-----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, Byy9XBeecXW9hyJZUjkBkU/5EDmEJK9BArvXFnxo74L85U/BL4wk0j++kNzpiQOO xGLJdrQwqljcX0T4Q6nxHQ== 0001019687-07-001801.txt : 20070613 0001019687-07-001801.hdr.sgml : 20070613 20070612175101 ACCESSION NUMBER: 0001019687-07-001801 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070613 DATE AS OF CHANGE: 20070612 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIONIX CORP CENTRAL INDEX KEY: 0000764667 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 870428526 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 002-95626-D FILM NUMBER: 07915931 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: IRVINE STATE: CA ZIP: 92618 FORMER COMPANY: FORMER CONFORMED NAME: SIONIX CORP /UT/ DATE OF NAME CHANGE: 19960515 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 10QSB 1 sionix_10qsb-123106.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, 2006 Commission File Number 2-95626-D Sionix Corporation ------------------ (Exact name of small business issuer as specified in its charter) Nevada 87-0428526 ------- ---------- State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 2082 Michelson Drive, Suite 306, Irvine, CA 92612 ------------------------------------------------- (Address of principal executive offices) 949 752-7980 ------------ (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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file for such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes [ ] No [X] As of May 15, 2007, there were 105,817,101 shares of Common Stock of the issuer outstanding. Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS We desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This Report on Form 10-QSB contains a number of forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, products, future results and events and financial performance. All statements made in this Report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, acquisitions, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "may," "will," variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated or implied by these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below) and apply only as of the date of this Report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below "Management's Discussion and Analysis and Plan of Operation," as well as those discussed elsewhere in this Report, and the risks discussed in our most recently filed Annual Report on Form 10-KSB and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors that may affect our business. Part I. FINANCIAL INFORMATION Item 1. Financial Statements SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET AS OF DECEMBER 31, 2006 (Unaudited) ASSETS CURRENT ASSETS: Cash & cash equivalents $ 371,068 PROPERTY AND EQUIPMENT, NET 36,969 ------------ Total assets $ 408,037 ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 213,035 Accrued expenses 1,223,855 Notes payable-related parties 129,000 Note payable-officers 47,860 Equity line of credit 252,336 ------------ Total current liabilities 1,866,085 Convertible notes, net 526,342 STOCKHOLDERS' DEFICIT Common stock, $0.001 par value ;150,000,000 shares authorized; 105,817,101 shares issued and 105,335,201 shares outstanding 105,335 Additional paid-in capital 13,397,675 Shares to be issued 43,900 Deficit accumulated during development stage (15,531,301) ------------ Total stockholders' deficit (1,984,391) ------------ Total liabilities & stockholders' deficit $ 408,037 ============ The accompanying notes form an integral part of these unaudited financial statements 1 SIONIX CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS (Unaudited) CUMULATIVE FOR THE THREE MONTH FROM INCEPTION PERIODS ENDED DECEMBER (OCTOBER 3, 1994) TO 2006 2005 DECEMBER 31, 2006 --------------- --------------- --------------- REVENUES $ -- $ -- $ -- OPERATING EXPENSES: General and administrative 204,420 104,265 11,947,718 Research and development -- -- 1,449,474 Impairment of intangible assets -- -- 1,267,278 Inventory obsolescence -- -- 365,078 Depreciation and amortization 7,793 7,996 508,198 --------------- --------------- --------------- Total operating expenses 212,212 112,261 15,537,746 --------------- --------------- --------------- LOSS FROM OPERATIONS (212,212) (112,261) (15,537,746) OTHER INCOME (EXPENSES) Interest income 106 -- 53,762 Interest expense (19,242) (2,432) (253,928) Loss on settlement of debts -- -- (230,268) Legal settlement -- -- 434,603 --------------- --------------- --------------- Total other income (expenses) (19,136) (2,432) 4,169 --------------- --------------- --------------- LOSS BEFORE INCOME TAXES (231,348) (114,694) (15,520,502) Income taxes 900 225 10,800 --------------- --------------- --------------- NET LOSS $ (232,248) $ (114,919) $ (15,531,301) =============== =============== =============== BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) =============== =============== =============== *BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING 9,702,244,142 102,524,186 =============== =============== *weighted average diluted number of shares are the same as basic weighted average number of shares as the effect is anti-dilutive. The accompanying notes form an integral part of these unaudited financial statements 2 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FROM INCEPTION (OCTOBER 3, 1994) TO DECEMBER 31, 2006 (Unaudited) DEFICIT COMMON STOCK ACCUMULATED TOTAL ----------------------- ADDITIONAL STOCK STOCK STOCK UNAMORTIZED DURING STOCKHOLDERS' NUMBER OF PAID-IN TO BE SUBSCRIPTION TO BE CONSULTING DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL ISSUED RECEIVABLE CANCELLED FEES STAGE (DEFICIT) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Shares issued for cash -Oct 1994 10,000 $ 10 $ 90 $ -- $ -- $ -- $ -- $ -- $ 100 Net loss for period Oct 3, 1994 to Dec 31, 1994 -- -- -- -- -- -- -- (1,521) (1,521) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance December 31, 1994 10,000 10 90 -- -- -- -- (1,521) (1,421) Shares issued for assignment right 1,990,000 1,990 (1,990) -- -- -- -- -- -- Issuance of shares for services 572,473 572 135,046 -- -- -- -- -- 135,618 Issuance of shares for debt 1,038,640 1,038 1,164,915 -- -- -- -- -- 1,165,953 Issuance of shares for cash 232,557 233 1,119,027 -- -- -- -- -- 1,119,260 Issuance of shares for subscription note receivable 414,200 414 1,652,658 -- (1,656,800) -- -- -- (3,728) Issuance of shares for future production cost 112,500 113 674,887 -- (675,000) -- -- -- -- Net loss for the year ended December 31, 1995 -- -- -- -- -- -- -- (914,279) (914,279) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance December 31, 1995 4,370,370 4,370 4,744,633 -- (2,331,800) -- -- (915,800) 1,501,403 Issuance of shares for reorganization 18,632,612 18,633 (58,033) -- -- -- -- -- (39,400) Issuance of shares for cash 572,407 573 571,834 -- -- -- -- -- 572,407 Issuance of shares for services 24,307 24 24,283 -- -- -- -- -- 24,307 Net loss for the nine month ended September 30, 1996 -- -- -- -- -- -- -- (922,717) (922,717) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 1996 23,599,696 23,600 5,282,717 -- (2,331,800) -- -- (1,838,517) 1,136,000 3 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED) FROM INCEPTION (OCTOBER 3, 1994) TO DECEMBER 31, 2006 (Unaudited) DEFICIT COMMON STOCK ACCUMULATED TOTAL ----------------------- ADDITIONAL STOCK STOCK STOCK UNAMORTIZED DURING STOCKHOLDERS' NUMBER OF PAID-IN TO BE SUBSCRIPTION TO BE CONSULTING DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL ISSUED RECEIVABLE CANCELLED FEES STAGE (DEFICIT) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Share issued for cash 722,733 723 365,857 -- -- -- -- -- 366,580 Share issued for service 274,299 274 54,586 -- -- -- -- -- 54,860 Cancellation of shares (542,138) (542) (674,458) -- 675,000 -- -- -- -- Net loss for the year ended September 30, 1997 -- -- -- -- -- -- -- (858,915) (858,915) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 1997 24,054,590 24,055 5,028,702 -- (1,656,800) -- -- (2,697,432) 698,525 Balance September 30, 1997 24,054,590 24,055 5,028,702 -- (1,656,800) -- -- (2,697,432) 698,525 Shares issued for cash 2,810,000 2,810 278,190 -- -- -- -- -- 281,000 Shares issued for services 895,455 895 88,651 -- -- -- -- -- 89,546 Shares issued for compensation 2,200,000 2,200 217,800 -- -- -- -- -- 220,000 Cancellation of shares (2,538,170) (2,538) (1,534,262) -- 1,656,800 -- -- -- 120,000 Net loss for the year ended September 30, 1998 -- -- -- -- -- -- -- (1,898,376) (1,898,376) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 1998 27,421,875 27,422 4,079,081 -- -- -- -- (4,595,808) (489,305) Shares issued for compensation 3,847,742 3,847 389,078 -- -- -- -- -- 392,925 Shares issued for services 705,746 706 215,329 -- -- -- -- -- 216,035 Shares issued for cash 9,383,000 9,383 928,917 -- -- -- -- -- 938,300 Net loss for the year ended September 30, 1999-Restated -- -- -- -- -- -- -- (1,158,755) (1,158,755) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 1999 41,358,363 41,358 5,612,405 -- -- -- -- (5,754,563) (100,800) 4 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED) FROM INCEPTION (OCTOBER 3, 1994) TO DECEMBER 31, 2006 (Unaudited) DEFICIT COMMON STOCK ACCUMULATED TOTAL ----------------------- ADDITIONAL STOCK STOCK STOCK UNAMORTIZED DURING STOCKHOLDERS' NUMBER OF PAID-IN TO BE SUBSCRIPTION TO BE CONSULTING DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL ISSUED RECEIVABLE CANCELLED FEES STAGE (DEFICIT) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Shares issued for cash 10,303,500 10,304 1,020,046 -- -- -- -- -- 1,030,350 Shares issued for compensation 1,517,615 1,518 1,218,598 -- -- -- -- -- 1,220,116 Shares issued for services 986,844 986 253,301 -- -- -- -- -- 254,287 Net loss for the year ended September 30, 2000 -- -- -- -- -- -- -- (2,414,188) (2,414,188) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2000 54,166,322 54,166 8,104,350 -- -- -- -- (8,168,751) (10,235) Shares issued for services and prepaid expenses 2,517,376 2,517 530,368 -- -- -- (141,318) -- 391,567 Shares issued for cash 6,005,000 6,005 594,495 -- -- -- -- 600,500 100,000 share to be issued for cash -- -- -- 10,000 -- -- -- -- 10,000 639,509 Shares to be issued for debt settlement in 2001 -- -- -- 103,295 -- -- -- -- 103,295 Net loss for the year ended September 30, 2001 -- -- -- -- -- -- -- (1,353,429) (1,353,429) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2001 62,688,698 62,688 9,229,213 113,295 -- -- (141,318) (9,522,180) (258,302) Shares issued for services and prepaid expenses 1,111,710 1,112 361,603 -- -- -- 54,400 -- 417,115 Shares issued as contribution 100,000 100 11,200 -- -- -- -- -- 11,300 Shares issued for compensation 18,838 19 2,897 -- -- -- -- -- 2,916 Shares issued for cash 16,815,357 16,815 1,560,782 (10,000) -- -- -- -- 1,567,597 Shares issued for debt settlement 1,339,509 1,340 208,639 (103,295) -- -- -- -- 106,684 Shares to be issued for services related to equity raising - 967,742 shares -- -- (300,000) 300,000 -- -- -- -- -- Cancellation of shares (7,533,701) (7,534) -- -- -- -- -- -- (7,534) Net loss for the year ended September 30, 2002 -- -- -- -- -- -- -- (1,243,309) (1,243,309) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2002 74,540,411 74,540 11,074,334 300,000 -- -- (86,918) (10,765,489) 596,467 5 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED) FROM INCEPTION (OCTOBER 3, 1994) TO DECEMBER 31, 2006 (Unaudited) DEFICIT COMMON STOCK ACCUMULATED TOTAL ----------------------- ADDITIONAL STOCK STOCK STOCK UNAMORTIZED DURING STOCKHOLDERS' NUMBER OF PAID-IN TO BE SUBSCRIPTION TO BE CONSULTING DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL ISSUED RECEIVABLE CANCELLED FEES STAGE (DEFICIT) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Shares issued for services 2,467,742 2,468 651,757 (300,000) -- -- -- -- 354,225 Shares issued for capital equity line 8,154,317 8,154 891,846 -- -- -- -- -- 900,000 Amortization of consulting fees -- -- -- -- -- -- 86,918 -- 86,918 Cancellation of shares (50,000) (50) 50 -- -- -- -- -- -- 7,349,204 shares to be cancelled -- -- 7,349 -- -- (7,349) -- -- -- Net loss for the year ended September 30, 2003 -- -- -- -- -- -- -- (1,721,991) (1,721,991) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2003 85,112,470 85,112 12,625,336 -- -- (7,349) -- (12,487,480) 215,619 Shares issued for capital equity line 19,179,016 19,179 447,706 -- -- -- -- -- 466,885 Shares issued for services 5,100,004 5,100 196,997 -- -- -- (13,075) -- 189,022 963,336 shares to be issued for cash -- -- -- 28,900 -- -- -- -- 28,900 500,000 shares to be issued for debt settlement -- -- -- 15,000 -- -- -- -- 15,000 Cancelled shares (7,349,204) (7,349) -- -- -- 7,349 -- -- -- Net loss for the year ended September 30, 2004 -- -- -- -- -- -- -- (1,568,770) (1,568,770) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2004 102,042,286 102,042 13,270,039 43,900 -- -- (13,075) (14,056,250) (653,344) 6 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED) FROM INCEPTION (OCTOBER 3, 1994) TO DECEMBER 31, 2006 (Unaudited) DEFICIT COMMON STOCK ACCUMULATED TOTAL ----------------------- ADDITIONAL STOCK STOCK STOCK UNAMORTIZED DURING STOCKHOLDERS' NUMBER OF PAID-IN TO BE SUBSCRIPTION TO BE CONSULTING DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL ISSUED RECEIVABLE CANCELLED FEES STAGE (DEFICIT) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Amortization of consulting fees -- -- -- -- -- -- 13,075 -- 13,075 Net loss for the year ended September 30, 2005 -- -- -- -- -- -- -- (467,917) (467,917) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2005 102,042,286 102,042 13,270,039 43,900 -- -- -- (14,524,167) (1,108,186) Net loss for the year ended September 30, 2006 -- -- -- -- -- -- -- (774,887) (774,887) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance September 30, 2006 102,042,286 102,042 13,270,039 43,900 -- -- -- (15,299,053) (1,883,073) Issuance of shares for services 3,292,915 3,293 29,636 -- -- -- -- -- 32,929 Beneficial conversion feature -- -- 98,000 -- -- -- -- -- 98,000 Net loss for the period ended December 31, 2006 -- -- -- -- -- -- -- (232,248) (232,248) ------------ --------- ------------ --------- ----------- ------- --------- ------------ ----------- Balance December 31, 2006 105,335,201 $ 105,335 $ 13,397,675 $ 43,900 $ -- $ -- $ -- $(15,531,301) $(1,984,391) ============ ========= ============ ========= =========== ======= ========= ============ =========== The accompanying notes form an integral part of these unaudited financial statements 7 SIONIX CORPORATION (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited) CUMULATIVE FOR THE THREE MONTH PERIODS FROM INCEPTION ENDED DECEMBER 31, (OCTOBER 3, 1994) TO 2006 2005 DECEMBER 31, 2006 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (232,248) $ (114,919) $(15,531,301) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 7,793 7,955 595,116 Amortization of consulting fees -- -- 13,075 Amortization of debt discount on convertible notes 1,842 -- 1,842 Issuance of common stock for compensation -- -- 1,835,957 Issuance of common stock for services 32,929 -- 2,129,486 Impairment of assets -- -- 514,755 Write-down of obsolete assets -- -- 38,862 Impairment of intangible assets -- -- 1,117,601 Loss on settlement of debts -- -- 130,268 Other -- -- 40,370 Increase in other current assets -- -- (510,727) Decrease in other receivable -- -- 3,000 Increase in deposits -- -- -- Increase (decrease) in accounts payable (59,576) 8,479 283,035 Increase in accrued interest 17,400 2,432 86,081 Increase (decrease) in accrued expense 69,684 92,683 1,137,599 ------------ ------------ ------------ Total adjustments 70,072 111,550 7,416,319 ------------ ------------ ------------ Net cash used in operating activities (162,176) (3,369) (8,114,982) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of patents -- -- (154,061) Purchase of equipment -- -- (380,174) ------------ ------------ ------------ Net cash used in investing activities -- -- (534,235) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes 622,500 8,360 1,079,933 Proceeds from (payment for) notes payable under equity line of credit (75,000) -- 681,000 Payment on notes payable to officers (18,800) (5,000) (170,642) Issuance of common stock for cash -- -- 7,376,094 Receipt of cash for stock to be issued -- -- 53,900 ------------ ------------ ------------ Net cash provided by financing activities 528,700 3,360 9,020,285 ------------ ------------ ------------ Net increase (decrease) in cash & cash equivalents 366,524 (9) 371,068 CASH & CASH EQUIVALENTS, BEGINNING 4,544 343 -- ------------ ------------ ------------ CASH & CASH EQUIVALENTS, ENDING $ 371,068 $ 334 $ 371,068 ============ ============ ============ Supplemental disclosure: Interest paid $ -- $ -- ============ ============ Income tax paid $ -- $ -- ============ ============ The accompanying notes form an integral part of these unaudited financial statements 8
SIONIX CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Sionix Corporation (the "Company") was incorporated in Utah in 1985. The Company was formed to design, develop, and market automatic water filtration system primarily for small water districts. The Company has completed its reincorporation as a Nevada corporation, effective July 1, 2003. The reincorporation was completed pursuant to an Agreement and Plan of Merger between Sionix Corporation, a Utah corporation ("Sionix Utah") and its wholly-owned Nevada subsidiary, Sionix Corporation ("Sionix Nevada"). Under the merger agreement, Sionix Utah merged with and into Sionix Nevada, and each share of Sionix Utah's common stock was automatically converted into one share of common stock, par value $0.001 per share, of Sionix Nevada. The merger was effected by the filing of Articles of Merger, along with the Agreement and Plan of Merger, with the Secretary of State of Nevada. The Company is a development stage company as defined in Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises." The Company is in the development stage and its efforts have been principally devoted to research and development, organizational activities, and raising capital. All losses accumulated since inception has been considered as part of the Company's development stage activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The audited financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these consolidated financial statements reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. The results of the three months ended December 31, 2006 are not necessarily indicative of the results to be expected for the full year ending September 30, 2007. REVENUE RECOGNITION The Company's policy to recognize revenues is in accordance with SEC Staff Accounting Bulletin No. 101, or other specific authoritative literature, as applicable. Accordingly, revenues from products sales are recorded when all four of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered ;(iii) the Company's price to the buyer is fixed or determinable; and (iv) collectibility is reasonably assured. The Company's policy is to report its sales levels on a net revenue basis, with net revenues being computed by deducting from gross revenues the amount of actual sales returns and the amount of reserves established for anticipated sales returns. 9 The Company's policy for shipping and handling costs, billed to customers, is to include it in revenue in accordance with Emerging Issues Task Force ("EITF") issue No. 00-10, "Accounting for Shipping and Handling Revenues and Costs." The purpose of this issue was to clarify the classification of shipping and handling revenues and costs. The consensus reached was that all shipping and handling billed to customers should be recorded as revenue. Accordingly, the Company records its shipping and handling amounts within net sales and operating expenses. The Company has not earned any revenue since its inception to the date of this report. STOCK-BASED COMPENSATION Effective October 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123-R, "Share-Based Payment" ("SFAS 123-R"), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including stock options based on their fair values. SFAS 123-R supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), which the Company previously followed in accounting for stock-based awards. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) to provide guidance on SFAS 123-R. The Company has applied SAB 107 in its adoption of SFAS 123-R. NET LOSS PER SHARE Net loss per share is calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. ESTIMATES The preparation of financial statements 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 revenue and expenses during the reporting period. Actual results could differ from those estimates FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value. 10 CASH AND CASH EQUIVALENTS Cash and cash equivalents represent cash and short-term highly liquid investments with original maturities of three months or less. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. The cost of additions and improvements are capitalized while maintenance and repairs are expensed as incurred. Depreciation of property and equipment is provided on a straight-line basis over the estimated five year useful lives of the assets. PROVISION FOR INCOME TAXES The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ADVERTISING The cost of advertising is expensed as incurred. Total advertising costs were $1,410 and $3,310 for the three month periods ended December 31, 2006 and 2005, respectively. RECLASSIFICATION For comparative purposes, prior period's consolidated financial statements have been reclassified to conform to report classifications of the current period. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This statement clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management has not determined the effect, if any, of the adoption of this statement will have on the financial statements. In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements No. 87, 88, 106, and 132(R)". One objective of this standard is to make it easier for investors, employees, retirees and other parties to understand and assess an employer's financial position and its ability to fulfill the obligations under its benefit plans. SFAS No. 158 requires employers to fully recognize in their financial statements the obligations associated with 11 single-employer defined benefit pension plans, retiree healthcare plans, and other postretirement plans. SFAS No. 158 requires an employer to fully recognize in its statement of financial position the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This Statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. SFAS No. 158 requires an entity to recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS No. 87. This Statement requires an entity to disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The Company is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures for fiscal years ending after December 15, 2006. Management believes that this statement will not have a significant impact on the financial statements. In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies may be able to adopt FAS 159 for their first quarter 2007 financial statements. The new Statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item's fair value in subsequent reporting periods must be recognized in current earnings. FAS 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities. Note 3. PROPERTY AND EQUIPMENT Equipment and machinery $ 187,805 Furniture and fixtures 22,183 ----------- 209,988 Less accumulated depreciation (173,019) ----------- $ 39,969 =========== Depreciation expenses for the quarter ended December 31, 2006 and 2005 were $7,793 and $7,955, respectively. 12 Note 4. ACCRUED EXPENSES Accrued expenses comprised of the following at December 31, 2006: Payroll taxes $ 144,472 Accrued Wages 944,954 Interest payable 69,098 Other accruals 65,331 ------------ Total $ 1,223,855 ============ Note 5. NOTES PAYABLE RELATED PARTIES The Company has received advances in the form of unsecured promissory notes from stockholders in order to pay ongoing operating expenses. These notes are at interest rates up to 13% and are due on demand. As of December 31, 2006 and 2005, notes payable amounted to $129,000 and $97,000, respectively. Accrued interest on the notes amounted to $54,938 and $44,051 as of December 31, 2006 and 2005, respectively OFFICERS Notes payables to officers are unsecured, interest free and due on demand. Proceeds from these notes payable were used to pay ongoing operating expense. The balances at December 31, 2006 and 2005 were $47,860 and $52,580, respectively. Note 6. NOTES PAYABLE UNDER EQUITY LINE OF CREDIT During the year ended September 30, 2003, the Company received $1,307,500 proceeds from promissory notes to Cornell Capital Partners, LP, net of 4% fee of $56,000 and $36,500 for escrow and other fees. The Company has settled $900,000 by issuing shares of common stock during the year ended September 30, 2003 (note 7). The notes payable outstanding at September 30, 2003, amounted to $500,000. The balance for the note payable outstanding at September 30, 2004 and 2005 were $ 233,115 and $ 233,115, respectively. In 2006, Company has entered into a settlement agreement with Cornell Capital Partner to pay the total amount of $327,336; $50,000 shall be paid on or before November 15, 2006, $25,000 payable per month on the 15th day of each month commencing December 15, 2006, with the balance of $27,336 due and payable on or before October 15, 2007. The Company recorded loss on settlement on debt of $94,221 for the year ended September 30, 2006. The balances payable were $252,336 and $233,115 as of December 31, 2006 and 2005, respectively. 13 Note 7. CONVERTIBLE NOTES During the three month period ended December 31, 2006, the Company entered into various debentures (Bridge Note) agreements with several investors. As per the terms of the agreement the note bears a simple interest rate of 10% per annum. The note will automatically mature and the entire outstanding principal amount, together with all unpaid and accrued interest, shall become due and payable after the earlier of (i) the eighteen (18) month anniversary of the date of issuance (ii) an event of default or (iii) the closing of any equity related financing by the Company in which the gross proceeds to the Company are at least $2,500,000, unless, prior to such time, this note shall have been converted into shares of the Company's common stock. The note is convertible into shares of common stock of the Company at $0.05 per share or shares of any equity security issued by the Company at a conversion price equal to the price at which such security is sold to any other party. The conversion price is adjustable as per the terms of the agreement for the subsequent issuances of equity security at a price different than the conversion price. The conversion price is also adjustable if the registration statement is not declared effective within 180 days after the closing but in no case the conversion price to be reduced below $0.04 per share. As of December 31, 2006, the Company recorded beneficial conversion feature expense of $1,842 and the unamortized beneficial conversion feature amount of $96,158 showing as net of the note payable amount of $622,500. The Company recorded an interest expense of $10,218 on the notes. Note 8. STOCKHOLDERS' EQUITY COMMON STOCK The Company has 150,000,000 authorized shares with 0.001 par value. As of December 31, 2006, the Company had 105,817,101 shares issued and 105,335,201 shares outstanding. During the quarter ended December 31, 2006, the company issued 3,292,915 shares valued at $0.01 per shares for consulting service. STOCK OPTIONS 2001 Executive Officers Stock Option Plan On October of 2000, the company entered into amendments to the employment agreement with each of the executive officers eliminating the provisions of stock bonuses. In lieu of the bonus provision, the Company adopted the 2001 Executive Officers Stock option Plan. The Company reserved 7,576,680 shares for issuance under the plan. 14 Options outstanding: Weighted Average Exercise Price Number of Options Outstanding at September 30, 2006 $0.15 7,343,032 Granted - - Forfeited - - Exercised - - - ------------------------------------------------------------------------------ Outstanding at December 31, 2006 $0.15 7,343,032 A summary of the Company's option activity is listed below: Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Stock Stock Remaining Price of Price of Exercise Options Options Contractual Options Options Price Outstanding Exercisable Life Outstanding Exercisable - -------- ----------- ----------- ---- ----------- ----------- $ 0.15 7,343,032 7,343,032 3.25 years $ 0.15 $ 0.15 The fair value of the options was calculated using the Black-Scholes option valuation model with the following weighted-average assumptions: Dividend yields of 0%; risk free interest rates of 6%; expected volatility of 100% and expected lives of 4.9 years. All options were vested prior to September 30, 2006. No options are vested during the three month period ended December 31, 2006. Note 9. 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, 2006, the Company had incurred cumulative losses of $15,531,301, including current loss of $232,248. 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. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL. The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto, included elsewhere in this Quarterly Report on Form 10-QSB. Except for the historical information contained in this report, the following discussion contains certain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in our most recent Annual Report on Form 10-KSB should be read as being applicable to all related forward-looking statements wherever they appear in this Report. Our actual results may differ materially from the results discussed in the forward-looking statements, as a result of certain factors including, but not limited to, those discussed elsewhere herein and in our most recent Annual Report on Form 10-KSB. PLAN OF OPERATION. During the next twelve months we plan to raise the remaining capital to complete a test ELIXIR unit for installation at the Villa Park Dam under our arrangement with the Serrano Water District, and commence testing of the unit. We believe that if the unit operates successfully, we will be in a position to aggressively market the ELIXIR product, using the Villa Park Dam unit as a prototype for additional installations. We plan to engage in substantial promotional activities in connection with the installation and operation of the unit, including media exposure and access to other public agencies and potential private customers. If the unit operates successfully, we believe we will receive orders for additional units. Depending on the availability of financing, we plan to establish a manufacturing facility in Southern California to commence production of the units. Depending on the size of the planned facility, we believe it may require capital expenditures in the range of $5 million to $20 million. In addition to capital expenditures, this will require hiring of a substantial number of additional employees. We anticipate that all of our capital needs will need to be funded by equity financing. RESULTS OF OPERATIONS (THREE MONTHS ENDED DECEMBER 31, 2006 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2005). The Company was relatively inactive during the quarter ended December 31, 2005 due to lack of resources. In the last quarter of fiscal 2006 and the three months ended December 31, 2006, the Company raised funds through the sale of Convertible Debentures, and was able to resume activities. Revenues for both periods were zero, as the Company had not yet commenced the sale of products. General and administrative expenses for the 2006 period totaled $204,420, an increase of $100,155 over the corresponding period in 2005, due to the resumption of development activity, the leasing of premises, and capital-raising activities. Interest expense increased to $19,136 from $2,432 in the 2005 quarter, representing interest on the Convertible Debentures issued in the quarter. As a result of these items, the loss for the three months ended December 31, 2006 was $232,248, an increase of $117,328 over the loss for the corresponding period in the 2006 fiscal year. 16 LIQUIDITY AND CAPITAL RESOURCES. On December 31, 2007, the Company had cash and cash equivalents of $371,068. The sole source of liquidity has been borrowings from affiliates and the sale of securities. During the period the Company raised approximately $622,500 from the sale of Convertible Debentures. 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 during the 2007 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 December 31, 2006, the Company had an accumulated deficit of $15,531,301. 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. GOING CONCERN OPINION. We currently have insufficient assets to continue our operations, unless we secure additional financing. As a result of our ongoing losses, lack of revenues from operations, and accumulated deficits at December 31, 2006, there is doubt about our ability to continue as a going concern. ITEM 3. CONTROLS AND PROCEDURES. At the end of the period covered by this Form 10-QSB, the Company's management, including its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer determined that such controls and procedures are effective to ensure that information relating to the Company required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There have been no changes in the Company's internal controls over financial reporting that were identified during the evaluation that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 17 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the three months ended December 31, 2006, the Company issued Secured Convertible Promissory Notes in the aggregate amount of $622,500 to nineteen investors. The Secured Convertible Promissory Notes are convertible at the rate of $.05 per share, bear interest at the rate of 10% per annum and become due and payable eighteen months after issuance (or earlier, if the Company consummates an equity financing with proceeds of $2.5 million or more.) Under an Investors Rights Agreement entered into with the noteholders, the Company is required to file a Registration Statement covering the shares of Common Stock issuable upon conversion, and to cause the Registration Statement to be declared effective within 180 days after the date of issuance of the Secured Convertible Promissory Notes. If the Registration Statement is not declared effective within this time frame, the conversion price is automatically reduced by $.0025 each thirty days until the Registration Statement is declared effective, but the conversion price cannot be reduced below $.04 per share. As of the date of this Report, the Company has not filed the Registration Statement contemplated by the Investors' Rights Agreement. The Company believes such sales were exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4 (2) thereof and Regulation D thereunder. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS 10.1 Form of Secured Convertible Promissory Note 31.1 Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 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: June 12, 2007 By: /s/ James J. Houtz --------------------------------------- James J. Houtz, President By: /s/ Robert McCray --------------------------------------- Robert McCray, Chief Financial Officer 19 EX-10.1 2 sionix_10q123106ex10-1.txt Exhibit 10.1 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. SIONIX CORPORATION SECURED CONVERTIBLE PROMISSORY NOTE $____________ ____________ __, 2006 SIONIX CORPORATION, a Utah corporation (the "COMPANY"), for value received, promises to pay to ________________, or its assigns (the "HOLDER"), the principal sum of ____________ Dollars ($_______), plus simple interest thereon at the rate of ten percent (10.00%) per annum (the "BASE RATE"), and such interest to be payable monthly in arrears, the first such payment to be due and payable on the first day of the first full month following the date hereof, until the whole amount of the principal amount outstanding remaining unpaid shall become due and payable, provided that, upon an Event of Default (as defined below), the interest rate shall increase to the lower of twelve percent (12%) per annum or the maximum amount allowed by law to be charged for interest hereunder (the "DEFAULT RATE"), and continuing up through the date on which such Event of Default is cured to Holder's satisfaction, after which the interest rate shall return to the Base Rate. This Note will automatically mature and the entire outstanding principal amount, together with accrued interest, shall become due and payable after the earlier of (i) the first anniversary of the date hereof, (ii) an Event of Default, or (iii) the closing of any equity or equity-related financing by the Company in which the gross proceeds to the Company are at least Two Million Five Hundred Thousand Dollars ($2,500,000) (the "MATURITY DATE"), unless, prior to such time, this Note shall have been converted into shares of the Company's capital stock pursuant to SECTION 1 hereof. Payments of both principal and interest are to be made at the address of the Holder set forth in Section 8(d) below or at such other place in the United States as the Holder shall designate to the Company in writing in lawful money of the United Sates of America. Interest on this Note shall be computed on the basis of a 360-day year consisting of twelve 30-day months. This Note is one of a series of notes issued pursuant to that certain Secured Convertible Note Purchase Agreement (the "AGREEMENT"), dated as of even date herewith, between the Company, the initial Holder and the other Purchasers party thereto. This Note shall be referred to herein as the "NOTE" and all Notes issued under the Agreement shall be referred to as the "NOTES"). The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder, by the acceptance of this Note, agrees: 1 1. CONVERSION. (a) OPTIONAL CONVERSION. At any time prior to the Maturity Date, the outstanding principal balance and accrued and unpaid interest of this Note may be converted in whole or in part, at the option of the Holder, into (i) shares of common stock of the Company ("COMMON STOCK") at a conversion price of five cents ($0.05) per share (the "CONVERSION PRICE") or (ii) shares of any equity security issued by the Company at a conversion price equal to the price at which such security is sold to any other party; provided however, that the Conversion Price shall be adjusted in accordance with SECTION 1(b), (c), (d) AND (e) hereof, and the Company shall deliver notice of such adjustment to the Holder in accordance with SECTION 1(f) of this Note. (b) ADJUSTMENTS TO CONVERSION PRICE. In the event the Company shall at any time after the Closing (as defined in the Agreement) issue Additional Shares of Common Stock (defined herein), without consideration or for a consideration per share less than the applicable Conversion Price in effect immediately prior to such issue ("DILUTIVE ISSUANCE"), then the Conversion Price shall be adjusted to the lowest issuance of each Dilutive Issuance, PROVIDED THAT if such issuance or deemed issuance was without consideration, then the Company shall be deemed to have received an aggregate of one tenth of one cent ($.001) of consideration for all such Additional Shares of Common Stock issued or deemed to be issued. For purposes of the foregoing paragraph, "ADDITIONAL SHARES OF COMMON STOCK" shall mean any issuances of equity securities (or securities convertible into equity securities) of the Company, other than the following: (i) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution of shares of Common Stock as described in Section 1(c), (d) or (e) hereof; (ii) up to 14,229,200 shares of Common Stock actually issued upon the exercise of stock options; (iii) up to an additional 13,981,770 shares of Common Stock (for a total of 28,210,970 including the stock option grants set forth in (ii) above) actually issued upon the exercise, exchange or conversion of options, warrants, convertible and other securities outstanding as of the date hereof and as set forth on Schedule 4.2 of the Agreement, in each case provided such issuance is pursuant to the terms of such option or convertible security; (iv) shares of the Company's Common Stock issued in connection with a financing with a commercial bank or other lending institution as approved by the Board of Directors of the Company; (v) shares of Common Stock of the Company issued pursuant to a merger or consolidation with another party so long as the Company is the surviving entity, and provided that such merger or acquisition does not result in the transfer of fifty percent (50%) or more of the outstanding securities of the Company; or (vi) shares of Common Stock issued in connection with a transaction where all of the Holders have indicated in writing that the transaction should be exempt from the anti-dilution adjustment provisions hereof. 2 (c) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company, at any time before the Maturity Date shall split, subdivide or combine the outstanding shares of Common Stock into a different number of shares of Common Stock, then (i) in the case of a split or subdivision, the Conversion Price for such securities shall be proportionately decreased and the shares of Common Stock issuable upon conversion of this Note shall be proportionately increased, and (ii) in the case of a combination, the Conversion Price shall be proportionately increased and the securities issuable upon conversion of this Note shall be proportionately decreased. (d) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY. If, while this Note or any portion hereof remains outstanding and unexpired, the holders of Common Stock, as applicable, shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, additional shares of Common Stock, as applicable, by way of dividend, then and in each case, this Note shall represent the right to convert, in addition to the number of shares of the security receivable upon exercise of this Note, and without payment of any additional consideration therefor, the amount of such additional shares of Common Stock, as applicable, that such holder would hold on the date of such conversion had it been the holder of record of that number of shares of Common Stock, as applicable, receivable upon exercise of this Note on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this SECTION 1. (e) RECLASSIFICATION, ETC. If the Company, at any time while this Note or any portion thereof remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which conversion rights under this Note exist into the same or a different number of securities of any other class or classes, this Note shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Note immediately prior to such reclassification or other change and the Conversion Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this SECTION 1. (f) REGISTRATION STATEMENT. Pursuant to Section 2.4(b) of the Investor Rights Agreement, in the event that the registration statement required to be filed by the Company thereunder is not declared effective within one hundred eighty (180) days following the Closing, the Conversion Price shall be reduced by $0.0025 per share for each thirty (30) day period that the effectiveness of the registration statement is delayed, but in no event shall this provision cause the Conversion Price to be reduced below $0.04 per share. (g) NOTICES. Whenever the Conversion Price or number of shares purchasable hereunder shall be adjusted pursuant to SUBSECTION 1(b), (c), (d), (e) OR (f) hereof, the Company shall promptly issue a certificate to the Holder, signed by the Chief Financial Officer of the Company, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which the adjustment was calculated and the Conversion Price and number of shares issuable hereunder after giving effect to such adjustment. 3 2. MECHANICS OF CONVERSION. (a) FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of this Note. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the Conversion Price. (b) STOCK CERTIFICATES. The Company shall, as soon as practicable thereafter, issue and deliver to the holder of this Note, or to its nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which it shall be entitled as aforesaid. Such conversion shall be deemed to have been made, as applicable, immediately prior to the close of business on the date of the closing of the transaction which causes the automatic conversion set forth above in SECTION 1. The person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holders of such shares of Common Stock on such date. 3. SECURITY. This Note is secured under that certain Security Agreement of even date herewith between the Company, the initial Holder and the other Purchasers party thereto (the "SECURITY AGREEMENT"). Reference is hereby made to the Security Agreement for a description of the nature and extent of the security for this Note and the rights with respect to such security of the Holder of this Note. 4. DEFAULT AND REMEDIES. (a) EVENT OF DEFAULT. An "EVENT OF DEFAULT" shall exist under this Note upon the happening of any of the following events or conditions, without demand or notice from the Holder: (i) failure to make any payments required hereunder within three (3) business days of (A) such payment becoming due, or (B) following notice given in accordance with the terms of this Note; (ii) failure to observe or perform any of the agreements, warranties, representations or covenants in this Note, the Agreement, the Security Agreement or the Investor Rights Agreement, which failure results in a material adverse effect upon Company and is not cured within thirty (30) days after the receipt of written notice thereof by the Holder or the holder of any of the Notes; (iii) any petition in bankruptcy being filed by or against Company or any proceedings in bankruptcy, insolvency or under any other laws relating to the relief of debtors, being commenced for the relief or readjustment of any indebtedness of Company, either through reorganization, composition, extension or otherwise, and which, in the case of any involuntary proceedings shall be acquiesced to by Company or shall continue for a period of ninety (90) days undismissed, undischarged or unbonded; (iv) the making by Company of an assignment for the benefit of creditors, which assignment results in a material adverse effect upon Company and is not cured within thirty (30) days after the receipt of written notice thereof by the Holder or the holder of any of the Notes; 4 (v) the appointment of a receiver of any property of Company which shall not be vacated or removed within ninety (90) days after appointment; or (vi) upon the date thirty (30) days following the occurrence of any event of default under the terms of any of the Company's indebtedness or the acceleration of any indebtedness of the Company, which occurrence or acceleration results in a material adverse effect upon Company. (b) REMEDIES. Upon the occurrence of an Event of Default under Section 4(a) hereof, at the option and upon the declaration of the Holder of the Note, the entire unpaid principal and accrued and unpaid interest on this Note shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, and Holder may immediately and without expiration of any period of grace, enforce payment of all amounts due and owing under this Note and exercise any and all other remedies granted to it at law, in equity or otherwise. 5. CHARGES, TAXES AND EXPENSES. Issuance of a certificate for shares of Common Stock upon the conversion of this Note shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificate shall be issued in the name of the Holder, or such certificates shall be issued in such name or names as may be directed by the Holder; PROVIDED, HOWEVER, that in the event certificates for shares of Common Stock (or replacement Notes) are to be issued in a name other than the name of the Holder, this Note when surrendered for exercise or transfer shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and PROVIDED FURTHER, that upon any transfer involved in the issuance or delivery of any certificates for shares of Common Stock or replacement Notes, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. Any transfer shall be subject to (i) the transferee's agreement in writing to be subject to the applicable terms of this Note and (ii) compliance with all applicable state and federal securities laws (including the delivery of investment representation letters, legal opinions and market stand-off agreements reasonably satisfactory to the Company, if such are requested by the Company). The Holder agrees that Holder shall execute such documents, and perform such acts, which are reasonably required to assure that the conversion hereof is consummated in compliance with all applicable laws. 6. NO RIGHTS AS STOCKHOLDER. This Note does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the conversion hereof. 7. LOSS, THEFT OR DESTRUCTION OF NOTE. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft or destruction of this Note and of indemnity or security reasonably satisfactory to it, the Company will make and deliver a new Note which shall carry the same rights to interest (unpaid and to accrue) carried by this Note, stating that such Note is issued in replacement of this Note, making reference to the original date of issuance of this Note (and any successors hereto) and dated as of such cancellation. 5 8. MISCELLANEOUS. (a) ISSUE DATE; GOVERNING LAW. The provisions of this Note shall be construed and shall be given effect in all respect as if it had been issued and delivered by the Company on the earlier of the date hereof or the date of issuance of any Note for which this Note is issued in replacement. This Note shall be binding upon any successors or assigns of the Company. This Note shall constitute a contract under the laws of the State of New York and for all purposes shall be construed in accordance with and governed by the laws of said state. (b) RESTRICTIONS. The Holder acknowledges that the shares of capital stock acquired upon the conversion of this Note will be subject to restrictions upon its resale imposed by state and federal securities laws. (c) ASSIGNMENT. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part by the Holder to any person or entity without the prior written consent of the Company except (assuming compliance with applicable state and federal securities laws) in connection with an assignment in whole to an affiliate of the Holder or to a successor corporation to the Holder resulting from a merger or consolidation of the Holder with or into another corporation or the sale of all or substantially all of the Holder's properties and assets. Effective upon any such assignment, the person or entity to whom such rights, interests and obligations were assigned shall have and exercise all of the Holder's rights, interest and obligations hereunder as if such person or entity were the original Holder of this Note. (d) NOTICES. Any notice, request or other communications required or permitted hereunder shall be given upon personal delivery or upon the seventh day following mailing by registered airmail (or certified first class mail if both the addresser and addressee are located in the United States), postage prepaid and addressed to the parties as follows: To the Company: SIONIX CORPORATION P.O. Box 53963 Irvine, CA 92619 Attn: James J. Houtz, President and CEO/COO To Holder: At the address listed on such Holder's signature page to the Agreement or to such other single place as any single addressee shall designate by written notice to the other addressees. (e) CHOICE OF VENUE; WAIVER OF RIGHT TO JURY TRIAL. (i) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE DEEMED MADE, EXECUTED, PERFORMED AND CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE OR ANY OTHER DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS NOTE, EACH PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND 6 UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE OR ANY OTHER DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS THAT ANY SUCH COURT LACKS PERSONAL JURISDICTION OVER SUCH PARTY. EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY SUCH PARTY AT ITS ADDRESS FOR NOTICES AS PROVIDED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER DOCUMENT THAT SUCH SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE PARTY UNDER THIS NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (ii) EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (i) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (iii) EACH OF THE PARTIES TO THIS NOTE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE, THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. (f) ENFORCEMENT. The Company shall pay all reasonable fees and expenses incurred by the Holder in the enforcement in any of the Company's obligations hereunder not performed when due. In the event of a dispute with regard to the interpretation of this Note, the prevailing party shall be entitled to collect the cost of attorney's fees, litigation expenses or such other expenses as may be incurred in the enforcement of the prevailing party's rights hereunder. 7 (g) AMENDMENT OR WAIVER. Holder acknowledges and agrees that the holders of a majority-in-interest of the then outstanding principal amount of the Notes issued under the Agreement will have the right and power to diminish or eliminate all rights of Holder hereunder. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the undersigned has caused this Secured Convertible Promissory Note to be executed by its officer thereunto duly authorized. COMPANY: SIONIX CORPORATION By:________________________ Name: Title: 9 NOTICE OF CONVERSION (To convert the foregoing Note into shares of Common Stock or any equity securities of the Company, execute this form and supply required information.) To: SIONIX CORPORATION (1) The undersigned hereby elects to convert the attached Secured Convertible Promissory Note (the "Note") into: __________ shares of Common Stock of SIONIX CORPORATION pursuant to Section 1(a) and the other applicable terms of the attached Note at a Conversion Price of $ _______ per share (originally $0.05); or __________ shares of ___________ of SIONIX CORPORATION pursuant to Section 1(a) and the other applicable terms of such Note at a Conversion Price of $ _____ per share. (2) In converting this Note, the undersigned hereby confirms and acknowledges that the securities being issued hereby are being acquired solely for the account of the undersigned and not as a nominee for any other party, or for investment, and that the undersigned will not offer, sell or otherwise dispose of any such securities, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws. (3) Please issue a certificate or certificates representing said securities in the name of the undersigned: _________________________________ (Name) (4) Capitalized terms used herein shall have the meanings ascribed to them in the Note. ____________________________ _________________________________ (Date) (Signature) _________________________________ (Print Name) ASSIGNMENT FORM (To be signed only upon assignment of the Note) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the assignee named below all of the rights of the undersigned represented by the attached Note with respect to the amount of principal covered by the Note set forth below: (Name and Address of Assignee Must be Printed or Typewritten) Social Security No. Address Principal Name of Assignee or Tax ID No. Amount - -------------- -------------- --------------------- --------------- and does hereby irrevocably constitute and appoint _________ Attorney to transfer said Note on the books of the Company, with full power of substitution in the premises. Dated: - ------------------------- Signature of Registered Holder Note: The signature on this assignment must correspond with the names as it appears upon the face of the Note in every particular, without alteration or enlargement or any change whatever. EX-31.1 3 sionix_ex3101.txt EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James J. Houtz, President and Chief Executive Officer of Sionix Corporation, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Sionix Corporation for the period ended December 31, 2006; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 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 functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 12, 2007 /s/ James J. Houtz ------------------- James J. Houtz President EX-31.2 4 sionix_ex3102.txt EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert E. McCray, Chief Financial Officer of Sionix Corporation, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Sionix Corporation for the period ended December 31, 2006; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 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 functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 12, 2007 /s/ Robert E. McCray ----------------------- Robert E. McCray Chief Financial Officer EX-32.1 5 sionix_ex3201.txt EXHIBIT 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF QUARTERLY REPORT ON FORM 10 - QSB OF SIONIX CORPORATION FOR THE PERIOD ENDED December 31, 2006 The undersigned is the Chief Executive Officer of Sionix Corporation (the "Company"). This certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification accompanies the Quarterly Report on Form 10-QSB of the Company for the period ended December 31, 2006 (the "Report"). I, James J. Houtz, certify that: (i) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is executed as of June 12, 2007 /s/ James J. Houtz ------------------ James J. Houtz, Chief Executive Officer EX-32.2 6 sionix_ex3202.txt EXHIBIT 32.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF QUARTERLY REPORT ON FORM 10 - QSB OF SIONIX CORPORATION FOR THE PERIOD ENDED December 31, 2006 The undersigned is the Chief Financial Officer of Sionix Corporation (the "Company"). This certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification accompanies the Quarterly Report on Form 10-QSB of the Company for the period ended December 31, 2006 (the "Report"). I, Robert E. McCray, certify that: (i) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is executed as of June 12, 2007 /s/ Robert E. McCray -------------------- Robert E. McCray, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----