-----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, GhrxN8rBG5/cQ3vJDGD95jTl979wrzYUksyStiUS7UBNScPgGqaCQOoDOY4TdRJk iNRTE5+gsP0tj5QbbrwiTw== 0000892569-99-001461.txt : 19990518 0000892569-99-001461.hdr.sgml : 19990518 ACCESSION NUMBER: 0000892569-99-001461 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 10QSB SEC ACT: SEC FILE NUMBER: 002-95626-D FILM NUMBER: 99626875 BUSINESS ADDRESS: STREET 1: 26875 JASPER CITY: MISSION VIEJO STATE: CA ZIP: 92691 BUSINESS PHONE: 9493647171 MAIL ADDRESS: STREET 1: 26875 JASPER CITY: MISSION VIEJO STATE: CA ZIP: 92691 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 10QSB 1 FORM 10-QSB 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 MARCH 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.) 9272 Jeronimo Road, Suite 108, Irvine CA 92618 ------------------------------------------------------------------ (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 March 31, 1999 - ----------------------------------- ----------------------------- Common Stock, without par value 32,186,875 1 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 only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 1999, have been made. SIONIX CORPORATION (A Development Stage Company) Balance Sheets
ASSETS March 31, September 30, 1999 1998 --------- ------------- (Unaudited) CURRENT ASSETS Cash $219,858 $ 11,230 -------- -------- Total Current Assets 219,858 11,230 -------- -------- PROPERTY AND EQUIPMENT - NET (Notes 2 and 3) 119,737 102,855 -------- -------- OTHER ASSETS Deposits 22,232 6,831 Intangibles - net (Note 4) 108,243 112,744 -------- -------- Total Other Assets 130,475 119,575 -------- -------- TOTAL ASSETS $470,070 $233,660 ======== ========
2 3 SIONIX CORPORATION (A Development Stage Company) Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, September 30, 1999 1998 ----------- ------------- (Unaudited) CURRENT LIABILITIES Accounts payable $ 44,101 $ 134,229 Accrued expenses 120,990 138,082 Related party payables - current portion (Note 6) 50,000 62,304 Convertible debenture -- 20,000 ----------- ----------- Total Current Liabilities 215,091 354,615 ----------- ----------- LONG-TERM DEBTS Related party payables - less current portion (Note 6) 329,718 368,351 ----------- ----------- Total Long-Term Debts 329,718 368,351 ----------- ----------- Total Liabilities 544,809 722,966 ----------- ----------- COMMITMENTS (Note 10) STOCKHOLDERS' EQUITY (DEFICIT) Common stock $0.001 par value; 100,000,000 shares authorized, 32,186,875 and 25,221,875 shares issued and outstanding, respectively 32,187 25,222 Additional paid-in capital 4,770,815 4,081,281 Deficit accumulated during the development stage (4,877,741) (4,595,809) ----------- ---------- Total Stockholders' Equity (Deficit) (74,739) (489,306) ----------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 470,070 $ 233,660 =========== ==========
3 4 SIONIX CORPORATION (A Development Stage Company) Statements of Operations (Unaudited)
From Inception on For the Six Months Ended For the Three Months Ended October 3, March 31, March 31, 1994 Through ---------------------------- ---------------------------- March 31, 1999 1998 1999 1998 1999 ----------- ----------- ----------- ----------- ----------- REVENUE $ -- $ -- $ -- $ -- $ 15,500 COST OF SALES -- -- -- -- 6,540 ----------- ----------- ----------- ----------- ----------- GROSS PROFIT -- -- -- -- 8,960 ----------- ----------- ----------- ----------- ----------- EXPENSES Research and development -- -- -- -- 850,353 Depreciation and amortization 23,834 46,600 12,142 23,300 407,929 Administrative and marketing 251,503 16,441 120,012 10,155 2,380,646 ----------- ----------- ----------- ----------- ----------- Total Expenses 275,337 63,041 132,154 33,455 3,638,928 ----------- ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (275,337) (63,041) (132,154) (33,455) (3,629,968) ----------- ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Write down of obsolete software -- -- -- -- (53,614) Interest income 4,784 -- 3,071 -- 4,784 Write-down of obsolete intangibles -- -- -- -- (1,040,865) Settlement costs -- -- -- -- (25,125) Interest (11,379) (14,452) (2,293) (6,121) (132,953) ----------- ----------- ----------- ----------- ----------- Total Other Income (Expense) (6,595) (14,452) 778 (6,121) (1,247,773) ----------- ----------- ----------- ----------- ----------- NET LOSS $ (281,932) $ (77,493) $ (131,376) $ (39,576) $(4,877,741) =========== =========== =========== =========== =========== LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00) =========== =========== =========== ===========
4 5 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Deficit) From Inception on October 3, 1994 through March 31, 1999
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) $ -- --------- ----------- ----------- ----------- ------------
5 6 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Deficit) (Continued) From Inception on October 3, 1994 through March 31, 1999
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) ----------- ----------- ---------- ---------- ------------
6 7 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Deficit) (Continued) From Inception on October 3, 1994 through March 31, 1999
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) ----------- ----------- ----------- ----------- -----------
7 8 SIONIX CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Deficit) (Continued) From Inception on October 3, 1994 through March 31, 1999
Deficit Accumulated Common Stock Additional During the -------------------- Paid-in Development Subscription Shares Amount Capital Stage Receivable ------ ------ ---------- ----------- ------------ Balance, September 30, 1997 24,054,590 $ 24,055 $ 5,028,702 $(2,697,433) $(1,656,800) Common stock issued for cash at $0.10 per share 2,810,000 2,810 278,190 -- -- Common stock issued for services valued at $0.10 per share 895,455 895 88,651 -- -- Option to purchase 2,200,000 shares of common stock at $0.001 per share -- -- 220,000 -- -- Cancellation of common stock and options (2,538,170) (2,538) (1,534,262) -- 1,656,800 Net loss for the year ended September 30, 1998 -- -- -- (1,898,376) -- ----------- -------- ----------- ----------- ----------- Balance, September 30, 1998 25,221,875 25,222 4,081,281 (4,595,809) -- Common stock issued for cash at $0.10 per share (unaudited) 6,965,000 6,965 689,534 -- -- Net loss for the six months ended March 31, 1999 (unaudited) -- -- -- (281,932) -- ----------- -------- ----------- ----------- ----------- Balance, March 31, 1999 (unaudited) 32,186,875 $ 32,187 $ 4,770,815 $(4,877,741) $ -- =========== ======== =========== =========== ===========
8 9 SIONIX CORPORATION (A Development Stage Company) Statements of Cash Flows (Unaudited)
From Inception on For the Six Months Ended For the Three Months Ended October 3, March 31, March 31, 1994 Through --------------------------- --------------------------- March 31, 1999 1998 1999 1998 1999 ----------- ---------- ----------- ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (281,932) $ (77,493) $ (131,376) $ (39,576) $(4,877,741) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities: Depreciation and amortization 23,834 46,600 12,142 23,300 407,929 Common stock issued for services -- -- -- -- 644,331 Write-down of obsolete assets -- -- -- -- 1,040,865 Change in Assets and Liabilities: (Increase) decrease in deposits (15,401) -- (5,001) -- (22,234) Increase (decrease) in accounts payable and accrued expenses (107,220) (38,810) (68,270) (19,261) 183,260 ----------- ---------- ----------- ----------- ----------- Net Cash Used by Operating Activities (380,719) (69,703) (192,505) (35,537 (2,623,590) ----------- ---------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangibles -- (10,447) -- (447) (150,188) Purchase of fixed assets (36,215) -- (3,060) -- (161,952) ----------- ---------- ----------- ----------- ----------- Net Cash Used by Investing Activities (36,215) (10,447) (3,060) (447) (312,140) ----------- ---------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of notes payable and contracts payable (70,937) 60 (133) (2,551) (100,844) Proceeds from sale of common stock 696,499 -- 43,000 -- 2,895,158 Proceeds from notes payable and convertible debenture -- 81,269 -- 24,895 361,274 ----------- ---------- ----------- ----------- ----------- Net Cash Provided by Financing Activities $ 625,562 $ 81,329 $ 42,867 $ 22,344 $ 3,155,588 ----------- ---------- ----------- ----------- -----------
9 10 SIONIX CORPORATION (A Development Stage Company) Statements of Cash Flows (Unaudited)
From Inception on For the Six Months Ended For the Three Months Ended October 3, March 31, March 31, 1994 Through --------------------------- --------------------------- March 31, 1999 1998 1999 1998 1999 ----------- ---------- ----------- ---------- ----------- INCREASE (DECREASE) IN CASH $ 208,628 $ 1,179 $ (152,698) $ (13,640) $ 219,858 CASH AT BEGINNING OF PERIOD 11,230 271 372,556 15,090 -- ----------- ---------- ----------- ----------- ----------- CASH AT END OF PERIOD $ 219,858 $ 1,450 $ 219,858 $ 1,450 $ 219,858 =========== ========== =========== =========== =========== CASH PAID FOR: Interest $ 11,379 $ 14,452 $ -- $ 6,121 $ 17,513 Income taxes $ -- $ -- $ -- $ -- $ -- SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Decrease (Increase) in subscription notes receivable and future production costs receivable $ -- $ -- $ -- $ -- $(1,536,800) Addition to debt for acquisition of intangibles $ -- $ -- $ -- $ -- $ 1,302,914 Common stock issued for services $ -- $ -- $ -- $ -- $ 644,331 Equipment acquired under lease payable $ -- $ -- $ -- $ -- $ 25,533
10 11 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements March 31, 1999 and September 30, 1998 NOTE 1 - COMPANY ORGANIZATION AND BUSINESS ACTIVITY Sionix Corporation (the "Company") was incorporated in Nevada on October 3, 1994. The Company was formed to design, develop, and market an automatic water filtration system primarily for small water districts. The Company is in the development stage and its efforts through December 31, 1998 have been principally devoted to research and development, organizational activities, and raising capital. As of March 31, 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. 11 12 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements March 31, 1999 and September 30, 1998 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) e. Basic Loss Per Share The computation of basic loss per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements. Stock warrants and stock options have been included in the fully diluted loss per share. f. Provision for Income Taxes No provision for federal income taxes have been recorded due to net operating losses. The Company accounts for income taxes pursuant to FASB Statement No. 109. The Internal Revenue Code contains provisions which may limit the loss carryforwards available should certain events occur, including significant changes in stockholder ownership interests. Accordingly, the tax benefit of the loss carryovers is offset by a valuation allowance of the same amount. The loss carryforwards of approximately $4,250,000 will expire by the year 2013. g. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. h. Unaudited Financial Statements The accompanying unaudited financial statements include all of the adjustments which, in the opinion of management, are necessary for a fair presentation. Such adjustments are of a normal, recurring nature. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment at March 31, 1999 consisted of the following:
Computers and test equipment $ 190,471 Furniture and fixtures 25,834 --------- Total 216,305 Less accumulated depreciation (96,568) --------- Property and Equipment - Net $ 119,737 =========
Depreciation expense for the six months ended March 31, 1999 and the year ended September 30, 1998 was $19,334 and $31,565, respectively. 12 13 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements March 31, 1999 and September 30, 1998 NOTE 4 - INTANGIBLE ASSETS Intangible assets at March 31, 1999 consisted of the following:
Patents issued and pending $ 135,033 Less accumulated amortization (26,790) --------- Intangible Assets - Net $ 108,243 =========
Amortization expense for the six months ended March 31, 1999 and for the year ended September 30, 1998 was $4,500 and $99,154, respectively. NOTE 5 - LOAN PAYABLE Pursuant to an acquisition agreement, the Company assumed various promissory notes originally signed in 1992 and 1993 totaling $50,000. The notes bear interest at 8% and were originally due in 1994. Management of the Company currently cannot locate the holder of the notes and consequently has not been able to settle the liability. The amount is being included as a current liability in the accompanying financial statements until management can locate the note holder and settle the debt. The liability is included in the related party payables. NOTE 6 - RELATED PARTY PAYABLES The Company has received advances in the form of promissory notes from various shareholders and other related parties in order to pay minimal ongoing operating expenses. As of March 31, 1999, $379,718 was due by the Company as a result of these promissory notes of which $50,000 is considered to be current. The notes bear interest at rates of 7% to 13.5%. All of the notes are due on demand and are unsecured. NOTE 7 - STOCKHOLDERS' EQUITY During the year ended December 31, 1995, 414,200 shares of common stock were issued in return for notes receivable in the amount of $1,656,800. These notes were secured by the shares issued and were non-recourse. They had a stated interest rate of 6% and had maturity dates ranging from March 1, 1998 to September 7, 1998. During the year ended September 30, 1998, the shares originally issued in conjunction with the receivable were canceled along with the corresponding subscription receivable. 13 14 SIONIX CORPORATION (A Development Stage Company) Notes to the Financial Statements March 31, 1999 and September 30, 1998 NOTE 8 - COMMON STOCK PURCHASE WARRANTS The Company's Board of Directors has authorized and approved 851,400 common stock purchase warrants as of December 31, 1998 as follows:
Number Exercise Price Expiration of Warrants Per Share Date ----------- -------------- ---------- 851,400 $ 0.50 June 30, 1999
NOTE 9 - GOING CONCERN The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. It is the intent of the Company to generate revenue through the sales of its software and hardware products. In the opinion of management, sales of the Company's products, together with the proceeds of an offering of its common stock, will be sufficient for it to continue as a going concern. NOTE 10 - COMMITMENTS Employment Agreement On January 1, 1998, the Company entered into an employment contract with an officer and director. The employment contract calls for payments of $7,083 per month to the officer through September 30, 2003. As a signing bonus, the officer was given the option to purchase 2,200,000 shares of the Company's common stock at $0.001 per share. Accordingly, compensation expense of $220,000 has been recorded. Item 2. Management's Discussion and Analysis or Plan 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, 14 15 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 March 31, 1999 Compared to Three Months Ended December 31, 1998) In March of 1998, the Company experienced a change in management, and a new Board of Directors was elected at the Annual Shareholders' Meeting in August 1998. As a result, the focus of the Company's efforts has changed to concentrate on development, manufacturing and distribution of the Company's hardware products. The immediate focus is on the DAF (Dissolved Air Flotation) System, Automatic Back-Flush Filtration System, 0-Zone Mixing Chamber and other related products, some of which have their own separate markets. The Company suspended work on the Sionix, SCADA System and SCADA Manager Software program. The Company is continuing with engineering focus on hardware and water filtration equipment. The first phase of testing was completed in November 1998. The second phase of testing is currently underway and is revealing useful data. Management expects to implement engineering adjustments in tooling prior to the execution of contracts for production tooling. Management is in negotiations with suppliers for tooling and production of various support products that have their own markets. For the quarter ended March 31, 1999, the Company reported a loss of $132,154, or $-0- per share. This compares with a loss of $150,556, or -0- per share for the quarter ending December 31, 1998. This decreased loss is principally due to slightly lower administrative and marketing expenses. Liquidity and Capital Resources. On March 31, 1999, the Company had cash on hand of $219,858. The principal source of liquidity has been sales of securities. Management anticipates that additional capital will be required to finance the Company's operations. The Company believes that expected cash flow plus the anticipated proceeds from sales of securities will be sufficient to finance the Company's operations at currently anticipated levels for a period of at least twelve months. However, there can be no assurance that the Company will not encounter unforeseen difficulties that may deplete its capital resources more rapidly than anticipated. Year 2000 Issues. The "year 2000" issue concerns the potential exposure related to the possible automatic generation of business and financial misinformation resulting from the application of computer programs which have been written using two digits, rather than four, to define the applicable year of business transactions. When the year 2000 begins, programs with such date-related logic will not be able to distinguish between the years 1900 and 2000, potentially causing software and hardware to fail, generating erroneous calculations or presenting 15 16 information in an unusable format. The Company is dependent on multiple computer servers and the third-party computer programs running on them to provide data in support of its accounting and engineering functions. The Company's plan for year 2000 compliance includes the following phases: (i) conducting a comprehensive inventory of the Company's internal systems, including information technology systems and non-information technology systems and the systems acquired or to be acquired by the Company from third parties, (ii) assessing and prioritizing any required changes, upgrades, or enhancements, (iii) resolving any problems by repairing or, if appropriate, replacing the non-compliant systems, (iv) testing all remediated systems for Year 2000 compliance and (v) developing contingency plans that may be employed in the event that any system used by the Company is unexpectedly affected by a previously unanticipated problem relating to the Year 2000. In recognition of the potential year 2000 problem, the Company has begun a program to replace any of its existing communications, engineering and accounting software that is not year 2000 compliant with new software that is warranted by its vendors as being year 2000 compliant. It is anticipated that the costs of such replacement will not be material. The Company has relationships with various third parties on whom it relies to provide goods and services necessary for the manufacture and distribution of its products. These include suppliers and vendors. As part of its determination of year 2000 readiness, the Company has identified material relationships with third party vendors and is in the process of assessing the status of their compliance through the use of informal inquiries and review of hardware and software documentation. The components to be purchased by the Company in connection with the manufacture of its products are generally available through numerous independent sources. Due to the broad diversification of these sources, the risk associated with potential business interruptions as a result of year 2000 non-compliance by one or more sources is not considered significant. It is anticipated that the steps the Company has taken and is continuing to take to deal with the year 2000 problem will reduce the risk of significant business interruptions, but there is no assurance that this outcome will be achieved. Failure to detect and correct all internal instances of non-compliance or the inability of third parties to achieve timely compliance could result in the interruption of normal business operations which could, depending on its duration, have a material adverse effect on the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings Inapplicable. Item 2. Changes in Securities and Use of Proceeds 16 17 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 (a) Exhibits 27. Financial Data Schedule (b) Reports on Form 8-K Inapplicable 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: May 17, 1999 Sionix Corporation By: /s/ JAMES J. HOUTZ ------------------------------------- James J. Houtz, President By /s/ ROBERT E. MCCRAY ------------------------------------- Robert E. McCray, Chief Financial Officer 17 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1999 JAN-01-1999 MAR-31-1999 219,858 0 0 0 0 219,858 0 0 470,070 215,091 0 0 0 32,187 0 470,070 0 0 0 132,154 0 0 0 (132,154) (132,154) (132,154) 0 0 0 (132,154) (.00) (.00)
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