<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTER ENDED: JUNE 30, 1998; 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 Pl., Suite 100, San Diego, California 92121
- -------------------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
(619) 622-0200
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-------------------------------------------------------------
(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 March 31, 1998, there were 23,910,020 shares of the registrant's
Common Stock, $.001 par value, outstanding and subscribed.
<PAGE> 2
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 March 31, 1997 and the results of its operations and
changes in its financial position from inception through March 31, 1997 have
been made. The results of its operations for such interim period is not
necessarily indicative of the results to be expected for the entire year.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Report.................................... 3
Balance Sheets ................................................ 4
Statement of Operations......................................... 6
Statement of Stockholders' Equity............................... 7
Statement of Cash Flows......................................... 11
Notes to Financial Statements for Period........................ 13
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> 3
[JONES, JENSEN & COMPANY, LLC LETTERHEAD]
INDEPENDENT ACCOUNTANT'S REPORT
-------------------------------
To the Board of Directors
Sionix Corporation
(A Development Stage Company)
San Diego, California
The accompanying balance sheet of Sionix Corporation (a development stage
company) as of June 30, 1998 and the related statements of operations,
stockholders' equity, and cash flows for the three months ended June 30, 1998
and 1997 and for the nine months ended June 30, 1998 and 1997 and from
inception on October 3, 1994 through June 30, 1998 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, 1997 was audited by us and we
expressed an unqualified opinion on it in our report dated February 2, 1998.
/s/ JONES, JENSEN & COMPANY
- ---------------------------
Jones, Jensen & Company
Salt Lake City, Utah
August 12, 1998
3
<PAGE> 4
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
----------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash in banks $ 28,455 $ 271
Inventory (Note 2) 6,525 6,525
Advances - employees 17,254 --
---------- ----------
Total Current Assets 52,234 6,796
---------- ----------
PROPERTY AND EQUIPMENT - NET (Notes 2 and 3) 119,754 90,436
---------- ----------
OTHER ASSETS
Deposit 10,000 --
Intangibles - net (Notes 2 and 4) 1,179,814 1,216,574
---------- ----------
Total Other Assets 1,189,814 1,216,574
---------- ----------
TOTAL ASSETS $1,361,802 $1,313,806
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
----------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 142,701 $ 209,448
Convertible debenture, current portion 20,000 10,000
Loan payable (Note 5) 50,000 50,000
Lease payable, current portion (Note 6) 8,609 7,847
Accrued expenses 43,918 38,934
----------- -----------
Total Current Liabilities 265,228 316,229
----------- -----------
LONG-TERM DEBTS
Lease payable (Note 6) 3,577 4,279
Related party payables (Note 7) 356,106 274,774
Convertible debenture (Note 8) -- 20,000
----------- -----------
Total Long-Term Debts 359,683 299,053
----------- -----------
Total Liabilities 624,911 615,282
----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 6 and 11) -- --
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 100,000,000 shares
authorized, 25,445,020 and 24,054,090 shares issued
and outstanding, respectively 25,445 24,055
Additional paid-in capital 5,060,812 5,028,702
Deficit accumulated during the developmental stage (2,812,566) (2,697,433)
Subscription receivable (Note 10) (1,536,800) (1,656,800)
----------- -----------
Total Stockholders' Equity 736,891 698,524
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,361,802 $ 1,313,806
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
SIONIX CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Nine Months Ended For the Three Months Ended October 3,
June 30, June 30, 1994 Through
-------------------------- -------------------------- June 30,
1998 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE $- $ 15,500 $ -- $ -- $ 15,500
COST OF SALES -- 6,540 -- -- 6,540
----------- ----------- ----------- ----------- -----------
GROSS PROFIT -- 8,960 -- -- 8,960
----------- ----------- ----------- ----------- -----------
EXPENSES
Research and development -- -- -- -- 850,353
Depreciation and
amortization 69,900 82,830 23,300 27,630 323,276
Administrative and
marketing 30,781 529,062 14,340 126,387 1,510,618
----------- ----------- ----------- ----------- -----------
Total Expenses 100,681 611,892 37,640 154,017 2,684,247
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (100,681) (602,932) (37,640) (154,017) (2,675,287)
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Write down of obsolete
software -- -- -- -- (53,614)
Settlement costs -- -- -- -- (25,125)
Interest (14,452) (9,766) -- (3,300) (58,540)
----------- ----------- ----------- ----------- -----------
Total Other Income
(Expense) (14,452) (9,766) -- (3,300) (137,279)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (115,133) $ (612,698) $ (37,640) $ (157,317) $(2,812,566)
=========== =========== =========== =========== ===========
LOSS PER SHARE $ (0.00) $ (0.03) $ (0.00) $ (0.01)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on October 3, 1994 through June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- 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.
7
<PAGE> 8
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- 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 112,500 113 674,887 -- (675,000)
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 services 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>
8
<PAGE> 9
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- 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 80,880 81 80,799 -- --
Issuance of common stock for
cash at $0.69 per share 14,545 15 9,985 -- --
Issuance of common stock for
cash at $0.67 per share 60,000 60 39,940 -- --
Issuance of common stock for
cash at $0.56 per share 4,444 4 2,496 -- --
Issuance of common stock for
cash at $0.50 per share 368,000 368 183,632 -- --
Issuance of common stock for
cash at $0.31 per share 8,064 8 2,492 -- --
Issuance of common stock for
cash at $0.25 per share 186,800 187 46,513 -- --
Issuance of common stock for
services at $0.20 per share 274,299 274 54,586 -- --
Cancellation of shares issued
for agreement for future
production costs and other
shares (542,138) (542) (674,458) -- 675,000
Net loss for the year ended
September 30, 1997 -- -- -- (858,916) --
---------- -------- ----------- ------------ ------------
Balance,
September 30, 1997 24,054,590 $ 24,055 $ 5,028,702 $ (2,697,433) $ (1,656,800)
---------- -------- ----------- ------------ ------------
</TABLE>
The accompanying nots are an integral part of these financial statements.
9
<PAGE> 10
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated Subscription
Shares Amount Capital Deficit Receivable
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance,
September 30, 1997 24,054,590 $ 24,055 $ 5,028,702 $(2,697,433) $(1,656,800)
Expiration of subscription
notes (144,570) (145) (119,855) -- 120,000
Issuance of common stock for
cash at $0.10 per share 1,535,000 1,535 151,965 -- --
Net loss for the nine months
ended June 30, 1998 -- -- -- (115,133) --
---------- ----------- ------------ ----------- -----------
Balance, June 30, 1998 25,445,020 $ 25,445 $ 5,060,812 $(2,812,566) $(1,536,800)
========== =========== ============ =========== ===========
</TABLE>
The accompanying nots are an integral part of these financial statements.
10
<PAGE> 11
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Nine Months Ended For the Three Months Ended October 3,
June 30, June 30, 1994 Through
---------------------------- ---------------------------- June 30,
1998 1997 1998 1997 1998
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (115,133) $ (612,698) $ (37,640) $ (157,317) $(2,812,566)
Adjustments to Reconcile Net
Loss to Net Cash Used by
Operating Activities:
Depreciation and amortization 69,900 82,830 23,300 27,630 323,276
Common stock issued
for services -- -- -- -- 214,785
Change in Assets and
Liabilities
(Increase) decrease in
accounts receivable -- -- -- -- --
(Increase) decrease in
advances (17,254) -- (17,254) -- (17,254)
(Increase) in deposits (10,000) (35,000) (10,000) -- (10,000)
(Increase) decrease in
inventory -- (12,269) -- -- (6,525)
Increase (decrease) in
accounts payable and
accrued expenses (61,763) 79,287 (22,954) 36,187 147,221
----------- ----------- ----------- ----------- -----------
Net Cash Used by
Operating Activities (134,250) (497,850) (64,548) (93,500) (2,161,063)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of intangibles (10,448) (69,954) -- -- (160,636)
Purchase of fixed assets (52,010) (2,007) (52,010) -- (133,763)
----------- ----------- ----------- ----------- -----------
Net Cash Used by
Investing Activities (62,458) (71,961) (52,010) -- (294,399)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of notes payable
and contracts payable (9,877) (7,058) (9,937) (2,575) (29,784)
Proceeds from sale of common
stock 153,500 359,080 153,500 41,700 2,071,158
Proceeds from notes payable
and convertible debenture 81,269 195,909 -- 46,257 442,543
----------- ----------- ----------- ----------- -----------
Net Cash Provided by
Financing Activities $ 224,892 $ 547,931 $ 143,563 $ 85,382 $ 2,483,917
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying nots are an integral part of these financial statements.
11
<PAGE> 12
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the Nine Months Ended For the Three Months Ended October 3,
June 30, June 30, 1994 through
--------------------------- --------------------------- June 30,
1998 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN CASH $ 28,184 $ (21,880) $ 27,005 $ (8,118) $ 28,455
CASH AT BEGINNING OF
PERIOD 271 36,041 1,450 22,279 --
----------- ----------- ----------- ----------- -----------
CASH AT END OF PERIOD $ 28,455 $ 14,161 $ 28,455 $ 14,161 $ 28,455
=========== =========== =========== =========== ===========
CASH PAID FOR:
Interest $ 20,140 $ 9,766 $ 5,688 $ 3,300 $ 32,760
Income taxes $ -- $ -- $ -- $ -- $ --
SUPPLEMENTAL DISCLOSURES
OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Decrease (Increase) in
subscription notes receivable
and future production costs
receivable $ 120,000 $ -- $ -- $ -- $(1,536,800)
Addition to debt for
acquisition of
intangibles $ -- $ -- $ -- $ -- $ 1,302,914
Common stock issued for
services $ -- $ -- $ -- $ -- $ 214,785
Equipment acquired under
lease payable $ -- $ -- $ -- $ -- $ 25,533
</TABLE>
The accompanying nots are an integral part of these financial statements.
12
<PAGE> 13
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1998 and September 30, 1997
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, 1998 have been principally devoted to research and
development, organizational activities, and raising capital. As of
June 30, 1998, the Company has $15,500 of 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.
13
<PAGE> 14
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1998 and September 30, 1997
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 June 30, 1998 and September
30, 1997 consisted of the following:
June 30, September 30,
1998 1997
------- -------------
Finished goods $6,525 $ 6,525
------ -------
Total $6,525 $ 6,525
====== =======
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 carryforwards 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 $2,800,000 will expire by the
year 2013.
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.
14
<PAGE> 15
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1998 and September 30, 1997
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1998 and September 30, 1997
consisted of the following:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
----------- ----------
<S> <C> <C>
Computers and test equipment $ 154,921 $ 125,603
Furniture and fixtures 10,503 10,503
----------- ----------
Total 165,424 136,106
Less accumulated depreciation (45,670) (22,068)
----------- ----------
Property and Equipment - Net $ 119,754 $ 90,436
=========== ==========
</TABLE>
NOTE 4 - INTANGIBLE ASSETS
Intangible assets at June 30, 1998 and September 30, 1997 consisted
of the following:
June 30, September 30,
1998 1996
------------ -----------
Patents issued and pending $ 112,340 $ 112,465
Intellectual property 1,227,264 1,227,138
Marketing and development costs 95,123 84,676
Less accumulated amortization (254,913) (207,705)
------------ -----------
Intangible Assets - Net $ 1,179,814 $ 1,216,574
============ ===========
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 totalling $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.
15
<PAGE> 16
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1998 and September 30, 1997
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:
June 30, September 30,
1998 1997
--------- ------------
Total $ 12,186 $ 12,126
Less: current portion (8,609) (7,847)
--------- --------
Long-term portion $ 3,577 $ 4,279
========= ========
The future minimum lease payments under this capital lease and the
net present value of the future minimum lease payments are as
follows:
Year Ending June 30, September 30,
September 30, 1998 1997
--------------- ------------ -------------
1998 $ 7,650 $ 9,470
1999 7,346 4,735
2000 -- --
2001 and thereafter -- --
-------- --------
Total future minimum lease payments 14,996 14,205
Less, amount representing interest (2,810) (2,079)
-------- --------
Present value of future minimum
lease payments $ 12,186 $ 12,126
======== ========
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 June 30, 1998, $356,043
was due from the Company as a result of these promissory notes. The
notes bear interest at 7% to 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.
16
<PAGE> 17
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements (Continued)
June 30, 1998 and September 30, 1997
NOTE 8 - CONVERTIBLE DEBENTURE
As of June 30, 1998, the Company has $20,000 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, October, and November 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 - 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. The total number of post-merger shares represented by
these notes is 1,996,032 shares. 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.
During the nine months ended June 30, 1998, two notes receivable
totaling $120,000 and representing 144,570 shares of common stock
were not paid when due and the corresponding stock certificates
were presented to the transfer agent for cancellation.
NOTE 10 - 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:
Number Exercise Price
of Warrants Per Share Expiration Date(s)
----------- --------------- ------------------
570,100 $ 1.00 May 15, 1998 - Sept. 30, 1998
81,400 $ 0.50 January 2, 1997 - March 31, 1999
NOTE 11 - 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. During the later part of the
Fiscal 1996, the Company focused its energies on raising capital to
begin the manufacturing and marketing of its equipment products.
Toward these ends, the Company engaged a public relations firm to
aid in the raising of capital and presented seminars on its
technology in areas where water quality is a serious problem.
Management believes, with successful completion of a financial
package, that delivered sales of the Company's equipment products
will occur. In the opinion of management, sales of the Company's
products, together with the proceeds of an offering, will be
sufficient for it to continue as a going concern.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
New management has arranged for the necessary capital needed for the
Company to complete engineering, design and procure machine tooling,
manufacture and test "beta" units, and begin limited production.
RESULTS OF OPERATIONS
For the quarter the Company is reporting a loss of $37,640 or $0.00 per
share on no revenues.
The Company is continuing to meet with many potential foreign and
domestic customers that require immediate solutions to water problems.
The Company maintains an Internet home page at http://www.sionix.com.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18
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PART II - OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
The Company is a defendant in a lawsuit in San Diego Superior Courts
filed at the end of December of 1997 by a disgruntled stockholder. The
stockholder alleges that he was improperly informed of the risks of his
investment in the Company. The ultimate outcome of the case is uncertain
but management believes that an unfavorable outcome is unlikely.
Therefore, no accrual has been recorded in the accompanying financial
statements.
The Company has been declared a judgement creditor in three lawsuits.
The amounts due on these judgements were previously recorded liabilities
in the accompanying financial statements.
With the exception of the above referenced matters, 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) 27. Financial Data Schedule.
(b) There were no other reports on Form 8-K filed during the quarter of
the period covered.
19
<PAGE> 20
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 13, 1998 /s/ James J. Houtz
------------------------------
By: James Houtz
Its: President
Dated: August 13, 1998 /s/ Joan Horowitz
------------------------------
By: Joan Horowitz
Its: Secretary
20
<PAGE> 21
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 28,455
<SECURITIES> 0
<RECEIVABLES> 17,254
<ALLOWANCES> 0
<INVENTORY> 6,525
<CURRENT-ASSETS> 52,234
<PP&E> 165,424
<DEPRECIATION> 45,670
<TOTAL-ASSETS> 1,361,802
<CURRENT-LIABILITIES> 265,228
<BONDS> 0
0
0
<COMMON> 25,445
<OTHER-SE> 711,446
<TOTAL-LIABILITY-AND-EQUITY> 1,361,802
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 37,640
<LOSS-PROVISION> (37,640)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (37,640)
<INCOME-TAX> 0
<INCOME-CONTINUING> (37,640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,640)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
