-----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, NyXKtO1Fs84NW9lY2XMMXOcj41WH3hCurL5EMuwWTO4nERQOyLbwbRbRgR5jQbe8 l+ylSa46BhJ7fx++LQ8jkA== 0001019687-03-000234.txt : 20030213 0001019687-03-000234.hdr.sgml : 20030213 20030213132341 ACCESSION NUMBER: 0001019687-03-000234 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030213 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: 03558162 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-123102.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 December 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) As of December 31, 2002, the Company had 76,258,153 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 3 Balance Sheet at December 31, 2002 (unaudited) 3 Statements of Operations for the Periods of Three Months ended December 31, 2002 and December 31, 2001, and Cumulative from Inception (unaudited) 4 Statements of Cash Flows for the Periods of Three Months ended December 31, 2002, and December 31, 2001 and Cumulative from Inception (unaudited) 5 Notes to Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis or Plan of Operation 12 Item 3. Controls and Procedures 12 PART II OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 14 2 Part I. FINANCIAL INFORMATION Item 1. Financial Statements SIONIX CORPORATION (A Development Stage Company) BALANCE SHEET December 31, 2002 (Unaudited)
ASSETS ------ CURRENT ASSETS: Cash & cash equivalents $ 199,823 Prepaid expenses 330,925 Other receivables 7,586 ------------- Total current assets 538,334 ------------- PROPERTY AND EQUIPMENT, NET 46,561 OTHER ASSETS Restricted cash 100,000 Deposits 6,831 ------------- Total other assets 106,831 ------------- $ 691,726 ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 34,172 Accrued expenses 15,899 Accrued interest 25,400 Notes payable 81,645 Equity Line of Credit 200,000 ------------- Total current liabilities 357,116 ------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, $0.001 par value; 100,000,000 shares authorized; 78,758,153 shares issued and 76,258,153 shares outstanding 76,258 Additional paid-in capital 11,608,842 Unamortized consulting fees (37,300) Deficit accumulated from inception (11,313,190) ------------- Total stockholders' equity 334,610 ------------- $ 691,726 ============= The accompanying notes are an integral part of these financial statements. 3
SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited)
CUMULATIVE THREE MONTH PERIODS ENDED FROM INCEPTION DECEMBER 31, (OCTOBER 3, 1994) TO 2002 2001 DECEMBER 31, 2002 ----------------- ------------------ -------------------- REVENUES $ - $ - $ - EXPENSES: General and Administrative 534,121 392,691 8,755,431 Research and development 9,135 22,300 1,294,278 Impairment of intangible assets - - 1,117,601 Depreciation and amortization 3,657 5,100 378,853 ----------------- ------------------ -------------------- 546,913 420,091 11,546,163 ----------------- ------------------ -------------------- OPERATING LOSS (546,913) (420,091) (11,546,163) OTHER INCOME (EXPENSE) Interest Income 1,108 1,739 51,237 Interest Expense (996) - (996) - (206,724) Legal Settlement - - 433,603 ----------------- ------------------ -------------------- 112 743 277,120 ----------------- ------------------ -------------------- LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (546,801) (419,348) (11,269,043) Income taxes 900 900 8,100 ----------------- ------------------ -------------------- LOSS BEFORE EXTRAORDINARY ITEM $ (547,701) $ (420,248) $ (11,277,143) EXTRAORDINARY ITEM-NET LOSS ON SETTLEMENT OF DEBTS - - (36,047) ----------------- ------------------ -------------------- NET LOSS (547,701) (420,248) (11,313,190) ================= ================== ==================== BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING 75,223,090 63,289,568 ================= ================== BASIC AND DILUTED NET LOSS PER SHARE $ (0.007) $ (0.007) ================= ================== The accompanying notes are an integral part of these financial statements. 4
SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (UNAUDITED)
CUMULATIVE THREE MONTHS ENDED FROM INCEPTION DECEMBER 31, (OCTOBER 3, 1994) 2002 2001 TO DECEMBER 31, 2002 ------------- ------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (547,701) $ (420,248) $(11,313,190) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,657 98,643 378,853 Issuance of common stock for compensation -- 2,916 1,835,957 Issuance of common stock for services & prepaid consulting fees 285,843 -- 1,826,078 Issuance of common stock for contribution -- 11,300 -- Stock to be issued for services received -- 12,040 -- Write-down of obsolete assets -- -- 38,862 Write-down of intangible assets -- -- 1,117,601 Loss on settlement of debts -- -- 36,047 Other -- -- 40,370 Changes in assets and liabilities: Increase of other assets -- -- (207,126) Increase in prepaid expense (123,931) -- (123,931) (Increase) decrease in other receivable (7,454) 11 (7,454) Increase in deposits -- -- (6,831) Increase/(decrease) in accounts payable (44,382) 135,857 104,171 Increase in accrued interest 996 996 42,382 Increase/(decrease) in accrued expense 12,384 (3,298) 12,768 ------------- ------------- ------------- Total Adjustments 127,113 258,465 5,087,747 ------------- ------------- ------------- Net cash used in operating activities (420,588) (161,783) (6,225,443) ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Decrease(increase) of certificate of deposit -- 100,000 (100,000) Purchase of patents -- -- (135,033) Purchase of equipment (21,818) -- (261,371) ------------- ------------- ------------- Net cash provided by (used in) investing activities (21,818) 100,000 (496,404) ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes to related party -- -- 345,773 Proceeds from issuance of notes 200,000 -- 200,000 Payments of notes (15,000) (5,000) (110,197) Issuance of common stock for cash -- 105,000 6,476,094 Receipt of cash for stock to be issued -- 5,000 10,000 ------------- ------------- ------------- Net cash provided by financing activities 185,000 105,000 6,921,670 ------------- ------------- ------------- Net Increase (decrease) in cash & cash equivalents (257,406) 43,217 199,823 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 457,229 21,827 -- ------------- ------------- ------------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 199,823 $ 65,044 $ 199,823 ============= ============= ============= SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock issued for services and prepaid $ 285,843 $ -- $ 1,826,078 ============= ============= ============= Stock issued for compensation $ -- $ 2,916 $ 1,835,957 ============= ============= ============= Stock issued for contributions $ -- $ 11,300 $ -- ============= ============= ============= Acquisition of intangible for debt $ -- $ -- $ 1,185,475 ============= ============= ============= Settlement of debt to equity $ -- $ -- $ 1,328,111 ============= ============= ============= CASH PAID FOR: Interest $ -- $ -- $ 2,134 ============= ============= ============= Income Tax $ -- $ -- $ 7,200 ============= ============= ============= The accompanying notes are an integral part of these financial statements. 5
SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 (the "Company") 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 fiscal year ended September 30, 2002. NOTE 3 - RECENT PRONOUNCEMENTS 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. Management is in the process of evaluating the requirements of SFAS No. 144 and does not expect that it will materially impact the Company's financial position or results of operations. In May 2002, the Board issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). SFAS 145 rescinds the automatic treatment of gains or losses from extinguishments of debt as extraordinary unless they meet the criteria for extraordinary items as outlined in 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. SFAS 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions and makes various technical corrections to existing pronouncements. The provisions of SFAS 145 related to the rescission of FASB Statement 4 are effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. All other provisions of SFAS 145 are effective for transactions occurring after May 15, 2002, with early adoption encouraged. The Company does not anticipate that adoption of SFAS 145 will have a material effect on its earnings or financial position. 6 SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF Issue 94-3, a liability for an exit cost, as defined, was recognized at the date of an entity's commitment to an exit plan. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002 with earlier application encouraged. The Company does not expect adoption of SFAS No. 146 to have a material impact, if any, on its financial position or results of operations. In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and Interpretation 9 thereto, to recognize and amortize any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset. This statement requires that those transactions be accounted for in accordance with SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." In addition, this statement amends SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to include certain financial institution-related intangible assets. The Company does not expect adoption of SFAS No. 147 to have a material impact, if any, on its financial position, results of operations or cash flows. In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 are effective for any guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN45 is not expected to have a material effect on the Company's financial position, results of operations, or cash flows. In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123, "Accounting for Stock Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used, on reported results. The Statement is effective for the Companies' interim reporting period ending January 31, 2003. The Companies do not expect the adoption of SFAS No. 148 to have a material impact on its financial position or results of operations or cash flows. 7 SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 4 - NOTES PAYABLE The Company has received advances in the form of unsecured promissory notes payable to some shareholders in order to pay ongoing operating expenses. These notes are unsecured, bear interest at rates up to 13% and are due on demand. As of December 31, 2002, the amounts due totaled $81,645. Accrued interest on the notes amounted to $25,400 at December 31, 2002. Interest expenses on the notes for the quarter ended December 31, 2002 and 2001 amounted to $996 for each period. NOTE 5 - EQUITY LINE OF CREDIT On September 17, 2002, the Company entered into an agreement with Cornell Capital Partners, LP (Investor), pursuant to which the Investor will purchase the Company's Common Stock, par value $.001 per share (the "Common Stock"), for an aggregate price of up to Seven Million Five Hundred Thousand Dollars ($7,500,000). Purchase Price" shall be set at one hundred percent (100%) of the Market Price during the Pricing Period. Market price is defined under the agreement as lowest closing Bid Price (as reported by Bloomberg L.P.) of the Common Stock during the Pricing Period. The termination date of this agreement is earliest of; (1) the Investor makes payment of Advances of $7,500,000, (2) any stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50) Trading Days or (3) the Company shall at any time fail materially to comply with the requirements of the agreement and such failure is not cured within thirty (30) days after receipt of written notice from the Investor or (4) the date occurring twenty-four (24) months after the Effective Date. To induce the Investor to execute and deliver the Equity Line of Credit Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations there under, or any similar successor statute (collectively, the "1933 Act"), and applicable state securities laws. During the Commitment Period, the Company shall not, without the prior written consent of the Investor, issue or sell (i) any Common Stock without consideration or for a consideration per share less than the Bid Price on the date of issuance or (ii) issue or sell any warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a consideration per share less than the Bid Price on the date of issuance, provided, however, that the Investor is given ten (10) days prior written notice and nothing in this section shall prohibit the issuance of shares of Common Stock pursuant to existing contracts or commitments, upon exercise of currently outstanding options or convertible securities, or in connection with any acquisition. On the date hereof, the Company shall obtain from each officer and director a lock-up agreement, as defined below, in the form annexed hereto as Schedule 2.6(b) agreeing to only sell in compliance with the volume limitation of Rule 144. On each Advance Date the Company shall pay to the Investor, directly from the gross proceeds held in escrow, an amount equal to four percent (4%) of the amount of each Advance. Under the agreement, upon the execution of this Agreement the Company was to issue to the Investor, shares of the Company's Common Stock in an amount equal to Two Hundred Ninety Thousand Dollars ($290,000) divided by the Closing Bid Price on the Closing Date. Upon the execution of the Agreement the Company was to issue to the Placement Agent shares of the Company's Common Stock in an amount equal to Ten Thousand Dollars ($10,000) divided by the Closing Bid Price of the Company's Common Stock on the 8 SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- date hereof. The Company has disclosed such shares totaling $300,000 in the financial statements for the year ended September 30, 2002 as shares to be issued and reduction from equity amount since it was the cost of raising equity. These shares were issued during the period ended December 31, 2002. During the period ended December 31, 2002, the Company received $192,000 proceeds from a promissory note to Cornell Capital Partners, LP, net of 4% fee of $8,000. The Company agreed to escrow 10 requests for advances under the Equity Line of Credit Agreement in the amount not less than $20,000. The request will be held in escrow by the law firm, which will release such requests to the Holder every 7 (seven) calendar days commencing on January 6, 2003. If this note is not fully paid when due, the outstanding principal owed will be payable in full together with interest at the rate of 24% per annum or the highest rate permitted by law, if lower. NOTE 6 - COMMON STOCK During the three months period ended December 31, 2002, the Company issued 967,742 shares of common stock pursuant to the equity line of credit agreement for $300,000 (note 5). The Company issued 750,000 shares of common stock for services amounting $198,925 and prepaid consulting expense amounting $37,300 in the three months period ended December 31, 2002. The valuation of shares was based upon market value of the shares at the time of the consummation of the transaction. NOTE 7 - EARNING PER SHARE Earnings per share for the three month periods ended December 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. 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 8 - RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform to the period ended December 31, 2002 presentation. NOTE 9 - LITIGATION, COMMITMENT & EXTRAORDINARY ITEM LITIGATION: The lawsuit which was 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 9 SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 gain of $79,999 in the year ended September 30, 2002, for the settlement award. The Company also recorded $17,618 as an extraordinary gain on settlement of debts for forgiven amount of note payable as per the settlement. In addition, all of outstanding stocks held by the defendants totaling 7,533,701 shares were returned to the Company and cancelled by the Company. Certain defendants appealed the settlement, but the judgment of the court was affirmed on January 21, 2003. The Company's counsel was served with a motion in the Federal case by the attorneys of Mr. Wade Cowart. The motion seeks to have the Company pay damages of up to $100,000 in connection with a restraining order that the Federal court previously issued against Mr. Cowart. The Company's counsel and the management believe that Wade Cowart will recover little, if anything. The Company posted the potential maximum liability of $100,000 as security bond. This claim is on hold until the appeal on the case described in the above paragraph is completed. A malpractice case brought by the Company against its former counsels, Wenthur and Chachas was settled in January 2002. The court granted $20,000 to the defendants. The Company has recorded $50,000; the difference of $70,000 previously recorded expense and the settlement amount, as a gain on settlement in the financial statement. DISSOLUTION OF JOINT VENTURE: In October 2000, the Company and the Environmental Products Division of Hoffinger Industries, Inc. ("EPD") entered into a Joint Venture Agreement to form Sionix/EDP (the "Joint Venture"), a limited liability corporation, to develop, market, sell and manufacture water filtration technology products. There was no activity by the joint venture through December 12, 2002. On December 12, 2002, the joint venture was dissolved. 10 SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 10 - GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Through December 31, 2002, the Company had incurred cumulative losses of $11,313,190 including current loss of $547,701. The Company's successful transition from a development stage company to attaining profitable operations is dependent upon obtaining financing adequate to fulfill its research and development activities, production of its equipment and achieving a level of revenues adequate to support the Company's cost structure. Management's plan of operations anticipates that the cash requirements for the next twelve months will be met by obtaining capital contributions through the sale of common stock and cash flow from operations. However, there is no assurance that the Company will be able to implement its plan. In that regard, on September 17, 2002, the Company entered into an agreement with an investor, pursuant to which the Investor will purchase the Company's Common Stock, par value $.001 per share for an aggregate price of up to Seven Million Five Hundred Thousand Dollars ($7,500,000). 11 Item 2. Management's Discussion and Analysis or Plan of Operation General - ------- Results of Operations (Three Months Ended December 31, 2002 Compared to ----------------------------------------------------------------------- Three Months Ended December 31, 2001). - -------------------------------------- General and administrative expenses in the three months ended December 31, 2002 increased by $141,430, from $392,691 in the prior period to $534,121 in the current period. The increase is principally due to marketing and selling costs as the Company moved from research and development to production and sales efforts. Research and development costs decreased by $13,165, reflecting the completion of most research and development activities for the Company's principal products. Net loss for the quarter increased by $127,453, due principally to the increase in general and administrative expenses, with no offsetting revenues. Liquidity and Capital Resources. -------------------------------- On December 31, 2002, the Company had cash and cash equivalents of approximately $199,823. The principal source of liquidity has been sales of securities. Management anticipates that additional capital will be required to finance the Company's operations. During 2002 the Company entered into an Equity Line of Credit Agreement with Cornell Capital, L. P. which allows the Company, at its option, to draw funds from time to time in exchange for the issuance of shares, up to a maximum of $7,500,000. The Company believes that available proceeds from the Equity Line of Credit Agreement, plus possible cash flow from the sale of products during the current quarter, will be sufficient to finance the Company's operations. However, the Company has no other 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 quarter. As of December 31, 2002, the Company had an accumulated deficit of $11,313,190. 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. Item 3. Controls and Procedures. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within 90 days of the filing date of this report. Based on this evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports under the Exchange Act are processed and reported within the time periods specified by law. The design of any such system of controls is based in part on assumptions about the likelihood of future events, and there can be no assurance that any such system of controls will succeed in all circumstances. Since the date of the evaluation described above, there have been no significant changes in our internal controls or in other factors that could significantly affect these controls. 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings The action the Company had filed against its former President and certain others was settled as to all defendants except one of the individual defendants, Wade Cowart. Mr. Cowart has filed a motion seeking to have the Company pay damages of up to $100,000 in connection with a restraining order that the Federal court previously issued against Mr. Cowart. The Company believes that Cowart will recover little, if anything. The Company posted the potential maximum liability of $100,000 as a security bond pending final disposition of the matter. Item 2. Changes in Securities and Use of Proceeds During the three month period ended December 31, 2002, the Company Issued 967,742 shares of its Common Stock to Cornell Capital, L.P. and its affiliates pursuant to an Equity Line of Credit agreement. During the period the Company issued 750,000 shares of common stock for services, valued at $198,925 and prepaid consulting expense amounting to $37,300. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable. 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (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: February 13, 2003 By: /s/ James J. Houtz --------------------------------------- James J. Houtz, President By: /s/ Robert McCray --------------------------------------- Robert McCray, Chief Financial Officer 14 CERTIFICATION I, James J. Houtz, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Sionix Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 13, 2003 /s/ James J. Houtz --------------------------- James J. Houtz, President 15 CERTIFICATION I, Robert McCray, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Sionix Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 13, 2003 /s/ Robert McCray ------------------------------------------- Robert McCray, Chief Financial Officer 16 EX-99.1 3 sionix_10qex99-1.txt EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Sionix Corporation (the "Company") on Form 10-QSB for the period ending December 31, 2002, as filed with the Securities and Exchange Commission (the "Report"), the undersigned, James J. Houtz, President of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 13, 2003 /s/ James R. Houtz ------------------ James R. Houtz President This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-99.2 4 sionix_10qex99-2.txt EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Sionix Corporation (the "Company") on Form 10-QSB for the period ending December 31, 2002, as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Robert McCray, Chief Financial Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 13, 2003 /s/ Robert McCray --------------------------- Robert McCray Chief Financial Officer This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----