To Intellectual Property and Technology
 
If our products are not effectively protected by valid, issued patents or if we are not otherwise able to protect our proprietary information, it could harm our business.
 
The success of our operations will depend in part on our ability and that of our licensors to:

•obtain any necessary patent protections for new technologies both in the United States and in other countries with substantial markets;
•defend patents once obtained;
•maintain trade secrets and operate without infringing upon the patents and proprietary rights of others; and
•obtain appropriate licenses upon reasonable terms to patents or proprietary rights held by others that are
necessary or useful to us in commercializing our technology, both in the United States and in other countries with substantial markets.

In the event we are not able protect our intellectual property and proprietary information, our business will be materially harmed.
 
We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive position.
 
In addition to any patents that we may apply for in the future, we will substantially rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.  However, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology.  To protect our trade secrets, we may enter into confidentiality agreements with employees, consultants and potential collaborators.  However, these agreements may not provide meaningful protection of our trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information.  Likewise, our trade secrets or know-how may become known through other means or be independently discovered by our competitors.  Any of these events could prevent us from developing or commercializing our products.
 
 
Our ability to compete in the environmental services market may decline if we do not adequately protect our proprietary technologies.
 
Because of the substantial length of time and expense associated with the development of new products, we, along with the rest of the industry, place considerable importance on obtaining and maintaining patent protection for new technologies, products and processes.  Our success will depend in part on our ability to obtain and maintain intellectual property that protects our technologies and technology products.  Patent positions may be highly uncertain and may involve complex legal and factual questions for which we seek patent protection.  No consistent standard regarding the allowance or enforceability of claims in many of our pending patent applications has emerged to date.  As a result, we cannot predict the breadth of claims that will ultimately be allowed in any future patent applications, if any, including those we have in-licensed or the extent to which we may enforce these claims against our competitors. The degree of future protection for our proprietary rights is therefore highly uncertain and we cannot assure you that:

•we will be the first to file patent applications or to invent the subject matter claimed in patent applications that we file, if any, which relate to the technologies upon which we rely;
•others will not independently develop similar or alternative technologies or duplicate any of our
technologies;
•any of our potential patent applications will result in issued patents;
•any of our potential patent applications will not result in interferences or disputes with third parties regarding priority of invention;
•any patents that may be issued to us, our collaborators or our licensors will provide a basis for commercially viable products or will provide us with any competitive advantages or will not be challenged by third parties;
•we will develop any proprietary technologies that are patentable;
•the patents of others will not have an adverse effect on our ability to do business; or
•new proprietary technologies from third parties, including existing licensors, will be available for licensing to us on reasonable commercial terms, if at all.

In addition, patent law outside the United States is uncertain and in many countries intellectual property laws are undergoing review and revision. The laws of some countries do not protect intellectual property rights to the same extent as domestic laws. It may be necessary or useful for us to participate in opposition proceedings to determine the validity of our competitors’ patents or to defend the validity of any of our or our licensor’s future patents, which could result in substantial costs and would divert our efforts and attention from other aspects of our business.
 
Technologies licensed to us by others, or in-licensed technologies, are important to our business. In particular, we depend on certain technologies relating to technology licensed to us, as well as our relationships with various communications, software and integrator companies.  In addition, we may in the future acquire rights to additional technologies by licensing such rights from existing licensors or from third parties.  Such in-licenses may be costly.  Also, we generally do not control the patent prosecution, maintenance or enforcement of in-licensed technologies.  Accordingly, we are unable to exercise the same degree of control over this intellectual property as we do over our internally developed technologies. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations, our ability to protect our proprietary information or obtain patent protection in the future may be impaired, which could have a significant adverse effect on our business, financial condition and results of operations.
 
Disputes concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and extremely costly and could delay our research and development efforts.
 
Our commercial success, if any, will be significantly harmed if we infringe the patent rights of third parties or if we breach any license or other agreements that we have entered into with regard to our technology or business.
 
We are aware of other companies and academic institutions that have been performing research in the areas of powder coating technology and water treatment.  To the extent any of these companies or academic institutions currently have, or obtain in the future, broad patent claims, such patents could block our ability to use various aspects of our discovery and development process and might prevent us from developing or commercializing newly discovered technologies or otherwise conducting our business.  In addition, it is possible that some of the new technologies that are discovered using our technology may not be patentable or may be covered by intellectual property of third parties.

 
We are not currently a party to any litigation, interference, opposition, protest, reexamination or any other potentially adverse governmental, ex parte or inter-party proceeding with regard to our patent or trademark positions.  However, the technology industries are characterized by extensive litigation regarding patents and other intellectual property rights.  Many technology companies have employed intellectual property litigation as a way to gain a competitive advantage.  If we become involved in litigation, interference proceedings, oppositions, reexamination, protest or other potentially adverse intellectual property proceedings as a result of alleged infringement by us of the rights of others or as a result of priority of invention disputes with third parties, we might have to spend significant amounts of money, time and effort defending our position and we may not be successful.  In addition, any claims relating to the infringement of third-party proprietary rights or proprietary determinations, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert management’s attention and resources, or require us to enter into royalty or license agreements that are not advantageous to us.
 
Should any person have filed patent applications or obtained patents that claim inventions also claimed by us, we may have to participate in an interference proceeding declared by the relevant patent regulatory agency to determine priority of invention and, thus, the right to a patent for these inventions in the United States.  Such a proceeding could result in substantial cost to us even if the outcome is favorable.  Even if successful on priority grounds, an interference action may result in loss of claims based on patentability grounds raised in the interference action.  Litigation, interference proceedings or other proceedings could divert management’s time and efforts.  Even unsuccessful claims could result in significant legal fees and other expenses, diversion of management’s time and disruption in our business.  Uncertainties resulting from initiation and continuation of any patent proceeding or related litigation could harm our ability to compete and could have a significant adverse effect on our business, financial condition and results of operations.
 
An adverse ruling arising out of any intellectual property dispute, including an adverse decision as to the priority of our inventions, could undercut or invalidate our intellectual property position.  An adverse ruling could also subject us to significant liability for damages, including possible treble damages, prevent us from using technologies or developing products, or require us to negotiate licenses to disputed rights from third parties.  Although patent and intellectual property disputes in the technology area are often settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and could include license fees and ongoing royalties.  Furthermore, necessary licenses may not be available to us on satisfactory terms, if at all.  Failure to obtain a license in such a case could have a significant adverse effect on our business, financial condition and results of operations.
 
Risks Related to Our Fluctuating Operating Results, Possible Acquisitions and Management of Growth
 
We expect that our results of operations will fluctuate from period to period, and this fluctuation could cause our stock price to decline, causing investor losses.
 
Our operating results could vary significantly in the future based upon a number of factors, including many factors over which we have little or no control.  We operate in a highly dynamic industry and future results could be subject to significant fluctuations.  These fluctuations could cause us to fail to meet or exceed financial expectations of securities analysts or investors, which could cause our stock price to decline rapidly and significantly.  Revenue and expenses in future periods may be greater or less than revenue and expenses in the immediately preceding period or in the comparable period of the prior year.  Therefore, period-to-period comparisons of our operating results are not necessarily a good indication of our future performance.  Some of the factors that could cause our operating results to fluctuate include:

•our ability to develop technology;
•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.
 
 
If we acquire products, technologies or other businesses, we will incur a variety of costs, may have integration difficulties and may experience numerous other risks that could adversely affect our business.
 
To remain competitive, we plan to acquire additional businesses, products and technologies and we currently are actively seeking material acquisitions that complement our business.  We have limited experience in identifying acquisition targets, successfully acquiring them and integrating them into our current infrastructure.  We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all.  In addition, future acquisitions could require significant capital infusions and could involve many risks, including, but not limited to, the following:
• we may have to issue convertible debt or equity securities to complete an acquisition, which would dilute our stockholders and could adversely affect the market price of the common stock;
• an acquisition may negatively impact our results of operations because it may require us to incur large one-time charges to earnings, amortize or write down amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or it may cause adverse tax consequences, substantial depreciation or deferred compensation charges;
•we may encounter difficulties in assimilating and integrating the business, technologies, products, personnel or operations of companies that we acquire;
•certain acquisitions may disrupt our relationship with existing collaborators who are competitive to the acquired business;
•acquisitions may require significant capital infusions and the acquired businesses, products or technologies may not generate sufficient revenue to offset acquisition costs;
•an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
•acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience; and
•key personnel of an acquired company may decide not to work for us.

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

•changes and limits in import and export controls;
•increases in custom duties and tariffs;
•changes in currency exchange rates;
•economic and political instability;
•changes in government regulations and laws;
•absence in some jurisdictions of effective laws to protect our intellectual property rights; and
•currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to the United States.
 
Any changes related to these and other factors could adversely affect our business to the extent we enter markets outside the United States.
 
 
Risks Related to our Common Stock; Liquidity Risks
 
The price of our common stock is expected to be volatile and an investment in common stock could decline in value.
 
The market price of our common stock, and the market prices in general for securities of companies in our industry, are expected to be highly volatile.  The following factors, in addition to other risk factors described in this filing, and the potentially low volume of trades in common stock, may have a significant impact on the market price of common stock, some of which are beyond our control:

•announcements of technological innovations and discoveries by us or our competitors;
•developments concerning any research and development, manufacturing, and marketing collaborations;
•new products or services that we or our competitors offer;
•actual or anticipated variations in operating results;
•the initiation, conduct and/or outcome of intellectual property and/or litigation matters;
•changes in financial estimates by securities analysts;
•conditions or trends in technology or software industries;
•changes in the economic performance and/or market valuations of other technology companies;
•our announcement of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
•additions or departures of key personnel;
•global unrest, terrorist activities, and economic and other external factors; and
•sales or other transactions involving our common stock.

The stock market in general has recently experienced relatively large price and volume fluctuations.  In particular, market prices of securities of technology companies have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies.  Continued market fluctuations could result in extreme volatility in the price of common stock, which could cause a decline in the value of common stock.  Prospective investors should also be aware that price volatility may be worse if the trading volume of common stock is low.
 
We do not expect to pay cash dividends in the foreseeable future.
 
We currently intend to retain any future earnings to finance the growth and development of our business; therefore, we do not expect to pay any cash dividends in the foreseeable future. Any future dividends will depend on our earnings, if any, and our financial requirements.
 
It is not anticipated that there will be an active public market for shares of our common stock in the near term, and you may have to hold your shares of common stock for an indefinite period of time. You may be unable to resell a large number of your shares of common stock within a short time frame or at or above their purchase price.
 
There is not an active public or other trading market for our common stock, and there can be no assurance that any market will develop or be sustained after the completion of this offering.  Because our common stock is expected to be thinly traded, an investor cannot expect to be able to liquidate its investment in case of an emergency or if it otherwise desires to do so.  Large transactions in common stock may be difficult to conduct in a short period of time.  Further, the sale of shares of common stock may have adverse federal income tax consequences.
 
 
It is more difficult for our shareholders to sell their shares because we are not, and may never be, eligible for the Nasdaq Stock Market or any National Stock Exchange.
 
We are not presently, nor is it likely that for the foreseeable future we will be, eligible for inclusion in the Nasdaq Stock Market or for listing on any United States national stock exchange.  To be eligible to be included in the Nasdaq Stock Market, a company is required to have not less than $4,000,000 of stockholders’ equity, a public float with a market value of not less than $5,000,000, and a minimum bid price of $4.00 per share. At the present time, we are unable to state when, if ever, we will meet the Nasdaq Stock Market application standards.  Unless we are able to increase our net worth and market valuation substantially, either through the accumulation of surplus out of earned income or successful capital raising financing activities, we will not be able to meet the eligibility requirements of the Nasdaq Stock Market.  As a result, it will more difficult for holders of our common stock to resell their shares to third parties or otherwise, which could have a material adverse effect on the liquidity and market price of our common stock.
 
Substantial future issuances of our common stock could depress our stock price.
 
The market price for our common stock could decline, perhaps significantly, as a result of issuances of a large number of shares of our common stock in the public market or even the perception that such issuances could occur.  Sales of a substantial number of shares of common stock, or the perception that holders of a large number of shares intend to sell their shares, could depress the market price of our common stock.
 
Directors and officers of the Company will have a high concentration of our common stock ownership.
 
Based on the aggregate number of shares of our common stock that are outstanding as of March 30, 2012, our officers and directors beneficially own approximately 52.09% of our outstanding common stock and 100% of our outstanding preferred stock.  Such a high level of ownership by such persons may have a significant effect in delaying, deferring or preventing any potential change in control of the Company.  Additionally, as a result of their high level of ownership, our officers and directors might be able to strongly influence the actions of our Board of Directors, and the outcome of actions brought to our stockholders for approval. Such a high level of ownership may adversely affect the voting and other rights of our stockholders.
 
We do not expect to make dividend payments in the foreseeable future.
 
The Company has never declared or paid any cash dividends on its common stock. For the foreseeable future, the Company intends to retain any earnings to finance the development and expansion of its business, and it does not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of the Board of Directors and will be dependent upon then existing conditions, including the Company's financial condition and results of operations, capital requirements, contractual restrictions, business prospects, and other factors that the board of directors consider relevant.
 
The bankruptcy of our wholly-owned subsidiary, XIOM Corp may have unforeseen consequences for our stock price.
 
On March 25, 2011, the XIOM Corp subsidiary of Environmental Infrastructure Holdings Corp. filed a voluntary petition in the United States Bankruptcy Court - District of Delaware under Chapter 7 of the United States Bankruptcy Code requesting liquidation of the assets and liabilities of XIOM Corp. As of the date of the filing, XIOM had estimated assets of $340,745 and liabilities of $4,044,878. As a result of the bankruptcy filing, 12 XIOM noteholders decided to exercise the convertibility provision of their notes, and entered into a Debt Conversion agreement with EIHC.  The agreements convert $1,140,373 of principal and interest into 4,561,496 shares of the Company’s common stock at a conversion price of $0.25 per share. Other noteholders may convert their XIOM notes into EIHC stock, resulting in further dilution of your shares.
 
 
The fact that we are subject to Penny Stock Regulation may make it less appealing for a broker-dealer to engage in transactions involving our securities.
 
The Commission has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker dealer must also disclose the commission payable to both the broker dealer and the registered representative, current quotations for the securities and, if the broker dealer is the sole market maker, the broker dealer must disclose this fact and the broker dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our common stock.
 
Stockholders should be aware that, according to the Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

·  
control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer;
·  
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
·  
“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
·  
excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
·  
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
·  
Our management is aware of the abuses that have occurred historically in the penny stock market.

Item 2. PROPERTY

Equisol, LLC leases approximately 2,000 square feet of manufacturing and warehouse facility in Kemah, TX pursuant to a five-year lease at $2,500 per month and a corporate office in West Conshohocken, PA for $180 per month on a two year lease. Rent expense for fiscal 2011 and 2010 was approximately $9,246 and $60,993, respectively, per annum. The manufacturing and warehouse facility is adequate for the needs of the Company at this time. However, if it were necessary to expand the manufacturing and warehouse capacity, the Company would need to relocate its facilities, at an additional cost per month. Such location would be relatively easy to locate, however the initial cost of moving might be substantial.

Item 3. LEGAL PROCEEDINGS

From time to time, the Company and its subsidiaries are parties to legal proceedings that arise in the normal course of business. We accrue for these items as losses become probable and can be reasonably estimated. While the outcome of these proceedings cannot be predicted with certainty, management believes that the outcome will not have a material adverse effect on the Company’s consolidated financial position or results of operations.
 
 
On August 4, 2010, two former officers of GSCP filed a complaint seeking to terminate their employment agreements for good cause and unspecified damages. On October 5, 2010, Equisol filed a Reconventional Demand against the former officers alleging, among other things, breach of contract and amended the same on October 27, 2010. Discovery has been initiated and depositions are ongoing. GSCP revenues during the first three quarters ended September 30, 2011 were much lower than those experienced in any quarter of the year ended December 31, 2010 as GSCP has implemented a new gross profit pricing strategy for customers.
 
The Company had been a party to an action commenced against EIHC and its subsidiary XIOM relating to defaulted notes of XIOM with a face value totaling $820,000. On or about November 18, 2010, the plaintiffs filed for a stipulation of dismissal. On March 25, 2011, XIOM filed for bankruptcy protection. Also on March 25, 2011, the noteholders representing the $820,000 executed Conversion Agreements with EIHC and XIOM to convert their notes payable and accrued interest into common stock in full and complete satisfaction of the notes. On April 6, 2011, 4,561,496 shares were issued. On October 13, 2011, the U.S. Bankruptcy Court approved the trustees report of no distribution and abandonment of Xiom’s assets and closed the bankruptcy proceedings the effect of which on the consolidated financials of the Company is the cancellation of 5,305,000 Xiom options and 3,653,916 Xiom warrants, and a net profit gain of $2,551,066, all attributed to the discontinued operation.

In early 2010, Equisol closed and exited its Electrical and Instrumentation Division (E&I) located in Lake Charles, LA, because of the economic environment and resulting lack of profitability. As a result, over the year, various vendors filed liens and threatened litigation proceedings due to the lack of payment by E&I of their bills due which was a result of their customers withholding payment. Additionally, the former officer of E&I filed a complaint alleging breach of contract of his employment agreement and seeking compensation which Equisol disputes.

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

Indemnification of Officers and Directors

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

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.
 
 
Part II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
General:

The authorized capital stock consists of 125,000,000 shares of common stock, par value $.0001 per share and 25,000,000 shares of preferred stock, par value $.0001 per share. As of March 30, there were 1,129,729 shares of Common Stock and 6,948,810 shares of the Company’s preferred stock issued and outstanding.  This does not include shares underlying warrants or options yet to be exercised.  The following summary description of the Common Stock is qualified in its entirety by reference to the Company's Certificate of Incorporation and all amendments thereto.

Common Stock:

Our authorized capital stock consists of 125,000,000 shares of common stock, par value $.0001 per share. Each share of Common Stock entitles its holder to one non-cumulative vote per share and, the holders of more than fifty percent (50%) of the shares voting for the election of directors can elect all the directors if they choose to do so, and in such event the holders of the remaining shares will not be able to elect a single director.  Holders of shares of Common Stock are entitled to receive 25% of such pooled dividends, as the board of directors may, from time to time, declare out of Company funds legally available for the payment of dividends.  Upon any liquidation, dissolution or winding up of the Company, holders of shares of Common Stock are entitled to receive pro rata all of the assets of the Company available for distribution to stockholders.

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

Preferred Stock:

Our authorized capital stock consists of 25,000,000 shares of preferred stock, par value $.0001 per share. The Certificate of Origination of the preferred shares provides for preferred shareholders to receive 75% of all pooled dividends. Additionally, each preferred share has a voting right equivalent to 50 votes of Common Stock and each preferred share can be converted to two shares of Common Stock at the request of the preferred shareholders or upon liquidation, dissolution, or winding up of the Company.

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

Market Information:

The Company’s Common Stock is traded on the NASD OTC Bulletin Board under the symbol “EIHC.OB” commencing on or about January 27, 2010.
 
 
There is currently a limited trading market for the Company’s Common Stock with the price being very volatile.  The following table shows the reported high and low closing prices per share, accounting for the 1:200 reverse split effective 3 March 2012, for our common stock through December 31, 2011.  Since that date through March 30, 2012, the closing price per share has been between $0.075 and $0.026.

   
High
   
Low
 
Fiscal 2011:
           
Fourth quarter
 
$
2.58
   
$
0.24
 
Third quarter
   
9.00
   
$
2.64
 
Second quarter
   
11.00
     
3.12
 
First quarter
   
15.00
     
5.26
 
                 
Fiscal 2010:
           
Fourth quarter
 
$
20.00
     
4.00
 
Third quarter
   
18.00
   
$
2.00
 
Second quarter
   
33.00
     
14.00
 
First quarter
   
60.00
     
28.00
 

Liquidation:

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

Dividend Policy:

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

Stock Transfer Agent:

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

On January 15, 2010, the Company issued 244,444 shares of its common stock to the daughter of the former chief executive officer of XIOM (to October 31, 2009) pursuant to a cashless exercise of 300,000 stock options which had been granted to her in May 2009 and the Company committed to issue 150,000 shares of its common stock (issued September 15, 2010) to a consultant for services rendered.  On February 17, 2010, the Company issued 211,765 shares of its common stock to a former consultant to XIOM pursuant to a cashless exercise of 300,000 stock options which had been granted to him in May 2009.  On March 30, 2010, the Company issued 250,000 shares of its common stock to the former chief executive of XIOM (to October 31, 2009) for services rendered.  The $42,500 fair value of the shares was included in selling, general and administrative expenses in the three months ended March 31, 2010.  On January 31, 2010, February 28, 2010, and June 30, 2010, the Company committed to issue a total of 253,382 shares of its common stock (issued September 15, 2010) pursuant to the three employment agreements discussed in Note 13.  On September 20, 2010, the Company issued 250,000 shares of its common stock for consulting services rendered.  Of the 9,268,797 shares committed to be issued at June 30, 2010, 1,123,855 shares were issued in September 2010. The remaining 8,144,942 shares committed to be issued were issued on 23 March 2011. In April, 2010, the Company issued 750,000 shares to an investor for an investment of $125,000.
 
 
Purchase of Equity Securities by the Small Business Issuer and Affiliated Purchasers

We did not repurchase any shares of our common stock during the year ending December 31, 2011.

Equity Compensation Plan Information

None

Item 6.  SELECTED FINANCIAL INFORMATION
 
Not required

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

Overview

 We currently do not plan to conduct any business other than the business in which EIHC and its subsidiary EQUISOL are engaged..

Plan of Operations:

The Company’s plans to move into an expansion phase were adversely affected by the weakened economy during fiscal 2011.  The Company focused on removing unprofitable lines and customers while divesting impaired assets as well as underperforming employees with the goal of reducing selling, general, and administrative costs.  As a result, the overall annual revenue decreased from $3.3 million in 2010 to $1.8 million in 2011, while the Company’s gross profit declined from $1.5 million to $839 thousand. Going forward, the focus of the Company is to expand organically through increased sales and improved productivity by holding down selling, general, and administrative costs.  The parent company will begin to acquire other entities focused on environmental equipment manufacturing, engineering, services, and consulting as well as geographic expansion throughout North America.  Longer term, we anticipate to pursue such acquisitions internationally.

The Company has approximately $1.5 million of firm contracts in house. The Company needs to raise additional funds to operate for the next 3 months even if it does not sell any systems or services.

The Company is not able to accurately forecast sales for fiscal 2011. The Company does not have sufficient cash resources and revenue to adequately support overseas marketing plans for the foreseeable future. Therefore, without increasing revenues or acquiring additional capital, it is likely that our overseas marketing plans will have to proceed at a slower rate.
 
Critical Accounting Policies

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

Our significant accounting policies are summarized in Note 3 of our audited financial statements for the year ended December 31, 2011. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:
 
 
REVENUE RECOGNITION

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

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

INVENTORY

Inventory consists primarily of various parts, materials and supplies utilized in the assembly of water treatment systems and is valued at the lower of cost (first-in, first-out) or market.

PROPERTY, EQUIPMENT AND DEPRECIATION

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

SHARE BASED PAYMENTS

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

Common stock options granted to employees are issued for past services from time to time, at the discretion of the Board of Directors, and the value of each option is recorded as compensation expense as of the grant date. The related excess tax benefit received upon the exercise of stock options has not been recognized because, in the opinion of management, it is more likely than not, that such tax benefit will not be utilized in the future.
 
IMPAIRMENT OF LONG-LIVED ASSETS
 
In accordance with Accounting Standards Codification (“ASC”) ASC 360-10-35, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company reviews long-lived assets, including its property and equipment, goodwill and other intangible assets, which include trade names and customer accounts and patents, for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. In such circumstances, the Company will estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to the fair value of the asset. Management believes that there are no impaired long-lived assets at December 31, 2011 and 2010.
 
 
Recently Adopted Accounting Pronouncements
 
New Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements.

Results of Operations:

For the Fiscal Years Ended December 31, 2011 Versus December 31, 2010
 
For the fiscal year ended December 31, 2011, the Company recorded $1,784,631 in sales and cost of sales of $944,340. This is in comparison to total sales of $3,272,183 and cost of sales of $1,877,951 for the fiscal year ended December 31, 2010. These amounts exclude the results of operations of the Company’s discontinued operations. Gross profit for fiscal 2011 was $839,291 or 47%, an decrease of $554,941 compared to the gross profit in fiscal 2010 of $1,394,232 (which was 43% of revenue).  This decrease in sales and increase in gross profit in fiscal 2011 resulted primarily from general economic conditions and the Company's decision to pursue profitable sales.

Selling, general and administrative expenses decreased from $2,350,302 in fiscal 2010 to $2,229,131 in fiscal 2011. This decrease resulted primarily from reduction in overhead and payroll.

Other expense increased from $83,000 in fiscal 2011 to show a gain (Other Income) of $591,931in fiscal 2011, principally due to the gain on settlement of debt and other liabilities.

Loss from continuing operations for the year ended December 31, 2011 was $947,909 compared to $1,039,150 for the year ended December 31, 2010, a decrease of $91,241.

The Company recorded a gain from the disposition of discontinued operations in fiscal 2011 of $2,551,066,. In November 2010, the Company’s board of directors determined that a sale of its XIOM subsidiary was in the best interests of the Company’s shareholders.  The Company’s results of operations showed a net gain of $1,447,923 in 2009 as compared to a net loss of $2,428,584 in fiscal 2010. This increased gain was attributable to the discharge of the Xiom Chapter 7 liquidation as well as the gain on settlement of the conversion of debt to shares of the Company’s common stock.

We will need to generate significant revenues to achieve profitability, which may not occur.  We expect our operating expenses to increase as a result of our plans for growth.  If we do achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis in the future. We expect to have quarter-to-quarter fluctuations in revenues, expenses, losses and cash flow, some of which could be significant. Results of operations will depend upon numerous factors, some beyond our control, including regulatory actions, market acceptance of our products and services, new products and service introductions, and competition.
 
 
Liquidity, Capital Resources and Operations:

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

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

At December 31, 2011, the Company had negative working capital of $1,134,000. During the fiscal years ended December 31, 2011, net cash used by operating activities was $176,000; in fiscal 2010, operating activities used $277,000. The Company incurred net losses of $2,429,000 for the fiscal year ended December 31, 2011 an improvement from the fiscal year ended December 31, 2010 when net losses were $7,835,000. Additionally, at December 31, 2011, the Company had a Stockholders’ Deficit of $4,894,000.

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates that in order to fulfill its plan of operations, it will need to seek financing from outside sources.  To this end, the Company is constantly pursuing private debt and equity sources.  However, there is no assurance that any future financing, if successful, will be sufficient to allow the Company to operate profitably or successfully. The Company raised $68,000 from a borrowing from a private investor in February, 2011 convertible into common stock of the Company with a maturity date of November 2011 and 8% interest per annum. It is also the intention of the Company’s management to improve profitability by significantly increasing sales of its environmental services in fiscal 2011 while maintaining reasonable levels of general and administrative expenses as the company grows.

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

In private placement transactions completed subsequent to the filing of our initial registration statement, from January 1, 2006 through October 20, 2006 (the effective date of the registration statement) we sold a total of 563,718 shares of restricted common stock from which we received gross offering proceeds of $670,000. These securities were offered and sold in reliance upon claimed private placement exemptions from registration. As a result, the purchasers of the shares may have the right to claim that the purchase transactions violated the federal securities laws. If any of these transactions did violate federal securities laws, the purchasers in those transactions may have claims against us for damages or for rescission and recovery of their full subscription price, plus interest. Although none of the purchasers of these shares has made or threatened any claim against us alleging violation of federal securities laws, in the event the purchasers of these securities successfully asserted claims for rescission it would have a substantial adverse effect on our business and on our ability to continue to operate. We may not have sufficient funds available to pay such claims, and there is no assurance that we would be able to obtain funds from other sources.  In that event, we may be forced to cease operations and liquidate our available assets to pay our liabilities, including, but not limited to, the rescission claims.

In connection with the acquisition of Equisol, LLC, the Company raised $705,000 in a private placement. These funds were used to pay for costs of the acquisition and working capital needs such as outstanding and overdue payables.


Inflation

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

Off-Balance Sheet Arrangements

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

 

Item 8.     FINANCIAL STATEMENTS

Index To Consolidated Financial Statements


 
 
Environmental Infrastructure Holdings Corp.
Consolidated Balance Sheets
As of December 31, 2011 and 2010
Unaudited
 
     Unaudited        
   
2011
   
2010
 
ASSETS            
Current Assets
           
Cash and cash equivalents
    61,177       18,323  
Accounts receivable, net of allowance for doubtful accounts of $205,000 and $205,000, respectively
    185,844       481,337  
Inventory
    25,000       94,841  
Prepaid expenses and other current assets
    -       -  
     Total Current Assets
    272,021       594,501  
                 
Property and equipment, net of accumulated depreciation and amortization
    685       8,099  
                 
Intangible assets, net of accumulated amortization and impairment allowances
    32,000       275,464  
                 
Assets of discontinued operation held for sale
    -       40,587  
                 
 Total Assets     304,706       918,651  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current Liabilities
               
Current portion of debt
    470,956       376,612  
Current portion of secured promissory note payable to related party
    98,201       107,202  
Accounts payable
    574,181       626,616  
Accrued expenses
    130,352       70,121  
Accrued compensation
    625,454       417,358  
Accrued interest
    179,902       130,844  
     Total Current Liabilities
    2,079,046       1,728,753  
                 
Long term portion of debt
    218,008       199,941  
Long term portion of secured promissory note payable to a related party
    300,000       300,000  
Liabilities of discontinued operation held for sale
    -       3,584,296  
Total Liabilities
    2,597,054       5,812,990  
                 
COMMITMENTS AND CONTINGENCIES
               
STOCKHOLDERS' DEFICIT
               
Preferred stock, $.0001 par value; authorized 25,000,000 shares, 6,948,810 issued
    695       -  
Common stock, $.0001 par value; authorized 125,000,000 shares: issued and outstanding 538,039 and 48,509,795 shares respectively
    54       4,851  
Committed to be issued 0 and 67,383 shares respectively
    7       2,537  
Additional paid in capital
    7,290,711       6,130,010  
Deficit
    (9,583,814 )     (11,031,737 )
     Total Stockholders' Deficit
    (2,292,348 )     (4,894,339 )
                 
Total Liabilities and Stockholder's Deficit
    304,706       918,651  
 
See accompanying notes to consolidated financial statements.
 
 
Environmental Infrastructure Holdings Corp.
Consolidated Statements of Operations
For the Years Ended December 31,
 
   
Unaudited
       
   
2011
   
2010
 
             
Revenues     1,783,631       3,272,183  
                 
Cost of Revenues
    944,340       1,877,951  
                 
Gross Profit     839,291       1,394,232  
                 
Operating Expenses
               
Marketing Costs associated with future product development and sales incured on acquisition of Tower Turbines, Inc.
    150,000          
Selling, general and administrative expenses
    2,229,131       2,350,302  
Operating Loss
    (1,539,840 )     (956,070 )
                 
Other (Expense) Income
               
Interest Expense
    (116,437 )     (83,235 )
Interest Income
    530       155  
Impairment of goodwill related to Gulf State Corporation Subsidiary
    (237,464 )        
Excess of fair market value of shares over debt settled
    (94,500 )        
Gain on settlement of former employee compensation liability based on terms of Mutual Termination and Release Agreement
    1,039,802          
     Total Other (Expense) Income
    591,931       (83,080 )
                 
Loss from Continuing Operations before Income Tax Provision
    (947,909 )     (1,039,150 )
                 
Income tax provision
    -       -  
                 
Loss from Continuing Operations
    (947,909 )     (1,039,150 )
Loss from Discontinued Operations, net of income tax
    (155,234 )     (1,389,434 )
Gain on disposition of discontinued operations
    2,551,066          
                 
Net Gan/(Loss)
    1,447,923       (2,428,584 )
                 
Loss per common share, basic and diluted:
               
Loss from continuing operations
    (2 )     (7 )
Loss from discontinued operations
    (0 )     -  
Net Loss
    (3 )     (7 )
                 
Weighted average number of common shares outstanding, basic and diluted (post 1:200 reverse split)
    395,586       343,731  
 
See accompanying notes to consolidated financial statements.
 
 
Environmental Infrastructure Holdings Corp.
Consolidated Statements of Stockholders' Deficit
For the Years Ended December 31, 2011 and 2010 (Adjusted to retroactively reflect 1 for 200 reverse stock split effective February 1, 2012)
(Unaudited)
 
    Series A Preferred Stock     Common Stock, $.0001 Par Value     Additional           Total   
   
Issued Shares
   
Issued Shares
   
Shares Committed to be Issued
     Paid In     Accumulated      Stockholders'  
   
Shares
   
Par Value
   
Shares
   
Par Value
   
Shares
   
Par Value
    Capital     Deficit     Deficit  
                                                       
Balance, December 31, 2009
    -       -       209,056     $ 21       48,050     $ 5     $ 5,350,923     $ (8,603,153 )   $ (3,252,204 )
                                                                         
Additional shares committed to be issued to members of Equisol due to nonreceipt of $1,500,000 by February 5, 2010 per the terms of the membership purchase agreement dated December 7, 2009
    -       -       -       -       78,216       8       (8 )     -       -  
                                                                         
Issuance of shares which were committed to be issued to parties at December 31, 2009
    -       -       7,625       1       (7,625 )     (1 )     -       -       -  
                                                                         
Sales of shares under private placement, net of offering costs of $10
    -       -       2,200       -       -       -       109,990       -       109,990  
                                                                         
Conversion of debt and accrued interest at January 22, 2010
    -       -       3,018       -       -       -       162,972       -       162,972  
                                                                         
Sale of shares in May 2010
    -       -       3,750       -       -       -       125,000       -       125,000  
                                                                         
Exercise of stock options pursuant to cashless exercise provisions
    -       -       2,281       -       -       -       -       -       -  
                                                                         
Issuance of shares and warrants and shares and warrants committed to be issued for consulting services
    -       -       4,000       1       1,750       -       181,899       -       181,900  
                                                                         
Issuance of shares and shares committed to be issued pursuant to employment agreements
    -       -       10,619       1       6,455       1       179,759       -       179,761  
                                                                         
Interest expense charge resulting from reduction in conversion price of convertible notes and exercise price of warrants pursuant to December 3, 2010 agreement
    -       -       -       -       -       -       26,826       -       26,826  
                                                                         
Net loss for year ended December 31, 2010
     -        -       -       -       -       -       -       (2,428,584 )     (2,428,584 )
                                                                         
Balance, December 31, 2010
    -       -       242,549       24       126,846       13       6,137,361       (11,031,737 )     (4,894,339 )
                                                                         
Issuance of shares which were committed to be issued to parties at December 31, 2010
    -       -       125,846       13       (125,846 )     (13 )     -       -       -  
                                                                         
Benficial conversion feature relating to issuance of debt on February 8, 2011
    -       -       -       -       -       -       26,520       -       26,520  
                                                                         
Issuance of shares to former employee pursuant to Mutual Termination and Release Agreement
    -       -       750       -       -       -       4,500       -       4,500  
                                                                         
Conversion of debt and accrued interest on March 25, 2011
    -       -       22,808       2       -       -       150,985       -       150,987  
                                                                         
Issuance of shares and shares committed to be issued  for consulting services
    -       -       34,750       4       3,600       -       205,812       -       205,816  
                                                                         
Issuance of shares to former employee pursuant to Mutual Termination and Release Agreement
    -       -       4,400       -       -       -       26,400       -       26,400  
                                                                         
Benficial conversion feature relating to issuance of debt on May 5, 2011 and June 17, 2011
    -       -       -       -       -       -       29,250       -       29,250  
                                                                         
Shares issued in connection with acquisition of Tower Turbines, Inc. on June 1, 2011
    -       -       10,000       1       -       -       99,999       -       100,000  
                                                                         
Shares issued July 19, 2011 in settlement of Equisol debt ($8,964) and accrued interest ($31,036), including $72,000 excess of the fair market value of the shares ($112,000) over debt settled ($40,000)
    -       -       20,000       2       -       -       111,998       -       112,000  
                                                                         
Shares issued August 22, 2011 in settlement of Equisol debt ($14,377) and accrued interest ($623), including $22,500 excess of the fair market value of the shares ($37,500) over debt settled ($15,000)
    -       -       7,500       1       -       -       37,499       -       37,500  
                                                                         
Conversion of EIHC debt due Asher Enterprises, Inc. into Company common stock
    -       -       55,860       6       -       -       70,714       -       70,720  
                                                                         
Benficial conversion feature relating to issuance of debt on July 14, 2011
    -       -       -       -       -       -       58,375       -       58,375  
                                                                         
Issuance of Series A Preferred Stock in satisfaction of accrued salaries payable to two officers
    6,948,810       695       -       -       -       -       114,305       -       115,000  
                                                                         
Issuance of shares and shares committed to be issued pursuant to employment agreements
    -       -       13,576       1       62,783       6       216,993       -       217,000  
                                                                         
Net loss for year ended December 31, 2011
    -       -       -       -       -       -       -       1,447,923       1,447,923  
                                                                         
Balance, December 31, 2011
    6,948,810     $ 695       538,039     $ 54       67,383     $ 7     $ 7,290,711     $ (9,583,814 )   $ (2,292,348 )
 
See accompanying notes to consolidated financial statements.
 
 
 
Environmental Infrastructure Holdings Corp.
Consolidated Statements of Cash Flows
For the Years Ended December 31,
 
 
   
Unaudited
       
   
2011
   
2010
 
             
Cash Flow from Operating Activities
           
Net Income (Loss)
  $ 1,447,923     $ (2,428,584 )
Loss from discontinued operations
    (155,234 )     1,389,434  
Gain on disposition of discontinued operations
    (2,551,066 )     -  
Adjustments to reconcile net loss to cash used in operating activities:
               
     Provision for doubtful accounts
    -       45,000  
     Depreciation and amortization
    15,685       9,393  
     Amortization of debt discounts
    54,718       5,332  
     Issuance of stock for services
    581,951       361,661  
     Excess of fair market value of the shares over debt settled
    94,500       -  
     Issuance of debt and stock for marketing expenses related to acquisition of Tower Turbines, Inc.
    150,000       -  
     Gain on settlement of former employee compensation liability based on terms of Mutual Termination and Release Agreement
    (17,600 )     -  
     Issuance of Series A Preferred Stock in satisfaction of accrued salaries payable to two officers
    115,000       -  
     Net change in operating assets and liabilities:
               
   Accounts Receivable
    (295,493 )     (81,252 )
    Inventory
    (69,841 )     78,814  
    Prepaid expenses and other current assets
    -       11,664  
    Accounts payable
    (52,435 )     182,921  
    Accrued expenses
    60,231       (26,212 )
    Accrued compensation
    208,096       417,358  
    Accrued interest
    49,058       42,561  
Net cash provided by (used in) operating activities - continuing operations
    (364,507 )     8,090  
Net cash used in operating activities - discontinued operations
    (2,009 )     (184,017 )
Net cash used in operating activities
    (366,516 )     (175,927 )
                 
Cash Flow from Investing Activities
               
Intangible assets additions
    -       -  
Property and equipment additions
    -       (1,573 )
Net cash provided by (used in) investing activities - continuing operations
    -       (1,573 )
Net cash provided by (used in) investing activities - discontinued operations
    -       (5,075 )
Net cash provided by (used in) operating activities
    -       (6,648 )
                 
Cash Flow from Financing Activities
               
Increases in debt
    269,731       -  
Repayment of  debt
    (48,208 )     (685,878 )
Loans from related party
    (9,000 )     407,202  
Loans to XIOM (discontinued operation)
    -       (168,644 )
Proceeds from private placement and private offerings of common stock, net of offering costs
    -       234,990  
Net cash provided by (used in) financing activities - continuing operations
    212,523       (212,330 )
Net cash provided by (used in) financing activities - discontinued operations
    -       168,644  
Net cash provided by (used in) financing activities
    212,523       (43,686 )
                 
Increase (decrease) in cash and cash equivalents
    40,713       (226,261 )
Cash and cash equivalents, beginning of year
    20,464       246,725  
Cash and cash equivalents, end of year
    61,177       20,464  
Less cash and cash equivalents of discontinued operations at end of year
    -       2,141  
Cash and cash equivalents of continuing operations at end of year
  $ 61,177     $ 18,323  
                 
Supplemental disclosures of cash flow information:
               
Interest paid
          $ 40,674  
Income taxes paid
          $ 3,963  
                 
Supplemental noncash disclosures:
               
Conversion of accrued compensation payable to Equisol chief executive officer to note payable convertible into Company common
               
    stock effective January 1, 2011
  $ 55,000     $ -  
                 
Conversion of accrued compensation payable to former employee into the Company common stock based on Mutual Termination
               
    and Release Agreement
  $ 44,000     $ -  
                 
Conversion of debt and accrued interest to common stock
  $ 1,140,373     $ 162,972  
 
 


ENVIRONMENTAL INFRASTRUCTURE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended December 31, 2011 and 2010
(Unaudited and unreviewed with respect to year ended Dec 31, 2011)
1)  ENTITY AND ORGANIZATION

EIHC Merger Co. was formed on November 5, 2009 as a wholly owned subsidiary of XIOM. On December 7, 2009 XIOM and EIHC Merger Co., executed an Agreement and Plan of Merger (the “Plan”) pursuant to Section 251(g) of the Delaware General Corporation Law. Pursuant to the plan, XIOM was repositioned as a wholly owned subsidiary of EIHC Merger Co.. EIHC Merger Co., then changed its name to Environmental Infrastructure Holdings Corp. (“EIHC” or the “Company”).

The Company is the successor issuer of XIOM for purposes of the Securities Act of 1933, as amended, and the filings made by XIOM hereunder. Pursuant to Rule 12(g)-3(a) promulgated under the Securities and 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.

On December 7, 2009, EIHC acquired Equisol, LLC (“Equisol”), a Pennsylvania limited liability company established on April 25, 2003. EIHC issued 18,563,693 shares to the owners of Equisol and committed to issue 8,084,942 additional shares so that the former owners of Equisol would own 40% of the fully diluted shares of EIHC. Because outstanding shares were 24,372,407 at the time of the acquisition, the sellers received the equivalent of 52% of the outstanding shares of EIHC. In addition, 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 unaudited consolidated financial statements are those of Equisol. 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. Also, in connection with the merger, the Company’s fiscal year end was changed from September 30 to December 31.

Operations

From offices located in Pennsylvania, Texas and Louisiana, Equisol and its subsidiaries operate as an equipment solutions provider, delivering environmentally friendly products, services, and engineering solutions to customers.

On July 16, 2004, Equisol’s subsidiary PD Acquisition, LLC (“PDIR”) acquired the business and certain assets of an engineering company, Penn-Del, Inc., for a total of approximately $477,790 in cash and 25,000 Class A units of membership interest of Equisol (now 34,261 shares of EIHC Common Stock).

On March 1, 2006, Equisol’s subsidiary Gulf States Acquisition, LLC (“Gulf States”), acquired a 100% stock ownership interest in an engineering company, Gulf States Chlorinator & Pump Inc. (“GSCP”) for $350,000 in cash.

On August 29, 2007, Equisol’s subsidiary Gulf States Acquisition, LLC acquired a 100% stock ownership in an engineering company, Electrical & Instrumentation, Inc. (“E&I”), for 104,607 Class A Units of membership interest of Equisol (now 143,359 shares of EIHC common stock). Thereafter, the acquired company’s operations were included with Equisol’s operations and the acquiree filed a final income tax return for the period January 1, 2007 to August 29, 2007. In February 2010, the E&I division of Equisol ceased operations (see Note 7).

In November 2010, the Board of Directors of EIHC determined that it was in the best interest of the stockholders to dispose of the XIOM subsidiary. Accordingly, the assets and liabilities of XIOM have been shown as held for sale in the accompanying unaudited consolidated financial statements. Efforts to sell the XIOM subsidiary were unsuccessful, and on March 25, 2011, XIOM filed a voluntary petition in the United States Bankruptcy Court – District of Delaware under Chapter 7 of the United States Bankruptcy Code requesting liquidation of the assets and liabilities of XIOM Corp.  On October 13, 2011, the U.S. Bankruptcy Court approved the trustees report of no distribution and abandonment of Xiom’s assets and closed the bankruptcy proceedings the effect of which on the consolidated financials of the Company is the cancellation of 5,305,000 Xiom options and 3,653,916 Xiom warrants, and a net profit gain of $2,551,066, all attributed to the discontinued operation.
 
 
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated balance sheet at December 31, 2011 includes the accounts of EIHC and its wholly-owned subsidiary Equisol (including Equisol’s Gulf States subsidiary). The unaudited consolidated statements of operations, stockholders’ deficit, and cash flows for the years ended December 31, 2011 and 2010 include the accounts of EIHC and Equisol. In November 2010, the Board of Directors determined to sell the Company’s wholly-owned subsidiary XIOM Corp, and its results of operations and assets and liabilities are shown as a discontinued operation in 2011 and 2010 (See Note 14). All significant intercompany balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, net, debt, accounts payable, and accrued expenses. The fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term activities of these instruments and/or based on valuations of instruments with similar terms.

REVENUE RECOGNITION

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

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

CASH AND CASH EQUIVALENTS

For the purpose of financial statement presentation, the Company includes cash on deposit, money market funds, and amounts held by brokers in cash accounts as cash. The Company considers securities with maturity of three months or less when purchased and funds temporarily held in escrow to be cash equivalents.

ACCOUNTS RECEIVABLE

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

INVENTORY

Inventory consists primarily of various parts, materials and supplies utilized in the assembly and the operation of water treatment systems and is valued at the lower of cost (first-in, first-out) or market. (See Note 4).
 
 
PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment is stated at cost less accumulated depreciation. Major expenditures for property and those that substantially increase useful lives are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income. Depreciation is provided by utilizing the straight-line method over the estimated useful lives of the assets. (See Note 5).
 
EQUITY INVESTMENTS

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

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Accounting Standards Codification (“ASC”) ASC 360-10-35, "Accounting for the Impairment or Disposal of Long- Lived Assets", the Company reviews long-lived assets, including its property and equipment, goodwill and other intangible assets, which include trade names and customer accounts and patents, for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. In such circumstances, the Company will estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to the fair value of the asset.

Coincident to the 2009 acquisition of XIOM, the Company recorded an impairment loss on the goodwill resulting from its acquisition of XIOM of $7,099,110. (See Note 6).
 
At December 31, 2011 the discontinued operations of XIOM include impairment charges of $56,552 relating to:
 
Property and Equipment
  $ 31,552  
Note receivable from and minority investment in publicly traded entity
    25,000  
Total
  $ 56,552  

 
EARNINGS (LOSS) PER SHARE

The Company follows Financial Accounting Standards Board Accounting Standards Codification (“ASC”) topic 260, “Earnings per Share”, which requires presentation of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”) by all publicly traded entities, as well as entities that have made a filing or are in the process of filing with a regulatory agency in preparation for the sale of securities in a public market.

Basic EPS is computed by dividing net income or loss available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of Diluted EPS gives effect to all potentially dilutive common shares during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. For the years ended December 31, 2011 and 2010, the diluted loss per common share calculation excluded the following potentially dilutive securities:
 
 
 
Common Shares Equivalent (post 1:200 reverse split)
 
 
Year Ended December 31,
 
 
2011
 
2010
 
Convertible notes payable (see Note 7)
   
38,175
     
38,715
 
Stock options  (see Note 10)
   
0
     
27,595
 
Common stock purchase warrants (see Note 10)
   
13,200
     
25,470
 
Total
   
51,915
     
91,240
 
 

 
INCOME TAXES

The Company records the tax effects of all transactions that have been reported in its consolidated financial statements. This includes tax effects that are taxable or deductible in the current reporting period, as well as tax effects that will lead to taxable income or tax deductions in future periods. Income taxes are accounted for using the asset/liability method. At each balance-sheet date, a current tax asset or liability is recorded, representing income taxes currently refundable or payable. Deferred tax assets and liabilities are also recorded, representing the tax effects of temporary book-tax differences, which will become payable or refundable in future periods. Deferred tax assets arise principally from net operating losses and capital losses available for carryforward against future years’ taxable income. Under the asset/liability method, the income tax provision is the result of the change in these current and deferred tax accounts from period to period, plus or minus tax payments made or refunds received during the year. A valuation allowance is recognized against deferred tax assets if, based on the weight of available evidence, it is more likely than not (i.e., greater than 50% probability) that some portion or all of the deferred tax asset will not be realized.

The Company follows ASC topic 740, “income taxes,” governing uncertain tax positions which provides guidance for recognition and measurement. This prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the consolidated financial statements. It also provides accounting guidance on derecognization, classification and disclosure of these uncertain tax positions.

Interest costs and penalties related to income taxes are classified as interest expense and selling, general and administrative costs, respectively, in the Company's consolidated financial statements. For the nine months ended September 30, 2011 and 2010, the Company did not recognize any interest or penalty expense related to income taxes. The Company is currently subject to a three-year statute of limitations by major tax jurisdictions.

FOREIGN CURRENCY TRANSLATION

For any future foreign subsidiaries, where the functional currency is other than the U.S. Dollar, revenue and expense accounts will be translated at the average rates during the period, and the balance sheet items will be translated at period end rates. Translation adjustments arising from the use of differing exchange rates from period to period will be included as a component of Stockholders’ Equity. Gains and losses from foreign currency transactions are included in net income.  In the years ended December 30, 2011 and 2010, there were no foreign sales.

SHARE BASED PAYMENTS

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

Common stock options granted to employees may be issued for past services from time to time, or for future service, at the discretion of the Board of Directors, and the value of each such option is recorded as compensation expense as of the grant date. The related excess tax benefit received upon the exercise of stock options has not been recognized because, in the opinion of management, it is more likely than not, that such tax benefit will not be utilized in the future. In addition, the Company may issue restricted stock, which vests either immediately or over a future service period.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements.

3)  ACQUISITION OF EIHC AND DISCONTINUED OPERATIONS
 
As noted above, on December 7, 2009, EIHC (legal acquirer) acquired Equisol and its subsidiaries (legal acquiree) in a transaction which has been accounted for in the accompanying financial statements as a reverse merger. As a result, the financial position and results of operations of EIHC and its subsidiary XIOM prior to the date of the acquisition have been excluded from the accompanying financial statements.  In connection with the merger, Equisol members received 42,291,931 shares (pre-reverse split).
 
 
The estimated fair values of the identifiable net assets of EIHC (and XIOM) at December 7, 2009 (date of acquisition) consisted of:
 
Cash and cash equivalents, including $268,975 held in escrow from XIOM private placement offering
 
$
348,028
 
Accounts receivable
       
(net of allowance for doubtful accounts of $85,000)
   
17,614
 
Stock subscription receivable (collected December 8, 2009)
   
204,975
 
Inventory
   
178,584
 
Prepaid expenses and other current assets
   
22,562
 
Property and equipment, net
   
167,263
 
Patents
   
2,400
 
Retainage receivable
   
51,851
 
Investment in and advances to investee
   
50,000
 
Security deposits
   
11,445
 
         
Total assets
   
1,054,722
 
Current portion of debt
   
1,819,311
 
Accounts payable
   
416,783
 
Accrued expenses
   
276,107
 
Accrued compensation
   
150,000
 
Accrued interest
   
373,426
 
         
Total liabilities
   
3,035,627
 
         
Identifiable net assets
 
$
(1,980,905
)

Goodwill of $7,099,110 (excess of the $5,118,205 estimated fair value, based on the stock trading price on the date of the acquisition, of the 24,372,407 shares retained by EIHC (formerly XIOM) shareholders over the $1,980,905 negative identifiable net assets of XIOM) was recorded at the December 7, 2009 acquisition date. As the Company believed that the estimated fair value of the goodwill recorded by EIHC was $0, the entire $7,099,110 goodwill was written off as an impairment loss on the December 7, 2009 acquisition date.
 
In December, 2010, the board of directors of EIHC determined that it was in the best interest of the stockholders to dispose of the XIOM subsidiary. Accordingly, the assets and liabilities of XIOM have been shown as held for sale in the accompanying financial statements. Efforts to sell the XIOM subsidiary were unsuccessful, and on March 25, 2011, XIOM filed a voluntary petition in the United States Bankruptcy Court – District of Delaware under Chapter 7 of the United States Bankruptcy Code requesting liquidation of the assets and liabilities of XIOM Corp.  On October 13, 2011, the U.S. Bankruptcy Court approved the trustees report of no distribution and abandonment of Xiom’s assets and closed the bankruptcy proceedings the effect of which on the consolidated financials of the Company is the cancellation of 5,305,000 Xiom options and 3,653,916 Xiom warrants, and a net profit gain of $2,551,066 all attributed to the discontinued operation.
 
4) INVENTORY
 
Inventory consisted of finished goods of $81,496 and $94,841, at December 31, 2011 and 2010, respectively.
 
 
5) PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following as of December 31, 2011 and 2010:

   
Useful Life- Years
   
2011
   
2010
 
Machinery and equipment
    5-10     $ 66,072     $ 66,072  
Vehicles
    3-5       28,587       28,587  
Furniture and fixtures
    5-7       5,522       5,522  
              100,181       100,181  
Less accumulated depreciation and amortization
            (99,496 )     (92,082 )
                         
Property and equipment, net
          $ 685     $ 8,099  

Depreciation and amortization of property and equipment for the years ended December 31, 2011 and 2010 was $685 and $3,393, respectively.

6) GOODWILL AND OTHER INTANGIBLE ASSETS
 
Intangible assets, net, consisted of the following as of December 31, 2011 and 2010:

 
2011
 
2010
 
Goodwill:
           
Acquisition of EIHC (formerly XIOM) on December 7, 2009
  $ 7,099,110     $ 7,099,110  
Impairment recognized on acquisition of EIHC
   (formerly  XIOM)
    (7,099,110 )     (7,099,110 )
Net
    -       --  
                 
Acquisition of Gulf States Chlorinator & Pump Inc.
               
   on March 1, 2006
    237,464       237,464  
                 
Other Intangible Assets:
 
     Trade name and customer accounts:
               
   Acquisition of intangible assets of Kerrigan
               
         Dupree, Inc. on April 17, 2007
    60,000       60,000  
   Accumulated amortization
    (28,000 )     (22,000 )
   Net
    32,000       38,000  
                 
Intangible assets, net
  $ 269,464     $ 275,464  

Goodwill is not amortized but is reviewed for impairment at least annually. The trade name and customer accounts and the patent costs are amortized over their estimated economic lives of 10 years. Expected future amortization of intangible assets for the years ending December 31, 2012, 2013, 2014, 2015, and 2016 is $6,000.

 
7) DEBT

Debt consisted of the following at December 31, 2011 and 2010:

   
2011
   
2010
 
Equisol:
           
Credit Card due
    2290       -  
                 
Due bank under E&I revolving line of credit, interest at 6.05% (default rate of 18%) and 7.25%, respectively, due 6/29/10 secured by accounts receivable of E&I ($0 at December 31, 2009 ) and by a right of setoff related to cash held at this bank. At 12/31/09, this bank held personal guaranties of the former owners of E&I; on February 25, 2010, the remaining balance due under this line of credit was paid down to zero by the Company. However, the former owners of E&I have retained borrowing authority under the line of credit and new borrowings have continued to occur since that date. To the date of the issuance of these consolidated financial statements, known borrowings under the line of credit in E & I’s name have been $29,000, the proceeds of which may be used to satisfy the $43,357 listed below in this table as due to the former owners at September 30, 2011, in a similar self-reimbursement to that of approximately $70,000 made by them from the line in 2008. In March 2010, the former owners reimbursed themselves $8,200, of which $3,495 was applied to reduce the amount due them by the Company and $4,705 represented expenses paid claimed by them as reimbursable Company expenses. As discussed in Note 12 under “Legal Proceedings” in the fourth paragraph, the former owners of E&I commenced an action alleging breach of contract of employment agreement. The Company believes its financial exposures concerning the former owners is likely limited to the extent of the remainder due of the $43,357. Management of the Company has indicated it is legally dissolving E&I which has already merged out of existence for income tax purposes.
    -       16,508  
                 
Convertible Debt due related parties and others, interest at
8%, due on demand, secured by all Equisol assets
under a lien junior to that of the    $400,000 promissory
note payable to related party (see Note 8),  convertible into
Equisol membership units
    136,326       162,067  
 
               
Convertible Debt to chief executive officer of Equisol, interest at 8%, due January 1, 2012, convertible at $0.20
    22,000       -  
                 
  Loan payable to chief executive officer of the Company, interest at 8%, due on demand .
    89,582       112,600  
                 
  Loan payable to former owners of E & I, interest at 0%, due on demand.
  (see the related discussion above in this table related to the balance due of $16,508 at December 31, 2011 and 2010, respectively,
  under the revolving line of credit with another bank).
    43,357       43,357  
                 
Convertible debt due to former owner of Tower Turbines, Inc., interest due at 12%, due on September 1, 2014
    50,000       -  
 
 
                 
Gulf States:
               
SBA guaranteed loan payable to financial institution,interest at prime rate plus 2.75%, due in monthly installments of principal and interest of $3,100 with 
balance due on May 31, 2016, secured by guaranties of Equisol and two officers of the Company, certain   personal property, and certain real property
owned by two officers of the Company. The loan requires, among other things, prior lender written consent concerning transfer or disposal of Company
assets, payment of distributions, or changes in ownership structure during the period the loan is outstanding
               
                 
EIHC:
               
Convertible Promissory Notes to Asher Enterprises, Inc., interest at a rate of 8% per annum (22% default rate), are due on December 30, 2011, January 25, 2012, and April 30, 2012, and are convertible at the option of the holder in whole or in part into Company common stock at a Variable Conversion price equal to 61% of the market price (defined as the average of the lowest three trading prices for the common stock during the ten trading day preceeding the conversion date). The Notes also provide that if the Company issues or sells any common stock for a consideration per share less than the conversion prices, the conversion price will be reduced to such consideration per share. The Company can prepay the notes in full if it so chooses. Reflected net of unamortized debt discount related to beneficial conversion feature of each note aggregating $28,180 as of December 31, 2011.
    117,689       -  
 
               
Convertible Promissory Notes to Barclay Lyons. LLC, interest at a rate of 9.875% semi-annually (15% default rate), are due on July 8, 2012, and are convertible at the option of the holder in whole or in part into Company common stock at a Variable Conversion price equal to 65% of the market price (defined as the average of the lowest three closing prices for the common stock during the term of the note preceding the conversion date). The Company can prepay the notes in full if it so chooses. Reflected net of unamortized debt discount related to beneficial conversion feature of each note aggregating $7,812 as of December 31, 2011.
    2,188       -  
 
               
Convertible Promissory Note to Warchest Capital, interest at a rate of 9.875% semi-annually (15% default rate), is due on July 8, 2012 and is convertible at the option of the holder in whole or in part into Company common stock at a Variable Conversion price equal to 65% of the market price (defined as the average of the lowest three closing prices for the common stock during the term of the note preceding the conversion date). The Company can prepay the notes in full if it so chooses. Reflected net of unamortized debt discount related to beneficial conversion feature of each note aggregating $23,435 as of December 31, 2011.
    6,565       -  
                 
Convertible Promissory Note to Leland Martin. LLC, interest at a rate of 9.875% semi-annually (15% default rate), is due on August 18, 2012 and is convertible at the option of the holder in whole or in part into Company common stock at a Variable Conversion price equal to 65% of the market price (defined as the average of the lowest three closing prices for the common stock during the term of the note preceding the conversion date). The Company can prepay the notes in full if it so chooses.
    15,000       -  
                 
Total
    688,964       576,553  
                 
Less current portion of debt
    (470,956 )     (376,612 )
                 
Long term portion of debt
  $ 218,008     $ 199,941  
 

Maturities of the debt as of December 31, 2010 for the next five years and thereafter are as follows:

Year ending December 31,

2011
    483,814  
2012
    42,972  
2013
    47,003  
2014
    47,114  
2015
    50,707  
Thereafter
    12,145  
Total
  $ 683,755  

Accrued interest on debt consisted of the following at December 31, 2011 and 2010:

   
2011
   
2010
 
             
Equisol loan payable to chief executive officer of the Company
    98,184       82,997  
EIHC Convertible debt
    3,214       -  
Equisol convertible debt
    22,725       35,866  
Accrued interest payable to a related party
    43,870       11,981  
 Total
  $ 167,993     $ 130,844  

Interest expense incurred for the years ended December 31, 2011 and 2010 is summarized as follows:
 
 
   
2011
   
2010
 
Equisol
  $ 107,338     $ 66,990  
EIHC (including debt discount of $
    5,934       -  
Gulf States