-----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, OhTMQ5/HQO2mSLbkTpkNJWvCX9ayfIB/sSqcwm9muoYTooUk9Oa/wB1cSKfIberh bh5XBDD7AA6TiDWU6mwzzg== 0001019687-02-000960.txt : 20020515 0001019687-02-000960.hdr.sgml : 20020515 20020515152258 ACCESSION NUMBER: 0001019687-02-000960 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIONIX CORP /UT/ CENTRAL INDEX KEY: 0000764667 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 870428526 STATE OF INCORPORATION: UT FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 002-95626-D FILM NUMBER: 02651659 BUSINESS ADDRESS: STREET 1: 9272 JERONIMO RD STREET 2: SUITE 108 CITY: IRVINE STATE: CA ZIP: 92618 BUSINESS PHONE: 9494549283 MAIL ADDRESS: STREET 1: 9272 JERONIMO RD STREET 2: SUITE 108 CITY: MISSION VIEJO STATE: CA ZIP: 92618 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 FORMER COMPANY: FORMER CONFORMED NAME: AUTOMATIC CONTROL CORP /NV DATE OF NAME CHANGE: 19960422 10QSB 1 sionix_10q-033102.txt U.S. 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, 2002 Commission File Number 2-95626-D Sionix Corporation ------------------ (Exact name of small business issuer as specified in its charter) Utah 87-0428526 State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 7282 Jeronimo Road, Suite 108, Irvine, CA 92618 ----------------------------------------------- (Address of principal executive offices) 949 454-9283 ------------ (Issuer's telephone number) Not Applicable ----------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of March 31, 2001, the Company had 60,135,173 shares of its $.001 par value common stock issued and outstanding. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet at March 31, 2002 (unaudited) Statements of Operations for the Periods of Three Months and Six Months ended March 31, 2002 and March 31, 2001, and Cumulative from Inception (unaudited) Statements of Cash Flows for the Periods of Three Months and Six Months ended March 31, 2002 and March 31, 2001, and Cumulative from Inception (unaudited) Notes to Financial Statements (unaudited) Item 2. Management's Discussion and Analysis or Plan of Operation PART II OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures 2 Part I. FINANCIAL INFORMATION Item 1. Financial Statements SIONIX CORPORATION (A Development Stage Company) BALANCE SHEET MARCH 31, 2002 (Unaudited)
ASSETS ------ CURRENT ASSETS: Cash & cash equivalents $ 69,818 Restricted Cash 40,000 Prepaid expenses 30,000 Other receivables 81,559 ------------- Total current assets 221,377 ------------- PROPERTY AND EQUIPMENT Equipment, net of accumulated depreciation of $165,833 20,577 Patents, net of accumulated amortization of $53,796 81,237 ------------- Total Property & Equipment 101,815 ------------- DEPOSITS 6,831 ------------- $ 330,023 ============= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 281,969 Accrued expenses 43,070 Accrued interest-related parties 22,424 Notes payable-related parties 181,645 ------------- Total current liabilities 529,108 ------------- COMMITMENTS & CONTINGENCIES STOCKHOLDERS' DEFICIT Common stock, $0.001 par value; 100,000,000 shares authorized; 60,135,173 shares issued and outstanding 59,653 Additional paid-in capital 9,728,449 Shares to be issued 44,500 Unamortized consulting fees (23,887) Deficit accumulated from inception (10,007,800) ------------- Total stockholders' deficit (199,085) ------------- $ 330,023 ============= The accompanying notes are an integral part of these financial statements.
3
SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited) CUMULATIVE THREE MONTHS ENDED SIX MONTHS ENDED FROM INCEPTION MARCH 31, MARCH 31, (OCTOBER 3, 1994) TO 2002 2001 2002 2001 MARCH 31, 2002 ------------ ------------ ------------ ------------ ------------------- REVENUES $ -- $ -- $ -- $ -- $ -- EXPENSES: General and Administrative 208,700 243,001 601,392 490,507 7,438,826 Research and development -- 156,643 22,300 160,408 1,238,893 Write-off of obsolete intangibles -- -- -- -- 1,040,865 Depreciation and amortization 5,099 8,569 10,199 18,494 364,237 ------------- ------------- ------------- ------------- ------------- 213,799 408,213 633,891 669,409 10,082,821 ------------- ------------- ------------- ------------- ------------- Operating Loss (213,799) (408,213) (633,891) (669,409) (10,082,821) OTHER INCOME(EXPENSE) Interest Income 283 1,596 2,023 4,710 44,342 Interest Expense -- (1,000) -- (2,000) (110,923) Interest Expense-related parties (974) (4,698) (1,970) (10,752) (93,821) Other expense -- -- -- -- (16,981) Legal Settlement 131,500 -- 131,500 -- 241,986 ------------- ------------- ------------- ------------- ------------- 130,809 (4,102) 131,553 (8,042) 64,603 ------------- ------------- ------------- ------------- ------------- Loss before income taxes (82,990) (412,315) (502,338) (677,451) (10,018,218) Income taxes -- -- 900 -- 7,200 ------------- ------------- ------------- ------------- ------------- NET LOSS BEFORE EXTRAORDINARY ITEM (82,990) (412,315) (503,238) (677,451) (10,025,418) EXTRAORDINARY ITEM -GAIN ON SETTLEMENT OF DEBTS 17,618 -- 17,618 -- 17,618 ------------- ------------- ------------- ------------- ------------- NET LOSS $ (65,372) $ (412,315) $ 485,620) $ 677,451) $(10,007,800) ============= ============= ============= ============= ============= BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING 62,493,660 55,938,006 62,896,537 55,043,752 ============= ============= ============= ============= BASIC AND DILUTED NET LOSS PER SHARE $ (0.001) $ (0.007) $ (0.008) $ (0.012) ============= ============= ============= ============= The accompanying notes are an integral part of these financial statements.
4 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited)
CUMULATIVE SIX MONTHS ENDED FROM INCEPTION MARCH 31, (OCTOBER 3, 1994) 2002 2001 TO MARCH 31, 2002 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (485,620) $ (677,451) $(10,007,800) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 10,199 18,494 364,237 Amortization of prepaid consulting 117,431 77,000 117,431 Gain on legal settlement (149,118) -- (149,118) Issuance of common stock for compensation 2,916 -- 1,835,957 Issuance of common stock for services 13,990 45,187 1,180,210 Issuance of common stock for contribution 11,300 -- 11,300 Write-down of obsolete assets -- -- 38,862 Write-down of intangible assets -- -- 1,040,865 Other -- -- 57,351 (Inc)/Dec of other assets -- -- (30,118) Decrease in other receivable 58 -- 58 Increase in deposits -- -- (6,831) Increase in accounts payable 68,414 132,417 281,969 Increase in accrued interest-related party 1,970 9,754 22,424 Increase in accrued interest -- 3,000 16,982 Inc/(Dec) in accrued expense (17,749) (14,963) 93,071 ------------- ------------- ------------- Total Adjustments 59,411 270,889 4,874,650 ------------- ------------- ------------- Net cash used in operating activities (426,209) (406,562) (5,133,150) ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Sale (purchase) of certificate of deposit 100,000 (40,000) (40,000) Purchase of patents -- -- (135,033) Purchase of equipment -- (11,044) (225,272) ------------- ------------- ------------- Net cash provided by (used in) investing activities 100,000 (51,044) (400,305) ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes to related party -- 40,369 345,773 Payments of notes to related party (25,000) (25,000) (60,197) Issuance of common stock for cash 354,700 168,000 5,273,197 Receipt of cash for stock to be issued 44,500 -- 44,500 ------------- ------------- ------------- Net cash provided by financing activities 374,200 183,369 5,603,273 ------------- ------------- ------------- Net Increase (decrease) in cash & cash equivalents 47,991 (274,237) 69,818 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 21,827 279,999 -- ------------- ------------- ------------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 69,818 $ 5,762 $ 69,818 ============= ============= ============= 5 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock issued for consulting services $ 13,990 $ 308,000 $ 556,398 ============= ============= ============= Acquisition of intangible for debt $ -- $ -- $ 1,185,475 ============= ============= ============= Conversion of debt to equity $ -- $ -- $ 1,269,247 ============= ============= ============= CASH PAID FOR: Interest $ -- $ -- $ 2,134 ============= ============= ============= Income Tax $ 900 $ -- $ 7,200 ============= ============= ============= The accompanying notes are an integral part of these financial statements.
6 NOTE 1 - BUSINESS ACTIVITY Sionix Corporation (the "Company") was incorporated in Utah in 1985. 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 have been principally devoted to research and development, organizational activities, and raising capital. NOTE 2 - BASIS OF PRESENTATION The accompanying unaudited financial statements of Sionix Corporation have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended September 30, 2001. NOTE 3 - RECENT PRONOUNCEMENTS On July 20, 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements make significant changes to the accounting for business combinations, goodwill, and intangible assets. SFAS No. 141 establishes new standards for accounting and reporting requirements for business combinations and will require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. This statement is effective for business combinations completed after June 30, 2001. SFAS No. 142 establishes new standards for goodwill acquired in a business combination and eliminates amortization of goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. Intangible assets with a determinable useful life will continue to be amortized over that period. This statement becomes effective January 1, 2002. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations". SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," was issued in August 2001. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, and addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. The adoption of above pronouncements, did not materially impact the Company's financial position or results of operations. NOTE 4 - COMMON STOCK During the six months period ended March 31, 2002, the Company issued 3,547,000 shares of common stock for cash at a price of $.10 per share, including 100,000 shares for cash of $10,000 received in the prior year. 100,000 shares of common stock were issued for contribution at a price of $.11 per share. The Company issued 18,838 shares for compensation to an employee at $.15 per share. The Company issued 92,929 shares for services received totaling $13,990. The Company issued 639,509 shares in the first quarter for debts of $103,294 settled in the prior year. 7 According to a legal settlement, the Company cancelled 7,533,701 shares of common stock issued to the former president and the director (Note 8). No gain or loss was recorded from this transaction since the transaction was recorded at par value at the time of issuance and reversed the recording of the issuance of the stock at par value. NOTE 5 - SHARES TO BE ISSUED The Company received cash of $44,500 for 445,000 shares of common stock to be issued subsequent to the period ended March 31, 2002. NOTE 6 - EARNINGS PER SHARE Earnings or loss per share for the three month periods ended March 31, 2002 and 2001 were determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding. Stocks to be issued are regarded as common stock equivalents and are considered in diluted earnings per share calculations. Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of dilutive securities is anti-dilutive. NOTE 7 - RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform to the period ended March 31, 2002 presentation. NOTE 8 - LEGAL SETTLEMENTS A malpractice case brought by the Company against its former counsel, Wenthur and Chachas, was settled in January 2002 for a $20,000 payment by the Company. The Company has recorded $50,000 (the difference between $70,000, the amount previously reserved, and the actual settlement amount) as a gain on settlement in the financial statement. An action was filed by the Company for professional negligence, malpractice, breach of fiduciary duty and breach of contract against Gilliam, Duncan & Harms, its previous patent counsel. The complaint alleged that the patent attorneys represented the Company and Jack Moorehead, former President of the Company, contemporaneously and failed to advise the corporation of the inherent conflict of interest in representing both parties. The action further alleged the patent attorneys aided Moorehead and others in misappropriating the Company's intellectual property and trade secrets. The action went to trial, and in December 2001 a minute order was issued announcing a judgment in favor of Sionix against the defendants. The judgment is still subject to appeal. One of the principal defendants in the case has filed bankruptcy, and the Company has filed a motion to establish that the obligation to the Company is not dischargeable in bankruptcy. The Company is the defendant in a collection action brought by a law firm that had previously represented it, Murphey & Murphey v. Sionix Corporation. The law firm seeks collection of approximately $156,000 in legal fees. The Company has filed a cross-complaint alleging, among other things, malpractice and breach of fiduciary duty. The Company intends to vigorously contest the action. The legal fees have been accrued in the financial statements. Extraordinary gain: The lawsuit which had been filed by the Company against its former President, Dascore, LLC, an entity controlled by the former President and in a business related to that of the Company; and a former officer and director of the Company (the "Defendants"), was settled. The Company alleged that the Defendants had (1) infringed on certain patents owned by the Company, through knowledge gained in their former positions; (2) sold or attempted to sell technology owned by the Company and covered by patents; (3) conspired to convert technology, money and equipment owned by the Company to pay personal expenses, and (4) defrauded the Company and breached their fiduciary duties in connection with their departure by retention of property owned by the Company. As a result of this settlement, the Company recorded a receivable of $79,999 for the settlement award. The Company recorded $17,618 as an extraordinary gain for the reduction amount of note payable as per the settlement. In addition, all of outstanding shares of Common Stock held by the defendants were returned and cancelled. 8 Item 2. Management's Discussion and Analysis or Plan of Operation General - ------- Results of Operations (Three Months Ended March 31, 2002 Compared to ----------------------------------------------------------------------- Three Months Ended March 31, 2001). - -------------------------------------- General and administrative expenses in the three months ended March 31, 2002 decreased by $34,301, from $243,001 in the prior period to $208,700 in the current period. The increase is principally due to decreased legal fees in the current period because of the resolution of various litigation matters during the current period. No research and development costs were incurred during the current quarter, compared to $156,643 during the prior period, reflecting the advanced state of development of the Company's products in the current period. Net loss for the quarter decreased $346,943. This decrease was principally due to income from a legal settlement, an extraordinary gain on the settlement of debts, and the lack of research and development expenses during the period. Liquidity and Capital Resources. ------------------------------- On March 31, 2002, the Company had cash and cash equivalents of approximately $69,818. The principal source of liquidity has been sales of securities and, to a lesser extent, the settlement of legal claims. Management anticipates that additional capital will be required to finance the Company's operations. The Company believes that anticipated proceeds from sales of securities and other financing activities, plus possible cash flow from operations towards the end of the fiscal year, will be sufficient to finance the Company's operations. However, the Company has no commitments for financing, and there can be no assurance that such financing will be available or that the Company will not encounter unforeseen difficulties that may deplete its capital resources more rapidly than anticipated. Also, the Company may not be able to generate revenues from operations during the fiscal year. As of March 31, 2001, the Company had an accumulated deficit of $10,007,800. It can be expected that the future operating results will continue to be subject to many of the problems, expenses, delays and risks inherent in the establishment of a developmental business enterprise, many of which the Company cannot control. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is the plaintiff in an action for professional negligence, malpractice, breach of fiduciary duty and breach of contract against Gilliam, Duncan & Harms, its previous patent counsel (San Diego County Superior Court, Case No. GIC754391). The complaint alleged that the patent attorneys represented the Company and Jack Moorehead, former President of the Company, contemporaneously and failed to advise the corporation of the inherent conflict of interest in representing both parties. The action further alleged the patent attorneys aided Moorehead and others in misappropriating the Company's intellectual property and trade secrets. The action went to trial, and in December 2001 a minute order was issued announcing a judgment in favor of Sionix against the defendants in the amount of $525,962. The judgment is still subject to appeal. One of the principal defendants in the case has filed bankruptcy, and the Company has filed a motion to establish that the obligation to the Company is not dischargeable in bankruptcy. The Company is the defendant in a collection action brought by a law firm that had previously represented it, Murphey & Murphey v. Sionix Corporation (San Diego Superior Court, North County Division, Case No. GIN 019186). The law firm seeks collection of approximately $156,000 in legal fees. The Company has filed a cross-complaint alleging, among other things, malpractice and breach of fiduciary duty. The Company intends to vigorously contest the action. Item 2. Changes in Securities and Use of Proceeds The following is a description of securities issued by the Company during the three months ended March 31, 2002 in transactions not registered under the Securities Act of 1933: The Company issued 13,843 shares to a single attorney for legal services rendered. The Company issued 2,592,000 shares to twenty-four investors in a private placement, at a price of $.10 per share. The Company believes each of the foregoing transactions was exempt by virtue of Section 4(2) from the registration requirement of the Securities Act of 1933. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable. 10 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None. 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. SIONIX CORPORATION Date: May 15, 2002 By: /s/ James J. Houtz --------------------------------------- James J. Houtz , President By: /s/ Robert McCray --------------------------------------- Robert McCray, Chief Financial Officer 11 -----END PRIVACY-ENHANCED MESSAGE-----