<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, 1999
Commission File No. 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.)
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, 1999
- ----------------------------------- --------------------------------
Common Stock, without par value 38,734,363
<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, 1999 and the results of its operations and
changes in its financial position from inception through December 31, 1999 have
been made.
<PAGE> 3
SIONIX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND SEPTEMBER 30, 1999
<PAGE> 4
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $165,147 $184,461
Other current assets -- 1,164
-------- --------
Total Current Assets 165,147 185,625
-------- --------
PROPERTY AND EQUIPMENT - NET 125,130 112,637
-------- --------
OTHER ASSETS
Deposits 41,831 37,231
Intangibles - net 101,492 103,742
-------- --------
Total Other Assets 143,323 140,973
-------- --------
TOTAL ASSETS $433,600 $439,235
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
SIONIX CORPORATION
(A Development Stage Company)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 15,448 $ 18,895
Accrued expenses 148,205 143,790
Related party payables - current portion 377,351 377,351
----------- -----------
Total Current Liabilities 541,004 540,036
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock $0.001 par value; 100,000,000 shares
authorized, 38,734,363 and 35,310,621 shares issued
and outstanding, respectively 38,734 35,311
Additional paid-in capital 5,564,478 5,225,527
Deficit accumulated during the development stage (5,710,616) (5,361,639)
----------- -----------
Total Stockholders' Equity (Deficit) (107,404) (100,801)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 433,600 $ 439,235
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
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,
1999 1998 1999
--------- --------- ------------
<S> <C> <C> <C>
REVENUE $ -- $ -- $ 15,500
COST OF SALES -- -- 6,540
--------- --------- -----------
GROSS MARGIN -- -- 8,960
--------- --------- -----------
EXPENSES
Research and development -- -- 857,438
Depreciation and amortization 13,292 11,692 446,482
Administrative and marketing 329,792 131,491 3,158,251
--------- --------- -----------
Total Expenses 343,084 143,183 4,462,171
--------- --------- -----------
LOSS FROM OPERATIONS (343,084) (143,183) (4,453,211)
--------- --------- -----------
OTHER INCOME (EXPENSE)
Write down of obsolete intangible -- -- (1,040,865)
Write down of obsolete software -- -- (53,614)
Settlement costs -- -- (25,125)
Interest expense (5,893) (7,373) (157,323)
--------- --------- -----------
Total Other Income (Expense) (5,893) (7,373) (1,276,927)
--------- --------- -----------
LOSS BEFORE EXTRAORDINARY
INCOME AND INCOME TAXES (348,977) (150,556) (5,730,138)
EXTRAORDINARY INCOME
Gain on settlement of debt - net
of zero tax benefit -- -- 19,522
--------- --------- -----------
Total Extraordinary Income -- -- 19,522
--------- --------- -----------
PROVISION FOR INCOME TAXES -- -- --
--------- --------- -----------
NET LOSS $(348,977) $(150,556) $(5,710,616)
========= ========= ===========
BASIC LOSS PER SHARE $ (0.01) $ (0.00)
========= =========
FULLY DILUTED LOSS PER SHARE $ (0.00) $ (0.00)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on October 3, 1994 Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------ During the
Subscription Additional Development
Shares Amount Paid-In 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 these financial statements.
<PAGE> 8
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------ During the
Subscription Additional Development
Shares Amount Paid-In 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 these financial statements.
<PAGE> 9
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
--------------------------- During the
Subscription Additional Development
Shares Amount Paid-In 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 these financial statements.
<PAGE> 10
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
--------------------------- During the
Subscription Additional Development
Shares Amount Paid-In 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
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.
<PAGE> 11
SIONIX CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception on October 3, 1994 Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
---------------------------- During the
Subscription Additional Development
Shares Amount Paid-In Capital Stage Receivable
------------ -------- --------------- ------------ ----------
<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) --
Common stock issued for
cash at $0.10 per share
(unaudited) 1,226,000 1,226 121,374 -- --
Common stock issued for
services valued at $0.10
per share (unaudited) 2,197,742 2,197 217,577 -- --
Net loss for the period ended
December 31, 1999
(unaudited) -- -- -- (348,977) --
---------- ------- ---------- ----------- ----------
Balance,
December 31, 1999
(unaudited) 38,734,363 $38,734 $5,564,478 $(5,710,616) $ --
========== ======= ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 12
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,
1999 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(348,977) $(150,556) $(5,710,616)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 13,292 11,692 446,482
Common stock issued for services 219,774 -- 1,080,140
Write-down of obsolete assets -- -- 1,040,865
Gain on settlement of debt -- -- (19,522)
Change in assets and liabilities:
Decrease in other current assets 1,164 -- --
(Increase) in deposits (4,600) (10,400) (41,831)
Increase (decrease) in accounts payable
and accrued expenses 968 (38,951) 201,344
--------- --------- -----------
Net Cash Used by Operating Activities (118,379) (188,215) (3,003,138)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles -- -- (150,188)
Purchase of fixed assets (23,535) (33,155) (199,147)
--------- --------- -----------
Net Cash Used by Investing Activities (23,535) (33,155) (349,335)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable and
contracts payable -- (70,804) (42,212)
Proceeds from sale of stock 122,600 653,500 3,259,558
Proceeds from notes payable and
convertible debenture -- -- 361,274
Payment of notes payable and
convertible debenture -- -- (61,000)
--------- --------- -----------
Net Cash Provided by Financing
Activities $ 122,600 $ 582,696 $ 3,517,620
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 13
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,
1999 1998 1999
--------- -------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH $ (19,314) $361,326 $ 165,147
CASH AT BEGINNING OF PERIOD 184,461 11,230 --
--------- -------- ----------
CASH AT END OF PERIOD $ 165,147 $372,556 $ 165,147
========= ======== ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Addition to debt for acquisition of intangibles $ -- $ -- $1,302,914
Common stock issued for services $ 219,774 $ -- $1,080,140
Equipment acquired under lease payable $ -- $ -- $ 25,533
CASH PAID FOR:
Interest $ 4,000 $ 9,086 $ 13,086
Income taxes $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 14
SIONIX CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and September 30, 1999
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at December
31, 1999 and 1998 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
September 30, 1999 audited financial statements. The results of
operations for periods ended December 31, 1999 and 1998 are not
necessarily indicative of the operating results for the full years.
<PAGE> 15
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 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, 1999 Compared to
Three Months Ended September 30, 1999) During the 1999 fiscal year and the first
quarter of the 2000 fiscal year the focus of the Company's efforts was on
development, manufacturing
<PAGE> 16
and distribution of the Company's hardware products. The immediate focus has
been 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.
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 began 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 quarter ended December 31, 1999, the Company reported a loss of
$348,977, or $.01 per share. This compares with a loss of $150,556, or $.00 per
share for the quarter ending September 30, 1999. The increase in the loss is
principally due to higher administrative and marketing costs, as the Company
plans to roll out production.
Liquidity and Capital Resources. On December 31, 1999, the Company had
cash and cash equivalents of approximately $165,147. 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.
PART II - OTHER INFORMATION
Item 1. 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). 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
<PAGE> 17
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.
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
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 14, 2000
Sionix Corporation
By: /s/ James J. Houtz
------------------------------------
James J. Houtz, President
By: /s/ Robert E. McCray
------------------------------------
Robert E. McCray,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 165,147
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 165,147
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 433,600
<CURRENT-LIABILITIES> 541,004
<BONDS> 0
0
0
<COMMON> 38,734
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 433,600
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 343,084
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (348,977)
<INCOME-TAX> (348,977)
<INCOME-CONTINUING> (348,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,977)
<EPS-BASIC> (.01)
<EPS-DILUTED> .00
</TABLE>
