<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1999
Commission File No.2-95626-D
SIONIX CORPORATION
(Name of small business issuer in its charter)
UTAH 87-0428526
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9272 JERONIMO ROAD, SUITE 108, IRVINE, CA 92618
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (949) 454-9283
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 12 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for the year ended September 30, 1999 were $0.
The aggregate market value of the voting stock held by non-affiliates as
of November 30, 1999, computed based on the average of the bid and ask prices
reported on the OTC Bulletin Board, was $5,507,620.
As of November 30, 1999, there were 35,782,521 shares of Common Stock of
the issuer outstanding.
Documents Incorporated by Reference: NONE
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General. Sionix Corporation, formerly Coronado Capital Corporation
(the"Company") designs and manufactures equipment for improving the treatment of
water for commercial, industrial and public water treatment facilities. To date
the Company's principal activities have been in the areas of research,
development and testing of its products. The Company's executive offices and
principal operations are located at 9272 Jeronimo Road, Irvine, California
92618, its telephone number is (949) 454-9283, and its website is located at
www.sionix.com.
Strategy. The Company was formed to develop advanced water treatment
technology for public and private potable drinking water systems and wastewater
treatment systems, as well as industrial systems. It is estimated that in the
United States alone, there are approximately 197,060 public rural water
districts, the great majority of which are considered small public water
systems, with populations less then 10,000. Reports of the U.S. Environmental
Protection Agency in the Federal Registry listed over 50,000 communities in the
United States that are currently in violation of the Safe Drinking Water Act,
and those numbers are expected to increase as more stringent EPA rules for small
public water systems become effective. In addition, urbanization in the third
world and the spread of agricultural activities have increased the demand for
public water systems. The company has targeted (1) small public water districts,
with limited financial resources, which provide communities with drinking water
or sewage treatment service and (2) water reclamation systems of
commercial-industrial clients that create and dispose of contaminated
wastewater.
Products
Sionix Modular Solids Separator Filtration System. Dissolved Air
Flotation ("DAF") technology is an established method for water treatment. The
Company's DAF Particle Separator utilizes and refines this technology for a
highly efficient pre-treatment process using ordinary oxygen. In addition, it
helps ordinary filters meet new EPA Safe Drinking Water Act (SDWA) regulations
and eliminates potentially cancer-causing disinfection by-product precursors
while reducing the risk of bacterial or parasitic contamination, particularly
THM's, cryptosporidium and giardia. The Company's patented equipment systems are
designed for quick installation, easy access for simple maintenance and to be
cost-effective for even the smallest water utilities or commercial applications.
A major problem facing the water treatment industry is the difficulty in
monitoring and disposing of microscopic parasites such as Cryptosporidium (4-5
microns) and Giardia cysts (7-12 microns), common chlorine-resistant organisms
that have infected millions of people in the United States. Sand-anthracite
water filtration beds, in use in most of the nation's public water districts,
will not filter out these parasites and experience frequent breakthroughs of
Cryptosporidium sized particles.
The Company uses a more efficient method of saturating recirculated
post-filter water with excess dissolved air, and applying this excess air in the
form of microscopic bubbles in a particle separator. Pressurized water
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can hold an excess amount of dissolved air and forms microscopic bubbles when
injected into water which has a lower pressure. A booster pump recirculates a
small amount (10%) of the post-filtered water through the dissolved
air-saturation assembly. A compressor forces air under high pressure through
small hollow-fiber polyolefin membrane fibers inside the air saturation assembly
housing. Oxygen and nitrogen molecules are transferred directly into the
recirculated high pressure water without forming air bubbles. This method of
transferring air into water is 100% efficient, and reduces the amount of energy
required to saturate recirculated water with excess dissolved air. The Sionix
DAF separator provides a denser concentration of white water bubbles. This
process requires less energy than a conventional system, and a fraction of the
floor space.
In general, water districts using sand-anthracite filters cannot meet
the new EPA Surface Water Treatment rules without a massive increase in on-site
chemical filter-aids and the installation of ozone equipment. Plant operators
must continually test raw influent water to adjust chemical filter aid dosage
properly. Chemical and metal (alum) filter-aids increase sludge volume and
landfill disposal problems.
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.
The Company's systems include automatic computer controls to optimize
ozone concentration levels and reduce monthly energy costs. Higher ozone contact
concentration levels using smaller sized generators are possible if most of the
algae is first removed by DAF. Extended contact time increases collision rate of
ionized ozone molecules with negatively charged organic suspended particles. By
utilizing the Sionix DAF particle separator to pre-treat the feedwater, less
energy is required to create the appropriate amount of ozone. By creating a
turbulent flow of water and gas within the mixing chamber, the Company 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.
Marketing and Customers. In the United States, the Company plans to
initially target the established base of 185,000 small to very small water
providers, as well as industrial users (such as the dairy industry, meat and
poultry producers, food and beverage processors, cooling tower manufacturers and
oil and gas producers) with a need for a clean, consistent water supply. In
addition to the domestic markets, the Company has been contacted by
representatives from local water systems in Europe, Latin America and Asia.
The Company's marketing efforts emphasize that its products are easily
expandable and upgradable; for example, adding ozone and microfiltration
equipment to a DAF unit is similar to adding a new hard drive to a personal
computer. Each piece of equipment comes with state-of-the-art telemetry and
wet-chemistry monitoring that expands as the system does. The Company plans to
provide lease financing for all of its products, not only making it easy for a
customer to acquire the equipment, but also guaranteeing
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that the customer will always have access to any refinements and improvements
made to the Company's products.
The Company plans to market its products through direct mail,
participation in industry groups and trade shows, and through selected
advertising in specialized publications.
Patents. The Company holds three U.S. patents on technology incorporated
into the Sionix Particle Separator Treatment System. One of the patents
generally relates to the vortex system in the DAF Particle Separator, and
another concerns the ozone mixing system. The third patent covers an automatic
backflushing system using air pressure to activate the valves. The Company also
holds several patents on the inline wet-chemistry water quality monitoring
system. In addition, several active patent applications are being processed. The
extent to which patents provide a commercial advantage or inhibit the
development of competing products varies. To some extent, however, the Company
is required to rely upon common law concepts of confidentiality and trade
secrets, as well as economic barriers created by the required investments in
tooling and technical personnel and the development of customer relationships,
to protect its proprietary products.
Employees. At November 30, 1999, the Company had four full-time
employees, none of whom are covered by any collective bargaining agreement. The
Company considers its relationship with its employees to be good.
Research and Development. The Company invests significantly in the
development of products for new applications. Only direct costs associated with
tooling for new products are capitalized. All other costs, including salaries
and wages of employees included in research and development, are expensed as
incurred. Most of the Company's research and development efforts are in
connection with development and refinement of the DAF Particle Separator and
related components.
Raw Materials. Materials and components used 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.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's office/manufacturing facility is located in Irvine,
California and is leased pursuant to a lease expiring in July of 2001. The
facility consists of approximately 3,400 square feet, including office area and
adjoining manufacturing/warehouse area. Management believes the Company's
facility will provide adequate space for its office, product assembly and
warehouse activities, although it may lease additional space for component
assembly and warehouse uses, depending on demand. The Company believes that
suitable additional space will be available to accommodate planned expansion.
ITEM 3. LEGAL PROCEEDINGS.
In June 1999 the Company filed an action against Jack Moorehead,
Dascore, LLC, S. Donna Friedman and certain others in the U.S. District Court
for the Southern District of California (Case No. 99-cv-1201-K-LSP).
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Moorehead is the former President of the Company, and Dascore LLC is an entity
controlled by him and in a business related to that of the Company. S. Donna
Friedman is a former officer and director of the Company.
The Complaint alleges, among other things, that the defendants have
infringed and continue to infringe on certain patents owned by the Company, and
that they are familiar with the Company's intellectual property through their
past positions with the Company. The Complaint also alleges that the defendants
have sold or attempted to sell technology owned by the Company and covered by
the Company's patents, and that the defendants are unfairly competing with the
Company by exploiting its technology without payment. In addition, the action
includes claims of false advertising, in that the defendants are falsely
representing that they own the technology; interference with economic relations
and interference with prospective advantage, relating to the effect that the
defendants' conduct has had on the Company's dealings with third parties; and
misappropriation of trade secrets learned by the defendants while associated
with the Company. The complaint further alleges that the defendants conspired to
convert technology, money and equipment owned by the Company, and used Company
funds to pay personal expenses. Finally, the complaint alleges that Moorehead
and Friedman defrauded the Company and breached their fiduciary duties to the
Company in connection with their departure from the Company and their retention
of property of the Company.
In the Complaint, the Company seeks monetary damages in an amount to be
determined, injunctive relief, an accounting and a declaratory judgment. The
case is currently in the discovery stage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Inapplicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed and traded on the 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 bid prices for the Company's common stock for each quarter of
the fiscal year ended September 30, 1999.
Fiscal 1999 High Low
----------- ---- ---
First Quarter $ 1.187 $ .125
Second Quarter .437 .156
Third Quarter .250 .062
Fourth Quarter .469 .062
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There were approximately 625 holders of record of the Company's common
stock as of September 30, 1999.
The Company has never declared or paid any cash dividend on its shares
of common stock.
During the fiscal year ended September 30, 1999, the Company sold
9,383,000 shares of Common Stock to approximately 73 purchasers, with gross
proceeds of $938,300. The Company believes all such sales were exempt from
registration under the Securities Act of 1933 by reason of Section 4(2) thereof
and Regulation D thereunder.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
General.
As of September 30, 1999, the Company had an accumulated deficit of
$5,361,639. It can be expected that the future operating results will continue
to be subject to many of the problems, expenses, delays and risks inherent in
the establishment of a new business enterprise, many of which the Company cannot
control.
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
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 (Year Ended September 30, 1999 Compared to Year
Ended September 30, 1998). During the 1999 fiscal year the focus of the
Company's efforts has been on development, manufacturing and distribution of the
Company's hardware products. The immediate focus is on the DAF (Dissolved Air
Flotation), Automatic Back-Flush Filtration System, O-Zone Mixing Chamber and
other related products, some of which have their own separate markets.
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The Company is continuing its engineering focus on hardware and water
filtration equipment. The first phase of testing was completed in November 1998.
The second phase of testing was completed in April 1999 and has revealed useful
data. Final testing is expected to begin in January 2000 for the first
production unit. Management is implementing engineering changes 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. The Company expects that it will implement minor engineering
adjustments in tooling prior to the execution of contracts for production
tooling.
For the year ended September 30, 1999, the Company reported a loss of
$765,830, or $.02 per share. This compares with a loss of $1,898,376 or $.08 for
the year ending September 30, 1998. The reduction in the loss is principally due
to a write-down of certain intangible assets in the 1998 fiscal year, decreased
interest expense, and decreases in general and administrative expenses.
Liquidity and Capital Resources. On September 30, 1999, the Company had
cash and cash equivalents of approximately $184,461. 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 from operations 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.
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 preparation for year 2000
compliance included the following phases: (i)it conducted a comprehensive
inventory of the Company's internal systems, including information technology
systems and non-information technology systems and the systems acquired or to be
acquired by the Company from third parties, (ii) it assessed and prioritized any
required changes, upgrades, or enhancements, (iii) it resolved any problems by
repairing or, if appropriate, replacing the non-compliant systems, (iv) it
tested any remediated systems for Year 2000 compliance, and (v) it developed
contingency plans to be employed in the event that any system used by the
Company was unexpectedly affected by a previously unanticipated problem relating
to the Year 2000.
To date the Company has not experienced any significant problems as a
result of the change in the year. It will continue to monitor its systems to
determine whether any problems arise.
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ITEM 7. FINANCIAL STATEMENTS
SIONIX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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C O N T E N T S
Independent Auditors' Report................................................ 10
Balance Sheet............................................................... 11
Statements of Operations.................................................... 13
Statements of Stockholders' Equity (Deficit)................................ 14
Statements of Cash Flows.................................................... 19
Notes to the Financial Statements........................................... 21
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INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders
Sionix Corporation
(A Development Stage Company)
Irvine, California
We have audited the accompanying balance sheet of Sionix Corporation (a
development stage company) as of September 30, 1999, and the related statements
of operations, stockholders' equity (deficit) and cash flows for the years ended
September 30, 1999 and 1998 and from inception on October 3, 1994 through
September 30, 1999. 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 audits 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, 1999 and the results of its
operations and its cash flows for the years ended September 30, 1999 and 1998
and from inception on October 3, 1994 through September 30, 1999 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 7 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 7. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
December 22, 1999
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SIONIX CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
------
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
CURRENT ASSETS
Cash $184,461
Other current assets 1,164
--------
Total Current Assets 185,625
--------
PROPERTY AND EQUIPMENT - NET (Notes 2 and 3) 112,637
--------
OTHER ASSETS
Deposits 37,231
Intangibles - net (Note 4) 103,742
--------
Total Other Assets 140,973
--------
TOTAL ASSETS $439,235
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SIONIX CORPORATION
(A Development Stage Company)
Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 18,895
Accrued expenses 143,790
Related party payables (Note 5) 377,351
-----------
Total Current Liabilities 540,036
-----------
Total Liabilities 540,036
-----------
COMMITMENTS (Note 8)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock $0.001 par value; 100,000,000 shares authorized,
35,310,621 shares issued and outstanding 35,311
Additional paid-in capital 5,225,527
Deficit accumulated during the development stage (5,361,639)
-----------
Total Stockholders' Equity (Deficit) (100,801)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 439,235
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SIONIX CORPORATION
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
From
For the Inception on
Years Ended October 3,
September 30, 1994 Through
-------------------------- September 30,
1999 1998 1999
--------- ----------- -------------
<S> <C> <C> <C>
REVENUE $ -- $ -- $ 15,500
COST OF SALES -- -- 6,540
--------- ----------- -----------
GROSS PROFIT -- -- 8,960
--------- ----------- -----------
EXPENSES
Research and development 7,085 -- 857,438
Depreciation and amortization 49,095 130,719 433,190
Administrative and marketing 699,316 649,306 2,828,459
--------- ----------- -----------
Total Expenses 755,496 780,025 4,119,087
--------- ----------- -----------
LOSS FROM OPERATIONS (755,496) (780,025) (4,110,127)
--------- ----------- -----------
OTHER INCOME (EXPENSE)
Write down of obsolete intangibles -- (1,040,865) (1,040,865)
Write down of obsolete software -- -- (53,614)
Settlement costs -- -- (25,125)
Interest expense (29,856) (77,486) (151,430)
--------- ----------- -----------
Total Other Income (Expense) (29,856) (1,118,351) (1,271,034)
--------- ----------- -----------
LOSS BEFORE EXTRAORDINARY
INCOME AND INCOME TAXES (785,352) (1,898,376) (5,381,161)
EXTRAORDINARY INCOME
Gain on settlement of debt - net of
zero tax benefit 19,522 -- 19,522
--------- ----------- -----------
Total Extraordinary Income 19,522 -- 19,522
--------- ----------- -----------
PROVISION FOR INCOME TAXES -- -- --
--------- ----------- -----------
NET LOSS $(765,830) $(1,898,376) $(5,361,639)
========= =========== ===========
BASIC LOSS PER SHARE $ (0.02) $ (0.08)
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on October 3, 1994 through September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
------------------------ Paid-in Subscription Development
Shares Amount Capital Receivable Stage
--------- ------ ----------- ------------ -----------
<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.
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SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
---------- ------- ----------- ------------ -----------
<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 (2,331,800) (915,800)
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 $(2,331,800) $(1,838,517)
---------- ------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
----------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
----------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance,
September 30, 1996 23,599,696 $ 23,600 $ 5,282,717 $(2,331,800) $(1,838,517)
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 $(1,656,800) $(2,697,433)
----------- -------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
---------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance,
September 30, 1997 24,054,590 $ 24,055 $ 5,028,702 $(1,656,800) $(2,697,433)
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
services valued at $1.25
per share 42,138 42 52,420 -- --
Common stock issued for
services valued at $0.22
per share 141,108 141 30,619 -- --
Common stock issued for
services valued at $0.25
per share 505,000 505 125,745 -- --
Common stock issued for
services valued at $0.38
per share 17,500 18 6,545 -- --
----------- -------- ----------- ----------- -----------
Balance forward 25,927,621 $ 25,928 $ 4,296,610 $ -- $(4,595,809)
----------- -------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 through September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
---------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance forward 25,927,621 $25,928 $4,296,610 $ -- $(4,595,809)
Common stock issued for
cash at $0.10 per share 9,383,000 9,383 928,917 -- --
Net loss for the year ended
September 30, 1999 -- -- -- -- (765,830)
---------- ------- ---------- --------- -----------
Balance,
September 30, 1999 35,310,621 $35,311 $5,225,527 $ -- $(5,361,639)
========== ======= ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
From
For the Inception on
Years Ended October 3,
September 30, 1994 Through
--------------------------- September 30,
1999 1998 1999
--------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(765,830) $(1,898,376) $(5,361,639)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 49,095 130,719 433,190
Common stock issued for services 216,035 429,546 860,366
Write-down of obsolete assets -- 1,040,865 1,040,865
Gain on settlement of debt (19,522) -- (19,522)
Change in assets and liabilities:
Decrease in inventory -- 6,525 --
(Increase) in other current assets (1,164) -- (1,164)
(Increase) in deposits (30,400) (6,831) (37,231)
Increase (decrease) in accounts payable and
accrued expenses (90,103) 81,495 200,376
--------- ----------- -----------
Net Cash Used by Operating Activities (641,889) (216,057) (2,884,759)
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles -- -- (150,188)
Purchase of fixed assets (49,875) (43,984) (175,612)
--------- ----------- -----------
Net Cash Used by Investing Activities (49,875) (43,984) (325,800)
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable and
contracts payable (12,305) (10,000) (42,212)
Proceeds from sale of stock 938,300 281,000 3,136,958
Proceeds from notes payable and
convertible debenture -- -- 361,274
Payment of notes payable and
convertible debenture (61,000) -- (61,000)
--------- ----------- -----------
Net Cash Provided by Financing Activities $ 864,995 $ 271,000 $ 3,395,020
--------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
19
<PAGE> 20
SIONIX CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
For the Inception on
Years Ended October 3,
September 30, 1994 Through
---------------------- September 30,
1999 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
INCREASE IN CASH $173,231 $ 10,959 $ 184,461
CASH AT BEGINNING OF PERIOD 11,230 271 --
-------- -------- ----------
CASH AT END OF PERIOD $184,461 $ 11,230 $ 184,461
======== ======== ==========
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Addition to debt for acquisition of intangibles $ -- $ -- $1,302,914
Common stock issued for services $216,035 $429,546 $ 860,366
Equipment acquired under lease payable $ -- $ -- $ 25,533
CASH PAID FOR:
Interest $ -- $ -- $ 6,134
Income taxes $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999
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, 1999 have been principally devoted to research and
development, organizational activities, and raising capital. As of
September 30, 1999, 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. Research and Development
Research and development costs are expensed as incurred.
21
<PAGE> 22
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Basic Net Loss Per Share
<TABLE>
<CAPTION>
For the Year Ended
September 30,
1999
---------------------------------------------
(Denominator)
(Numerator) Weighted
Income Average Net Income
(Loss) Number of (Loss) Per
Amounts Shares Share
------------ ------------- ------
<S> <C> <C> <C>
Loss before extraordinary income $ (785,352) 31,186,275 $(0.02)
Gain on settlement of debt 19,522 31,186,275 0.00
------------ ----------- ------
$ (765,830) 31,186,275 $(0.02)
============ =========== ======
<CAPTION>
For the Year Ended
September 30,
1999
---------------------------------------------
(Denominator)
(Numerator) Weighted
Income Average Net Income
(Loss) Number of (Loss) Per
Amounts Shares Share
------------ ------------- ------
<S> <C> <C> <C>
Loss before extraordinary income $ (1,898,376) 22,649,816 $(0.08)
Gain on settlement of debt -- 22,649,816 --
------------ ----------- ------
$ (1,898,376) 22,649,816 $(0.08)
============ =========== ======
</TABLE>
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 not been
included as they are antidilutive.
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 $4,000,000 will expire by the year 2014.
22
<PAGE> 23
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
h. New Accounting Pronouncements
The Financial Accounting Standards Board has also issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 130
establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income
is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to
be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that displays
with the same prominence as other financial statements. SFAS No. 131
supersedes SFAS No. 14 "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards on the way that public
companies report financial information about operating segments in
annual financial statements and requires reporting of selected
information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosure
regarding products and services, geographic areas and major customers.
SFAS No. 131 defines operating segments as components of a company
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS No. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information
for earlier years to be restated. Because of the recent issuance of the
standard, management has been unable to fully evaluate the impact, if
any, the standard may have on future financial statement disclosures.
Results of operations and financial position, however, will be
unaffected by implementation of these standards.
23
<PAGE> 24
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. New Accounting Pronouncements (Continued)
In February 1998, the Financial Accounting Standards Board ("FASB") has
issued Statement of Financial Accounting Standard ("SFAS") No 132.
"Employers' Disclosures about Pensions and other Postretirement
Benefits" which standardizes the disclosure requirements for pensions
and other Postretirement benefits and requires additional information
on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis. SFAS No. 132 is effective for
years beginning after December 15, 1997 and requires comparative
information for earlier years to be restated, unless such information
is not readily available. Management believes the adoption of this
statement will have no material impact on the Company's financial
statement.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value.
Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash
flows. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Management believes the adoption
of this statement will have no material impact on the Company's
financial statements.
i. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1999 consisted of the
following:
Computers and test equipment $ 155,022
Furniture and fixtures 74,943
---------
Total 229,965
Less accumulated depreciation (117,328)
---------
Property and Equipment - Net $ 112,637
=========
Depreciation expense for the years ended September 30, 1999 and 1998
was $40,093 and $31,565, respectively.
24
<PAGE> 25
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999
NOTE 4 - INTANGIBLE ASSETS
Intangible assets at September 30, 1999 consisted of the following:
Patents issued and pending $ 135,033
Less accumulated amortization (31,291)
---------
Intangible Assets - Net $ 103,742
=========
Amortization expense for the years ended September 30, 1999 and 1998
was $9,002 and $99,154, respectively.
NOTE 5 - RELATED PARTY PAYABLES
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 liabilities. 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.
The Company has received other advances in the form of promissory notes
from various shareholders and other related parties in order to pay
ongoing operating expenses. As of September 30, 1999, $377,351 was due
by the Company as a result of these promissory notes and the liability
is considered to be current. Some of the notes bear interest at rates
of 7% to 13.5%. All notes are due on demand and are unsecured.
NOTE 6 - 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.
NOTE 7 - 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.
25
<PAGE> 26
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999
NOTE 8 - 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 to
reflect the discount from fair market value.
Accounts Payable
At September 30, 1999, the Company owed vendors amounts totaling
$18,894 that are more than one year past due. One of the affected
vendors has a judgment against the Company for the amount owed. As of
September 30, 1999, the Company was making monthly payments on the
amount owed to that vendor. It is the Company's intention to pay off
all amounts owed as stated above by the end of fiscal 2000.
Contingent Liabilities
A certain company has asserted a claim against the Company for fees
related to the hiring of an employee through that Company. According to
the Company's legal counsel, the maximum exposure from this claim is
$6,000. It is the Company's contention that it previously negotiated a
settlement of this claim in which the Company was released of any
related liability. The Company intends to vigorously fight this claim
and expects no negative outcome as a result of this claim. Accordingly,
the Company has made no provision in the financial statements relative
to this claim.
26
<PAGE> 27
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
See Item 11 for information on beneficial ownership of the Company's
securities.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James J. Houtz 60 President, Chief Operating Officer and a Director
Robert E. McCray 63 Chief Financial Officer and a Director
Joan C. Horowitz 57 Secretary/Treasurer and a Director
</TABLE>
Mr. Houtz has been President and Chief Operating Officer of the Company
since March 1998. For more than five years prior to that time he was a
self-employed consultant in the areas of engineering and new product
development.
Mr. McCray has been Chief Financial Officer of the Company since July
1998. Prior to that time he was employed by San Clemente Hospital and Medical
Center, as Supervisor-Accounts Payable and Supervisor-Data Processing.
Ms. Horowitz has been Secretary/Treasurer and Office Manager of the
Company since April 1998. Prior to that time she was employed by Coldwell Banker
in office management.
The term of office of each director is one year or until his successor
is elected at the Company's annual meeting. Each officer is appointed by the
Board of Directors and serves at the pleasure of the Board.
In January 1998 the Company entered into a five-year employment
agreement with James J. Houtz. The agreement calls for salary to Mr. Houtz of
$85,000 per year, which amount is increased by 10% each year. In addition, after
the first year of the Employment Agreement, during each calendar quarter for the
term of the Agreement Mr. Houtz is to receive options to purchase 255,000 shares
of the Company's Common Stock, at an exercise price of $.001 per share. Upon
execution of the Employment Agreement, Mr. Houtz received an option to purchase
2,200,000 shares at an exercise price of $.001 per share. The Employment
Agreement also provides that Mr. Houtz is to receive options to purchase an
additional 1,650,000 shares of Common Stock, also exercisable at $.001 per
share, at such time as he negotiates and
27
<PAGE> 28
completes the private placement of Common Stock of the Company with gross
proceeds of at least $800,000. Finally, Mr. Houtz may receive options to
purchase up to an additional 13,250,000 shares over the next five years based on
the gross revenues of the Company.
In July 1998 the Company entered into an employment agreement with
Robert E. McCray, which expires in September 2001. The agreement calls for
salary to Mr. McCray of $50,000 per year, which amount is increased by 8% each
year. In addition, during each calendar quarter for the term of the Agreement
Mr. McCray is to receive options to purchase 25,000 shares of the Company's
Common Stock, at an exercise price of $.001 per share.
In April 1998 the Company entered into an employment agreement with Joan
C. Horowitz, which expires in September 2001. The agreement calls for salary to
Ms. Horowitz of $32,000 per year, which amount is increased by 8% each year. In
addition, during each calendar quarter for the term of the Agreement Ms.
Horowitz is to receive options to purchase 20,000 shares of the Company's Common
Stock, at an exercise price of $.001 per share.
ITEM 10. EXECUTIVE COMPENSATION.
The aggregate annual remuneration, during the fiscal year ending
September 30, 1999, of the three highest paid persons who are officers or
directors was as follows:
<TABLE>
<CAPTION>
Aggregate Capacities in which
Name remuneration remuneration was received
---- ------------ -------------------------
<S> <C> <C>
James J. Houtz $107,667 President and Chief Operating Officer
Robert E. McCray $ 52,000 Chief Financial Officer
Joan C. Horowitz $ 23,390 Secretary
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth ownership information as of September
30, 1999 with respect to all officers and directors and promoters, and each
shareholder who beneficially owns more than 5% of the outstanding shares:
<TABLE>
<CAPTION>
Name and Address No. of Shares Percentage
---------------- ------------- ----------
<S> <C> <C>
S. Donna Friedman Trust 5,968,000 16.7%
4120 Porte De Merano #80
San Diego, CA. 92122
James J. Houtz 6,065,667(1) 16.9%
Robert E. McCray 44,713 .1%
Joan C. Horowitz 25,000 .07%
All Directors and Officers
as a Group (3 Persons) 6,135,380(1) 17.1%
</TABLE>
- -------------
(1) Includes 5,711,500 shares issuable upon exercise of currently exercisable
options.
28
<PAGE> 29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the description of Employment Agreements with members of management
described above.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed herewith or incorporated by reference:
Exhibit 10.1* Employment Agreement with James J. Houtz, dated January 1,
1998.
Exhibit 10.2* Employment Agreement with Robert E. McCray, dated July 1,
1998.
Exhibit 10.3* Employment Agreement with Joan C. Horowitz, dated April 1,
1998.
Exhibit 10.4* Industrial Lease between the Company and The Irvine Company,
dated August 6, 1998.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
*Incorporated by reference from the Company's Annual Report on Form 10-KSB for
the fiscal year ending September 30, 1998, filed on January 14, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Sionix Corporation
Date: January 14, 2000 By /s/ James J. Houtz
------------------------------------
James J. Houtz, President
29
<PAGE> 30
EXHIBIT INDEX
Exhibit 10.1* Employment Agreement with James J. Houtz, dated January 1, 1998.
Exhibit 10.2* Employment Agreement with Robert E. McCray, dated July 1, 1998.
Exhibit 10.3* Employment Agreement with Joan C. Horowitz, dated April 1, 1998.
Exhibit 10.4* Industrial Lease between the Company and The Irvine Company, dated
August 6, 1998.
Exhibit 27 Financial Data Schedule
*Incorporated by reference from the Company's Annual Report on Form 10-KSB for
the fiscal year ending September 30, 1998, filed on January 14, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 185,625
<PP&E> 229,965
<DEPRECIATION> 117,328
<TOTAL-ASSETS> 439,235
<CURRENT-LIABILITIES> 540,036
<BONDS> 0
0
0
<COMMON> 35,311
<OTHER-SE> (100,801)
<TOTAL-LIABILITY-AND-EQUITY> 439,235
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 755,496
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,856
<INCOME-PRETAX> (785,532)
<INCOME-TAX> 0
<INCOME-CONTINUING> (785,532)
<DISCONTINUED> 0
<EXTRAORDINARY> 19,522
<CHANGES> 0
<NET-INCOME> (765,830)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
