-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tift2KcaNgUv1XcXv7AXx7+H7tpEvoWUkf/lbZk1TpMJvsrXUzzeyDtk0oPcY01S THfhwLb3+J3P43a5X952hA== 0000892569-98-000440.txt : 19980219 0000892569-98-000440.hdr.sgml : 19980219 ACCESSION NUMBER: 0000892569-98-000440 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19980218 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIONIX CORP /UT/ CENTRAL INDEX KEY: 0000764667 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] STATE OF INCORPORATION: UT FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 002-95626-D FILM NUMBER: 98544764 BUSINESS ADDRESS: STREET 1: 5405 MOREHOUSE DR STREET 2: SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6196220200 MAIL ADDRESS: STREET 1: 5405 MOREHOUSE DRIVE STREET 2: SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: AUTOMATIC CONTROL CORP /NV DATE OF NAME CHANGE: 19960422 FORMER COMPANY: FORMER CONFORMED NAME: SIONIX CORP DATE OF NAME CHANGE: 19960214 FORMER COMPANY: FORMER CONFORMED NAME: CORONADO CAPITAL CORP DATE OF NAME CHANGE: 19950111 10KSB 1 FORM 10-KSB FOR THE YEAR ENDED SEPTEMBER 30, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____ COMMISSION FILE NUMBER: 2-95626-D SIONIX CORPORATION (Exact name of Registrant as specified in its charter) UTAH 87-0428526 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 5355 MIRA SORRENTO PLACE, SUITE 100, SAN DIEGO, CALIFORNIA 92121 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (619) 622-0200 Securities Registrant pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part II of this Form 10-K or any amendments to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the registrant, based upon the closing price on September 30, 1997 was approximately $12,800,000. The number of shares outstanding of the registrant's common stock as of September 30, 1997 was 24,054,590. 1 2 SIONIX CORPORATION FORM 10-KSB FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997 INDEX
PAGE ---- PART I Item 1. Business 1 Item 2. Properties 4 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Security Holders 4 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 5 Item 6. Selected Financial Data 5 Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations 5 Item 8. Financial Statements and Supplementary Data 6 Item 9. Disagreements on Accounting and Financial Disclosures 6 PART III Item 10. Directors and Executive Officers of the Registrant 21 Item 11. Executive Compensation 22 Item 12. Security Ownership of Certain Beneficial Owners and Management 23 Item 13. Certain Relationships and Related Transactions 23 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 24 Signatures 25
2 3 PART I ITEM 1. THE BUSINESS GENERAL Sionix Corporation, formerly Coronado Capital Corporation (hereinafter referred to as "Sionix" or the "Company") was incorporated under the laws of the State of Utah on January 15, 1985, as a "blind pool", with no specific business, for the purpose of raising capital to purchase various business endeavors. Coronado Capital held a public offering of stock in August 1985. The net proceeds were invested into what became a number of unsuccessful ventures and Coronado Capital became relatively inactive by 1988. In February 1994, Coronado Capital merged with Alimet, Inc., a Delaware corporation. Alimet, Inc. was researching and manufacturing aluminum-based metal matrix composite alloys for the use in non-aerospace applications. By late 1994, Coronado Capital determined that the financial requirement to produce and market these new metals was far beyond Coronado Capital's means and Coronado Capital took a one time charge for research and manufacturing costs. During fiscal 1995, the Company entered into an Acquisition Agreement and Plan of Reverse Merger with Automatic Control Corporation, a Nevada Corporation ("ACC"), under which ACC would merge with and into the Company (the "Merger"). On December 28, 1995, the merger was approved by the shareholders of the Company and the merger was consummated and effective as of January 5, 1996. The newly merged company was renamed Sionix Corporation at a special meeting of the shareholders held on January 23, 1996. The Company has designed and tested equipment for improving the treatment of water for commercial, industrial and public water treatment facilities. As of September 30, 1997 the Company has had seven of its patents issued and an eighth one allowed. It is currently in the process of raising capital to begin widespread manufacturing and marketing of it's product lines. The Company's executive offices and principal operations are located at 5355 Mira Sorrento Place, Suite 100, San Diego, California 92121 and its telephone number is (619) 622-0200. PRODUCTS Dissolved Air Flotation (DAF) Particle Separator The Company has taken a bulky, yet extremely effective, 70 year old technology and made it modular and portable. In fact, DAF technology is so efficient, the American Water Works Association's (AWWA) internet website lists over 125 research papers that verify the treatment and cost benefits of DAF and the October 1997 issue of the AWWA Journal published a report on the effectiveness of DAF in extending the run lengths of microfiltration products. Like it's much larger, costlier and older sibling, the Sionix DAF particle separators use microscopic air bubbles to remove suspended particles in the water. In the Sionix DAF column, a vertical vortex of spinning water forms a high-pressure zone at the outer perimeter and a low-pressure vortex of trapped air in its center. Algae, oils and other buoyant particles are pushed by the microscopic air bubbles into the center. The contaminants are held there by surface tension at the vortex's air-water interface and slowly discharged along with excess air and water to the waste line. The Company's DAF process uses no polymer chemicals or toxic metals and wastewater can be safely returned to a lake, river, or reservoir without damaging the environment. Additionally, the Sionix DAF particle separators substantially improves filter efficiency, increases flow rates in existing sand-type or micro-type filters and extends the life of the filter media by extending the time between filter cleaning cycles. 1 4 The real advantages of Sionix's patented DAF technology is it's size and affordable cost. The standard tank-type DAF particle separators treat tremendous amounts of water, so they are very large, in most cases require engineering and construction and take up a great deal of space. These DAF "projects", by their very nature, are too costly for most small municipal waster districts and are not conducive to applications such as hotels, cooling towers, dairies or food processing facilities. On the other hand, the Sionix DAF particle separator requires a minimal amount of space, is economically priced and, since it is a modular piece of equipment, is installed in a matter of hours, not built on-site as a project. Each basic DAF module has a flow-through of 200 gallons per minute (288,000 gallons per day), an amount necessary to supply all the drinking and potable water requirements for approximately 2,400 people. And because modules can be manifolded to meet any gallon per day requirement many larger facilities can benefit by this technology. Ozone Oxidation System Ozone, long recognized as an excellent "polisher" of water, is being installed in hundreds of municipal water systems around the country. Used in Europe for many decades, this technology has also finally found it's way to the rest of the world. However, problems of high energy costs caused by less than perfect feedwater and inefficient mixing of water and gas, have caused some to become wary of this outstanding technology. To overcome these problems, Sionix combined a corona-discharge ozone generator with its patented double-helix ozone mixing chamber. By utilizing the Sionix DAF particle separator (discussed above) to pre-treat the feedwater, less energy is required to create the appropriate amount of Ozone for polishing (cleaner water = less Ozone). By creating a turbulent flow of water and gas within the mixing chamber, Sionix has achieved a much higher saturation with less Ozone (and a minimum of excess Ozone) than in other mixing methods. This equipment was designed to match flow-throughs with the Sionix DAF particle separator, can also be manifolded to create more flow-through, is installed, not constructed, and can be used with or without the DAF system, depending on the quality of the feedwater. Microfiltration System The requirements of the Surface Water Treatment Rule of the Safe Drinking Water Act of 1996 are forcing more water treatment facilities around the country to look into microfiltration. With the potential requirements of the proposed Enhanced Surface Water Treatment Rule and the addition of the Ground Water Treatment Rule, microfiltration will leap to the forefront of water treatment. Currently, most microfiltration is "membrane" based. And when membranes get dirty, they must be cleaned (if possible) and replaced. In fact, many treatment facilities have turned away from membrane technology solely because of the high maintenance and replacement costs. Sionix attacked this problem by perfecting (and patenting) a method that "scrubs" the water through a filter media, rather than pushing the water directly through it. By utilizing a woven stainless steel, 2-micron filter element, the Sionix microfiltration system automatically backflushes in less than one second when the differential pressure increases 3 psi. As with other Sionix equipment, these microfiltration units were designed to work with or without the other products and are installed as complete subassemblies, not constructed on-site. Sionix5 Software Designed to operate and monitor all of the Sionix equipment products, this user friendly software program was expanded to contain an extensive library of state and federal clean water laws and acts, a plant operator training program, an automatic health department report compiler, and a SCADA design program. 2 5 AVAILABILITY OF MATERIALS Materials and components use by the Company for manufacturing are carefully selected based on stringent specifications for usage and operating conditions. Every effort is made to specify parts from multiple sources for independence from manufacturers and distributors. The Company has avoided using hard-to-get special parts to further minimize dependency from vendors. Simplicity in design and the use of common, widely used and readily available components is emphasized. MARKETING AND CUSTOMERS Internationally, the total replacement value of the municipal filtration-equipment market in 24 of the largest countries exceeds $5.6 trillion. Domestically, the immediate market exceeds $200 billion by EPA estimate. In the United States, an established base of 185,000 small to very small water providers are an ideal target market group for the company's equipment and services. This is clearly the group with the greatest need: most of them now operate outdated, inefficient and expensive systems with EPA reports listing more than 50,000 that are currently in violation of the Safe Drinking Water Act. With more stringent regulation and testing requirements on the way for both surface water and ground water more facilities are going to be forced into changing the way they do business. However, many commercial and industrial water providers and users are coming under heavy scrutiny by state and federal regulators. The dairy industry, meat and poultry producers, food and beverage processors, cooling tower manufacturers and oil and gas producers are just some of the industries that create "bad water" (bacterial, chemical, etc.) and are being targeted with possible indictments for violation of water statutes. Most of these are prime candidates for Sionix products. In addition to the domestic markets, the Company has been contacted by representatives from Spain, Portugal, and Brazil that, combined, have more than $40 billion dollars assigned for water and wastewater treatment. Sionix meets this challenge with products that are easily expandable and upgradable. Adding Ozone and microfiltration equipment to a DAF unit is like adding a new hard drive to your computer. Each piece of equipment comes with state-of-the-art telemetry and wet-chemistry monitoring that expands as the system does. Sionix provides lease financing for all of it's products that not only makes it easy for a customer to acquire the equipment, but will guarantee that the customer will always have access to any refinements and improvements made to the company's products. EMPLOYEES At September 30, 1997 the Registrant had 4 full time employees. ITEM 2. PROPERTIES At September 30, 1997 the Registrant did not own property. ITEM 3. LEGAL PROCEEDINGS In July 1997, the Company settled a lawsuit filed in San Diego County Superior Court by Michael Maung, an ex-employee, for a cash amount that was paid in full on December 1, 1997. With the exception of the above-referenced matter, the Company is not a party to any material legal proceedings, nor to the Company's knowledge are there any other material legal proceedings contemplated against it. 3 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the first and final quarter of fiscal 1996, there were two matters submitted to a vote of the security holders of the registrant. The first was a special meeting of the shareholders held on January 23, 1996, for the purpose of changing the name of the registrant from Sionix Corporation and to amend the Articles of Incorporation to provide that action by written consent of its shareholders may be taken without a meeting in accordance with Section 1-10a-704 of the Utah Revised Business Corporation Act. Both proposals were approved and adopted. The second matter was the action by written consent of a majority of the shareholders taken on September 16, 1996, wherein Section 2.4 of the By-laws of the registrant was amended to provide that a special meeting of the shareholders may be called by the president of the corporation, a majority of the board of directors or by the written request of shareholders holding at least ten (10) percent of all votes entitled to be cast on such issue to be proposed at such special meeting. (THE REST OF THE PAGE LEFT INTENTIONALLY BLANK) 4 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS MARKET FOR COMMON STOCK The Company's common stock is listed and traded on the NASDAQ OTC Bulletin Board under the symbol SINX. There has been relatively limited trading activity in the Company's stock since inception. The following table represents the high and low sales prices for the Company's common stock for each quarter of fiscal 1996.
Fiscal 1996 Asked Bid ----------- ----- --- First Quarter $ 0.500 $ 0.625 Second Quarter $ 0.375 $ 0.688 Third Quarter $ 0.188 $ 0.438 Fourth Quarter $ 0.063 $ 0.188
HOLDERS OF RECORD There were approximately 600 holders of record of the Company's common stock as of September 30, 1997. DIVIDENDS The Company has never declared or paid any cash dividend on its shares of common stock. Future dividends, if any, will vary depending on the Company's profitability and anticipated capital requirements. ITEM 6. SELECTED FINANCIAL DATA Financial Highlights
(September 30 for Year Ended December 31 1996 and 1997) ----------------------- -------------------------- 1994 1995 1996 1997 ------- ---------- ---------- ----------- Net Revenues $ - $ - $ - $ 15,500 Net Income (1,521) (914,279) (922,717) (858,916) Earnings per share - (0.05) (0.04) (0.03) Return on net revenues - - - - Cash and short-term investments - 229,407 36,041 271 Total assets 1,521 1,602,593 1,404,340 1,313.806 Stockholders' equity - 1,468,903 1,136,000 698,524
5 8 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company's balance sheet as of September 30, 1997 continues to reflect negative working capital. This was due to a delay in the release of the beta version of the Sionix5 Office Automation and Training Program until October 1996. The Company received financial support by way of a private placement that raised approximately $519,500 since May, 1996. Included in this amount is $142,500 from the Company's top management." These funds allowed the Company to create its initial inventory of product for sale and to ramp up its marketing department. RESULTS OF OPERATIONS The Company released the Sionix5 Software as a stand-alone program in January 1997. and plans to begin marketing the Sionix SCADA System and Sionix5 SCADA Manager before the end of the year. The Sionix Filtration Module is schedule for release in the first quarter of 1997. The Board of Directors approved a change in the fiscal year end of the Company from December 31 to September 30, effective with the current quarter, on September 27, 1996. For the quarter ended September 30, 1996 the Company is reporting a loss of $287,000, or $0.01 per share. This compares with a loss of $283,000, or $0.01 for the previous quarter ended June 30, 1996 and a loss of $352,000, or $0.02 per share, for the quarter ended September 30, 1995. There were no revenues reported for the quarter ended September 30, 1996. For the short year ended September 30, 1996 the Company is reporting a loss of $923,000, or $0.04 per share. This compares with a loss of $516,000, or $0.02 per share for the nine months ended September 30, 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS
Page ---- Balance Sheets - September 30, 1997 7 Statement of Operations 9 Statement of Stockholders' Equity 10 Statement of Cash Flows - periods ended September 30, 1997 13 Notes to Financial Statements for Period 15 Independent Auditor's Report 20
All other schedules are not submitted because they are not applicable or not required or because the information is included in the financial statements or notes thereto. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. 6 9 SIONIX CORPORATION (A Development Stage Company) Balance Sheet ASSETS
September 30, 1997 ------------- CURRENT ASSETS Cash in banks $ 271 Inventory (Note 2) 6,525 ---------- Total Current Assets 6,796 ----------- PROPERTY AND EQUIPMENT - NET (Notes 2 and 3) 90,436 ---------- OTHER ASSETS Intangibles - net (Notes 2 and 4) 1,216,574 ---------- Total Other Assets 1,216,574 ----------- TOTAL ASSETS $1,313,806 ==========
The accompanying notes are an integral part of the financial statements 7 10 SIONIX CORPORATION (A Development Stage Company) Balance Sheet (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 1997 ------------- CURRENT LIABILITIES Accrued expenses $ 38,934 Loan payable (Note 5) 50,000 Lease payable, current portion (Note 6) 7,847 Convertible debenture, current portion (Note 8) 10,000 Accounts payable 209,448 ----------- Total Current Liabilities 316,229 ----------- LONG-TERM DEBTS Related party payables (Note 7) 274,774 Lease payable (Note 6) 4,279 Convertible debenture (Note 8) 20,000 ----------- Total Long-Term Debts 299,053 ----------- Total Liabilities 615,282 ----------- COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY Common stock $.001 par value, 100,000,000 shares authorized, 24,054,590 shares issued and outstanding 24,055 Additional paid-in capital 5,028,702 Deficit accumulated during the development stage (2,697,433) Subscription receivable (Note 9) (1,656,800) ----------- Total Stockholders' Equity 698,524 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,313,806 ===========
The accompanying notes are an integral part of the financial statements 8 11 SIONIX CORPORATION (A Development Stage Company) Statements of Operations
From Inception on For the For the Nine October 3, Year Ended Months Ended 1994 Through September 30, September 30, September 30, 1997 1996 1997 ------------- ------------- ------------- REVENUE $ 15,500 $ - $ 15,500 COST OF SALES 6,540 - 6,540 ----------- ----------- ----------- GROSS PROFIT 8,960 - 8,960 ----------- ----------- ----------- EXPENSES Research and development 6,701 328,174 850,353 Depreciation and amortization 93,420 82,551 253,376 Administrative and marketing 673,074 501,480 1,479,837 ----------- ----------- ----------- Total Expenses 773,195 912,205 2,583,566 ----------- ----------- ----------- LOSS FROM OPERATIONS (764,235) (912,205) (2,574,606) ----------- ----------- ----------- OTHER INCOME (EXPENSE) Write down of obsolete software (53,614) - (53,614) Settlement costs (25,125) - (25,125) Interest (15,942) (10,512) (44,088) ----------- ----------- ----------- Total Other Income (Expense) (94,681) (10,512) (122,827) ----------- ----------- ----------- NET LOSS BEFORE TAXES (858,916) (922,717) (2,697,433) PROVISION FOR INCOME TAXES - - - ----------- ----------- ----------- NET LOSS $ (858,916) $ (922,717) $(2,697,433) =========== =========== =========== NET LOSS PER SHARE $ (0.03) $ (0.04) =========== ===========
The accompanying notes are an integral part of the financial statements 9 12 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity From Inception on October 3, 1994 through September 30, 1997
Deficit Accumulated Common Stock Additional During the ------------------------ Paid-in Development Subscription Shares Amount Capital Stage Receivable --------- ----------- ----------- ----------- ------------ 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) $ - --------- ----------- ----------- ----------- ----
The accompanying notes are an integral part of the financial statements 10 13 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Continued) From Inception on October 3, 1994 through September 30, 1997
Deficit Accumulated Common Stock Additional During the -------------------------- Paid-in Development Subscription Shares Amount Capital Stage Receivable ----------- ----------- ----------- ----------- ----------- 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) ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements 11 14 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Continued) From Inception on October 3, 1994 through September 30, 1997
Deficit Accumulated Common Stock Additional During the -------------------------- Paid-in Development Subscription Shares Amount Capital Stage Receivable ---------- ----------- ----------- ----------- ----------- 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) =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements 12 15 SIONIX CORPORATION (A Development Stage Company) Statements of Cash Flows
From Inception on For the For the Nine October 3, Year Ended Months Ended 1994 Through September 30, September 30, September 30, 1997 1996 1997 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (858,916) $ (922,717) $(2,697,433) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 93,420 82,551 253,376 Common stock issued for services 54,860 24,307 214,785 Change in assets and liabilities: (Increase) decrease in inventory 33,808 (40,333) (6,525) (Increase) decrease in other current assets 2,981 70,410 - (Increase) decrease in deposits 6,996 (6,996) - Increase in accounts payable and accrued expenses 136,111 28,182 208,984 ----------- ----------- ----------- Net Cash Used by Operating Activities (530,740) (764,596) (2,026,813) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangibles (75,771) (33,968) (150,188) Purchase of fixed assets (6,671) (41,244) (81,753) ----------- ----------- ----------- Net Cash Used by Investing Activities (82,442) (75,212) (231,941) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of notes payable and contracts payable (11,742) (8,165) (19,907) Proceeds from sale of stock 366,580 572,407 1,917,658 Proceeds from notes payable and convertible debenture 222,574 82,200 361,274 ----------- ----------- ----------- Net Cash Provided by Financing Activities $ 577,412 $ 646,442 $ 2,259,025 =========== =========== ===========
The accompanying notes are an integral part of the financial statements 13 16 SIONIX CORPORATION (A Development Stage Company) Statements of Cash Flows (Continued)
From Inception on For the For the Nine October 3, Year Ended Months Ended 1994 Through September 30, September 30, September 30, 1997 1996 1997 ------------- ------------- ------------- INCREASE (DECREASE) IN CASH $ (35,770) $ (193,366) $ 271 CASH AT BEGINNING OF PERIOD 36,041 229,407 - ----------- ----------- ----------- CASH AT END OF PERIOD $ 271 $ 36,041 $ 271 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Change in subscription notes receivable and future production costs receivable $ 675,000 $ - $(1,656,800) Addition to debt for acquisition of intangibles $ - $ - $ 1,302,914 Common stock issued for services $ 54,860 $ 24,307 $ 214,785 Equipment acquired under lease payable $ - $ 25,533 $ 25,533 CASH PAID FOR: Interest $ - $ - $ 6,134 Income taxes $ - $ - $ -
The accompanying notes are an integral part of the financial statements 14 17 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements September 30, 1997 NOTE 1 - COMPANY ORGANIZATION AND BUSINESS ACTIVITY Sionix Corporation (the "Company") was incorporated in Nevada on October 3, 1994. The Company was formed to design, develop, and market an automatic water filtration system primarily for small water districts. The Company is in the development stage and its efforts through September 30, 1997 have been principally devoted to research and development, organizational activities, and raising capital. As of September 30, 1997, the Company has had $15,500 of revenues. The ultimate recovery of investments and costs is dependent on future profitable operations, which presently cannot be determined. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a September 30 year end. b. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. c. Property and Equipment Property and equipment are recorded at cost. Major additions and improvements are capitalized. Minor replacements, maintenance and repairs that do not increase the useful life of the assets are expensed as incurred. Depreciation of property and equipment is determined using the straight-line method over the expected useful lives of the assets as follows: Description Useful Lives ----------- ------------ Computers and test equipment 5 years Furniture and fixtures 5 years d. Capitalized Marketing Costs Capitalized marketing costs are recorded at cost. The Company follows the policy of capitalizing marketing costs associated with the development of marketing materials. Amortization of the costs are determined using the straight-line method over the expected useful life of 15 years. 15 18 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements September 30, 1997 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) e. Inventory Inventory is stated at the lower of average cost or market. f. Research and Development Research and development costs are expensed as incurred. g. Net Loss Per Share The computation of net loss per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements. h. Provision for Income Taxes No provision for federal income taxes have been recorded due to net operating losses. The Company accounts for income taxes pursuant to FASB Statement No. 109. The Internal Revenue Code contains provisions which may limit the loss carryforwards available should certain events occur, including significant changes in stockholder ownership interests. Accordingly, the tax benefit of the loss carryovers is offset by a valuation allowance of the same amount. The loss carryforwards of approximately $2,697,000 will expire by the year 2012. i. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment at September 30, 1997 consisted of the following: Computers and test equipment $ 125,603 Furniture and fixtures 10,503 --------- Total 136,106 Less accumulated depreciation (45,670) --------- Property and Equipment - Net $ 90,436 =========
Depreciation expense for the year ended September 30, 1997 and for the nine months ended September 30, 1996 was $23,602 and $16,440, respectively. 16 19 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements September 30, 1997 NOTE 4 - INTANGIBLE ASSETS Intangible assets at September 30, 1997 consisted of the following: Patents issued and pending $ 112,466 Intellectual property 1,227,138 Marketing and development costs 84,676 Less accumulated amortization (207,705) ----------- Intangible Assets - Net $ 1,216,575 ===========
Amortization expense for the year ended September 30, 1997 and the nine months ended September 30, 1996 was $69,818 and $66,111, respectively. NOTE 5 - LOAN PAYABLE Pursuant to an acquisition agreement, the Company assumed various promissory notes originally signed in 1992 and 1993 totaling $50,000. The notes bear interest at 8% and were originally due in 1994. Management of the Company currently cannot locate the holder of the notes and consequently has not been able to settle the liability. The amount is being included as a current liability in the accompanying financial statements until management can locate the note holder and settle the debt. NOTE 6 - LEASE COMMITMENTS The Company leases equipment with a lease term through July of 1999. Obligations under this capital lease have been recorded in the accompanying financial statements at the present value of future minimum lease payments. The capitalized cost of $25,533 less accumulated depreciation of $7,660 is included in property and equipment in the accompanying financial statements. Depreciation expense for this equipment for the year ended September 30, 1997 was $5,107. Obligations under this capital lease consist of the following: Total $ 12,126 Less: current portion (7,847) -------- Long-term portion $ 4,279 ========
17 20 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements September 30, 1997 NOTE 6 - LEASE COMMITMENTS (Continued) The future minimum lease payments under this capital lease and the net present value of the future minimum lease payments are as follows:
Year Ending September 30, ------------- 1998 $ 9,470 1999 4,735 2000 - 2001 and thereafter - -------- Total future minimum lease payments 14,205 Less, amount representing interest (2,079) -------- Present value of future minimum lease payments $ 12,126 ========
NOTE 7 - RELATED PARTY PAYABLES The Company has received advances in the form of promissory notes from various shareholders and other related parties in order to pay minimal ongoing operating expenses. As of September 30, 1997, $274,774 was due by the Company as a result of these promissory notes. Some of the notes bear interest at rates of 7% to 13%. All notes are due on demand and unsecured. NOTE 8 - CONVERTIBLE DEBENTURE As of September 30, 1997, the Company has $30,000 in 10% redeemable, convertible debentures outstanding. Interest accrues at a rate of 10% and is payable on a quarterly basis. The principle and unpaid interest are due during September, October and November 1998. The principal amount is convertible at the option of the holder at any time prior to maturity into shares of the Company's common stock at a rate of $1.00 per common share. NOTE 9 - STOCKHOLDERS' EQUITY During the year ended December 31, 1995, 414,200 shares of common stock were issued in return for notes receivable in the amount of $1,656,800. These notes are secured by the shares issued and are non-recourse. They have a stated interest rate of 6% and have maturity dates ranging from March 1, 1998 to September 7, 1998. 18 21 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements September 30, 1997 NOTE 10 - COMMON STOCK PURCHASE WARRANTS The Company's Board of Directors has authorized and approved 1,526,768 common stock purchase warrants as of September 30, 1997 as follows:
Number Exercise Price Expiration of Warrants Per Share Date(s) ----------- -------------- ------------------------------- 570,100 $ 1.00 May 15, 1998 - Sept. 30, 1998 104,445 $ 10.00 January 4, 1998 783 $ 5.50 May 15, 1998 851,400 $ 0.50 January 2, 1998 - June 30, 1999
NOTE 11 - GOING CONCERN The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. It is the intent of the Company to generate revenue through the sales of its software and hardware products. During the later part of the Fiscal 1996, the Company focused its energies on raising capital to begin the manufacturing and marketing of its equipment products. Toward these ends the Company engaged the public relations firm of Howard Bronson Associates of New York to aid in the raising of capital and presented seminars on its technology in areas where water quality is a serious problem. Management believes, with successful completion of a financial package, that delivered sales of the Company's equipment products will occur. In the opinion of management, sales of the Company's products, together with the proceeds of an offering, will be sufficient for it to continue as a going concern. 19 22 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders Sionix Corporation San Diego, California We have audited the accompanying balance sheet of Sionix Corporation (a development stage company) as of September 30, 1997, and the related statements of operations, stockholders' equity and cash flows for the year ended September 30, 1997, for the nine months ended September 30, 1996, and from inception on October 3, 1994 through September 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sionix Corporation (a development stage company) as of September 30, 1997, and the results of its operations and its cash flows for the year ended September 30, 1997, for the nine months ended September 30, 1996 and from inception on October 3, 1994 through September 30, 1997 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company is a development stage company with no significant operating results to date and has suffered recurring losses which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Jones, Jensen & Company Salt Lake City, Utah February 2, 1998 20 23 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists all of the Directors and Executive Officers of the Company, and provides certain information concerning each such person, including the number of shares of Common Stock of the Registrant beneficially owned directly or indirectly by such person at the close of business on September 30, 1996.
Amount and Position Nature of Percent with Beneficial of Name Age Since Registrant Ownership Class ---- -- ---- -------- --------- ----- Michael Taylor 44 1996 CEO/CFO 1,017,849 4.23% Director Jack Moorehead 66 1996 President 797,929 3.32% Director S. Donna Friedman(1) 64 1995 Secretary 9,638,000 40.07% Treasurer Director Laura Friedman(1) 29 1995 Director 383,786 1.60% Cheryl Friedman(1) 31 1995 Director 383 786 1.60% Rodney Anderson 69 1997 Director 51,103 .21%
(1) Director, S. Donna Friedman is the mother of Directors Laura Friedman and Cheryl Friedman. PRINCIPAL OCCUPATION Michael Taylor - Elected as a Director and appointed as CEO/CFO of the Registrant in May 1996. Mr. Taylor has a BA degree in Business Administration (with a specialty in accounting) from California State University, Fullerton, and has practiced as a tax and financial consultant since 1977. Mr. Taylor was President, CEO and a Director of Coronado Capital Corporation from February 15, 1994 until the merger with Sionix Corporation. Jack Moorehead - Elected as a Director on December 28, 1995 and appointed as the President of the Registrant in May, 1996. Mr. Moorehead has a degree in Civil Engineering from the University of Detroit, and completed graduate courses in marketing at the University of Miami. He was a marketing executive with Florida Power and Light and Bevis Associates, their advertising agency under Vice President D.P. Cauldwell. Before founding Sionix Corporation, he served as a consultant for a variety of firms, patenting new products and developing marketing programs for those products. He was granted six U.S. patents for an automatic rapid back flush filter system, a dissolved air flotation system, and an apparatus for mixing ozone, chemicals and liquids, which are all now assigned to Sionix Corporation. S. Donna Friedman - Elected as a Director and appointed as Secretary and Treasurer on December 28, 1995. As Executive Assistant to the President, Lockheed Air Terminal, Inc. in Burbank, California, Ms. Friedman processed legal documents and contracts, leases, proposals, acquisitions, agenda, minutes and resolutions, financial and budget related material. Prior to joining Lockheed, Ms. Friedman also proposed, developed and implemented plans for product scheduling and shipping for an automated systems manufacturer. 21 24 Cheryl Friedman - Elected as a Director on December 28, 1995. Ms. Friedman graduated with honors from UC, Santa Barbara, with a BA in Communication Studies. She is currently a Management Supervisor at McCann-Erickson Worldwide Advertising agency in charge if the marketing and advertising for Nestle Beverage Company. She started her career at J. Walter Thompson in San Francisco in 1988 before joining the San Francisco office of Ketchum Communications to launch the first Investment Services advertising campaign for Bank of America. She joined Ogilvy & Mather Advertising in New York in April, 1993 working on Kraft General Foods. Shortly thereafter, she became Account Supervisor responsible for all new product development for Post Kids Cereals. Ms. Friedman's Project Phoenix program created three new Kraft Foods assignments worth an estimated $42 million. She has traveled extensively throughout the United States, Canada, Europe, Africa and the Middle East. Laura Friedman - Elected as a Director on December 28, 1995. Ms. Friedman received a BS in Business Administration with an emphasis in Marketing from San Diego State University. She was Media Planner and Buyer at Franklin Stoorza Advertising for the San Diego County Water Authority, International Savings Bank, Voucher Corporation, McDonald's and Travelodge Hotels before joining Ammirati & Puris/Lintas Advertising, New York. Ms. Friedman controls $100 million in annual media billings for Aetna, RCA, and other clients. She has traveled extensively throughout the United States, Canada, Europe, Africa and the Middle East. Rodney Anderson - Elected as a director in February 1997. Mr. Anderson has been the owner of RJ Metal Products, a tool and die shop for over 20 years. He was also a Director of Coronado Capital from February 15, 1994 until the merger with Sionix. ITEM 11. EXECUTIVE COMPENSATION COMPENSATION OF OFFICERS For the fiscal year ended September 30, 1996, executive officers received compensation as follows:
Name Position Amount of Compensation ---- -------- ---------------------- Michael Taylor CEO/CFO 70,000 shares(1) Jack Moorehead President $ 54,480 S. Donna Friedman Sec/Treas. $ 0
(1) See Item 13., for information regarding compensation of Michael A. Taylor. EMPLOYMENT CONTRACTS/STOCK INCENTIVE PLANS No employment contracts or stock incentive plans were adopted or granted by the Company during the fiscal year ended September 30, 1997. COMPENSATION OF DIRECTORS No director of the Company received any compensation for being a director during the fiscal year ended September 30, 1997. 22 25 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information, to the extent known by the Company, as to the persons and companies who owned beneficially more than five percent (5%) of the outstanding shares of the Common Stock of the Company at the close of business on September 30, 1997, and the beneficial ownership of the Company, as a group, as of such date. The number of shares held by each Director is set forth in Item 10 hereinabove.
Title of Amount and Nature of Class Name and Address Beneficial Ownership Percent of Class - -------- ---------------- -------------------- ---------------- Common S. Donna Friedman Trust 9,638,000 40.87% 4120 Porte De Merano #80 San Diego, CA. 92122 Common All Directors and 12,326,933 51.25% Officers as a Group (Five (6) Persons)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CONSULTING AGREEMENT WITH MICHAEL A. TAYLOR On May 15, 1996, the Company entered into a consulting agreement with Michael A. Taylor under which Mr. Taylor as consultant would provide financial, tax and management consultant services to the Company with regard to matters that effect the accounting, tax return preparation, fund raising and management of the Company. The term of the consulting agreement is for a period of two (2) years. Under the terms of said contract as approved and adopted by the board of directors, Mr. Taylor would receive as compensation for his services to the Company five hundred thousand shares (500,000) of common stock. In consideration of the continued performance and services to be provided by Mr. Taylor to the Company under the consulting agreement, the Company agreed to pay Mr. Taylor in current funds as compensation for his services a fee of $5,000 per month plus reimbursement for all out of pocket costs, or in lieu of cash, cause to be issued ten thousand (10,000) shares of common stock per month. Mr. Taylor has not been paid any cash compensation for his services and has been issued 90,000 shares of common stock as compensation under said consulting agreement. PURCHASE OF UNREGISTERED SHARES OF THE COMPANY'S COMMON STOCK During the period covered by this report, Jack F. Moorehead, the President and a Director of the Company purchased 34,000 shares of unregistered and restricted common stock of the Company at prices ranging from $0.50 to $1.00 per share. Michael A. Taylor, the Chief Executive Officer, Chief Financial Officer and a Director of the Company purchased 108,245 shares of unregistered and restricted common stock of the Company at prices ranging from $0.50 to $1.00 per share. 23 26 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as a part of this report: (1) Financial Statements of Sionix Corporation set forth under Item 8 are filed as part of this report. (2) To include the Financial Statement Schedules other than those listed above have been omitted since they are either not required, not applicable, or the information is otherwise included. 27. Financial Data Schedule (b) Information filed as part of this report from Form 8-K: None 24 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the Undersigned, thereunto duly authorized. SIONIX CORPORATION (REGISTRANT) Date: February 11, 1998 /S/ Jack F. Moorehead ----------------------------------- By: Jack Moorehead Its: President Date: February 11, 1998 /S/ Michael A. Taylor ----------------------------------- By: Michael A. Taylor Its: Chief Executive Officer Chief Financial Officer 25 28 EXHIBIT INDEX Exhibit No. Description - ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR SEP-30-1997 OCT-01-1996 SEP-30-1997 271 0 0 0 6,525 6,796 1,560,386 253,376 1,313,806 316,229 299,053 0 0 24,055 674,469 1,313,806 15,500 15,500 6,540 6,540 851,934 0 15,942 (858,916) 0 (858,916) 0 0 0 (858,916) (0.03) (0.03)
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