SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 1997; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _________ to __________
Commission File Number: 2-95626-D
SIONIX CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
UTAH 87-0428526
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5355 Mira Sorrento Place, Suite 100, San Diego, California 92121
- ---------------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(619) 622-0200
--------------------------------------------------
(Registrant's telephone number, including area code)
5405 Morehouse Drive, Suite 200, San Diego, California 92121
------------------------------------------------------------
(Former name or former address, if changed since last report)
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 a
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
On June 30, 1997 there were 23,650,338 shares of the registrant's Common
Stock, $.001 par value, outstanding and subscribed.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements included herein have been prepared by the Company,
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of December 31, 1996 and the results of its operations and changes in
its financial position from inception through December 31, 1996 have been made.
The results of operations for such interim period is not necessarily indicative
of the results to be expected for the entire year.
Index to Financial Statements
Page
Balance Sheets .......................................................... 3
Statement of Operations ................................................. 5
Statement of Stockholders' Equity ....................................... 6
Statement of Cash Flows ................................................. 9
Notes to Financial Statements for Period ................................ 11
Independent Auditor's Report ............................................ 17
All other schedules are not submitted because they are not applicable or
not required or because the information is included in the financial statements
or notes thereto.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Page 2
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
------------ --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash in banks $ 14,161 $ 36,041
Accounts Receivable 35,000 -
Inventory (Note 2) 52,602 40,333
Prepaid expenses 2,981 2,981
---------------------------------------
Total Current Assets 104,744 79,355
---------------------------------------
PROPERTY AND EQUIPMENT - NET
(Notes 2 and 3) 92,874 107,367
---------------------------------------
OTHER ASSETS
Intangibles - net (Notes 2 and 4) 1,214,246 1,210,622
Deposits 6,996 6,996
---------------------------------------
Total Other Assets 1,221,242 1,217,618
---------------------------------------
TOTAL ASSETS $ 1,418,860 $ 1,404,340
=======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
------------ --------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Loan payable (Note 5) $ 50,000 $ 50,000
Lease payable, current portion (Note 6) 7,847 7,847
Accrued expenses 191,559 112,272
---------------------------------------
Total Current Liabilities 249,406 170,119
---------------------------------------
LONG-TERM DEBTS
Lease payable (Note 6) 8,963 16,021
Related party payables (Note 7) 248,109 72,200
Convertible debenture (Note 8) 30,000 10,000
---------------------------------------
Total Long-Term Debts 287,072 98,221
---------------------------------------
Total Liabilities 536,478 268,340
---------------------------------------
COMMITMENTS AND CONTINGENCIES
(Notes 6 and 11) - -
---------------------------------------
STOCKHOLDERS' EQUITY
Common stock $0.001 par value,
100,000,000 shares authorized,
23,650,338 and 23,599,696 shares
issued and outstanding, respectively 23,650 23,600
Additional paid-in capital 4,966,747 5,282,717
Deficit accumulated during the
developmental stage (2,451,215) (1,838,517)
Subscription receivable (Note 10) (1,656,800) (2,331,800)
---------------------------------------
Total Stockholders' Equity 882,382 1,136,000
---------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,418,860 $ 1,404,340
=======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
October 3,
For the Nine Months For the Three Months 1994 Through
Ended, June 30, Ended June 30, June 30,
--------------------------------------------------------
1997 1996 1997 1996 1997
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 50,000 $ - $ - $ - $ 50,000
COST OF SALES 14,863 - - - 14,863
--------------------------------------------------------
GROSS PROFIT 35,137 - - - 35,137
-------------------------------------------------------
EXPENSES
Research and Development - 394,639 - - 843,652
Depreciation and
Amortization 82,830 60,938 27,630 15,495 242,785
Administrative and
Marketing 555,239 605,213 126,387 265,470 1,362,003
-------------------------------------------------------
Total Expenses 638,069 1,060,790 154,017 280,965 2,448,440
-------------------------------------------------------
LOSS FROM OPERATIONS (602,932)(1,060,790)(154,017) (280,965) (2,413,303)
-------------------------------------------------------
OTHER INCOME EXPENSE)
Interest (9,766) (15,588) (3,300) (1,981) (37,912)
-------------------------------------------------------
Total other Income
(Expense) (9,766) (15,588) (3,300) (1,981) (37,912)
-------------------------------------------------------
NET LOSS $(612,698) $(1,076,378) $(157,317) $(282,946) $(2,451,215)
==========================================================
LOSS PER SHARE $ (0.03) $ (0.13) $ (0.01) $ (0.01)
===============================================
</TABLE>
The accompanying notes are an integral part of these financial statements
Page 5
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on October 3, 1994 through June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated Subscription
Shares Amount Capital Deficit Receivable
-------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance
October 3, 1994 - $ - $ - $ - $ -
Shares issued to initial
stockholders in October
1994 at $0.01
per share 10,000 10 90 - -
Net loss from October 3,
1994 through December
31, 1994 - - - (1,521) -
-------- ------- -------- --------- ----------
Balance
December 31, 1994 10,000 10 90 (1,521) -
Issuance of Common
stock for assignment
of rights recorded at
predecessor cost
at $0.00
per share 1,990,000 1,990 (1,990) - -
Issuance of Common
stock for services
at $0.25
per share 572,473 572 135,046 - -
Issuance of Common
stock for debt
at $0.25
per share 188,561 188 47,347 - -
Issuance of Common
stock for debt
at $0.50
per share 595,860 596 297,334 - -
Issuance of Common
stock for debt
at $2.00
per share 98,194 98 196,290 - -
Issuance of Common
stock for debt
at $4.00
per share 156,025 156 623,944 - -
-------- ------- -------- --------- ----------
Balance Forward 3,611,113 3,610 1,298,061 (1,521) -
--------- ------- --------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated Subscription
Shares Amount Capital Deficit Receivable
-------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance Forward 3,611,113 3,610 1,298,061 (1,521) -
--------- ------- --------- --------- ----------
Issuance of Common
stock for cash at
$4.00 per share 138,040 138 552,022 - -
Issuance of Common
stock for subscription
note receivable at
$4.00 per share 414,200 414 1,652,658 - (1,656,800)
Issuance of Common
stock for future
production costs
at $6.00
per share 112,500 113 647,887 - (676,000)
Issuance of Common
stock for cash
at $6.00
per share 94,517 95 567,005 - -
Net loss for
the year ended
December 31, 1995 - - - (914,279) -
--------- ------- --------- --------- ----------
Balance December
31, 1995 4,370,370 4,370 4,744,633 (915,800) (2,331,800)
Issuance of Common
stock in
reorganization 18,632,612 18,633 (58,033) - -
Issuance of Common
stock for cash
at $1.00
per share 572,407 573 571,834 - -
Issuance of Common
stock for service
at $1.00
per share 24,307 24 24,283 - -
Net loss for the
nine months ended
September
30, 1996 - - - (922,717) -
--------- ------- --------- --------- ----------
Balance September
30, 1996 23,599,696 $23,600 $5,282,717 $(1,838,517) $(2,331,800)
========== ======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 7
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated Subscription
Shares Amount Capital Deficit Receivable
-------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance
September 30,
1996 23,599,696 $ 23,600 $5,282,717 $(1,838,517) $(2,331,800)
Issuance of
common stock
for cash at $1.00
per share 125,380 125 125,255 - -
Issuance of
common stock
for cash at
$0.50 per share 467,400 467 233,233 - -
Cancellation of
shares issued for
agreement for
future production
costs and other
shares (542,138) (542) (647,488) - 675,000
Net loss for
six months ended
June 30, 1997 - - - (612,698) -
------------------------------------------------------------
Balance,
June 30, 1997 26,650,338 $ 23,650 $4,966,747 $(2,451,215) $(1,656,800)
--------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 8
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
October 3,
For the Nine Months For the Three Months 1994 Through
Ended, June 30, Ended June 30, June 30,
--------------------------------------------------------
1997 1996 1997 1996 1997
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(612,698) $(1,076,378) $(157,317) $(282,946) $(2,451,215)
Adjustments to
Reconcile Net Loss
to Net Cash Used
By Operating Activities:
Depreciation and
amortization 82,830 60,938 27,630 15,495 242,785
Common stock issued
for services - 135,618 - - 159,925
Change in Assets and
Liabilities
(Increase) decrease
in accounts receivable(35,000) - - - (35,000)
(Increase) decrease
in inventory (12,269) - - - (52,602)
(Increase) decrease
in other current
assets - (4,596) - - (2,981)
Increase (decrease)
in accrued expenses 79,287 11,455 (36,187) (31,165) 152,160
----------------------------------------------------------
Net Cash Used by
Operating Activities (497,850) (872,963) (93,500) (298,616) (1,986,928)
----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of deposits - - (6,996)
Purchase of Intangibles (69,954) (9,154) - - (144,371)
Purchase of fixed assets (2,007) (20,879) - (1,831) (77,089)
---------------------------------------------------------
Net Cash Used By
Investing activities (71,961) (30,033) - (1,831) (228,456)
---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 9
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
October 3,
For the Nine Months For the Three Months 1994 Through
Ended, June 30, Ended June 30, June 30,
--------------------------------------------------------
1997 1996 1997 1996 1997
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes
payable and contracts
payable (7,058) (20,900) (2,575) (14,400) (15,222)
Proceeds from sale of
Common stock 359,080 822,352 41,700 242,907 1,910,158
Proceeds from notes
payable and convertible
debenture 195,909 83,100 46,257 83,100 334,609
-----------------------------------------------------------
Net Cash Provided by
Financing Activities $547,931 $884,552 $85,382 $311,607 $2,229545
===========================================================
INCREASE (DECREASE)
IN CASH $(21,880) $(18,444) $(8,118) $ 11,160 $ 14,161
CASH AT BEGINNING
OF PERIOD 36,041 130,260 22,279 100,656 -
-----------------------------------------------------------
CASH AT END OF
PERIOD $14,161 $111,816 $14,161 $111,816 $ 14,161
===========================================================
CASH PAID FOR:
Interest $ 9,766 $ 3,055 $ 3,300 $ 1,981 $ 15,900
Income taxes $ - $ - $ - $ - $ -
SUPPLEMENTAL DISCLOSURES
OF NON-CASH
INVESTING AND
FINANCING ACTIVITIES:
Increase in subscription notes
receivable and future
production
costs receivable $ - $ - $ - $ - $(2,331,800)
Addition to debt
for acquisition
of intangibles $ - $ - $ - $ - $ 1,302,914
Common stock issued
for services $ - $ - $ - $135,618 $ 159,925
Equipment acquired
under lease payable $ - $ - $ - $ - $ 25,533
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 10
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and September 30, 1996
NOTE 1- COMPANY ORGANIZATION AND BUSINESS ACTIVITY
Sionix Corporation (formerly Automatic Control Corporation) (the "Company") was
incorporated in Nevada on October 3, 1994. The Company was formed to design,
develop, and market an automatic water filtration system primarily for small
water districts.
The Company is in the development stage and its efforts through March 31, 1997
have been principally devoted to research and development, organizational
activities, and raising capital. As of March 31, 1997, the Company has had
limited revenues. The ultimate recovery of investments and costs is dependent on
future profitable operations, which presently cannot be determined.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected to change its year end to September 30,
subject to IRS approval.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
c. Property and Equipment
Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful life of the assets are expensed as incurred. Depreciation of
property and equipment is determined using the straight-line method over the
expected useful lives of the assets as follows:
Description Useful Lives
---------------------------------------------------------------
Computers and test equipment 5 years
Furniture and fixtures 5 years
d. Intangible Assets
Intangible assets are recorded at cost. Amortization of the costs are determined
using the straight-line method over the expected useful life of 15 years.
Page 11
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements(Continued)
June 30, 1997 and September 30, 1996
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Inventory
Work-in-process and finished goods are stated at the lower of average cost or
market. Inventories at September 30, 1996 consisted of the following:
June 30, September 30,
1997 1996
-----------------------------------------
Work-in-progress $ - $ 33,083
Finished goods 52,602 7,250
------------------------------------------
Total $ 52,602
==========================================
$ 40,333
f. Research and Development
Research and development costs are expensed as incurred.
g. Net Loss Per Share
The computation of net loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
h. Provision for Income Taxes
No provision for income taxes have been recorded due to net operating losses.
The Company accounts for income taxes pursuant to FASB Statement No. 109. The
Internal Revenue Code contains provisions which may limit the loss carry
forwards available should certain events occur, including significant changes in
stockholder ownership interests, accordingly the tax benefit of the loss
carryovers is offset by a valuation allowance of the same amount. The loss
carryovers of approximately $2,450,000 will expire by the year 2012.
i. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Page 12
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements(Continued)
June 30, 1997 and September 30, 1996
NOTE 3- PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1997 and September 30, 1996 consisted of the
following:
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
--------------------------------------------
<S> <C> <C>
Computers and test equipment $ 127,610 $ 125,603
Furniture and fixtures 3,832 3,832
--------------------------------------------
Total 131,442 129,435
Less accumulated depreciation (38,568) (22,068)
--------------------------------------------
Property and Equipment - Net $ 92,874 $ 170,637
============================================
</TABLE>
NOTE 4- INTANGIBLE ASSETS
Intangible assets at June 30, 1997 and September 30, 1996 consisted of the
following:
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
--------------------------------------------
<S> <C> <C>
Patents issued and pending $ 106,524 $ 102,531
Intellectual property 745,793 745,667
Marketing and development
costs 566,147 500,312
Less accumulated amortization (204,218) (137,888)
--------------------------------------------
Intangible Assets - Net $ 1,214,246 $ 1,210,622
============================================
</TABLE>
NOTE 5- LOAN PAYABLE
Pursuant to the acquisition agreement as explained in Note 9, the Company
assumed various promissory notes originally signed in 1992 and 1993 totaling
$50,000. The notes bear interest at 8% and were originally due in 1994.
Management of the Company currently cannot locate the holder of the notes and
consequently has not been able to settle the liability. The amount is being
included as a current liability in the accompanying financial statements until
management can locate the note holder and settle the debt.
Page 13
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1997 and September 30, 1996
NOTE 6- LEASE COMMITMENTS
The Company leases equipment with a lease term through July of 1999. Obligations
under this capital lease have been recorded in the accompanying financial
statements at the present value of future minimum lease payments. The
capitalized cost of $25,533 less accumulated depreciation of $2,553 is included
in property and equipment in the accompanying financial statements.
Obligations under this capital lease consist of the following:
Total $ 16,810
Less: current portion ( 7,847)
----------------
Long-term portion $ 8,963
+++++===========
The future minimum lease payments under this capital lease and the net present
value of the future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year Ending
September 30, Amount
------------- --------
<S> <C>
1997 $ 2,160
1998 9,470
1999 7,892
2000 -
2001 and thereafter -
Total future minimum lease payments 19,522
Less, amount representing interest (2,712)
Present value of future minimum
lease payments $ 16,810
==========
</TABLE>
Page 14
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1997 and September 30, 1996
NOTE 7- RELATED PARTY PAYABLES
The Company has received advances in the form of promissory notes from various
shareholders and other related parties in order to pay minimal ongoing operating
expenses. As of March 31, 1997, $248,109 was due from the Company as a result of
these promissory notes. The notes bear interest at 10% and 13% and originally
matured during November and December, 1996. The related parties and shareholders
currently intend to extend the promissory notes at least another year and thus
the corresponding liability has been classified as long-term in the accompanying
financial statements.
NOTE 8- CONVERTIBLE DEBENTURE
In September 1996 to December 1996, the Company raised $30,000 in 10%
redeemable, convertible debentures. Interest accrues at a rate of 10% and is
payable on a quarterly basis. The principle and unpaid interest are due during
September 1998. The principal amount is convertible at the option of the holder
at any time prior to maturity into shares of the Company's common stock at a
rate of $1.00 per common share.
NOTE 9- ACQUISITION AGREEMENT AND PLAN OF REVERSE MERGER
On December 1, 1995, Automatic Control Corporation (ACC) entered into an
Acquisition Agreement and Plan of Reverse Merger with Coronado Capital
Corporation (Coronado). The shareholders of ACC and Coronado approved the merger
on December 21, 1995 and December 28, 1995, respectively. The merger was
effective on January 5, 1996. Under the terms of the merger agreement between
the two companies, the stock of Coronado was reverse-split on a 1-for-4 basis
effective as of January 16, 1996, and each pre-merger shareholder of ACC
received 4.819 new shares of the surviving corporation.
As a result of the merger, the pre-merger shareholders of ACC made up
approximately 95% of the total issued and outstanding shares of Coronado,
following the effective date of the merger.
Under the terms of the merger agreement, the name of Coronado was changed to
Automatic Control Corporation. On January 23, 1996, the shareholders approved
the change of the Company's name to Sionix Corporation.
NOTE 10- STOCKHOLDERS' EQUITY
During the year ended March 31, 1995, 414,200 shares of common stock were issued
in return for notes receivable in the amount of $1,656,800. These notes are
secured by the shares issued and are non-recourse. They have a stated interest
rate of 6% and have maturity dates ranging from March 1, 1998 to September 7,
1998.
In March 1997, the Company revoked an agreement for future production costs due
to the heavy backlog of the contracting company. Under the original agreement,
the Company issued 542,138 shares for productions costs valued at $675,000.
Under the revocation agreement, the shares originally issued have been cancelled
and the accompanying financial statements reflect the cancellation.
Page 15
<PAGE>
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1997 and September 30, 1996
NOTE 11- COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a lawsuit in San Diego County Superior Court filed
by an ex-employee. The ex-employee alleges that the Company breached his
employment contract and personally defamed him. The Company has filed its cross
claims and intends to vigorously defend the lawsuit. The ultimate outcome of the
case is uncertain but management believes an unfavorable outcome is remote.
Therefore, no accrual has been recorded in the accompanying financial
statements.
NOTE 12- COMMON STOCK PURCHASE WARRANTS
The Company's Board of Directors has authorized and approved 1,443,328 common
stock purchase warrants as of March 31, 1997 as follows:
<TABLE>
<CAPTION>
Number Exercise Price
of Warrants Per Share Expiration Date(s)
----------------------------------------------------------------
<S> <C> <C> <C>
570,100 $ 1.00 May 15, 1998 - Sept. 30, 1998
104,445 $ 10.00 January 4, 1998
783 $ 550.00 May 15, 1998
851,400 $ 0.50 January 2, 1998 - June 30, 1999
</TABLE>
NOTE 13- GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. It is the
intent of the Company to generate revenue through the sales of its software and
hardware products. The Company is in the process of completing a $500,000
private placement of its common stocks to fill requests for its hardware
products. In the opinion of management, sales of the Company's products,
together with the proceeds of the private placement, will be sufficient to fund
the Company's operating expenses and capital requirements for at least the next
twelve months. However, the outcome of these events is currently uncertain.
Page 16
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Sionix Corporation
(A Development Stage Company)
San Diego, California
The accompanying balance sheet of Sionix Corporation (formerly Automatic
Control Corporation) (a development stage company) as of June 30, 1997 and the
related statements of operations, stockholders' equity and cash flows for the
three months then ended June 30, 1997 and 1996 and for the six months ended June
301, 1997 and 1996 and from inception on October 3, 1994 through June 30, 1997,
were not audited by us and, accordingly, we do not express an opinion on them.
The accompanying balance sheet of Sionix Corporation as of September 30, 1996
was audited by us and we expressed an unqualified opinion on it in our report
dated October 17, 1996.
/s/ JONES, JENSEN & COMPANY
Jones, Jensen & Company
August 11, 1997
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Page 17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter the Company continued to re-focus its energies on the
marketing of its patented water treatment components and filtration products.
This was necessary because the original marketing surveys conducted prior to the
release of the Company's automation software indicated a high degree of need for
the software product by water industry professionals, yet, upon the release of
the software product many water facilities that originally committed to the
Company's software declined on their commitments citing budget restrictions.
However, every water utility or commercial enterprise that has requested a pilot
test model of the Company's DAF treatment system have asked the Company include
the software package in full. Some of the components of the full package are
being prepared to be marketed separately. Since software sales did not meet any
of management's projections, additional investment by officers, directors and
stockholders was required to enable the company to continue operations.
Currently the Company is being represented by two investment groups to provide
funding to initiate manufacturing of the water treatment components and
filtration products.
RESULTS OF OPERATIONS
For the quarter the Company is reporting a loss of $157,300 or less than
$0.01 per share. This represents a 23.8% reduction in the loss over the previous
quarter and a 55.5% reduction in the loss over the same quarter of the previous
year.
In order to market it's water treatment components and filtration
equipment, the Company has made many presentations to municipal and commercial
water treatment facilities that has resulted in numerous requests for a
short-term pilot study of the Company's equipment on-site. Additionally,
negotiations of OEM agreements with several international companies are
continuing. These negotiations have taken longer than originally expected as
more information about the serious condition of water quality in the United
States and elsewhere is published and assessments of the economics of water
treatment continue. Management is confident that these OEM agreements will be
consummated in the near future. The Company maintains an internet website at
www.sionix.com.
CAUTIONARY STATEMENT:
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer which
are not historical or current facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
Page 18
<PAGE>
of the date made. The following important factors, among others, in some cases
have affected and in the future could affect the Company's actual results and
could cause the Company's actual financial performance to differ materially from
that expressed in any forward-looking statement: (i) the extremely competitive
and volatile conditions that currently exist in the water filtration marketplace
are expected to continue, placing further pressure on pricing which could
adversely impact sales and erode profit margins; (ii) many of the Company's
major competitors in each of its channels of distribution have significantly
greater financial resources than the Company; and (iii) the inability to carry
out marketing and sales plans would have a materially adverse impact on the
Company's projections. The foregoing list should not be construed as exhaustive
and the Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Page 19
<PAGE>
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
At the end of the period coverage by this report the Company is a defendant
in a lawsuit in San Diego County Superior Court filed by an ex-employee. The
ex-employee alleged that the Company breached his employment contract and
personally defamed him. The Company had filed its cross claim and intends to
vigorously defend the lawsuit. At the time of the filing of this report, the
parties had settled the lawsuit.
With the exception of the above referenced matter, there are no legal
proceedings against the Company and the Company is unaware of any unasserted
claim or assessment which will have a material effect on the financial position
or future operations of the Company.
Item 2. Changes in Securities.
Not required.
Item 3. Defaults Upon Senior Securities.
Not required.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Required
Item 5. Other Information.
Not required.
Item 6. Exhibits and Reports on Form 8-K.
(a) There are no exhibits filed with this Form 10-Q.
(b) There were no other reports on Form 8-K filed during the quarter of the
period covered.
Page 20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
SIONIX CORPORATION
A Utah Corporation
Dated: August 14, 1997 /s/ Jack F. Moorehead
-----------------------------
By: Jack F. Moorehead
Its: President
Dated: August 14, 1997 /s/ Michael A. Taylor
-----------------------------
By: Michael A. Taylor
Its: Chief Executive Officer
Page 21
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<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
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