<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
Commission File No. 2-95626-D
SIONIX CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Utah 87-0428526
---------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer incorporation
of organization) or Identification No.)
7282 Jeronimo Road, Suite 108
-----------------------------------------------------------------
(Address of principal executive offices)
(949) 454-9283
------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Title of each Class of Common Stock Outstanding at December 31, 1998
- ----------------------------------- --------------------------------
Common Stock, without par value 31,756,875
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements.
The financial statements included herein have been prepared by the
Company, without audit. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, 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, 1998 and the results of its operations and
changes in its financial position from inception through December 31, 1998 have
been made.
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $372,556 $ 11,230
-------- --------
Total Current Assets 372,556 11,230
-------- --------
PROPERTY AND EQUIPMENT - NET (Notes 2 and 3) 126,569 102,855
-------- --------
OTHER ASSETS
Deposits 17,231 6,831
Intangibles - net (Note 4) 110,494 112,744
-------- --------
Total Other Assets 127,725 119,575
-------- --------
TOTAL ASSETS $626,850 $233,660
======== ========
</TABLE>
2
<PAGE> 3
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
----------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 85,698 $ 134,229
Accrued expenses 147,663 138,082
Related party payables - current portion (Note 6) 50,000 62,304
Convertible debenture -- 20,000
----------- -----------
Total Current Liabilities 283,361 354,615
----------- -----------
LONG-TERM DEBTS
Related party payables - less current portion (Note 6) 329,851 368,351
----------- -----------
Total Long-Term Debts 329,851 368,351
----------- -----------
Total Liabilities 613,212 722,966
----------- -----------
COMMITMENTS (Note 10)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock $0.001 par value; 100,000,000 shares
authorized, 31,756,875 and 25,221,875 shares issued
and outstanding, respectively 31,757 25,222
Additional paid-in capital 4,728,246 4,081,281
Deficit accumulated during the development stage (4,746,365) (4,595,809)
----------- -----------
Total Stockholders' Equity (Deficit) 13,638 (489,306)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 626,850 $ 233,660
=========== ===========
</TABLE>
3
<PAGE> 4
SIONIX CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended October 3,
December 31, 1994 Through
-------------------------------- December 31,
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE $ -- $ -- $ 15,500
COST OF SALES -- -- 6,540
----------- ----------- -----------
GROSS PROFIT -- -- 8,960
----------- ----------- -----------
EXPENSES
Research and development -- 850,353
Depreciation and amortization 11,692 23,300 395,787
Administrative and marketing 131,491 6,286 2,260,634
----------- ----------- -----------
Total Expenses 143,183 29,586 3,506,774
----------- ----------- -----------
LOSS FROM OPERATIONS (143,183) (29,586) (3,497,814)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 1,713 -- 1,713
Write down of obsolete intangibles -- -- (1,040,865)
Write down of obsolete software -- -- (53,614)
Settlement costs -- -- (25,125)
Interest (9,086) (8,331) (130,660)
----------- ----------- -----------
Total Other Income (Expense) (7,373) (8,331) (1,248,551)
----------- ----------- -----------
NET LOSS BEFORE TAXES (150,556) (37,917) (4,746,365)
PROVISION FOR INCOME TAXES -- -- --
----------- ----------- -----------
BASIC NET LOSS $ (150,556) $ (37,917) $(4,746,365)
=========== =========== ===========
BASIC NET LOSS PER SHARE $ (0.00) $ (0.00)
=========== ===========
FULLY DILUTED NET LOSS PER SHARE $ (0.00) $ (0.00)
=========== ===========
</TABLE>
4
<PAGE> 5
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on October 3, 1994 through December 31, 1998
<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>
5
<PAGE> 6
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through December 31, 1998
<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>
6
<PAGE> 7
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through December 31, 1998
<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>
7
<PAGE> 8
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through December 31, 1998
<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, 1997 24,054,590 $ 24,055 $ 5,028,702 $(2,697,433) $(1,656,800)
Common stock issued for
cash at $0.10 per share 2,810,000 2,810 278,190 -- --
Common stock issued for
services valued at $0.10
per share 895,455 895 88,651 -- --
Option to purchase
2,200,000 shares of
common stock at $0.001
per share -- -- 220,000 -- --
Cancellation of common
stock and options (2,538,170) (2,538) (1,534,262) -- 1,656,800
Net loss for the year ended
September 30, 1998 -- -- -- (1,898,376) --
----------- ----------- ----------- ----------- -----------
Balance,
September 30, 1998 25,221,875 25,222 4,081,281 (4,595,809) --
Common stock issued for
cash at $0.10 per share
(unaudited) 6,535,000 6,535 646,965 -- --
Net loss for the three
months ended
December 31, 1998
(unaudited) -- -- -- (150,556) --
----------- ----------- ----------- ----------- -----------
Balance,
December 31, 1998
(unaudited) 31,756,875 $ 31,757 $ 4,728,246 $(4,746,365) $ --
=========== =========== =========== =========== ===========
</TABLE>
8
<PAGE> 9
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended October 3,
December 31, 1994 Through
---------------------------- December 31,
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (150,556) $ (37,917) $(4,746,365)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 11,692 23,300 395,786
Common stock issued for services 644,331
Write-down of obsolete assets -- -- 1,040,865
Change in assets and liabilities:
(Increase) decrease in deposits (10,400) -- (17,231)
Increase in accounts payable and
accrued expenses (38,951) (19,549) 251,529
----------- ----------- -----------
Net Cash Used by
Operating Activities (188,215) (34,166) (2,431,085)
----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of intangibles -- (10,000) (150,188)
Purchase of fixed assets (33,155) -- (158,892)
----------- ----------- -----------
Net Cash Used by
Investing Activities (33,155) (10,000) (309,080)
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of notes payable and
contracts payable (70,804) 2,611 (100,711)
Proceeds from sale of stock 653,500 -- 2,852,158
Proceeds from notes payable and
convertible debenture -- 56,374 361,274
----------- ----------- -----------
Net Cash Provided by
Financing Activities $ 582,696 $ 58,985 $ 3,112,721
----------- ----------- -----------
</TABLE>
9
<PAGE> 10
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended October 3,
December 31, 1994 Through
------------------------- December 31,
1998 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH $ 361,326 $ 14,819 $ 372,556
CASH AT BEGINNING OF PERIOD 11,230 271 --
---------- ---------- ----------
CASH AT END OF PERIOD $ 372,556 $ 15,090 $ 372,556
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Addition to debt for acquisition of intangibles $ -- $ -- $1,302,914
Common stock issued for services $ -- $ -- $ 644,331
Equipment acquired under lease payable $ -- $ -- $ 25,533
CASH PAID FOR:
Interest $ 9,086 $ -- $ 15,220
Income taxes $ -- $ -- $ --
</TABLE>
10
<PAGE> 11
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998 and September 30, 1998
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
December 31, 1998 have been principally devoted to research and
development, organizational activities, and raising capital. As
of December 31, 1998, 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:
<TABLE>
<CAPTION>
Description Useful Lives
----------- ------------
<S> <C>
Computers and test equipment 5 years
Furniture and fixtures 5 years
</TABLE>
d. Research and Development
Research and development costs are expensed as incurred.
11
<PAGE> 12
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998 and September 30, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Basic Loss Per Share
The computation of basic loss per share of common stock is based
on the weighted average number of shares outstanding at the date
of the financial statements. Stock warrants and stock options
have been included in the fully diluted loss per share.
f. 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 $4,250,000 will expire by the year 2013.
g. 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 December 31, 1998 consisted of the
following:
<TABLE>
<S> <C>
Computers and test equipment $ 172,471
Furniture and fixtures 40,774
----------
Total 213,245
Less accumulated depreciation (86,676)
----------
Property and Equipment - Net $ 126,569
==========
</TABLE>
Depreciation expense for the three months ended December 31,
1998 and the year ended September 30, 1998 was $9,442 and
$31,565, respectively.
12
<PAGE> 13
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998 and September 30, 1998
NOTE 4 - INTANGIBLE ASSETS
Intangible assets at December 31, 1998 consisted of the
following:
<TABLE>
<S> <C>
Patents issued and pending $ 135,033
Less accumulated amortization (24,539)
-----------
Intangible Assets - Net $ 110,494
===========
</TABLE>
Amortization expense for the three months ended December 31,
1998 and for the year ended September 30, 1998 was $2,250 and
$99,154, 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.
The liability is included in the related party payables.
NOTE 6 - 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 December
31, 1998, $379,851 was due by the Company as a result of these
promissory notes of which $50,000 is considered to be current.
The notes bear interest at rates of 7% to 13.5%. All of the
notes are due on demand and are unsecured.
NOTE 7 - 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 were secured by the shares
issued and were non-recourse. They had a stated interest rate of
6% and had maturity dates ranging from March 1, 1998 to
September 7, 1998. During the year ended September 30, 1998, the
shares originally issued in conjunction with the receivable were
cancelled along with the corresponding subscription receivable.
13
<PAGE> 14
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998 and September 30, 1998
NOTE 8 - COMMON STOCK PURCHASE WARRANTS
The Company's Board of Directors has authorized and approved
851,400 common stock purchase warrants as of December 31, 1998
as follows:
<TABLE>
<CAPTION>
Number Exercise Price Expiration
of Warrants Per Share Date
<S> <C> <C>
851,400 $ 0.50 June 30, 1999
</TABLE>
NOTE 9 - 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. In the
opinion of management, sales of the Company's products, together
with the proceeds of an offering of its common stock, will be
sufficient for it to continue as a going concern.
NOTE 10 - COMMITMENTS
Employment Agreement
On January 1, 1998, the Company entered into an employment
contract with an officer and director. The employment contract
calls for payments of $7,083 per month to the officer through
September 30, 2003. As a signing bonus, the officer was given
the option to purchase 2,200,000 shares of the Company's common
stock at $0.001 per share. Accordingly, compensation expense of
$220,000 has been recorded.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General. The Company has formulated its business plans and strategies
based on certain assumptions of the Company's management regarding the
size of the market for the products which the Company will be able to
offer, the Company's anticipated share of the market, and the estimated
prices for and acceptance of the Company's products. The Company
continues to believe its business plans and the assumptions upon which
they are based are valid. Although these plans and assumptions are based
on the best estimates of management, there can be no assurance that these
assessments will prove to be correct. No independent marketing studies
have been conducted on behalf of or otherwise obtained by the Company,
nor are any such studies planned. Any future success that the Company
might enjoy will depend upon many factors, including factors which may be
beyond the control of the Company or which cannot be predicted at this
time. These factors may include product obsolescence, increased levels of
competition, including the entry of additional competitors and increased
success by existing competitors, changes in general economic conditions,
increases in operating costs including cost of supplies, personnel and
equipment, reduced margins caused by competitive pressures and other
factors, and changes in governmental
14
<PAGE> 15
regulation imposed under federal, state or local laws.
The Company's operating results may vary significantly due to a variety
of factors including changing customers profiles, the availability and
cost of raw materials, the introduction of new products by the Company or
its competitors, the timing of the Company's advertising and promotional
campaigns, pricing pressures, general economic and industry conditions
that affect customer demand, and other factors.
Results of Operations (Three Months Ended December 31, 1998
Compared to Three Months Ended September 30, 1998) In March of 1998, the
Company experienced a change in management, and a new Board of Directors
was elected at the Annual Shareholders' Meeting in August 1998. As a
result, the focus of the Company's efforts has changed to concentrate on
development, manufacturing and distribution of the Company's hardware
products. The immediate focus is on the DAF (Dissolved Air Flotation)
Tower, Automatic Back-Flush Filtration System, 0-Zone Mixing Chamber and
other related products, some of which have their own separate markets.
The Company suspended work on the Sionix, SCADA System and SCADA Manager
Software program.
The Company is continuing with engineering focus on hardware
and water filtration equipment. The first phase of testing was completed
in November 1998.The second phase of testing is currently underway and is
revealing useful data. Management expects to implement minor engineering
adjustments in tooling prior to the execution of contracts for production
tooling. Management is in negotiations with suppliers for tooling and
production of various support products that have their own markets.
.
For the quarter ended December 31, 1998, the Company reported
a loss of $150,556, or $-0- per share. This compares with a loss of
$37,917, or -0- per share for the quarter ending September 30, 1998. This
increased loss is principally due to higher administrative and marketing
expenses.
Liquidity and Capital Resources. On December 31, 1998, the Company had
cash on hand of $372,556. The principal source of liquidity has been sales of
securities. Management anticipates that additional capital will be required to
finance the Company's operations. The Company believes that expected cash flow
plus the anticipated proceeds from sales of securities will be sufficient to
finance the Company's operations at currently anticipated levels for a period of
at least twelve months. However, there can be no assurance that the Company will
not encounter unforeseen difficulties that may deplete its capital resources
more rapidly than anticipated.
Year 2000 Issues.The "year 2000" issue concerns the potential exposure related
to the possible automatic generation of business and financial misinformation
resulting from the application of computer programs which have been written
using two digits, rather than four, to define the applicable year of business
transactions. When the year 2000 begins, programs with such date-related logic
will not be able to distinguish between the years 1900 and 2000, potentially
causing software and hardware to fail, generating erroneous calculations or
presenting information in an unusable format.
The Company is dependent on multiple computer servers and the third-party
computer programs running on them to provide data in support of its accounting
and engineering functions. The Company's plan for year 2000 compliance includes
the following phases: (i) conducting a comprehensive inventory of the Company's
internal systems, including information technology systems and non-information
technology
15
<PAGE> 16
systems and the systems acquired or to be acquired by the Company from third
parties, (ii) assessing and prioritizing any required changes, upgrades, or
enhancements, (iii) resolving any problems by repairing or, if appropriate,
replacing the non-compliant systems, (iv) testing all remediated systems for
Year 2000 compliance and (v) developing contingency plans that may be employed
in the event that any system used by the Company is unexpectedly affected by a
previously unanticipated problem relating to the Year 2000.
In recognition of the potential year 2000 problem, the Company has begun
a program to replace any of its existing communications, engineering and
accounting software that is not year 2000 compliant with new software that is
warranted by its vendors as being year 2000 compliant. It is anticipated that
the costs of such replacement will not be material.
The Company has relationships with various third parties on whom it
relies to provide goods and services necessary for the manufacture and
distribution of its products. These include suppliers and vendors. As part of
its determination of year 2000 readiness, the Company has identified material
relationships with third party vendors and is in the process of assessing the
status of their compliance through the use of informal inquiries and review of
hardware and software documentation.
The components to be purchased by the Company in connection with the
manufacture of its products are generally available through numerous independent
sources. Due to the broad diversification of these sources, the risk associated
with potential business interruptions as a result of year 2000 non-compliance by
one or more sources is not considered significant. It is anticipated that the
steps the Company has taken and is continuing to take to deal with the year 2000
problem will reduce the risk of significant business interruptions, but there is
no assurance that this outcome will be achieved. Failure to detect and correct
all internal instances of non-compliance or the inability of third parties to
achieve timely compliance could result in the interruption of normal business
operations which could, depending on its duration, have a material adverse
effect on the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has is not a party to any material legal proceeding.
Item 2. Changes in Securities and Use of Proceeds
Inapplicable.
Item 3 - Defaults upon Senior Securities.
Inapplicable.
Item 4 - Submission of Matters to a Vote of Security Holders
16
<PAGE> 17
Inapplicable.
Item 5 - Other Information
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27. Financial Data Schedule
Signatures
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 16, 1999
Sionix Corporation
By: /s/ James J. Houtz
---------------------------------------------
James J. Houtz, President
By: /s/ Robert E. McCray
---------------------------------------------
Robert E. McCray, Chief Financial Officer
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 372,556
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 372,556
<PP&E> 213,245
<DEPRECIATION> 86,676
<TOTAL-ASSETS> 626,850
<CURRENT-LIABILITIES> 283,361
<BONDS> 0
0
0
<COMMON> 31,757
<OTHER-SE> (18,119)
<TOTAL-LIABILITY-AND-EQUITY> 626,850
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 150,556
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (150,556)
<INCOME-TAX> 0
<INCOME-CONTINUING> (150,556)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,556)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
