<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1997
[ ] 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: 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)
Registrant's telephone number, including area code: (619) 622-0200
Securities Registrant pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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 II of this Form 10-K or any
amendments to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant, based upon the closing price on September 30, 1997 was
approximately $12,800,000.
The number of shares outstanding of the registrant's common stock as of
September 30, 1997 was 24,054,590.
1
<PAGE> 2
SIONIX CORPORATION
FORM 10-KSB
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 5
Item 6. Selected Financial Data 5
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations 5
Item 8. Financial Statements and Supplementary Data 6
Item 9. Disagreements on Accounting and
Financial Disclosures 6
PART III
Item 10. Directors and Executive Officers of the Registrant 21
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management 23
Item 13. Certain Relationships and Related Transactions 23
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 24
Signatures 25
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. THE BUSINESS
GENERAL
Sionix Corporation, formerly Coronado Capital Corporation (hereinafter
referred to as "Sionix" or the "Company") was incorporated under the laws of the
State of Utah on January 15, 1985, as a "blind pool", with no specific business,
for the purpose of raising capital to purchase various business endeavors.
Coronado Capital held a public offering of stock in August 1985. The net
proceeds were invested into what became a number of unsuccessful ventures and
Coronado Capital became relatively inactive by 1988. In February 1994, Coronado
Capital merged with Alimet, Inc., a Delaware corporation. Alimet, Inc. was
researching and manufacturing aluminum-based metal matrix composite alloys for
the use in non-aerospace applications. By late 1994, Coronado Capital determined
that the financial requirement to produce and market these new metals was far
beyond Coronado Capital's means and Coronado Capital took a one time charge for
research and manufacturing costs.
During fiscal 1995, the Company entered into an Acquisition Agreement
and Plan of Reverse Merger with Automatic Control Corporation, a Nevada
Corporation ("ACC"), under which ACC would merge with and into the Company (the
"Merger"). On December 28, 1995, the merger was approved by the shareholders of
the Company and the merger was consummated and effective as of January 5, 1996.
The newly merged company was renamed Sionix Corporation at a special meeting of
the shareholders held on January 23, 1996.
The Company has designed and tested equipment for improving the
treatment of water for commercial, industrial and public water treatment
facilities. As of September 30, 1997 the Company has had seven of its patents
issued and an eighth one allowed. It is currently in the process of raising
capital to begin widespread manufacturing and marketing of it's product lines.
The Company's executive offices and principal operations are located at
5355 Mira Sorrento Place, Suite 100, San Diego, California 92121 and its
telephone number is (619) 622-0200.
PRODUCTS
Dissolved Air Flotation (DAF) Particle Separator
The Company has taken a bulky, yet extremely effective, 70 year old
technology and made it modular and portable. In fact, DAF technology is so
efficient, the American Water Works Association's (AWWA) internet website lists
over 125 research papers that verify the treatment and cost benefits of DAF and
the October 1997 issue of the AWWA Journal published a report on the
effectiveness of DAF in extending the run lengths of microfiltration products.
Like it's much larger, costlier and older sibling, the Sionix DAF
particle separators use microscopic air bubbles to remove suspended particles in
the water. In the Sionix DAF column, a vertical vortex of spinning water forms a
high-pressure zone at the outer perimeter and a low-pressure vortex of trapped
air in its center. Algae, oils and other buoyant particles are pushed by the
microscopic air bubbles into the center. The contaminants are held there by
surface tension at the vortex's air-water interface and slowly discharged along
with excess air and water to the waste line. The Company's DAF process uses no
polymer chemicals or toxic metals and wastewater can be safely returned to a
lake, river, or reservoir without damaging the environment. Additionally, the
Sionix DAF particle separators substantially improves filter efficiency,
increases flow rates in existing sand-type or micro-type filters and extends the
life of the filter media by extending the time between filter cleaning cycles.
1
<PAGE> 4
The real advantages of Sionix's patented DAF technology is it's size and
affordable cost. The standard tank-type DAF particle separators treat tremendous
amounts of water, so they are very large, in most cases require engineering and
construction and take up a great deal of space. These DAF "projects", by their
very nature, are too costly for most small municipal waster districts and are
not conducive to applications such as hotels, cooling towers, dairies or food
processing facilities. On the other hand, the Sionix DAF particle separator
requires a minimal amount of space, is economically priced and, since it is a
modular piece of equipment, is installed in a matter of hours, not built on-site
as a project.
Each basic DAF module has a flow-through of 200 gallons per minute
(288,000 gallons per day), an amount necessary to supply all the drinking and
potable water requirements for approximately 2,400 people. And because modules
can be manifolded to meet any gallon per day requirement many larger facilities
can benefit by this technology.
Ozone Oxidation System
Ozone, long recognized as an excellent "polisher" of water, is being
installed in hundreds of municipal water systems around the country. Used in
Europe for many decades, this technology has also finally found it's way to the
rest of the world. However, problems of high energy costs caused by less than
perfect feedwater and inefficient mixing of water and gas, have caused some to
become wary of this outstanding technology.
To overcome these problems, Sionix combined a corona-discharge ozone
generator with its patented double-helix ozone mixing chamber. By utilizing the
Sionix DAF particle separator (discussed above) to pre-treat the feedwater, less
energy is required to create the appropriate amount of Ozone for polishing
(cleaner water = less Ozone). By creating a turbulent flow of water and gas
within the mixing chamber, Sionix has achieved a much higher saturation with
less Ozone (and a minimum of excess Ozone) than in other mixing methods. This
equipment was designed to match flow-throughs with the Sionix DAF particle
separator, can also be manifolded to create more flow-through, is installed, not
constructed, and can be used with or without the DAF system, depending on the
quality of the feedwater.
Microfiltration System
The requirements of the Surface Water Treatment Rule of the Safe
Drinking Water Act of 1996 are forcing more water treatment facilities around
the country to look into microfiltration. With the potential requirements of the
proposed Enhanced Surface Water Treatment Rule and the addition of the Ground
Water Treatment Rule, microfiltration will leap to the forefront of water
treatment. Currently, most microfiltration is "membrane" based. And when
membranes get dirty, they must be cleaned (if possible) and replaced. In fact,
many treatment facilities have turned away from membrane technology solely
because of the high maintenance and replacement costs.
Sionix attacked this problem by perfecting (and patenting) a method that
"scrubs" the water through a filter media, rather than pushing the water
directly through it. By utilizing a woven stainless steel, 2-micron filter
element, the Sionix microfiltration system automatically backflushes in less
than one second when the differential pressure increases 3 psi. As with other
Sionix equipment, these microfiltration units were designed to work with or
without the other products and are installed as complete subassemblies, not
constructed on-site.
Sionix5 Software
Designed to operate and monitor all of the Sionix equipment products,
this user friendly software program was expanded to contain an extensive library
of state and federal clean water laws and acts, a plant operator training
program, an automatic health department report compiler, and a SCADA design
program.
2
<PAGE> 5
AVAILABILITY OF MATERIALS
Materials and components use by the Company for manufacturing are
carefully selected based on stringent specifications for usage and operating
conditions. Every effort is made to specify parts from multiple sources for
independence from manufacturers and distributors. The Company has avoided using
hard-to-get special parts to further minimize dependency from vendors.
Simplicity in design and the use of common, widely used and readily available
components is emphasized.
MARKETING AND CUSTOMERS
Internationally, the total replacement value of the municipal
filtration-equipment market in 24 of the largest countries exceeds $5.6
trillion. Domestically, the immediate market exceeds $200 billion by EPA
estimate.
In the United States, an established base of 185,000 small to very small
water providers are an ideal target market group for the company's equipment and
services. This is clearly the group with the greatest need: most of them now
operate outdated, inefficient and expensive systems with EPA reports listing
more than 50,000 that are currently in violation of the Safe Drinking Water Act.
With more stringent regulation and testing requirements on the way for both
surface water and ground water more facilities are going to be forced into
changing the way they do business. However, many commercial and industrial water
providers and users are coming under heavy scrutiny by state and federal
regulators. The dairy industry, meat and poultry producers, food and beverage
processors, cooling tower manufacturers and oil and gas producers are just some
of the industries that create "bad water" (bacterial, chemical, etc.) and are
being targeted with possible indictments for violation of water statutes. Most
of these are prime candidates for Sionix products. In addition to the domestic
markets, the Company has been contacted by representatives from Spain, Portugal,
and Brazil that, combined, have more than $40 billion dollars assigned for water
and wastewater treatment.
Sionix meets this challenge with products that are easily expandable and
upgradable. Adding Ozone and microfiltration equipment to a DAF unit is like
adding a new hard drive to your computer. Each piece of equipment comes with
state-of-the-art telemetry and wet-chemistry monitoring that expands as the
system does. Sionix provides lease financing for all of it's products that not
only makes it easy for a customer to acquire the equipment, but will guarantee
that the customer will always have access to any refinements and improvements
made to the company's products.
EMPLOYEES
At September 30, 1997 the Registrant had 4 full time employees.
ITEM 2. PROPERTIES
At September 30, 1997 the Registrant did not own property.
ITEM 3. LEGAL PROCEEDINGS
In July 1997, the Company settled a lawsuit filed in San Diego County
Superior Court by Michael Maung, an ex-employee, for a cash amount that was paid
in full on December 1, 1997.
With the exception of the above-referenced matter, the Company is not a
party to any material legal proceedings, nor to the Company's knowledge are
there any other material legal proceedings contemplated against it.
3
<PAGE> 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first and final quarter of fiscal 1996, there were two
matters submitted to a vote of the security holders of the registrant. The first
was a special meeting of the shareholders held on January 23, 1996, for the
purpose of changing the name of the registrant from Sionix Corporation and to
amend the Articles of Incorporation to provide that action by written consent of
its shareholders may be taken without a meeting in accordance with Section
1-10a-704 of the Utah Revised Business Corporation Act. Both proposals were
approved and adopted.
The second matter was the action by written consent of a majority of the
shareholders taken on September 16, 1996, wherein Section 2.4 of the By-laws of
the registrant was amended to provide that a special meeting of the shareholders
may be called by the president of the corporation, a majority of the board of
directors or by the written request of shareholders holding at least ten (10)
percent of all votes entitled to be cast on such issue to be proposed at such
special meeting.
(THE REST OF THE PAGE LEFT INTENTIONALLY BLANK)
4
<PAGE> 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
MARKET FOR COMMON STOCK
The Company's common stock is listed and traded on the NASDAQ OTC
Bulletin Board under the symbol SINX. There has been relatively limited trading
activity in the Company's stock since inception. The following table represents
the high and low sales prices for the Company's common stock for each quarter of
fiscal 1996.
<TABLE>
<CAPTION>
Fiscal 1996 Asked Bid
----------- ----- ---
<S> <C> <C>
First Quarter $ 0.500 $ 0.625
Second Quarter $ 0.375 $ 0.688
Third Quarter $ 0.188 $ 0.438
Fourth Quarter $ 0.063 $ 0.188
</TABLE>
HOLDERS OF RECORD
There were approximately 600 holders of record of the Company's common
stock as of September 30, 1997.
DIVIDENDS
The Company has never declared or paid any cash dividend on its shares
of common stock. Future dividends, if any, will vary depending on the Company's
profitability and anticipated capital requirements.
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights
<TABLE>
<CAPTION>
(September 30 for
Year Ended December 31 1996 and 1997)
----------------------- --------------------------
1994 1995 1996 1997
------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net Revenues $ - $ - $ - $ 15,500
Net Income (1,521) (914,279) (922,717) (858,916)
Earnings per share - (0.05) (0.04) (0.03)
Return on net revenues - - - -
Cash and short-term investments - 229,407 36,041 271
Total assets 1,521 1,602,593 1,404,340 1,313.806
Stockholders' equity - 1,468,903 1,136,000 698,524
</TABLE>
5
<PAGE> 8
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet as of September 30, 1997 continues to
reflect negative working capital. This was due to a delay in the release of the
beta version of the Sionix5 Office Automation and Training Program until October
1996. The Company received financial support by way of a private placement that
raised approximately $519,500 since May, 1996. Included in this amount is
$142,500 from the Company's top management." These funds allowed the Company to
create its initial inventory of product for sale and to ramp up its marketing
department.
RESULTS OF OPERATIONS
The Company released the Sionix5 Software as a stand-alone program in
January 1997. and plans to begin marketing the Sionix SCADA System and Sionix5
SCADA Manager before the end of the year. The Sionix Filtration Module is
schedule for release in the first quarter of 1997.
The Board of Directors approved a change in the fiscal year end of the
Company from December 31 to September 30, effective with the current quarter, on
September 27, 1996. For the quarter ended September 30, 1996 the Company is
reporting a loss of $287,000, or $0.01 per share. This compares with a loss of
$283,000, or $0.01 for the previous quarter ended June 30, 1996 and a loss of
$352,000, or $0.02 per share, for the quarter ended September 30, 1995. There
were no revenues reported for the quarter ended September 30, 1996.
For the short year ended September 30, 1996 the Company is reporting a
loss of $923,000, or $0.04 per share. This compares with a loss of $516,000, or
$0.02 per share for the nine months ended September 30, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Balance Sheets - September 30, 1997 7
Statement of Operations 9
Statement of Stockholders' Equity 10
Statement of Cash Flows - periods ended September 30, 1997 13
Notes to Financial Statements for Period 15
Independent Auditor's Report 20
</TABLE>
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.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
6
<PAGE> 9
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
<TABLE>
<CAPTION>
September 30,
1997
-------------
<S> <C>
CURRENT ASSETS
Cash in banks $ 271
Inventory (Note 2) 6,525
----------
Total Current Assets 6,796
-----------
PROPERTY AND EQUIPMENT - NET (Notes 2 and 3) 90,436
----------
OTHER ASSETS
Intangibles - net (Notes 2 and 4) 1,216,574
----------
Total Other Assets 1,216,574
-----------
TOTAL ASSETS $1,313,806
==========
</TABLE>
The accompanying notes are an integral part of the financial statements
7
<PAGE> 10
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30,
1997
-------------
<S> <C>
CURRENT LIABILITIES
Accrued expenses $ 38,934
Loan payable (Note 5) 50,000
Lease payable, current portion (Note 6) 7,847
Convertible debenture, current portion (Note 8) 10,000
Accounts payable 209,448
-----------
Total Current Liabilities 316,229
-----------
LONG-TERM DEBTS
Related party payables (Note 7) 274,774
Lease payable (Note 6) 4,279
Convertible debenture (Note 8) 20,000
-----------
Total Long-Term Debts 299,053
-----------
Total Liabilities 615,282
-----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY
Common stock $.001 par value,
100,000,000 shares authorized,
24,054,590 shares issued and outstanding 24,055
Additional paid-in capital 5,028,702
Deficit accumulated during the development stage (2,697,433)
Subscription receivable (Note 9) (1,656,800)
-----------
Total Stockholders' Equity 698,524
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,313,806
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
8
<PAGE> 11
SIONIX CORPORATION
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
From
Inception on
For the For the Nine October 3,
Year Ended Months Ended 1994 Through
September 30, September 30, September 30,
1997 1996 1997
------------- ------------- -------------
<S> <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 6,701 328,174 850,353
Depreciation and amortization 93,420 82,551 253,376
Administrative and marketing 673,074 501,480 1,479,837
----------- ----------- -----------
Total Expenses 773,195 912,205 2,583,566
----------- ----------- -----------
LOSS FROM OPERATIONS (764,235) (912,205) (2,574,606)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Write down of obsolete software (53,614) - (53,614)
Settlement costs (25,125) - (25,125)
Interest (15,942) (10,512) (44,088)
----------- ----------- -----------
Total Other Income (Expense) (94,681) (10,512) (122,827)
----------- ----------- -----------
NET LOSS BEFORE TAXES (858,916) (922,717) (2,697,433)
PROVISION FOR INCOME TAXES - - -
----------- ----------- -----------
NET LOSS $ (858,916) $ (922,717) $(2,697,433)
=========== =========== ===========
NET LOSS PER SHARE $ (0.03) $ (0.04)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
9
<PAGE> 12
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on October 3, 1994 through September 30, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
------------------------ Paid-in Development Subscription
Shares Amount Capital Stage 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 the financial statements
10
<PAGE> 13
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through September 30, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Development Subscription
Shares Amount Capital Stage 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>
The accompanying notes are an integral part of the financial statements
11
<PAGE> 14
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on October 3, 1994 through September 30, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Development Subscription
Shares Amount Capital Stage 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 notes are an integral part of the financial statements
12
<PAGE> 15
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
For the For the Nine October 3,
Year Ended Months Ended 1994 Through
September 30, September 30, September 30,
1997 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (858,916) $ (922,717) $(2,697,433)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 93,420 82,551 253,376
Common stock issued for services 54,860 24,307 214,785
Change in assets and liabilities:
(Increase) decrease in inventory 33,808 (40,333) (6,525)
(Increase) decrease in other
current assets 2,981 70,410 -
(Increase) decrease in deposits 6,996 (6,996) -
Increase in accounts payable and
accrued expenses 136,111 28,182 208,984
----------- ----------- -----------
Net Cash Used by
Operating Activities (530,740) (764,596) (2,026,813)
----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of intangibles (75,771) (33,968) (150,188)
Purchase of fixed assets (6,671) (41,244) (81,753)
----------- ----------- -----------
Net Cash Used by
Investing Activities (82,442) (75,212) (231,941)
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of notes payable and
contracts payable (11,742) (8,165) (19,907)
Proceeds from sale of stock 366,580 572,407 1,917,658
Proceeds from notes payable and
convertible debenture 222,574 82,200 361,274
----------- ----------- -----------
Net Cash Provided by
Financing Activities $ 577,412 $ 646,442 $ 2,259,025
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
13
<PAGE> 16
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception on
For the For the Nine October 3,
Year Ended Months Ended 1994 Through
September 30, September 30, September 30,
1997 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH $ (35,770) $ (193,366) $ 271
CASH AT BEGINNING OF PERIOD 36,041 229,407 -
----------- ----------- -----------
CASH AT END OF PERIOD $ 271 $ 36,041 $ 271
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Change in subscription notes
receivable and future production
costs receivable $ 675,000 $ - $(1,656,800)
Addition to debt for acquisition of
intangibles $ - $ - $ 1,302,914
Common stock issued for services $ 54,860 $ 24,307 $ 214,785
Equipment acquired under lease
payable $ - $ 25,533 $ 25,533
CASH PAID FOR:
Interest $ - $ - $ 6,134
Income taxes $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of the financial statements
14
<PAGE> 17
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997
NOTE 1 - COMPANY ORGANIZATION AND BUSINESS ACTIVITY
Sionix 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
September 30, 1997 have been principally devoted to research and
development, organizational activities, and raising capital. As of
September 30, 1997, the Company has had $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 a September 30 year
end.
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. Capitalized Marketing Costs
Capitalized marketing costs are recorded at cost. The Company
follows the policy of capitalizing marketing costs associated with
the development of marketing materials. Amortization of the costs
are determined using the straight-line method over the expected
useful life of 15 years.
15
<PAGE> 18
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Inventory
Inventory is stated at the lower of average cost or market.
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 federal 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 carryforwards of approximately $2,697,000 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.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1997 consisted of the
following:
<TABLE>
<S> <C>
Computers and test equipment $ 125,603
Furniture and fixtures 10,503
---------
Total 136,106
Less accumulated depreciation (45,670)
---------
Property and Equipment - Net $ 90,436
=========
</TABLE>
Depreciation expense for the year ended September 30, 1997 and for
the nine months ended September 30, 1996 was $23,602 and $16,440,
respectively.
16
<PAGE> 19
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997
NOTE 4 - INTANGIBLE ASSETS
Intangible assets at September 30, 1997 consisted of the following:
<TABLE>
<S> <C>
Patents issued and pending $ 112,466
Intellectual property 1,227,138
Marketing and development costs 84,676
Less accumulated amortization (207,705)
-----------
Intangible Assets - Net $ 1,216,575
===========
</TABLE>
Amortization expense for the year ended September 30, 1997 and the
nine months ended September 30, 1996 was $69,818 and $66,111,
respectively.
NOTE 5 - LOAN PAYABLE
Pursuant to an acquisition agreement, 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.
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 $7,660 is included in property and
equipment in the accompanying financial statements. Depreciation
expense for this equipment for the year ended September 30, 1997 was
$5,107.
Obligations under this capital lease consist of the following:
<TABLE>
<S> <C>
Total $ 12,126
Less: current portion (7,847)
--------
Long-term portion $ 4,279
========
</TABLE>
17
<PAGE> 20
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997
NOTE 6 - LEASE COMMITMENTS (Continued)
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,
-------------
<S> <C>
1998 $ 9,470
1999 4,735
2000 -
2001 and thereafter -
--------
Total future minimum lease payments 14,205
Less, amount representing interest (2,079)
--------
Present value of future minimum
lease payments $ 12,126
========
</TABLE>
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 September 30, 1997,
$274,774 was due by the Company as a result of these promissory
notes. Some of the notes bear interest at rates of 7% to 13%.
All notes are due on demand and unsecured.
NOTE 8 - CONVERTIBLE DEBENTURE
As of September 30, 1997, the Company has $30,000 in 10% redeemable,
convertible debentures outstanding. 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 December 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.
18
<PAGE> 21
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997
NOTE 10 - COMMON STOCK PURCHASE WARRANTS
The Company's Board of Directors has authorized and approved
1,526,768 common stock purchase warrants as of September 30, 1997
as follows:
<TABLE>
<CAPTION>
Number Exercise Price Expiration
of Warrants Per Share Date(s)
----------- -------------- -------------------------------
<S> <C> <C>
570,100 $ 1.00 May 15, 1998 - Sept. 30, 1998
104,445 $ 10.00 January 4, 1998
783 $ 5.50 May 15, 1998
851,400 $ 0.50 January 2, 1998 - June 30, 1999
</TABLE>
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 the public relations firm of
Howard Bronson Associates of New York 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.
19
<PAGE> 22
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Sionix Corporation
San Diego, California
We have audited the accompanying balance sheet of Sionix Corporation (a
development stage company) as of September 30, 1997, and the related statements
of operations, stockholders' equity and cash flows for the year ended September
30, 1997, for the nine months ended September 30, 1996, and from inception on
October 3, 1994 through September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sionix Corporation (a
development stage company) as of September 30, 1997, and the results of its
operations and its cash flows for the year ended September 30, 1997, for the
nine months ended September 30, 1996 and from inception on October 3, 1994
through September 30, 1997 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company is a development stage company with no
significant operating results to date and has suffered recurring losses which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 11. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Jones, Jensen & Company
Salt Lake City, Utah
February 2, 1998
20
<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists all of the Directors and Executive Officers of
the Company, and provides certain information concerning each such person,
including the number of shares of Common Stock of the Registrant beneficially
owned directly or indirectly by such person at the close of business on
September 30, 1996.
<TABLE>
<CAPTION>
Amount and
Position Nature of Percent
with Beneficial of
Name Age Since Registrant Ownership Class
---- -- ---- -------- --------- -----
<S> <C> <C> <C> <C>
Michael Taylor 44 1996 CEO/CFO 1,017,849 4.23%
Director
Jack Moorehead 66 1996 President 797,929 3.32%
Director
S. Donna Friedman(1) 64 1995 Secretary 9,638,000 40.07%
Treasurer
Director
Laura Friedman(1) 29 1995 Director 383,786 1.60%
Cheryl Friedman(1) 31 1995 Director 383 786 1.60%
Rodney Anderson 69 1997 Director 51,103 .21%
</TABLE>
(1) Director, S. Donna Friedman is the mother of Directors Laura
Friedman and Cheryl Friedman.
PRINCIPAL OCCUPATION
Michael Taylor - Elected as a Director and appointed as CEO/CFO of the
Registrant in May 1996. Mr. Taylor has a BA degree in Business Administration
(with a specialty in accounting) from California State University, Fullerton,
and has practiced as a tax and financial consultant since 1977. Mr. Taylor was
President, CEO and a Director of Coronado Capital Corporation from February 15,
1994 until the merger with Sionix Corporation.
Jack Moorehead - Elected as a Director on December 28, 1995 and
appointed as the President of the Registrant in May, 1996. Mr. Moorehead has a
degree in Civil Engineering from the University of Detroit, and completed
graduate courses in marketing at the University of Miami. He was a marketing
executive with Florida Power and Light and Bevis Associates, their advertising
agency under Vice President D.P. Cauldwell. Before founding Sionix Corporation,
he served as a consultant for a variety of firms, patenting new products and
developing marketing programs for those products. He was granted six U.S.
patents for an automatic rapid back flush filter system, a dissolved air
flotation system, and an apparatus for mixing ozone, chemicals and liquids,
which are all now assigned to Sionix Corporation.
S. Donna Friedman - Elected as a Director and appointed as Secretary and
Treasurer on December 28, 1995. As Executive Assistant to the President,
Lockheed Air Terminal, Inc. in Burbank, California, Ms. Friedman processed legal
documents and contracts, leases, proposals, acquisitions, agenda, minutes and
resolutions, financial and budget related material. Prior to joining Lockheed,
Ms. Friedman also proposed, developed and implemented plans for product
scheduling and shipping for an automated systems manufacturer.
21
<PAGE> 24
Cheryl Friedman - Elected as a Director on December 28, 1995. Ms.
Friedman graduated with honors from UC, Santa Barbara, with a BA in
Communication Studies. She is currently a Management Supervisor at
McCann-Erickson Worldwide Advertising agency in charge if the marketing and
advertising for Nestle Beverage Company. She started her career at J. Walter
Thompson in San Francisco in 1988 before joining the San Francisco office of
Ketchum Communications to launch the first Investment Services advertising
campaign for Bank of America. She joined Ogilvy & Mather Advertising in New York
in April, 1993 working on Kraft General Foods. Shortly thereafter, she became
Account Supervisor responsible for all new product development for Post Kids
Cereals. Ms. Friedman's Project Phoenix program created three new Kraft Foods
assignments worth an estimated $42 million. She has traveled extensively
throughout the United States, Canada, Europe, Africa and the Middle East.
Laura Friedman - Elected as a Director on December 28, 1995. Ms.
Friedman received a BS in Business Administration with an emphasis in Marketing
from San Diego State University. She was Media Planner and Buyer at Franklin
Stoorza Advertising for the San Diego County Water Authority, International
Savings Bank, Voucher Corporation, McDonald's and Travelodge Hotels before
joining Ammirati & Puris/Lintas Advertising, New York. Ms. Friedman controls
$100 million in annual media billings for Aetna, RCA, and other clients. She has
traveled extensively throughout the United States, Canada, Europe, Africa and
the Middle East.
Rodney Anderson - Elected as a director in February 1997. Mr. Anderson
has been the owner of RJ Metal Products, a tool and die shop for over 20 years.
He was also a Director of Coronado Capital from February 15, 1994 until the
merger with Sionix.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS
For the fiscal year ended September 30, 1996, executive officers
received compensation as follows:
<TABLE>
<CAPTION>
Name Position Amount of Compensation
---- -------- ----------------------
<S> <C> <C>
Michael Taylor CEO/CFO 70,000 shares(1)
Jack Moorehead President $ 54,480
S. Donna Friedman Sec/Treas. $ 0
</TABLE>
(1) See Item 13., for information regarding compensation of Michael A. Taylor.
EMPLOYMENT CONTRACTS/STOCK INCENTIVE PLANS
No employment contracts or stock incentive plans were adopted or granted
by the Company during the fiscal year ended September 30, 1997.
COMPENSATION OF DIRECTORS
No director of the Company received any compensation for being a
director during the fiscal year ended September 30, 1997.
22
<PAGE> 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, to the extent known by the
Company, as to the persons and companies who owned beneficially more than five
percent (5%) of the outstanding shares of the Common Stock of the Company at the
close of business on September 30, 1997, and the beneficial ownership of the
Company, as a group, as of such date. The number of shares held by each Director
is set forth in Item 10 hereinabove.
<TABLE>
<CAPTION>
Title of Amount and Nature of
Class Name and Address Beneficial Ownership Percent of Class
- -------- ---------------- -------------------- ----------------
<S> <C> <C>
Common S. Donna Friedman Trust 9,638,000 40.87%
4120 Porte De Merano #80
San Diego, CA. 92122
Common All Directors and 12,326,933 51.25%
Officers as a Group
(Five (6) Persons)
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING AGREEMENT WITH MICHAEL A. TAYLOR
On May 15, 1996, the Company entered into a consulting agreement with
Michael A. Taylor under which Mr. Taylor as consultant would provide financial,
tax and management consultant services to the Company with regard to matters
that effect the accounting, tax return preparation, fund raising and management
of the Company. The term of the consulting agreement is for a period of two (2)
years. Under the terms of said contract as approved and adopted by the board of
directors, Mr. Taylor would receive as compensation for his services to the
Company five hundred thousand shares (500,000) of common stock. In consideration
of the continued performance and services to be provided by Mr. Taylor to the
Company under the consulting agreement, the Company agreed to pay Mr. Taylor in
current funds as compensation for his services a fee of $5,000 per month plus
reimbursement for all out of pocket costs, or in lieu of cash, cause to be
issued ten thousand (10,000) shares of common stock per month. Mr. Taylor has
not been paid any cash compensation for his services and has been issued 90,000
shares of common stock as compensation under said consulting agreement.
PURCHASE OF UNREGISTERED SHARES OF THE COMPANY'S COMMON STOCK
During the period covered by this report, Jack F. Moorehead, the
President and a Director of the Company purchased 34,000 shares of unregistered
and restricted common stock of the Company at prices ranging from $0.50 to $1.00
per share. Michael A. Taylor, the Chief Executive Officer, Chief Financial
Officer and a Director of the Company purchased 108,245 shares of unregistered
and restricted common stock of the Company at prices ranging from $0.50 to $1.00
per share.
23
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
(1) Financial Statements of Sionix Corporation set forth under
Item 8 are filed as part of this report.
(2) To include the Financial Statement Schedules other than
those listed above have been omitted since they are either
not required, not applicable, or the information is
otherwise included.
27. Financial Data Schedule
(b) Information filed as part of this report from Form 8-K: None
24
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the Undersigned, thereunto duly authorized.
SIONIX CORPORATION
(REGISTRANT)
Date: February 11, 1998 /S/ Jack F. Moorehead
-----------------------------------
By: Jack Moorehead
Its: President
Date: February 11, 1998 /S/ Michael A. Taylor
-----------------------------------
By: Michael A. Taylor
Its: Chief Executive Officer
Chief Financial Officer
25
<PAGE> 28
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 271
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 6,525
<CURRENT-ASSETS> 6,796
<PP&E> 1,560,386
<DEPRECIATION> 253,376
<TOTAL-ASSETS> 1,313,806
<CURRENT-LIABILITIES> 316,229
<BONDS> 299,053
0
0
<COMMON> 24,055
<OTHER-SE> 674,469
<TOTAL-LIABILITY-AND-EQUITY> 1,313,806
<SALES> 15,500
<TOTAL-REVENUES> 15,500
<CGS> 6,540
<TOTAL-COSTS> 6,540
<OTHER-EXPENSES> 851,934
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,942
<INCOME-PRETAX> (858,916)
<INCOME-TAX> 0
<INCOME-CONTINUING> (858,916)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (858,916)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
